Housing tenure choices with private information
We model the provision of owner-occupied versus rental housing services as a competitive search economy where households have private information over their expected duration. Owning solves the private information problem at the cost of double search. With public information, households with low vacancy hazard rates pay lower rents and search in thicker markets. With private information, housing is under-provided to long-duration households to discourage short-duration households from searching there. If a household has a high enough expected duration, rental distortions become large enough that she prefers to own. Customizing a house ameliorates the information problem while rent control exacerbates it.
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