Quantifying and Explaining Stickiness in Housing Rents: A Turkish Case Study with Micro-Level Data

Using a national panel of housing units, this paper documents that the rate of nominal rigidity in housing rents is high in Turkey between 2008 and 2011. We find that, on average, 31.5 percent of the rents did not change from year to year in nominal terms. We then ask if the incidence of nominal rigidity depends on the turnover status of the housing unit. We show that 35.4 percent of the nonturnover units had rigid rents, while for only 17.1 percent of the turnover units rents did not change. We also present evidence that grid pricing is associated with more than half of the nominal rigidity in housing rents in our sample. The household- and individual-level determinants of the nominal rigidity in rents and turnover status are also investigated using the micro-level details available in our dataset. We document that, relative to the low-income tenants, high-income tenants are less likely to have rigid rents and they are also less likely to change units frequently. This finding suggests that search and moving costs impose frictions that amplify the opportunity costs of high-income tenants; thus, they are more likely to agree on reasonable rent increases for the purpose of saving time and reducing emotional stress.