IDEAS home Printed from https://ideas.repec.org/p/ssb/dispap/467.html
   My bibliography  Save this paper

The Impact on Rent from Tenant and Landlord Characteristics and Interaction

Author

Listed:

Abstract

Owner-occupied housing services and rented housing services are often considered close substitutes, and both house price and rental price indices rely on regressions based on dwelling and location characteristics. However, while such characteristics are exhaustive in the owner's market, they cannot capture the additional complexity of rental markets. This paper offers a theoretical framework and an empirical analysis of additional factors that affect rent. The factors comprise three categories: Landlord characteristics, tenant characteristics, and characteristics of the landlord-tenant interaction. We analyze a novel data set sampled from the Norwegian rental market and obtain substantial improvements in explanatory power by including information on tenant and landlord characteristics and interaction. While variation in geographical variables explains 17 percent of the variation in monthly rent; variation in hedonic variables explain only 12 percent. Variation in tenant and landlord characteristics and interaction explains as much as 15 percent of rent variation. The full model captures 44 percent of rent variation and offers insights into the monetary values of landlord type, market mediation, tenure length, tenant type, and services. This additional explanatory power accentuates the difference between the owner's and renter's market, and the results come with ramifications for the general understanding of the rental market, for construction of rental indices, and for the assumption of a rental-equivalence principle in CPI-construction.

Suggested Citation

  • Erling Røed Larsen & Dag Einar Sommervoll, 2006. "The Impact on Rent from Tenant and Landlord Characteristics and Interaction," Discussion Papers 467, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:467
    as

    Download full text from publisher

    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp467.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Timothy K.M. Beatty & Erling Røed Larsen & Dag Einar Sommervoll, 2005. "Measuring the Price of Housing Consumption for Owners in the CPI," Discussion Papers 427, Statistics Norway, Research Department.
    2. Steven C Bourassa & Martin Hoesli & Jian Sun, 2004. "What's in a view?," Environment and Planning A, Pion Ltd, London, vol. 36(8), pages 1427-1450, August.
    3. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
    4. Schmitz, Patrick W., 2002. "Simple contracts, renegotiation under asymmetric information, and the hold-up problem," European Economic Review, Elsevier, vol. 46(1), pages 169-188, January.
    5. Andrea Baranzini & José V. Ramirez, 2005. "Paying for Quietness: The Impact of Noise on Geneva Rents," Urban Studies, Urban Studies Journal Limited, vol. 42(4), pages 633-646, April.
    6. Grenadier Steven R., 1995. "Flexibility and Tenant Mix in Real Estate Projects," Journal of Urban Economics, Elsevier, vol. 38(3), pages 357-378, November.
    7. Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, vol. 45(9), pages 1741-1764, October.
    8. Schulz, Rainer & Werwatz, Axel, 2001. "A state space model for Berlin house prices," SFB 373 Discussion Papers 2001,58, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    9. Allen C. Goodman & Masahiro Kawai, 1985. "Length-of-Residence Discounts and Rental Housing Demand: Theory and Evidence," Land Economics, University of Wisconsin Press, vol. 62(2), pages 93-105.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Røed Larsen, Erling & Weum, Steffen, 2008. "Testing the efficiency of the Norwegian housing market," Journal of Urban Economics, Elsevier, vol. 64(2), pages 510-517, September.

    More about this item

    Keywords

    hedonic regression; housing market; landlord; rent; rental index; rental market; tenant.;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:467. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (L Maasø). General contact details of provider: http://edirc.repec.org/data/ssbgvno.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.