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Efficiency Rents: A New Theory of the Natural Vacancy Rate for Rental Housing


  • Thomas J. Miceli

    (University of Connecticut)

  • C. F. Sirmans

    (Florida State University)


This paper adapts the theory of efficiency wages to explain the natural vacancy rate in rental housing markets. An equilibrium vacancy rate penalizes landlords who fail to maintain their units because if a tenant vacates a unit, the landlord will not be able to fill it immediately, thus costing him the rental income for a finite period of time. We provide evidence for the theory by showing that vacancy rates across metropolitan areas vary inversely with the stringency of state habitability laws. We also find some evidence for the search-cost theory of the natural vacancy rate.

Suggested Citation

  • Thomas J. Miceli & C. F. Sirmans, 2010. "Efficiency Rents: A New Theory of the Natural Vacancy Rate for Rental Housing," Working papers 2010-30, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2010-30

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    Efficiency rents; natural vacancy rate; rental housing;

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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