Modeling Rental Housing Market: A Conceptual Framework

Submitted by nanda on 24 July 2014 - 6:10pm

Rental housing is a more prominent feature of large metropolitan areas. These areas are characterized by a larger proportion of migrants, young and transient population. These groups create varying types of demand for rental housing in the urban areas. In this paper an attempt has been made to understand the forces operating on demand and supply as they affect the rental housing market. The demand for rental housing is viewed as a question of choice of tenure. The question of choice of tenure is decided at the household level and is influenced by various economic and non-economic considerations. In this study the major variable considered is the relative cost of two types of tenures. The influence of other variables such as subsidies, taxation, inflation and uncertainty is seen through their impact on cost of housing. The impact of income/wealth of the household and the rent control act on the choice of tenure has also been taken into account. The supply of rental housing in a metropolitan area will consist of supply from both public and private sectors. The determinants of supply of each of these sectors are analysed. The impact of the rent control act and inflationary expectations on the supply of rental housing has been discussed. The rental housing market is segmented into various submarkets according to location, housing type, type of supplier and government policies. The analysis of determination of rents in various submarkets is carried out in a segmented framework.