Insecure property rights and the housing market: explaining India's housing vacancy paradox

Sahil Gandhi, Richard K. Green and Shaonlee Patranabis ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: One housing paradox in many markets is the simultaneous presence of high costs and high vacancy rates. India has expensive housing relative to incomes and an urban housing vacancy rate of 12.4%. We show how insecure property rights in India, as a result of rent control and weak contract enforcement, increases vacancy rates. Using a two-way linear fixed effects panel regression, we exploit changes in rent control laws in the states of West Bengal, Karnataka, Gujarat, and Maharashtra to find that pro-tenant laws are positively related to vacancy rates. A pro-landlord policy change liberalizing rent adjustments could potentially reduce vacancy rates by 2.8 to 3.1 percentage points. Contract enforcement measured by density of judges is negatively related to vacancy. We estimate that a policy change in rent control laws would have a net welfare benefit and could reduce India's housing shortage by 7.5%.

Keywords: vacant housing; housing markets; property rights; rent control; India (search for similar items in EconPapers)
JEL-codes: P48 R31 R38 (search for similar items in EconPapers)
Date: 2022-09-01
New Economics Papers: this item is included in nep-law and nep-ure
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Citations: View citations in EconPapers (1)

Published in Journal of Urban Economics, 1, September, 2022, 131. ISSN: 0094-1190

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Journal Article: Insecure property rights and the housing market: Explaining India’s housing vacancy paradox (2022)
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