Screening Under Regulation: How Landlords Adapt Deposits to Perceived Risk in Rental Housing Markets

Jon Charterina Abando
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Jon Charterina Abando: Euskal Herriko Unibertsitatea (EHU)

EKONOMIAZ. Revista vasca de Economía, 2026, vol. 109, issue 01, 208-231

Abstract: This paper analyses the determinants of security deposits in residential rental contracts as a proxy for landlords’ perceived adverse selection risk. Using administrative data from the Basque Autonomous Community, we estimate General Linear Models with robust errors and interaction terms capturing tenant and landlord characteristics, demographic composition, market size, and regulatory change. We pay particular attention to the regulatory change introduced by Royal Decree-Law 7/2019, which strengthened tenant protection and capped deposits. The results show that deposits are not uniformly related to demographic or contractual attributes but vary in a context-dependent manner shaped by market conditions, institutional actors, and regulation. Rather than reflecting objective risk or discrimination, deposits operate as adaptive screening devices under asymmetric information. The findings point to the limits of uniform regulation and the need for context-sensitive housing policies.

Keywords: rental housing market; adverse selection; security deposits; asymmetric information; rental regulation (search for similar items in EconPapers)
JEL-codes: D82 K23 R31 (search for similar items in EconPapers)
Date: 2026
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