Equilibrium Evictions

P. Dean Corbae, Andy Glover and Michael Nattinger

No 32898, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a simple equilibrium model of rental markets for housing in which eviction occurs endogenously. Both landlords and renters lack commitment; a landlord evicts a delinquent tenant if they do not expect total future rent payments to cover costs, while tenants cannot commit to paying more rent than they would be able or willing to pay given their outside option of searching for a new rental. Renters who are persistently delinquent are more likely to be evicted and pay more per quality-adjusted unit of housing than renters who are less likely to be delinquent. Evictions due to a tenant’s inability to pay are never socially efficient, and lead to lower quality investment in housing and too few vacancies relative to the socially optimal allocation. Government policies that restrict landlords’ ability to evict can improve welfare relative to laissez-faire, but a full moratorium on evictions only raises welfare when it is temporarily adopted in response to a large adverse shock. Finally, rent support can effectively eliminate evictions even without covering all missed rent and delivers significantly larger gains than eviction restrictions.

JEL-codes: E60 R31 (search for similar items in EconPapers)
Date: 2024-09
New Economics Papers: this item is included in nep-dge, nep-ipr and nep-ure
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Working Paper: Equilibrium Evictions (2023)
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