 Do market rents reflect user costs?Geert Goeyvaerts and Erik Buyst Journal of Housing Economics, 2019, vol. 44, issue C, 112-130 Abstract: Although in many countries more than twenty percent of all households rely on the private rental market for housing, the research concerning the fundamentals of rental prices has been limited. Standard capital investment theory states that the market rental price of capital services will equal the user cost of capital in equilibrium. The empirical evidence in support of the rent-user cost equivalence theorem is, however, scarce if not non-existent. We examine the relationship between market rents and the user cost of rental properties based on a unique micro data set on the earnings and costs of Flemish landlords. Robust regression estimates of portfolio-average rental earnings on portfolio-average user costs point to a strong correspondence at the micro-level. In some cases, we find a user cost coefficient which is not significantly different from one together with an intercept estimate which is not significantly different from zero even when we control for landlord characteristics. Keywords: Rent; User costs; Market equilibrium; Robust regression (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:44:y:2019:i:c:p:112-130 DOI: 10.1016/j.jhe.2019.01.001 Access Statistics for this article Journal of Housing Economics is currently edited by H. O. Pollakowski More articles in Journal of Housing Economics from Elsevier |
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