Equilibrium Evictions

P. Dean Corbae, Andrew Glover and Michael Nattinger

No RWP 23-03, Research Working Paper from Federal Reserve Bank of Kansas City

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 house. 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 are never socially optimal, and lead to lower quality investment in housing and too few vacancies relative to the socially optimal allocation. In our calibrated model, housing externalities widen the gap in housing access and quality between relatively high- and low-earning renters. Finally, government policies that restrict landlords’ ability to evict can improve welfare, though a full moratorium on evictions should be reserved for crises; rent support is generally a better policy than restricting evictions.

Keywords: eviction; rental burden; housing externalities; housing supply (search for similar items in EconPapers)
JEL-codes: R21 R31 R38 (search for similar items in EconPapers)
Pages: 51
Date: 2023-04-21
New Economics Papers: this item is included in nep-dge, nep-mic and nep-ure
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Working Paper: Equilibrium Evictions (2024)
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