Rent Guarantee Insurance

Boaz Abramson and Stijn Van Nieuwerburgh

No 32582, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A rent guarantee insurance (RGI) policy makes a limited number of rent payments to the landlord on behalf of an insured tenant unable to pay rent due to a negative income or health expenditure shock. We introduce RGI in a rich quantitative equilibrium model of housing insecurity and show it increases welfare by improving risk sharing across idiosyncratic and aggregate states of the world, reducing the need for a large security deposits, and reducing homelessness which imposes large costs on society. While unrestricted access is not financially viable with either private or public insurance providers due to moral hazard and adverse selection, restricting access can restore viability. Private insurers must target better off renters to break even, while public insurers focus on households most at-risk of homelessness.

JEL-codes: E20 E62 G11 G18 G22 G5 R21 R38 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-dge
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Working Paper: Rent Guarantee Insurance (2024)
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