Search and Matching in Rental Housing Market
This paper builds up a model for a rental housing market. With a search and matching friction in a rental housing market, a new house entry is endogenized according to a business cycle. A price negotiation happens only when owner and tenant newly match and make a contract for a rental price. After making a contract, a rental price is fixed until the contract ends. Simulations show that variations of a price and a market tightness change according to a search friction in a housing market, a speed of a housing cycle, a bargaining power between owner and tenant for a price setting. An extensive margin effect brought by a housing entry well contributes to a price variation and this effect significantly changes by parameters.
Former studies, such as Wheaton (1990), focus on a search behavior in a housing market and show advantage of a search model to explain a housing market.
Non-homeownership rates are at nontrivial level for a business cycle analysis across countries. In Japan, Statistics Bureau of Japan (2018) shows that a non-homeownership rate keep about 40 percent for many years. Australian Bureau of Statistics reports that the proportion of Australian households renting their home is 32 percent in 2017–18. In the U.S., the Census Bureau releases national non-homeownership rates and it is about 35 percent in the last few years. As well as buying and selling houses, a leasing house behavior can contribute to a business cycle.