Estimating the Vulnerability of Households to Rent Increases
- AREUEA-ASSA 2021
- Publication Type:
- Conference Proceeding
- Proceedings of 2021 ASSA-AREUEA conference, 2021
- Issue Date:
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The question investigated in this paper is how vulnerable are US households today to the risk of rent increases. The short answer is that US households are, on average, more vulnerable to the risk of rent increases in 2018 than they were throughout the 1970s, 1980s, 1990s, and 2000s (and in heavily regulated markets even more vulnerable than they were in the 1940s and 1950s). To measure vulnerability requires a normative framework. We follow the approach developed by Sinai and Souleles (2005). We find that the rent premium that would leave households indifferent between the discounted cost of renting and its expected value is greater today, on average, than it was over the past fifty years (and in heavily regulated markets greater than it was over the past eighty years). There is therefore a clear public policy implication from this research.
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