Reforming housing rental market in a life-cycle model

Abstract

Housing rental market share in most countries around the world is low. We explore the reasons behind this underdevelopment with a survey conducted among a representative group of 1005 Poles. It turns out that strong tenure preferences of households toward owning can be attributed to both economic and psychological factors. Building on these findings, we develop a life-cycle model and evaluate the effect of the following reforms aimed at improving the functioning of the rental market: (i) changing the quality of rental services, (ii) reducing the risk of investment in rental housing and (iii) removing fiscal incentives for owning. The results indicate that the reforms, if introduced simultaneously, significantly increase the rental market share.