Tenant Rights, Evictions, and Rent Affordability

The paper presented in this Virtual Real Estate Seminar use state-level differences in the legal relationship between landlords and tenants to estimate the impact of these differences on housing markets. The authors construct a search-theoretic model of landlord and tenant search and matching, which predicts that an increase in the cost of eviction reduces the number of evictions, but raises rents and homeless rates, and lowers housing supply and vacancy rates. To test these predictions, they construct an annual index to measure the level of the legal protection of tenant rights in each state. Their instrumental variable results indicate while a one-unit increase in the Tenant-Right Index reduces eviction rate by 8.9 percent, rental housing is 6.1 percent more expensive in areas where tenants have more protections against landlords. A higher Tenant-Right Index is also associated with a decrease in housing supply and an increase in the homeless rate. Taken together, their findings highlight a significant trade-off between tenant protections and rent affordability. Thus the welfare effects of tenant rights depend on the presumably large benefits for those who avoid eviction versus a loss of consumer surplus for other housing consumers.