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Rental Market Regulation in the European Union

Author(s): Carlos Cuerpo and Peter Pontuch: European Commission; Sona Kalantaryan: European University Institute

Rental Market Regulation in the European Unionpdf(623 kB) Choose translations of the previous link 

Summary for non-specialistspdf(34 kB) Choose translations of the previous link 

The state of development of rental markets as a genuine alternative to home-ownership stands out as a particularly relevant institutional factor shaping the outcome of the housing market and playing a balancing role and alleviating house price pressures. This is especially the case when it proves to be an affordable platform for young and low-income households, providing them with a viable alternative to a hasty first step into the property ladder. In order to help policymakers develop a sizeable private rental market acting as an attenuating factor of housing prices volatility, it is important to depict the relevant dimensions of the rental market regulation and assess their likely impact on the aggregate housing market. Against this background, this paper first develops a two-dimensional indicator on rental market regulation, covering for rent controls and the tenant-landlord relationship. The resulting indices are put to the test by assessing their impact on housing prices. According to this analysis, an efficient, fair and swift judicial system appears as a necessary step towards unlocking rental markets full potential. Moreover, rent controls appear to have a significant destabilizing impact on the aggregate housing market, increasing the volatility of house prices when confronted with different shocks. Finally, qualitative aspects of the tenancy contract negotiation do not have a first-hand impact on housing market dynamics.

(European Economy. Economic Papers 515. April 2014. Brussels. PDF. 52pp. Tab. Graph. Ann. Bibliogr. Free.)

KC-AI-14-515-EN-N (online)KC-AI-14-515-EN-C (print)
ISBN 978-92-79-35164-8 (online)ISBN 978-92-79-36007-7 (print)
doi: 10.2765/69909 (online)doi: 10.2765/76958 (print)

JEL classification: C23, C38, R15, R28, R52

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

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