Market structures of rental housing: conceptualising perfect competition in mixed local rental markets

Abstract

Governments in many countries have required social housing providers to operate more in terms of market principles and engage in commercial activities. At the same time, public authorities have also tried to strengthen the role of the private rental sector in the provision of housing for low-income households and homeless people. As a result, the once clear demarcation between the activities of social and private landlords appears to be shifting, which has arguably led to increased competitive pressures on both landlord groups. In an attempt to establish a more meaningful analytical approach to the concept of competition between rental tenures, this paper sets out an idea of a perfectly competitive rental market structure. The theoretical part of the paper is guided by questions surrounding how one can translate established economic theories of competitive markets to rental housing and what a competitive market structure is in context of competition between social and market renting. In the second part of the paper, the above theoretical concept is applied to two local housing markets: Coventry in England and Breda in the Netherlands. Here, I will provide evidence on how and why rental housing in Breda seems to be more competitive than in Coventry. The application of the model will highlight the value of the present approach.