Abstract
This paper presents a model of the rental housing market in which apartment rent, vacancy rate, and rate of household doubling up are determined simultaneously. The supply side is monopolistically competitive, with each landlord maximizing revenues for a fixed number of units. On the demand side, households choose between renting a unit alone and doubling up with another household on the basis of apartment rent. The nature of short-run equilibrium is discussed, as are changes in equilibrium due to changes in landlord costs, income distribution, and population size. In particular, the model suggests the possibility of increases in rental prices or occupancy rates in the face of declining demand. Implications for long-run equilibrium are also considered.
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