The Social Housing and Rental Housing Markets in an Equilibrium Rent Search Model

Abstract

The housing market has some analogies with the labour market. In particular, the matching of a landlord and a tenant does not occur immediately and the presence of frictions means there is no single level of rent which can ensure a balance between the supply and demand for housing. This article uses a search equilibrium model a la Pissarides-Burdett- Mortensen in order to represent the rental housing market. Then, we analyse the effects of the building of social housing and of housing benefits. We show that housing policy does not necessarily lead to an improvement of access to housing and can increase the average rent.