Rent Setting Research Articles

A Study on the Forecasting of Real Estate Market Using Algorithms

Technology using algorithms has an impact on various aspects of the real estate market, such as real estate market price prediction, investment recommendation, and rent setting. First, it was confirmed that by improving the accuracy of real estate price prediction, real estate market price prediction using AI algorithm can derive more accurate results through machine learning and deep learning technologies based on past data. In addition, it is the development of an investment recommendation system. The investment recommendation system using AI can promote efficient fund management by discovering promising investment opportunities in the real estate market and proposing them to investors. The next is the optimization of lease on a deposit basis, monthly rent, and rent setting. The rent setting model using AI technology can set the rent appropriately through negotiations between real estate owners and tenants in consideration of market trends, demand, and predictions by region. Finally, it is the automation and efficiency of the real estate transaction process system. Smart contracts and automation systems using AI can save money and time between transaction parties by simplifying and streamlining the real estate transaction process. However, problems with data security and privacy protection are emerging as new challenges. New security and privacy problems arise in dealing with personal information, transactions, and data, and appropriate responses to them are urgent.

Energy poverty alleviation by social housing providers: A qualitative investigation of targeted interventions in France, England, and the Netherlands

Decisions made by social housing providers (SHPs) profoundly affect their tenants' energy affordability, a group characterised by above-average energy poverty rates. Concentrated deprivation in this tenure has intensified due to policy-driven ‘residualisation’, compelling SHPs to serve almost exclusively low-income and marginalised households. Despite this, research exploring the potential of SHPs to tackle energy poverty through targeted interventions for their most vulnerable tenants remains sparse. The 2021–2022 energy price crisis offers a unique context to investigate this issue, given its substantial impact on household energy affordability. This study delves into insights of social housing professionals through focus groups conducted in France, England, and the Netherlands. It examines their views on the effectiveness of interventions and assesses their feasibility within the respective institutional contexts. We find that SHPs generally favour retrofit prioritisation and behavioural interventions as effective means of supporting at-risk tenants, whereas alterations in rent setting or housing allocation are considered potentially impactful but often undesirable or impracticable. We identify institutional barriers and lack of data as key obstacles to SHPs' adoption of more targeted interventions. To empower SHPs in tackling energy poverty, housing policy reforms must acknowledge and address the significant impact of energy costs within total housing expenses.

The great social housing trade-off. ‘Insiders’ and ‘outsiders’ in urban social rental housing in Norway

In this paper, I ask how social housing providers in urban Norway balance between the needs of existing tenants (the insiders) and prospective residents (the outsiders). Based on qualitative interviews with social housing bureaucrats, I examine how the fifteen largest municipal social housing providers in Norway negotiate the trade-off between insiders and outsiders in housing allocation, rent setting and tenancy length decisions. While many of the institutional features of Norwegian social housing are designed to favour disadvantaged outsiders, this study suggests that openness to outsiders is counteracted by the protection of insider-tenants’ residential stability through housing allowances, frequent tenancy renewals and discretionary exceptions. The paper concludes with reflections on social mechanisms that may influence the great social housing trade-off between insiders and outsiders. I argue that tenant-turnover strategies are blunted in contexts where insider-tenants are often no more privileged than outsiders, and that a ‘virtue of necessity mechanism’ may protect the residential stability of insiders in heavily targeted social housing.

Increased rent misspent? How ownership matters for renovation and rent increases in rental housing in Sweden

Renovations of the housing rental stock have become a political concern since they have been claimed to drive gentrification and affect tenants’ everyday lives as well as long-term housing conditions. Furthermore, new actors have entered the market, partly as a result of high supply on the international capital markets creating a flow of capital into market segments. This has led to a critique of private equity in the housing sector, and raised the question of the extent to which ownership of the rental stock matters for housing affordability. Yet there seems to be little systematic research on this topic. This study uses a unique dataset covering the entire rental housing stock in Sweden to address whether there are differences in renovation investments between different ownership groups. The purpose of this article is to increase understanding of how ownership affects renovation processes, and specifically to analyse to what extent, and how, private and public actors differ in renovation and rent setting decisions. Our results demonstrate that public housing companies raised rents less and renovated more, particularly in the lower-income segments of the multi-family building stock between 2014 and 2020.

Area income, construction year and mobility of renters in Sweden: two hypotheses about the impact of rent control

PurposeThis paper aims to test two hypotheses related to the supposedly negative impact of rent control on residential mobility: the mobility of renters is, first, negatively related to how attractive their residential areas are and, second, relatively high for renters living in properties built after 2005.Design/methodology/approachThis paper estimates logit and multinomial logit regressions and models household moves. The multinomial logit regressions separate between short- and long-distance moves and between moves to rentals and to owned dwellings. This paper uses the “relative income” of the tenants’ residential areas to proxy area attractiveness. This paper estimates regressions for entire Sweden and the three largest “commuting” regions and municipalities, respectively.FindingsThe full sample provides support of both hypotheses in all regressions. Hypothesis one gets stronger support for moves to other rentals than moves to owned dwellings but about equally strong support for short- and long-distance moves. Hypothesis one obtains strongest support in Gothenburg municipality while hypothesis two obtains strongest support in the Malmö region. Also, hypothesis two obtains stronger support for short-distance moves than long-distance moves and slightly stronger support for moves to owned dwellings than those to rented dwellings.Research limitations/implicationsThis paper does not estimate “how much” rent control affects mobility, and results cannot be used to design specific rent setting policies. Results may be sensitive to how different types of moves are defined.Practical implicationsEfforts to reform rent setting policies in Sweden are encouraged.Originality/valueTo the best of the author’s knowledge, this paper’s two hypotheses are not tested before in Sweden and can be tested without control groups.

Affordable Housing Without Public Subsidies

Problem, research strategy, and findings Rental housing affordability is a severe problem for low- and moderate-income families across the United States. While some renters benefit from subsidies or rent regulation, most low-income renters live in unsubsidized, unregulated units, particularly in low-cost 1- to 4-unit properties. Some of these small rental properties are low cost because they are low quality or are in low-demand neighborhoods, but there has long been speculation that many of these units are low cost because their owners set rents below market. However, the extent to which owners set rent below market, which owners do so, and why, is unknown. I conducted a nationwide survey with follow-up interviews of the owners of small rental properties to understand below-market rent setting. I find that nearly half of small rental owners choose to set rents below market. These discounts are substantial, averaging 16% below market. Owners’ rent-setting strategies are diverse, and there do not appear to be sharp distinctions between owners who set rent below market and those who do not. However, there is evidence that some owners’ lack of knowledge of market conditions contributes to discounts, as does owners’ impressions of their tenants’ incomes. Takeaway for practice Most municipalities likely have large stocks of good-quality below-market rental housing in small rental properties. Supporting below-market small rentals could be a means for municipalities to realize their housing affordability goals. However, the right policies to support this part of the stock are unclear and likely vary by jurisdiction. Planners could examine the owners and tenants of small rentals in their area to understand their needs and respond accordingly. Supporting this stock will raise new equity questions, particularly regarding who gets to rent these units and practical issues about how the public sector can productively engage with nonprofessional landlords.

Payment Performance and Residency Discounts in the Rental Housing Market

AbstractPrevious literature on rental housing has studied length of residence discounts by concentrating on turnover cost. I present an analysis of the impact of tenant payment performances on landlord rent setting. First, I establish and simulate a landlord's dynamic optimal rent setting model in light of the tenant's previous rent payment performance. Under some environments, simulation results show an interesting outcome, landlords give rental discount to tenants who had late rent payments. I then use Experian RentBureau data to estimate the relationship between payment history and rent, and find that late payers received subsequent rent discounts during the housing market's expansion period (2002–2007) while payment performance has less or no influence on rent setting after the subprime mortgage crisis. These results are predicted by the simulations of the theoretical model.

Rent increase strategies and distributive justice: the socio-spatial effects of rent control policy in Amsterdam

Rent controls and rent setting regulation in different contexts incorporate and balance different aims, in particular when securing affordability and the effective distribution of scarce housing by incorporating market mechanisms. As rent policy is frequently discussed in terms of affordability or market functioning in broad terms, small-scale distributive socio-spatial effects are often not regarded. In this paper, three strategies under the new rent sum policy are compared against the former policy and practice for Amsterdam, the Netherlands, to observe the effects of distributive justice. The new rent policy partly decentralizes rent increase decisions from the national level to local authorities and housing associations. Using microdata on all social housing units and their tenants’ distributive justice, outcomes under the former policy and practice are observed for a 6-year period (2008–2014) and the effects of three different rent increase strategies under the new rent sum policy are forecasted for the same period, combining an ex ante and an ex post evaluation. The possibilities for housing associations to vary rent increases for different groups of tenants in order to improve distributive justice outcomes are explored. Results show that all three possible strategies decrease the observed affordability gap between new and long-term tenants. Valuing the distributions of these strategies by applying two different standards for distributive justice shows the rent sum policy may only result in modest improvements.

Is renting unaffordable in the Netherlands?

Tenants in the Netherlands not only pay relatively more for their housing consumption than owner-occupiers, but also appear to be subject to Schwabe's law on rent. This law states that households with a lower income are confronted with higher rent-to-income ratios than households with a higher income. In the Netherlands most rents are regulated, so these are expected to be at below-market levels. Tenants of these dwellings are eligible for housing allowances if their income is considered insufficient for paying the rent. The hypothesis is that a rental dwelling with a regulated rent and for which the tenant receives a housing allowance should be affordable to the tenant. However, as this paper shows, even a maximum degree of government intervention (rent regulation and housing allowances) plus the impact of affordable rent setting by landlords, leading to a maximum subsidisation of the tenant, cannot prevent a situation whereby tenants are paying an unaffordable rent. And an unaffordable rent suggests that these tenants may indeed feel impacted by housing affordability problems.

Alternate Proposal for Interest Free House Finance

In this paper, we revisit the design of interest free house finance. First, we discuss the current practice in conventional banking and Islamic banking. Then, we discuss an alternate design for interest free house finance. The proposal we present attempts to analyze the implication of using market based rent setting in place of using an interest rate benchmark. In the alternate design, the Islamic bank buys the house by paying the house owner full amount of the house upfront. Then, the bank gives the house on rent to the client and the Islamic bank also enters into an options contract as the call option writer. If the call buyer does not exercise the call option, the options contract expires and the Islamic bank is in a position to give the house on rent again. We present numerical examples of computing rents in two separate structures. In structure I, call option is used with the lease contract. In structure II, house is resold at market price with stated price floor.

Between ‘Market’ and ‘Welfare’: Rent Restructuring Policy in the Housing Association Sector, England

This paper empirically evaluates the market and welfare impacts of rent restructuring policy in the housing association (RSL) sector. The focus is on the financial viability of housing associations in the north of England, the affordability problems of tenants in the south, and the changes of turnover rates of RSL tenancies that have resulted. Using data from the Regulatory and Statistical Returns and the CORE (COntinuous REcording) from 2001/02 to 2005/06, the analysis shows that the ‘market’ component of the rent formula plays a more substantial role in affecting the RSL rent levels despite the ‘welfare’ measures in the policy—the greater emphasis on local earnings, the restriction of annual rent increase and the imposition of rent ceilings. Given that social housing in England is essentially a residual mode of provision, it is argued that a more flexible approach in balancing these two conflicting principles in rent setting is needed.

Liberalization and the privatization of public rental housing in Kolkata

The paper focuses on the privatization of public rental housing in Kolkata. The State government has decided to sell to its sitting tenants, due to high maintenance costs and loopholes in the rent setting and allocation processes. The success of privatization of public housing in Kolkata is contingent upon the government’s capacity to turn its liabilities into assets for the future, fending off possible negative externalities of privatization on the low income households that constitute the majority population in the city. The paper suggests that considerable benefits can be accrued from the privatization and concludes with two possible alternatives, within a conducive liberalized environment. The alternatives are not conclusive, but designed to promote alternatives in future research.

Getting a policy to ‘stick’: centralising control of social rent setting in England

English The attempts of English central government to control the rents that social housing landlords set for individual properties offer a fruitful example of the role that context and content play in shaping policy implementation. Since the early 1970s there have been three initiatives to assert greater central control over this policy variable. Using a modified version of the conceptual framework proposed by van Meter and van Horn (1975), this article identifies the factors influencing the implementation of each initiative. It concludes by highlighting the role of context, as opposed to the policy design or communication, in getting a policy to ‘stick’.

Correlation between Negotiated Rents and Neighbourhood Quality: A Case Study of Two Cities in Sweden

The aim of this paper is to analyse whether or not differentiated rents reflect differences in neighbourhood quality in housing of similar quality and age in two target cities in Sweden. The system for rent setting in Sweden is partly based on a process of negotiation in which the annual change in actual rents is an outcome of negotiations between the local branch of the Swedish Union of Tenants and local municipal housing companies. One possible outcome of these negotiations could be change to the rental structure in the different neighbourhoods within the municipality. By allowing differences in negotiated rent outcomes in different neighbourhoods, a better relationship of rent level to tenant perception of neighbourhood quality can be achieved. It is the understanding of the authors that in a number of local-housing-market rent negotiations over the last decade, the parties involved have agreed on the need for and have consciously aimed towards making such adjustments. In this paper, regression analysis has been used to analyse data about rent levels for residential units from two cities in Sweden, namely Gothenburg and Luleå. It can be concluded that differentiated rents are indeed present, hence the existing rent-setting system in Sweden can be used to improve the relationship between rental structure and neighbourhood quality.

A Study of Housing Affordability in Relation to Economic Development in Hong Kong

Hong Kong is one of the most densely populated urban environments in the world. Under its laissez faire free economy, the government dominates the supply of land. The government has applied different measures to ensure affordability in public housing, in rent setting as well as various subsidised-ownership programmes. Starting from minimal intervention towards privatisation, Hong Kong has adopted several measures to obtain a sustainable affordable housing environment along with its economic development, which can be a unique reference for housing provision of other developing countries. The prime intent of this paper is to investigate Hong Kong’s public housing policy towards affordability, in relation to various stages of economic development. This paper examines selected aspects of economic development in relation to affordable housing provision and its influence on households’ affordability. This paper investigates the role of GDP, inflation rate, housing price and households’ income on housing affordability and tries to identify the relationship between affordability and those economic indicators. The study suggests that housing price, income and inflation rate plays a dominant role on affordability rather than GDP.

Spatial Versus Non-Spatial Determinants of Shopping Center Rents: Modeling Location and Neighborhood-Related Factors

This study is an attempt to model the economic trade-off between spatial and non-spatial determinants of shopping center rents while assessing the role of neighborhood and location attributes in the rent setting process. For that purpose, two space-related indices, namely the Economic Potential Index (EPI) and the Center Attraction Index (CAI), are designed based on a major origin-destination phone survey and on financial data obtained for eight major shopping centers in Quebec City, Canada. The database, which is processed through a regional GIS, includes 1,007 retail units, representing some 4.4 million square feet of gross leasable area. While findings confirm that the EPI act as a significant determinant of shopping center rents, they also bring out the complexity of the relationships between endogenous and exogenous rent determinants.

Setting the Rents of Social Housing: The Impact and Implications of Rent Restructuring in England

The question of how the rents of social housing should be set has been a matter of debate in many European countries. This paper draws on research into the probable impacts of the UK government's policy to restructure rents in England to explore some of the issues involved in determining the rents of social housing. The paper discusses why social rent setting is a particular issue in the UK and how the government is seeking to address it through the rent restructuring policy that is currently being implemented. Then, after outlining the nature of the study on which the paper is based, the local effects of the policy on social housing rents are examined. An assessment is made of whether the policy is likely to fulfil its explicit objectives and it is concluded that only some of these are likely to be met. It is also concluded that the current direction of UK policy raises some questions that are likely to be of concern beyond the UK.

Rent differentials, housing benefit and management of the public housing stock in the United Kingdom

Despite the prevailing emphasis on markets and choice in the public services there has been very little consideration of the way in which local authority rent setting policies can be used to influence the demand for various types of properties. The present government has promised that long delayed proposals for the reform of housing benefit will be brought forward soon. At the same time, social landlords have been increasingly concerned about high rates of turnover in their stock and in some areas low demand leading to abandonment and demolition. In this paper it is argued that greater rent differentials related to quality and location will be necessary to cope with such changes.

Bargaining, utility and rents

This paper analyses the effect of potential lease expiry on the rental negotiation process and levels of rental agreed. Several observers have noted that tenants may use the threat of lease termination at rental negotiations in order to obtain a rental and/or other concession. It is argued that it will often be rational for the landlord to make a rental concession in these circumstances and a model that identifies a theory‐forecasted concession level for landlords is developed. However, the bargaining process will often cause deviation from an equilibrium solution. The concession level of the landlord will be a function of four variables: expected landlord’s cost of void, probability of tenant relocation, landlord’s risk preference and the effects of the bargaining process. Utility theory is used to illustrate why the risk averse or risk neutral landlord in a potential lease termination situation will always maximise his/her utility by conceding an amount on the open market rental value provided that the landlord perceives the probability of lease termination to be greater than zero. However, although it is possible to identify a positive solution to the calculation of maximum concession, behavioural approaches to bargaining theory suggest that differences in individual negotiator’s attributes, social contexts and cognitive biases will also affect the outcome of a negotiated rent setting process.

Neither market nor command economy: Swedish negotiative rent setting in practice

The Swedish use‐value rent system is discussed against the background of data from a research project conducted in 1994 on the existence of rent differences. Using data from the same year, rents were studies in 936 twin‐dwellings (or 468 pairs of observations), half of which were owned by private landlords, and half by Municipal Housing Companies. The object was to find out 1) whether rent‐setting was systematically biased in favour of any category of owner, and 2) if signs of location related rent differences could be found. In a third of these observations rent differences greater than five per cent was found. And though differences were much more common in municipalities of medium size, there was no systematic bias in favour of either of the two owner categories. Assuming that the year of construction or renovation of the estates could be taken to reflect differences in quality and standard, significant location related differences were found.