Insecure property rights and the housing market: explaining India's housing vacancy paradox

Gandhi, Sahil, Green, Richard K. and Patranabis, Shaonlee (2022) Insecure property rights and the housing market: explaining India's housing vacancy paradox. Journal of Urban Economics, 131. ISSN 0094-1190

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Abstract

One housing paradox in many markets is the simultaneous presence of high costs and high vacancy rates. India has expensive housing relative to incomes and an urban housing vacancy rate of 12.4%. We show how insecure property rights in India, as a result of rent control and weak contract enforcement, increases vacancy rates. Using a two-way linear fixed effects panel regression, we exploit changes in rent control laws in the states of West Bengal, Karnataka, Gujarat, and Maharashtra to find that pro-tenant laws are positively related to vacancy rates. A pro-landlord policy change liberalizing rent adjustments could potentially reduce vacancy rates by 2.8 to 3.1 percentage points. Contract enforcement measured by density of judges is negatively related to vacancy. We estimate that a policy change in rent control laws would have a net welfare benefit and could reduce India's housing shortage by 7.5%.

Item Type:	Article
Additional Information:	© 2022 The Author(s)
Divisions:	Geography & Environment
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences
JEL classification:	P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy; Legal Institutions; Property Rights R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R38 - Government Policies; Regulatory Policies
Date Deposited:	12 Sep 2022 16:33
Last Modified:	18 Apr 2024 02:21
URI:	http://eprints.lse.ac.uk/id/eprint/116600

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