Avenging the tenants: regulating the middle man's rents

Bakker, Jan David and Datta, Nikhil (2024) Avenging the tenants: regulating the middle man's rents. CEP Discussion Papers (CEPDP2019). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We explore the role of intermediaries in the rental market. Using novel UK data on fees letting agencies charged to both tenants and landlords, combined with a matched property-agency listings dataset, we study the effects of a policy that regulated the fees charged to tenants. We estimate pass-throughs of the tenant fee price cap to landlord fees and rental prices, explore demand responses, and entry and exit of both letting agents and landlords. Agents absorb 70% of the regulation and landlords the remaining 30%. Micro-BLP estimates imply a landlord-agency demand elasticity of -1.6 and a second-order elasticity of 9.7 suggesting a highly concave local demand response. Tenant demand is completely unresponsive to the tenant fee reduction. There is no market exit of landlords or agencies. Hence, the policy successfully reduced the cost of renting without any adverse effects. Our results are consistent with letting agents extracting rents from tenants due to tenants' inattention to fees.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	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 L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation L - Industrial Organization > L8 - Industry Studies: Services > L85 - Real Estate Services
Date Deposited:	06 Feb 2025 16:24
Last Modified:	06 Feb 2025 16:24
URI:	http://eprints.lse.ac.uk/id/eprint/126810

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