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Fair market rent and the distribution of rents in Los Angeles

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  • McMillen, Daniel
  • Singh, Ruchi

Abstract

A unique data source is used to analyze the effect of the fair market rent (FMR) on the distribution of apartment rents in Los Angeles for 2007–2015. The data set includes the results of semi-annual surveys of rents in Los Angeles since 2007. The surveys include information on location, characteristics of the property, and a rating of the overall quality of the building exterior. Histograms suggest there is a tendency for rents to cluster at values around the FMR, particularly for small (studio and 1 bedroom) units. We also estimate a model explaining the probability that a unit's rent lies in a set of intervals, including regions just below and just above the FMR. The estimates suggest that the probability that the rent clusters around the FMR is significantly higher than would be expected given the underlying characteristics of the properties. An analysis of changes in rents over time suggests that the tendency for rents to cluster in the region just above the FMR is persistent for individual properties over time.

Suggested Citation

  • McMillen, Daniel & Singh, Ruchi, 2020. "Fair market rent and the distribution of rents in Los Angeles," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:regeco:v:80:y:2020:i:c:s0166046217304702
    DOI: 10.1016/j.regsciurbeco.2018.09.004
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    Cited by:

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    2. Nicholas Chiumenti & Amrita Kulka & Aradhya Sood, 2022. "How to Increase Housing Affordability: Understanding Local Deterrents to Building Multifamily Housing," Working Papers 22-10, Federal Reserve Bank of Boston.
    3. Céline Grislain-Letrémy & Corentin Trevien, 2022. "The Long-Term Impact of Housing Subsidies on the Rental Sector: the French Example," Working papers 886, Banque de France.

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