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Tenancy Law Reform Act and Length of Tenancy Discount: Heterogenous Effects in a West German Household Sample

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  • Fuchs, Benjamin
  • Fitzenberger, Bernd

Abstract

Compared to other European countries rental apartments dominate the German housing market. Policymakers and a large part of the population alike worry about the amount of affordable living space. Especially in metropolitan areas a high demand for living space exists and has been leading to a shortage and as a consequence to increasing rents. In 2001 the German government passed the Tenancy Law Reform Act to restrict the growth in rents (at least partially) and to strengthen the tenant's position. Up to now the efficacy of this reform has not been examined on national level. A further point of interest is the identification of a length of tenancy discount. The existing literature confirms such a discount where long-term tenants have to pay a lower real valued rent than short-term tenants. Our empirical analysis exploits data from the German Socio-Economic Panel (SOEP) that offers the unique advantage of a large and representative sample. We find that the Tenancy Law Reform Act in 2001 appears to have been successful in the restriction of exorbitant rents. Further, we identify a significant duration discount in the first years of a tenancy. This discount is significantly larger in the upper part of the conditional rent distribution.

Suggested Citation

  • Fuchs, Benjamin & Fitzenberger, Bernd, 2013. "Tenancy Law Reform Act and Length of Tenancy Discount: Heterogenous Effects in a West German Household Sample," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79723, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79723
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    References listed on IDEAS

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    1. Hoffmann, Johannes & Kurz, Claudia, 2002. "Rent indices for housing in West Germany 1985 to 1998," Working Paper Series 116, European Central Bank.
    2. Schlicht, Ekkehart, 1981. "The Tenant’s Decreasing Willingness to Pay and the Rent Abatement Phenomen," Darmstadt Discussion Papers in Economics 15, Darmstadt University of Technology, Department of Law and Economics.
    3. Joachim Zietz & Emily Zietz & G. Sirmans, 2008. "Determinants of House Prices: A Quantile Regression Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 37(4), pages 317-333, November.
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    5. Allen C. Goodman & Masahiro Kawai, 1985. "Length-of-Residence Discounts and Rental Housing Demand: Theory and Evidence," Land Economics, University of Wisconsin Press, vol. 62(2), pages 93-105.
    6. Guasch, J. Luis & Marshall, Robert C., 1987. "A theoretical and empirical analysis of the length of residency discount in the rental housing market," Journal of Urban Economics, Elsevier, vol. 22(3), pages 291-311, November.
    7. Zvi Griliches, 1961. "Hedonic Price Indexes for Automobiles: An Econometric of Quality Change," NBER Chapters, in: The Price Statistics of the Federal Goverment, pages 173-196, National Bureau of Economic Research, Inc.
    8. Barker, David, 2003. "Length of residence discounts, turnover, and demand elasticity. Should long-term tenants pay less than new tenants?," Journal of Housing Economics, Elsevier, vol. 12(1), pages 1-11, March.
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    Cited by:

    1. Davies, Clementine, 2021. "Financialisation and rental housing: A case study of Berlin," IPE Working Papers 153/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Weber, Jan Philip & Lee, Gabriel, . "On the Measure of Private Rental Market Regulation Index and its Effect on Housing Rents: Cross Country Evidence," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 21, August.

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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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