Thomas Bézy

« Who’s your landlord? Assortative matching and heterogeneous returns in rental markets »

Abstract:

Housing returns exhibit a high degree of unexplained heterogeneity across units. Using a nationwide data set containing administrative information on linked renters and owners for 4.5 million private rental dwellings in France, we document heterogeneous returns on the rental market across levels of landlord income. By including landlords’ characteristics, we are able to explain 90% of the heterogeneity in rental returns. In addition, we find that high-income landlords invest in locations with lower rental returns and lower non-payment risk. As they also invest in locations with higher price appreciation, gross total returns are relatively flat along the income distribution. We explain these findings by a novel theory of rental housing assignment, implying assortative matching between tenants’ and landlords’ incomes. These results have implications for the measurement of inequality and the incidence of housing market policies.