Information Asymmetry, Regulations, and Equilibrium Outcomes: Theory and Evidence from the Housing Rental Market

Abstract

Housing affordability in the United States is a perennial concern. We explore the role of information asymmetry and regulations on equilibrium outcomes in rental markets to show that while landlords price the cost of regulations into rent, they also invest in tenant screening to alleviate information asymmetry, thus restricting access to rental housing. We are the first to document this additional tenant screening in response to regulations.

Keywords: Rental Market, Landlord Regulations, Information Asymmetry, Tenant Screening, Affordable Housing

JEL Classification: G0, G13, G18, G28, R3, R31, R38