Expectations, Intermediaries, and the Term Structure of Rental Housing Supply

61 Pages Posted: 6 Apr 2022 Last revised: 9 May 2022

See all articles by Jiayin Hu

Jiayin Hu

Peking University - National School of Development (NSD); Peking University - China Center for Economic Research (CCER)

Shangchen Li

Guanghua School of Management, Peking University

Yingguang (Conson) Zhang

Peking University - Department of Finance, Guanghua School of Management

Zheng Zhang

Peking University - Department of Finance, Guanghua School of Management

Date Written: March 17, 2022

Abstract

Housing decisions depend critically on the supply of long-term rental housing, yet surprisingly few studies examine the determinants of this supply. Based on term structure theories of asset prices and extrapolative beliefs, we hypothesize that housing market conditions shape the term structure of rental supply. Using unique contract-level data between landlords, tenants, and a large rental agency in China, we show that growth in home prices, transaction volume, and rent significantly inhibit the supply of longer-term rental housing. Rental agencies increase this supply by financing renovation. Our findings uncover a cross-market spillover mechanism that affects housing stability, which can be generalized to understand the determinants of long-term capital supply.

Keywords: Rental housing, housing price, intermediary, extrapolation, expectation, housing stability

JEL Classification: G12, G21, G23, L85, R31, R38

Suggested Citation

Hu, Jiayin and Li, Shangchen and Zhang, Yingguang and Zhang, Zheng, Expectations, Intermediaries, and the Term Structure of Rental Housing Supply (March 17, 2022). Available at SSRN: https://ssrn.com/abstract=4060219 or http://dx.doi.org/10.2139/ssrn.4060219

Jiayin Hu

Peking University - National School of Development (NSD) ( email )

5 Yiheyuan Rd
Beijing, China 100871

HOME PAGE: http://nsd.pku.edu.cn/szdw/qzjs/h/496603.htm

Peking University - China Center for Economic Research (CCER)

5 Yiheyuan Rd
Beijing, China 100871

Shangchen Li

Guanghua School of Management, Peking University ( email )

Yingguang Zhang (Contact Author)

Peking University - Department of Finance, Guanghua School of Management ( email )

Beijing, Beijing 100871
China

Zheng Zhang

Peking University - Department of Finance, Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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