Effects of Market Conditions on Prices and Profits of Rental Housing

by C. Peter Rydell

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Analyzes first-year data from the Housing Assistance Supply Experiment. Market conditions in Brown County, Wisconsin, and St. Joseph County, Indiana, differ sharply, yet tenants' housing costs are about the same. St. Joseph County's housing market is looser than Brown County's but this condition has not resulted in much discounting of the price of housing services. Even if a housing allowance program erased price discounts in loose markets, then, the resulting price increases would be small. However, because rent losses are larger, profits and capital value per unit in St. Joseph County are only two-thirds those for comparable units in Brown County. Housing market conditions thus affect rents only slightly but affect profits greatly.

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