Do Owners Take Better Care of Their Housing Than Renters? |
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| Authors: | John Harding Thomas J Miceli CF Sirmans |
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| Institution: | School of Business Administration, University of Connecticut, Storrs, CT 06269.;University of Connecticut. Storrs, CT 06269 or . |
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| Abstract: | According to conventional wisdom, homeowners take better care of their housing than do renters, as a result of the rental externality. We argue that two forms of homeowner externality ootentially create similar incentives for owners to undermaintain their housing. The first is due to the inability of prospective buyers to fully observe past seller maintenance, and the second is a result of the limited liability of borrowers in the event of mortgage default. Empirical analysis verifies the existence of the mortgage externality, but we find no evidence for the resale externality. |
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