Estimation and policy implications of rental housing demand

The demand for rental housing using the Annual Housing Survey SMSA sample for 1977 is estimated. The principal determinants of rental housing demand, namely housing price and permanent/transitory income, are computed through spatially varying hedonic price techniques and instrumental variables methods (relating to human and nonhuman capital), respectively. Based on the demand estimation results, impacts of hypothetical cash and rent subsidy programs are analyzed in terms of “housing” and “welfare” effects. It is found that a rent subsidy achieves considerably larger effects than does a cash subsidy.