Japanese Housing Tenure Choice and Welfare Implications after the Revision of the Tenant Protection Law |
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Authors: | Miki Seko Kazuto Sumita |
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Institution: | (1) Faculty of Economics, Keio University, 2-15-45 Mita, Minato-ku Tokyo, 108-8345, Japan;(2) Department of Economics, Kanazawa Seiryo University, Kanazawa-shi Ishikawa, 920-8620, Japan |
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Abstract: | A new mode of housing tenure in Japan, rental housing with fixed rental terms, was introduced in March 2000 with the revision
of the Japanese Tenant Protection Law. This paper examines the implications of this new system by analyzing the determinants
of the choices by households among the three types of housing tenure in Japan: owned housing, general rental housing, and
rental housing with fixed rental terms, and calculates the estimated compensating variation. Our micro-data is based on the
three waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) covering all of Japan. The difference
between general rental housing and rental housing with fixed rental terms is reflected in the length of the contract term
and the level of rent. We carefully eliminate potential sample selection bias introduced to the conditional logit housing
tenure choice model through the estimation of the hedonic price regression of each housing tenure alternative. We find that
households with a smaller number of family members, those who moved from outside the local housing market, those headed by
an unmarried household head, and those with plans to own a house in the near future tend to select rental housing with fixed
rental terms. The estimated mean compensating variation by introducing rental housing with fixed rental terms for all households
selecting that tenure is 1,205 JPY per month or 1.96% of their monthly rent. Moreover, younger and/or lower income households
derived the greatest benefit from the revised law in the form of lower rents.
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Keywords: | Housing tenure choice Rental housing Rent control Japan and deregulation Conditional logit Sample selection bias Compensating variation |
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