Tenants’ rents are remarkably sticky even though regular recontracting would suggest substantial rent flexibility. In addition, rent stickiness varies significantly across structures such as detached units and large apartment. We offer the first theoretical explanation of rent stickiness that is consistent with these two facts. In this theory, search and bargaining with incomplete information generates stickiness in the absence of menu costs or other commonly used modeling assumptions.
This paper provides estimates of the net depreciation rate for rental housing using a unique confidential data set from the Bureau of Labor Statistics that covers over 30,000 rental units from 1998 to 2009. Our data and econometric approach allow us to add to the literature in three main ways.