Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/118617
Authors: 
Andersson, Tommy
Ehlers, Lars
Svensson, Lars-Gunnar
Year of Publication: 
2015
Series/Report no.: 
WZB Discussion Paper SP II 2015-207
Abstract: 
This paper explores situations where tenants in public houses, in a specific neighborhood, are given the legislated right to buy the houses they live in or can choose to remain in their houses and pay the regulated rent. This type of legislation has been passed in many European countries in the last 30-35 years (the U.K. Housing Act 1980 is a leading example). The main objective with this type of legislation is to transfer the ownership of the houses from the public authority to the tenants. To achieve this goal, selling prices of the public houses are typically heavily subsidized. The legislating body then faces a tradeoff between achieving the goals of the legislation and allocating the houses efficiently. This paper investigates this specific tradeoff and identifies an allocation rule that is individually rational, equilibrium selecting, and group non-manipulable in a restricted preference domain that contains "almost all" preference profiles. In this restricted domain, the identified rule is the equilibrium selecting rule that transfers the maximum number of ownerships from the public authority to the tenants. This rule is preferred to the current U.K. system by both the existing tenants and the public authority. Finally, a dynamic process for finding the outcome of the identified rule, in a finite number of steps, is provided.
Subjects: 
public housing
existing tenants
equilibrium
minimum equilibrium prices
maximum trade
group non-manipulability
dynamic price process
JEL: 
C71
C78
D71
D78
Document Type: 
Working Paper

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