We review the existing literature on the causes of vacancies in the housing market. First, we present a detailed overview of theoretical approaches that may explain the mechanisms causing vacancies under the assumptions of a standard market model, the search and matching theory and behavioral economics. Concerning the latter, we propose a new framework to explain vacancies in the housing market in the context of prospect theory which could be extended by future research. Second, we formulate hypotheses based on these theories regarding the causes and the extent of vacancies. Third, we evaluate the validity of the hypotheses by referring to the existing empirical literature while comparing the data, samples and methods employed in the various studies. The main findings of our literature review are (1) that there is considerable room to extend existing theoretical models and (2) that some hypotheses have either been investigated by the empirical literature only to a limited degree or have not been investigated at all. We also suggest that (3) a social welfare analysis that takes the specific type of vacancy into account is highly relevant for housing policy decisions.
Search frictions matching prospect theory real estates housing vacancy