This paper considers two tenure modes—owner- and renter-occupied housing—and models the effect of the rental externality and tenure security on single-family housing quality. We show that both rental externality and tenure security reduce renter-occupied housing quality when the user’s utilization, which reduces the quality of the accommodation, and the owner’s maintenance, which raises quality, are substitutes. Using singlefamily housing data in Japan, we obtain empirical results that are consistent with theoretical predictions. These results indicate that conventional wisdom—that the quality of renter-occupied housing is lower than that of owner-occupied housing—is supported for single-family housing in Japan.
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