Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2014:23: Transferring Ownership of Public Housing to Existing Tenants: A Mechanism Design Approach

Tommy Andersson (), Lars Ehlers () and Lars-Gunnar Svensson ()
Additional contact information
Tommy Andersson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Lars Ehlers: Département de sciences économiques, Université de Montréal, Postal: Département de sciences économiques, Université de Montréal, Montréal, Québec H3C 3J7, Canada
Lars-Gunnar Svensson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This paper explores the situation when tenants in public houses, in a specific neighborhood, are given the legislated right to buy the houses they live in but 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 (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, the selling prices of the public houses are typically heavily subsidized. The legislating body then faces a trade-off between achieving the goals of the legislation and allocating the houses efficiently. This paper investigates this specific trade-off and identifies an allocation rule that is individual 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 also weakly preferred to the current U.K. system by both the existing tenants and the public authority. Finally, a dynamic process that finds the outcome of the identified rule, in a finite number of steps, is provided.

Keywords: Public housing; existing tenants; equilibrium; minimum equilibrium prices; maximum trade; group non-manipulability; dynamic price process

JEL-codes: C71; C78; D71; D78

29 pages, June 8, 2014

Full text files

wp14_23.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to David Edgerton ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-02-06 14:12:38.