Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2015:12: Transferring Ownership of Public Housing to Existing Tenants: A Market 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: 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 a housing market with an existing tenant in each house and where the existing tenants initially rent their houses. The idea is to identify equilibrium prices for the housing market given the prerequisite that a tenant can buy any house on the housing market, including the one that he currently is possessing, or continue renting the house he currently is occupying. The main contribution is the identification of an individually rational, equilibrium selecting, and group non-manipulable price mechanism in a restricted preference domain that contains almost all preference profiles. In this restricted domain, the identified mechanism is the equilibrium selecting mechanism that transfers the maximum number of ownerships to the existing tenants. We also argue that the theoretical model represents an extension and an improvement of the U.K. Housing Act 1980 whose main objective is to transfer the ownership of the houses to the existing tenants.

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

JEL-codes: C71; C78; D71; D78

34 pages, April 24, 2015

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