Working Paper: CEPR ID: DP15102
Authors: David Genesove; Itai Ater; Eran Hoffmann; Yael Elster
Abstract: This paper studies how a Covid-19 lockdown affected residential lease payments. Survey data on 1511 Israeli renter households show nearly one in eight households not paying full rent during the lockdown, with these households holding back, on average, a third of their contractually due rent. Financially fragile households with greater income cuts, and households with leases lacking provisions that effectively provide for damages upon non-payment pay a lower share of contract rent. So do households with more frequent encounters with their landlord, or longer tenure in the apartment. Bargaining and relational contracts theories help explain these results.
Keywords: COVID-19; Bargaining; Contract Renegotiation; Rental; Relational Contracts
JEL Codes: D86; C7; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Financial fragility (F65) | reduced rent payments (R21) |
| Income cuts (H53) | reduced rent payments (R21) |
| Financial fragility + income cuts (F65) | additional reduced rent payments (R21) |
| Contractual guarantees (L14) | greater share of rent paid (D33) |
| Longer tenure and frequent interactions with landlords (R21) | lower rent payments (R21) |