An Economic Analysis of Housing Abandonment

Benjamin P. Scafidi, Michael H. Schill, Susan M. Wachter, Dennis P. Culhane

Research output: Contribution to journalArticlepeer-review

45 Scopus citations

Abstract

Landlord abandonment of rental housing has affected many American cities since the 1960's. Because of data limitations, there have been few empirical analyses of the determinants of housing abandonment. In this paper, we use a rich database that contains information on individual residential properties in New York City to estimate a reduced form model of owner abandonment. We model an owner's decision to abandon his or her property as being similar to an investor's decision to exercise a put option on a financial instrument. When required to pay delinquent taxes, a wealth-maximizing landlord has an incentive to cede ownership of his or her residential property when the value of all outstanding liens exceeds the property's market value. Estimates from the model are used to examine whether empirical evidence supports this option model of abandonment.

Original languageEnglish (US)
Pages (from-to)287-303
Number of pages17
JournalJournal of Housing Economics
Volume7
Issue number4
DOIs
StatePublished - Dec 1998

ASJC Scopus subject areas

  • Economics and Econometrics

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