The welfare effects of eviction policies

This paper studies the implications of rental market policies that address evictions and homelessness. Policies that make it harder to evict delinquent tenants, for example by providing tax-funded legal counsel in eviction cases (“Right-to-Counsel”) or by instating eviction moratoria, imply eviction and homelessness are less likely given default. But higher default costs to landlords lead to higher equilibrium rents and lower housing supply. I quantify these tradeoffs in a model of rental markets in a city, matched to micro data on rents and evictions as well as shocks to income and family structure. I find that “Right-to-Counsel” drives up rents so much that homelessness increases by 15% and welfare is dampened. Since defaults on rent are driven by persistent income shocks, stronger protections are ineffective in preventing evictions of delinquent tenants, and lead to a large increase in default premia. In contrast, rental assistance lowers renters’ default risk and as a result reduces homelessness by 45% and evictions by 75%, and increases welfare. Eviction moratoria can prevent a spike in evictions following a rare economic downturn, as long as they are used as a temporary measure.

Here is the paper, that is by Boaz Abramson, who is currently on the job market from Stanford.