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Rental Housing Markets, the Incidence and Duration of Vacancy, and the Natural Vacancy Rate

Stuart A. Gabriel and Frank E. Nothaft
New intermetropolitan and time-series data from the BLS are used to derive and model the incidence and the duration of rental vacancies and to assess the importance of those indicators to the price adjustment mechanism for rental housing. Research findings indicate that the duration of vacancy varies with measures of MSA housing costs and housing stock heterogeneity; in contrast, the incidence of vacancy varies directly with measures of population mobility, presence of public housing units, and population growth. Results support a more general specification of rental price adjustment in which the rate of real rent change reflects deviations in observed vacancy incidence and duration from their equilibrium levels. Based on this innovation, the research provides new estimates of equilibrium vacancy rates for a large set of metropolitan areas over the 1987-1996 period.