Neighbourhood rental market integration and private rent trajectories – evidence from the city of Vienna

Abstract

The urban housing regime in Vienna is often regarded as one of the last integrated rental markets once described by Kemeny. Thus, according to the theory, private landlords should be forced to charge lower rents due to direct competition from the social sector. This paper formally tests this hypothesis on a very local level by linking private rent trajectories across Viennese subdistricts to their housing market structure while controlling for possible effects of location, initial prices and socioeconomic variation. Indeed significant evidence for a price dampening effect is found, as higher shares of limited-profit housing within the local rental market substantially increase the probability of a subdistrict joining a lower rent development path. However, the magnitude of the effect increases considerably for more peripheral locations associated to less demand pressure. A similar relationship is found for municipal housing, but with much lower impact, most likely due to comparatively stronger entry barriers. Thus this paper concludes a price dampening neighbourhood effect which varies with the openness of the social housing supply and the centrality of the location.