Apartment Allocation in a Price Regulated Queue Market

Abstract: The issue of a housing shortage is a focal point of Swedish political debate, often in relation to the rental regulation present. This thesis focuses on egalitarianism and self-segregation using a data set covering intermediated rental apartments from the Stockholm Housing Agency 2006--2015. We analyse the allocation of apartment value in a straight queue with partial market rents. The market prices of adjacent housing co-operatives are used to estimate a value for each rental apartment. We then examine how the value is distributed and use the average area income per postal code to show if there is evidence of self-segregation. Our analysis indicates that the rent and queue time are the main factors determining the allocation of apartment value in the housing queue. The regulation gains, estimated by assuming a cost of capital and comparing market value to actual rents, are distributed proportionally to rent and hence to income. Consequently, the allocation is more egalitarian than a pure market, but allocates the greatest gains to the highest income groups. We find weak evidence of self-segregation using average area income and ambiguous results with other measures. The study indicates an efficient allocation with regard to queue time and rent, although there is reason to nuance the egalitarian picture of the rental regulation.