Eviction as Bargaining Failure: Hostility and Misperceptions in the Rental Housing Market

Charlie Rafkin (Massachusetts Institute of Technology)
Wed, Jan 31 2024, 3:30pm - 5:00pm PST
Landau Lucas A

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Court evictions from rental housing are common but could be avoided if landlords and tenants bargained instead. Such evictions are inefficient if they are costlier than bargaining. We test for two potential causes of inefficient eviction — hostile social preferences and misperceptions — by conducting lab-in-the-field experiments in Memphis, Tennessee with 1,808 tenants at risk of eviction and 371 landlords of at-risk tenants. We detect heterogeneous social preferences: 24% of tenants and 15% of landlords exhibit hostility, giving up money to hurt the other in real-stakes Dictator Games, yet more than 50% of both are highly altruistic. Both parties misperceive court or bargaining payoffs in ways that undermine bargaining. Motivated by the possibility of inefficient eviction, we evaluate the Emergency Rental Assistance Program, a prominent policy intervention, and find small impacts on eviction in an event-study design. To quantify the share of evictions that are inefficient, we estimate a bargaining model using the lab-in-the-field and event-study evidence. Due to hostile social preferences and misperceptions, one in four evictions results from inefficient bargaining failure. More than half would be inefficient without altruism. Social preferences weaken policy: participation in emergency rental assistance is selected on social preferences, which attenuates the program’s impacts despite the presence of inefficiency.