PUBLIC HOUSING RENT DEFAULT: A TRAJECTORY OF RATIONAL CHOICE AND BOUNDED RATIONALITY

Michael N. Elonge, University of Maryland, College Park, Maryland, U.S.A.

Published in

JOURNAL OF INTERNATIONAL FINANCE STUDIES
Volume 18, Issue 2, p35-42, October 2018

ABSTRACT

Unlike fair market rent, public housing rent is subsidized by governments to make housing affordable to most limited income families. Since subsidized housing does not imply free rent, it is therefore a rational choice for public housing tenants to allocate the appropriate share of their income to pay their rent consistently to avoid rent default and possibly, eviction. Eviction from public housing could ultimately lead tenants to nowhere or at best into homeless shelters. This study argues that rent default is a misnomer of rational choice and that, there could be bounded rationality in the rational choice of tenants to pay rent that accounts for rent default despite the rent subsidy. To authenticate this argument, this study engaged public housing residents at risk of rent default and examined other related variables such as tenants’ attitude towards public housing, knowledge of personal finance, and basic economics, as a function in the decision to pay rent. The study employs multiple regression analysis to assert that these related variables are evident of bounded rationality in public housing rent debacle, and are significant to rent payment. The implication of this study is multidimensional and adds value not just to public housing tenants, but as well as to public housing stakeholders.

Keywords

Public housing rent default, rational choice, bounded rationality, tenant attitude, finance, and economics


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