To capitalise or not to capitalise? Public agencies versus urban residents

Abstract

In recent decades, urban residents in various countries have faced the dilemma of whether to accept offers, made by public authorities’ agencies, to increase their property rights in the housing units in which they live or to maintain their existing status and pay higher annual fees. These offers, involving a broad range of housing ownership policies, have often met with indifference or only marginal acceptance. In this paper we analyse the factors that seem to underlie the tenants’ (or lessees’) preferences and the housing authorities’ proposals. To explain the results we use a sequential game approach, in which the two sides, the lessees and the authorities, base their decisions on their respective payoffs and the response of the other party. The data regarding the acceptance or rejection of the authorities’ proposals are from the Israeli housing market, where fees and property rights are the key variables.