This paper presents the theoretical and empirical bases for the performance of the U.S. rental market during the 1970–1994 period. On the theoretical side is a renter maximization problem using a state dependent, intertemporal, discrete choice utility function with constraints relating to budget, credit, FHA, tax, and demand. On the empirical side are several statistical specifications to examine the rental market performance. We have specified a single equation model to capture the effects of FHA's participation, tax policies, and financial problems in that period. We then proceeded to examine the model's sensitivity within the disequilibrium environment of Fair, (1972, 1974) and the equilibrium environment of Maisel (1963, 1965). We also examined the results from the rational expectation point of view that was developed to explain anomalous predictions in that period. We found that the results do not reject the hypotheses that spurious tax policies, lower FHA's participation, and capital and credit problems have significantly influenced the decline of the rental housing production during the time period.
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