When the tenure of a housing lease contract expires, the Japanese Housing Lease Law obligates the landlord to renew the contract if the tenant so requests. On top of it, the past court rulings allow the landlord to increase the rent only mildly at the contract renewal. It has been considered, therefore, that the Housing Lease Law has been restraining the supply of rental housing, especially those with large floor spaces, even though the Law would not have much effect on those with small floor spaces because their turnover ratio is high.
Recently, a claim was made that Housing Lease Law is not restraining the supply of rental housing because it is observed that the unit rent (the rent per floor space) declines as the size of the floor space increases. This observation, however, may be caused by the fact that smaller houses are located closer to the CBD.
The current study examines the relationship between the floor space and the unit rent after controlling the proximity of each house to the CBD using a micro data for Osaka suburbs.
The result shows that the unit rent and the floor space have a statistically significant, positive relationship.
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