21

Housing is fully an economic good. Demand and supply factors play first order roles on prices and quantity exchanged. It is also a heavily regulated market. The law, in particular in France, is complex, its execution described by the “Code de procédure civile” is even more complex. In this text, we focus on the rental housing market and attempt to rationalize the existence of such regulations by various market imperfections. In a first part, we describe the lenght of litigation procedures between landlords and tenants. In a second part, we study the consequences of such delays under adverse selection: landlords attempt to screen tenants according to their (exogenous) propensity to sustain the rent. In a third part, we consider moral hazard issues, whereby tenants undertake actions affecting their likelihood of defecting on the rent. We conclude on the need for economists to consider asymmetries of information in urban economics and for law scholars willing to defend the Civil Code of French origine, to investigate where economic inefficiencies lie in order to keep its initial spirit. Classification JEL: R52, K41