Relationship between market share and rent level: understanding supply structure in the Japanese private rental housing market

• Date: 12 July 2023
• Pages: 25-47
• DOI: https://doi.org/10.1108/IJHMA-03-2023-0037
• Published date: 12 July 2023
• Subject Matter: Property management & built environment,Real estate & property,Housing markets
• Author: Masatomo Suzuki,Chihiro Shimizu

Relationship between market

share and rent level:

understanding supply structure in

the Japanese private rental

housing market

Masatomo Suzuki

School of Data Science, Yokohama City University, Yokohama, Japan, and

Chihiro Shimizu

Graduate School of Social Data Science, Hitotsubashi University,

Tokyo, Japan

Abstract

Purpose –This study aims to investigate the relationship between market share and rent levels to

understandthe supply structure in the Japanese privaterental housing market.

Design/methodology/approach –The study calculates the municipal-level market share of a

dominant rental housing operator in Japan and ascertained the overall market rent and the dominant

operator’s rent premium at the municipal level by using a major web portal’s listing data of rental

houses.

Findings –The study shows that, as market share increased, overall market rent tends to decrease, and

analyzed by marketshare, there is no signif‌icant difference between the rent of the dominant operator and the

overall marketrent.

Practical implications –The results of the study suggest that dominantoperators may have lowered the

rent of their own propertyto prioritize f‌illing vacancies, which, in turn, causesthe overall level of market rent

to decline. This is an outcome of rental housing operators’strategy to maximize long-term rental income

under subleasecontracts with individual owners, whichensures stable rental income for owners regardlessof

the occupationstatus of the apartments.

Originality/value –Previous research on regional monopolies in mortgage sales and brokerage

businesses in the USA implies that rental housing operators in a position of great inf‌luence over the

market can control and keep the market rents at high levels, that is, at large costs for co nsumers. The

f‌indings of the study are novel in showing the inverse relationship in the Japanese private rental

market.

Keywords Japan, Market share, Housing supply, Rental housing market, Cannibalization,

Regional monopoly

Paper type Research paper

The authors would like to thank three anonymous referees, Richard Reed (the editor), Yuta Kuroda

(discussant) and Takeshi So, participants of 2022 Applied Regional Science Conference, and seminar

participants at Hitotsubashi University for their helpful comments and suggestions. The authors

acknowledge Daito Trust Construction Co., Ltd. for their helpful comments and suggestions, as well

as for providing the data. This work gratefully acknowledges the support received from JSPS

KAKENHI Grant Numbers 23K13464, 22H00065, 20K14896 and 20H00082.

Conf‌lict of interest: The authors have no conf‌licts of interest to declare.

Japanese

private rental

housing

market

25

Received17 March 2023

Revised14 June 2023

Accepted17 June 2023

InternationalJournal of Housing

Marketsand Analysis

Vol.18 No. 1, 2025

pp. 25-47

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-03-2023-0037

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1753-8270.htm

Introduction

An understanding of the supply structure in the rental housing market is important,

especially in the shrinking demandphase that results from declining and aging populations.

It is a common cause that prices (and rents) fall when there is an oversupply, since the

increased competition results in housing providers vying with each other to f‌ill in the

durable housing (Glaeser and Gyourko, 2005)[1]. This challenge may not be solved by

merely adjusting prices (or rents) and by the natural vacancy rate, the latter of which

indicates a region-specif‌ictime required for a buyer and a seller (or an owner and a tenant) to

have a successful match between them (Eubank and Sirmans, 1979;Hagen and Hansen,

2010;Hwang and Quigley, 2006;Rosen and Smith, 1983). As the degree of oversupply

becomes severe, unsold housing emerges (Ciaramella and Celani, 2014), and existing

housing providers leavethe housing market (Goodman, 2013;Molloy, 2016). The oversupply

of housing makes the marketless viable.

To better understand the mechanism of oversupply in the rental housing market, it is

necessary to look at the cumulative supply for each“rental housing operator”who manages

multiple rental housing units. There is a market-induced upper limit for the demand for

rental units from any given operator,as properties are marketed through the brand names of

rental houses. Rental houses have varied levels of quality and characteristics, which

determine which rental house a potential client may approach. If a dominant operator’s

properties are oversupplied in a region, rent levels may fall, whichmay cause a decrease in

rent levels for the overall rental housing market in the region. This aspect has been little

investigated so far in the rentalhousing market.

This study newly investigates the relationship between market share andrent levels in

the Japanese private rental housing market. Under sublease contracts with individual

owners, which ensure a stable rentalincome for owners regardless of the vacancy status of

the apartments, rental housing operators set rents for each property with a view to

maximizing long-term rental income. Focusing on the municipal-level market share of the

large rental housing operatorsin Japan, the study shows that:

as market share increased, overall market rent tended to decrease; and

analyzed by market share, there was no difference in rent levels between those of

the dominant operator and the overall market.

This suggests that dominant operatorsmay have lowered the rent of their own properties to

prioritize f‌illingvacancies, which, in turn, causes the overall market rent to decline.

Previous research on regionalmonopolies in mortgage sales and brokerage businessesin

the USA (Ambrose and Conklin, 2014;Ganand Riddiough, 2008) implies that rental housing

operators in a position of great inf‌luence over the market can control and keep the market

rents at high levels; that is, they induce large costs for consumers.The f‌indings of the study

are novel in showing the inverserelationship in the Japanese private rental market.

The remainder of this paper is organized as follows. Section 2 reviews the previous

literature. Section 3 presents the study’sconceptual framework. Section 4 describes the data

set used in this study. Section 5 documents the summary statistics and spatial distribution

of the key variables. Section 6 describes the empirical strategy, and Section 7 presents our

empirical results. Section8 discusses the implications of the results, and Section 9 concludes

the paper.

Literature review

While the bargaining powerof individual sellers in the housing market has been thoroughly

investigated (Harding et al.,2003), there is a dearth of knowledge on the regional-level

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