Camilo Pérez, PUC Chile

Paper: Monetary Policy and Heterogeneous Responses in Rental Housing Markets

Abstract: This paper develops a theoretical framework to rationalize new empirical evidence on the heterogeneous effects of monetary policy on rental housing markets in Chile. Building on Pérez (2026), which shows that contractionary monetary policy shocks reduce house prices while increasing rents and rental housing income—thereby benefiting landlords and contributing to higher income inequality—I focus on a novel stylized fact: rental prices rise in low- and middle-income areas but decline in high-income areas. To explain this pattern, I develop an extended Two-Agent New Keynesian (TANK) model of the housing and rental market, building on Dias and Duarte (2022), which segments the housing market by quality and models borrowers’ tenure choice—owning or renting in either the low- or high-quality segment—within a multinomial logit framework. Combined with quality-differentiated collateral constraints and nominal rent rigidities, the model generates endogenous demand reallocation: contractionary shocks tighten borrowing capacity, pushing households toward low-quality rental housing and raising rents in lower-income segments, while leaving high-quality rents unchanged or declining. These mechanisms highlight the role of housing market segmentation in the transmission of monetary policy.