On the optimality of the hybrid tenure mode

In contrast to most studies in the tenure choice literature, our model confronts the agent with a continuum of tenure modes combining homeownership and tenancy. In principle, the hybrid tenure mode contract, while appearing in different forms, may be detected in various real estate markets around the world. In a two-period model with risky rent prices, we thus derive conditions under which the risk-averse asset occupant is inclined to combine the two traditional tenure modes. (C) 1998 Academic Press.