Beyond DiPasquale–Wheaton: The Renter-Occupied Housing (ROH) Model

The classical DiPasquale–Wheaton model has long served as a fundamental framework in real estate economics. However, its implicit assumption of market homogeneity limits its application to the renter-occupied housing market. This paper addresses this structural gap. It introduces a novel conceptual architecture. The model theoretically separates tenants’ pure consumption demand from capital owners’ investment demand. The predictions of the model are confronted with Polish metropolitan data from 2007 to 2025 in a case study of an exogenous demand shock: the influx of refugees from Ukraine in March 2022. The evidence is descriptive and does not claim causal identification. The observed pattern is consistent with the model: a sharp one-off rise in rents was accompanied by a sharp fall in new rental offers, after which nominal rents stabilised, as would be expected if rental demand met an income-based affordability barrier and the market moved from price clearing towards quantity rationing. The model postulates that capitalisation rates are endogenous under conditions of extreme market stress. It also introduces a housing stock leak index alongside a supply allocation parameter. These variables capture structural allocation inefficiencies that may explain why growth in the aggregate housing stock often fails to improve rental housing availability. The ROH model provides an analytical framework for researchers and public policy makers. It indicates that stimulating investment demand without addressing income barriers and physical stock leakage may lead mainly to asset price inflation and deepen housing exclusion. A rigorous test of the income ceiling is left for further research.