Must Agreements Be Kept? Residential Leases During Covid-19

Abstract

We study residential lease payments during the COVID-19 pandemic. A survey of Israeli renters shows that nearly one-in-eight did not pay full rent during the first lockdown in March-April 2020. These households held back two-thirds of their contractually due rent on average. Financially fragile households with large income cuts withheld a greater share. Both formal and relational aspects of the landlord-tenant relationship affected payments: tenants paid more of their rent if their leases included formal provisions against non-payment, and less if they had strong relationships with their landlords. We use bargaining and relational contracts theories to explain our findings.