Financing Constraints and Maintenance Investments: Evidence from Apartments

Seltzer, Lee

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Financing Constraints and Maintenance Investments: Evidence from Apartments

Abstract: This paper studies whether renters bear the costs of building financing constraints in the form of reduced maintenance. Using a novel data set combining housing code violations from forty-five U.S. cities with apartment financing information, I show more financially constrained buildings incur more code violations. I then exploit a natural experiment, effectively reducing financial resources for some New York City rent-stabilized buildings. Following the shock, code violations increase for affected buildings relative to controls, and the effect is concentrated among more financially constrained buildings. The results are consistent with financing constraints reducing maintenance.

Keywords: corporate finance; commercial real estate; housing code violations;

JEL Classification: G3; G31; R30;