The Journal of College and University Student Housing - Volume 41, No. 2 & Volume 42, No. 1 - 91

that they avoid signing contracts with property owners with a large number of claims
ﬁled against them, meaning that students
have a high level of concern not only about the
condition of the apartments, but also about
the property owners. Although asymmetric
information between renters and property
owners potentially induces a "lemon" market
in which the entire group of property owners
ends up offering poor services (Akerlof, 1970),
the present results suggest that providing
information about property owners via the
Claims Record can ameliorate the problem
of a "lemon" market and also reduce the cost
of searching for housing. When renters are
provided with transparent information about
property owners in advance of signing the
contract, they need to spend less time and
effort checking whether the property owner of
housing they are interested in is reliable.

UH. Regarding UHgrad and UHund, all
coefﬁcients were positive and signiﬁcant.
These coefﬁcients show that the rent charged
by University Housing for graduate and undergraduate students is, respectively, about
45% and 130% higher than the rent charged
for housing managed by private property
owners. The coefﬁcient for UHgrad shows
that the university premium for students
living in graduate university housing accounts
for, at a minimum, about 38% (≈0.45/1.45) of
what the students pay University Housing,
implying that an enormous cost associated
with uncertainty is prominent in the housing
market of Urbana-Champaign. When we
interpret this issue from the perspective of
private property owners, the result implies
that they could raise their rent if they could
successfully relieve renters of their concerns

about potential problems and also if students
could search for this housing as easily as for
university housing. From policy makers' point
of view, the rental gap could be minimized by
implementing a policy that would make information about private property owners more
symmetrical, resulting in an efﬁcient housing
market that would beneﬁt both renters and
private property owners. One remedy would
be to standardize the form used for the lease
contract, as proposed by Wenner (1999), in
addition to making the Claims Record available. Another possibility would be to develop
an information infrastructure that would
enable prospective renters to have access to
information that might cause anxiety upon
signing a contract, such as the content of the
lease contract, information about the property
owners, crime records in the neighborhood
of the housing, and the conﬁguration of residences in the building. Generally, international students have difﬁculty adjusting to a new
environment in the United States (Rajapaksa
& Dundes, 2002); consequently, they might
be more willing to pay to protect themselves
against uncertainty compared with domestic
students.10 Considering the fact that many
international students (about 37%, or 4,450
out of 12,239 in the 2012 fall semester) attend
graduate school at the University of Illinois at
Urbana-Champaign, such an information infrastructure would contribute substantially to
efﬁciency in the housing market.

10

In addition, international students are sometimes not eligible
to be renters in off-campus housing or are forced to pay multiple
months of rent as a down payment because they do not have
credit scores or U.S. bank accounts when they ﬁrst arrive in
the United States. University Housing, in general, requires no
deposit or only a small deposit and often can bill the student's
university account.
91
The Journal of College and University Student Housing - Volume 41, No. 2 & Volume 42, No. 1

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