ON THE SUPPLY OF LANDLORD LABOR IN SMALL REAL-ESTATE RENTAL FIRMS

Small real estate rental firms in the United States tend to be employee-owner firms in which the landlord does maintenance and repairs as a part-time job rather than principal-agent firms in which the landlord hires part-time workers. Applying work incentives theory to explain this observation, we find that the difference in incentive compatibility conditions for the two forms of organization provides a bias toward the employee-owner form of organization for sufficiently small-scale operations. By supplying labor to the firm, the landlord avoids transferring economic rents to contract labor, rents that function as incentives for assuring profit-maximizing maintenance effort even when worker productivity is at its lowest.