Effects of the COVID-19 pandemic and the war in Ukraine on the local housing rental market in Poland

Abstract

The COVID-19 pandemic that started in early 2020 and the Russian invasion of Ukraine in February 2022 caused multidimensional shocks to the housing market. Understanding their micro-level impact is crucial to optimizing future responses to similar shocks, designing sustainable urban and socio-economic policies, and investing. Based on the hedonic Spatial Error Model for the local housing rental market in Poland, during the pandemic, the valuation of the leisure-related apartment characteristics (the availability of a balcony and a private garden) increased. As tenants spent more time at home or in their neighbourhood, the proximity of housing to green areas became increasingly important, and the relevance of proximity to university buildings decreased. Then, amidst the war, a reluctance to use gas heating has been noticed. Combined with the observed price premium for the location of apartments in revitalised tenement houses, this means that the modernisation of the historic housing stock is not only ecologically desired, but also is capitalised in the achieved rents. The rent change throughout the pandemic has been estimated at -6.7%, while during the war-related crisis, at +29.7%. Finally, low sensitivity of hedonic rent indices to the detected changes in rent-setting factors has been found.