Why Rent Control Doesn't Work • Hacker News Board

Re: Why Rent Control Doesn't Work

#11

Post by xrd » Mon, Apr 08, 2019, 4:15 AM UTC

This is an interesting conversation. As others have said, this article does indicate rent control works for the renters. What are the arguments about who it doesn't work for? I've heard landlords angry about this kind of thing in Oregon but never heard them complain about the values of their properties skyrocketing. It's human nature to only see the downside. But, is the solution to make these rent controls temporary? Is the big problem, as the article suggests, that the laws don't adapt to the dynamic nature inherent to cities?

Could blockchain solve this?

Joking!

Re: Why Rent Control Doesn't Work

#12

Post by stickfigure » Mon, Apr 08, 2019, 4:19 AM UTC

neilwilson wrote: post #6

Supply side markets work when they defeat the power of hoarding. Pick any market, and if sitting on the item makes you money in the long term, rather than putting it to use then you have a monopoly problem of some sort. For a market to work, it must always be the case that using the item to cause some socially useful economic flow to happen is more profitable than sitting on it, or trading your hoard with other hoard…

Keeping an apartment empty ... should be cripplingly expensive.

It is? I mean, if you owned an apartment that could rent for $3000/mo, then keeping it empty is a direct reduction of your income by $3000/mo.

The problem seems to be that offering an apartment under a rent control regime creates an opportunity cost, so maybe the owner thinks it's worthwhile to "spend" $3k/mo to achieve a future return some other way.

Re: Why Rent Control Doesn't Work

#13

Post by skybrian » Mon, Apr 08, 2019, 4:23 AM UTC

Note that Oregon's new rent control law is at 7% + inflation per year which seems like a very mild restriction and unlikely to cause bad long-term effects?

I would guess this only guards against sudden, extreme increases; eventually, someone on fixed income will have to move somewhere cheaper, but at least they know what's coming and have some time to figure it out.

It seems unlikely these studies say very much about mild rent control.

Re: Why Rent Control Doesn't Work

#14

Post by orangecat » Mon, Apr 08, 2019, 4:27 AM UTC

xrd wrote: post #11

This is an interesting conversation. As others have said, this article does indicate rent control works for the renters. What are the arguments about who it doesn't work for? I've heard landlords angry about this kind of thing in Oregon but never heard them complain about the values of their properties skyrocketing. It's human nature to only see the downside. But, is the solution to make these rent controls temporary…

this article does indicate rent control works for the renters

Current renters. Future renters get locked out.

What are the arguments about who it doesn't work for?

By discouraging development, it creates an environment where the only people who can afford housing are the rent control lottery winners, and the very wealthy who can outbid everyone else for the few remaining units. In other words, San Francisco.

Re: Why Rent Control Doesn't Work

#15

Post by autokad » Mon, Apr 08, 2019, 4:34 AM UTC

deepsun wrote: post #3

Well, economists said similar things before the Great Depression. But market couldn't fix it, so government had to basically redistribute tax money "from rich to poor". Yes, there were mega-projects like Hoover dam, but the main idea was to give poor some money to buy the goods. I don't have opinion on rent control in question, but I can see it as yet another form of redistributing money "from rich to poor". Every si…

capitalism probably was not the cause of the depression, its also worth noting that arguably none of those "from rich to poor" things worked, and arguably it was the end of WW2 that ended it.

i myself am in a rare camp that believe the great depression was caused by a decline in population blip created from ww1/spanish flu. the pattern seems rather consistent, you first have a boom (roaring 20s) followed by a difficult / if not impossible to end depression - like Japan as well. but I'm in a rare camp, so don't take my opinion for a grain of salt.

Re: Why Rent Control Doesn't Work

#16

Post by kungfoodog » Mon, Apr 08, 2019, 4:42 AM UTC

LanceH wrote: post #4

irq11 wrote: post #2

This is a good discussion of rent control, even though the title is unfortunately click-baitey. The great thing about this episode is that it actually does something that most popular discussions of rent control don’t do: it acknowledges that it does work, for the rent controlled people. It also acknowledges that the harms of rent control are smaller, and spread across a large number of people (which is why rent cont…

It does work for those renting. Whether those are who it needs to work for gets greatly distorted as time goes by. The cost is also not widely distributed, but can fall heavily on the property owner.

One anecdotal example of this - my sister, lives in SF, near market in a rent controlled apartment paying ~$2200 for a single bedroom. She is a director at a tech company making high 300k - 400k a year depending on bonus etc - so obviously doesn't need rent control to have a roof over her head. Recently her job moved to South Bay (Palo Alto) but she refuses to move cause she can't let go of the "great deal" in the city. Way I see it - everyone is hurting - she, cause of he horrible commute, but can't let go of the "great deal", someone who probably really deserves that apartment/rent, the landlord, the environment.

I know just one anecdotal example and I am sure there are many other examples on the other side where rent control helps. But to me, it looks like rent control really distorts the market way too much to be an effective solution to the housing crisis.

Re: Why Rent Control Doesn't Work

#17

Post by hindsightbias » Mon, Apr 08, 2019, 4:42 AM UTC

avs733 wrote: post #5

I lost respect for freakonomics and their analysis a while ago. What I used to find pointed and creative I now see as willfully ignoring elemebts of reality to come to some conclusion that is notable mostly for it's faux-contrarian 'creativity.' they, along with Malcolm Gladwell, some take a complex issue...use complexity to dismiss existing reductivist solutions...and then substitute their own equally reductivist co…

They always put the glib in glibertarian.

Particularly liked their take on climate change: “sure it exists, but there’s no way governments can solve the problem - but if we give corporations trillions and trillions of dollars we can engineer a solution”

Re: Why Rent Control Doesn't Work

#18

Post by solatic » Mon, Apr 08, 2019, 4:44 AM UTC

neilwilson wrote: post #6

Supply side markets work when they defeat the power of hoarding. Pick any market, and if sitting on the item makes you money in the long term, rather than putting it to use then you have a monopoly problem of some sort. For a market to work, it must always be the case that using the item to cause some socially useful economic flow to happen is more profitable than sitting on it, or trading your hoard with other hoard…

> Keeping an apartment empty and outside the housing services supply market should be cripplingly expensive.

Jerusalem tried this. Lots of apartments owned by wealthy foreign landlords who only occupy the apartments once or twice a year, if that, on holiday, transforming large sections of the city into ghost neighborhoods.

https://www.timesofisrael.com/jerusalem-ups-ghost-apartment-...

It hasn't worked. Odds are that the tax on empty apartments simply isn't high enough. So the question is, how do you determine the tax rate to make it adequately "crippling" to absentee owners? Should it be some factor of the property's value? Won't matter, it'll be factored in as part of the cost. Should it be some kind of wealth tax? Not really possible, since as foreign owners, most of their wealth is located abroad.

It makes sense on paper but it's fairly difficult to carry out in practice.

Re: Why Rent Control Doesn't Work

#19

Post by ToFundorNot » Mon, Apr 08, 2019, 4:53 AM UTC

skybrian wrote: post #10

neilwilson wrote: post #6

Supply side markets work when they defeat the power of hoarding. Pick any market, and if sitting on the item makes you money in the long term, rather than putting it to use then you have a monopoly problem of some sort. For a market to work, it must always be the case that using the item to cause some socially useful economic flow to happen is more profitable than sitting on it, or trading your hoard with other hoard…

Calling it "hoarding" doesn't seem right unless there are both high vacancy rates and strong demand. How often is that the case?

Currently? at least Vancouver, and possibly Toronto. I don't know about other markets. It's roughly 4.3% of Vancouver's housing stock[1]

Toronto has roughly 23% [2] of its for sale stock vacant, unfortunately there have been no openly published numbers on total vacancies.

[1]https://www.cbc.ca/news/canada/british-columbia/empty-homes-... [2]https://www.narcity.com/ca/on/toronto/news/a-shocking-number...

Re: Why Rent Control Doesn't Work

#20

Post by flukus » Mon, Apr 08, 2019, 5:08 AM UTC

irq11 wrote: post #2

This is a good discussion of rent control, even though the title is unfortunately click-baitey. The great thing about this episode is that it actually does something that most popular discussions of rent control don’t do: it acknowledges that it does work, for the rent controlled people. It also acknowledges that the harms of rent control are smaller, and spread across a large number of people (which is why rent cont…

> it does work, for the rent controlled people

And anyone relying on their labor. If the cost of living goes up for those people then the cost of other things go up. It's in everyone's interest that cheap housing is available (by some means or other), but lately we've all been sacrificing for the literal rent seekers.