TL;DR version: Rent control keeps overall rents artificially high by disincentivizing new construction.
Correct?
Why Rent Control Doesn't Work
21–30 of 95 posts
Re: Why Rent Control Doesn't Work
#22Supply 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…
Zoning should take into account rental status. So an area can be zoned for primary home ownership or home rental.
Thus if you have your secondary unoccupied residence in that zone, then it would be a zoning violation so you must live in it or rent it out.
Re: Why Rent Control Doesn't Work
#23This 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.
It also discourages downsizing. If you're old and retired, and want to move into a house that's a bit smaller now that your kids have moved out, maybe you can't afford to because it would mean paying more in rent than you do currently. This can exacerbate (or cause) shortages.
Re: Why Rent Control Doesn't Work
#24Supply 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…
Use a land value tax, and update it frequently. If rents are going up in an area, then the land value is increasing and taxes should go up accordingly.
This also removes the disincentives around making property improvements. It makes little sense for cities to penalize people for renovating and improving property.
It also adds healthy competition among landlords/owners and encourages higher density in places where land value & demand is high.
Re: Why Rent Control Doesn't Work
#25* SF: has rent control, prices go up.
* Cambridge: removes rent control, prices go up.
How do you show the causal relationship? Seems like there's constrained housing supply everywhere.
Re: Why Rent Control Doesn't Work
#26Supply 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.
This was one of the key points in the episode: rent control changes this. It's not about the landlords, it's about the tenants.
If you've rented a rent-controlled apartment for a long time, even if it's huge (because you rented it when you had a large family), then it is not cripplingly expensive to hold on to it when your needs change.
It is cheaper, in fact, for you to hold on to your 6 bedroom apartment, though you use just one room, than it would be to swap it for a one bedroom apartment because you'd lose the rent control price. (See the example of Nat Sherman.)
Re: Why Rent Control Doesn't Work
#27Supply 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" $3k/mo to achieve a future return some other way.
Well, airbnb does change that equation.
If your monthly rent in the city is between 500$-2000$/mo, but you could feasibly rent 100$-500$/day, you might opt for the second. This would take the property off the long-term rental market.
Re: Why Rent Control Doesn't Work
#28This 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.
> (...) 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.
I would also add that it also creates the ideal environment for corruption and organized crime, as bribing decision-makers becomes the only way for some to have access to desirable housing. Supply and demand always works, and if those with a higher purchasing power are in the race then their highet offers are extended through side-channels.
Re: Why Rent Control Doesn't Work
#29Supply 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…
I would much prefer a land value tax and relaxation of regulations preventing new construction (in London you can't build in certain areas/over a certain height because of Protected Views [1], which seems utterly bizarre, as if maintaining views is more important than sufficient housing)
Re: Why Rent Control Doesn't Work
#30Supply 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.
" 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."
That depends on the secondary capital effects of the reduction in supply. If you keep that and several other apartments empty in an area then you force up the rents and capital prices on the ones you do let out.
Just like De Beers drip feeding diamonds onto the market, or the Saudis drip feeding oil.