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Why Rent Control Doesn't Work

freakonomics.com

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Re: Why Rent Control Doesn't Work

#31

Post by around_here »

kungfoodog wrote: post #16
LanceH wrote: post #4

Earlier quoted context omitted.

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 ci…

She leaves, and some also wealthy person gets to pay way more for it. The also wealthy landlord gets to get way too much for it. I'm happier to watch the owners of capital hurt for it.

Decommodify housing. Full stop, no rents. Housing by need.

Re: Why Rent Control Doesn't Work

#32

Post by bhl »

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…

You're onto something. The thing that got the United States out of the Great Depression and into 20 years of prosperity between mid 1940s and late 1960s was the Federal government's massive involvement in the economy, mainly during World War 2 and afterwards.

Surprisingly, Roosevelt's attempt to boost the economy with public works in the 1930s didn't help much. If you look at charts around this time, economic inequality was decreasing and the median wage was growing linearly with productivity. It was also during this time that rent control was implemented as a public policy (mentioned in the podcast).

Re: Why Rent Control Doesn't Work

#33

Post by imtringued »

skybrian wrote: post #13

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…

It would definitively have better outcomes but I don't think it would be politically acceptable. 7% means doubling rent every 10 years. Building more housing within those 10 years to prevent excessive increases in rent is certainly possible but will it actually happen? The type of government that uses rent control doesn't actually want to take it's medicine (more housing). They just want a quick win even if it causes problems over the long term.

Re: Why Rent Control Doesn't Work

#34

Post by imtringued »

memoir2comment wrote: post #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.

Why look at the price rather than the population/housing capacity growth? If you have housing for 500000 residents and 600000 looking for housing or living in the city then prices will go up simply because demand outstrips supply as you said. The demand probably grows every single year.

Rent goes up because people can afford it, so this is actually not a problem that needs to be solved. What needs to be solved is the fact that 100000 people cannot find a place in the city at all. No matter how low or high the price of rent is, you will always have a shortage of 100000 units if you're not increasing the supply.

Re: Why Rent Control Doesn't Work

#35

Post by pizzazzaro »

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…

In spite of their crutch upon Freidman-ite economics, this is one of those rare cases where Chicago boys rely on all the evidence rather than cherry-picking and thus turning a potential hard-science into BS.

A more ideal solution is to add subsidized competition. Remember how all the Republicans were railing about Obamacare's public option, about how no competition for that could ever make money? Well, force these SOBs to get creative.

Also, can we please limit our housing to humans and just banks that exist in our country? And not imvestment banks? Im getting tired of trying to buy a house, only to find some Israeli, European, Chinese, etc bank bought it, - or Bear Stearns - and will bring it back to market in 6 months at a 30% price increase for the effort of mowing the lawn.

Or worse, if that investment bank buys an apartment building or old hotel. They'll just "renovate" mostly with paint, start up a building management company, add in bougie things like concierge services, and then try to charge double the market rate.

If my future home is your investment property? I see very clearly how much you're making off me. And I'm considering other options purely out of spite.

Re: Why Rent Control Doesn't Work

#37

Post by JamesBarney »

neilwilson wrote: post #30
stickfigure wrote: post #12

Earlier quoted context omitted.

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 Saud…

This is just a description of a normal Monopoly which I think is pretty rare in housing because I never hear about it.

Re: Why Rent Control Doesn't Work

#38

Post by ukoki »

alexgmcm wrote: post #29
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…

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) [1] https://en.wikipedia.org/wiki/Protected_view

How about just taxing the profits of house sales exorbitantly? Eg 70% tax on profits of house sales unless you are a UK resident and it's your only home. This way it's still worth buying housing with the intention of leasing it, but buying housing just to sit on it will be drastically less profitably.

Re: Why Rent Control Doesn't Work

#39

Post by fenk85 »

around_here wrote: post #31
kungfoodog wrote: post #16

Earlier quoted context omitted.

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 ci…

She leaves, and some also wealthy person gets to pay way more for it. The also wealthy landlord gets to get way too much for it. I'm happier to watch the owners of capital hurt for it. Decommodify housing. Full stop, no rents. Housing by need.

I recommend you take a trip to any Russia (ex Soviet city)

Re: Why Rent Control Doesn't Work

#40

Post by izacus »

alexgmcm wrote: post #29
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…

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) [1] https://en.wikipedia.org/wiki/Protected_view

How is that sustainable though? This means destroying more environment by building essentially empty spaces and forcing more and more people to drive longer distances to reach cities.
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