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Why Rent Control Doesn't Work

freakonomics.com

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Re: Why Rent Control Doesn't Work

#61

Post by brianwawok »

bradleyjg wrote: post #59
brianwawok wrote: post #58

Earlier quoted context omitted.

What happened to all the landlords who owned a building when rent controlled was first introduced? Most got stuck with a huge future loss. Seems weird to subsidize one side but not the other.

They are long dead. How does it make any sense to give a windfall to a group of owners far removed in time and ownership to “balance” that?

That's not my argument ;) My argument is that is why you don't give landlords a one time cash payment when you end rent control. You are making someones property worth MORE, paying them is giving them a double win.

Re: Why Rent Control Doesn't Work

#62

Post by JetSpiegel »

pizzazzaro wrote: post #35
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 SO…

> Also, can we please limit our housing to humans and just banks that exist in our country?

I would argue at least in cities this would solve most problems. Humans must be either the owners or the tenants, and banks must put all their houses on the market within 1 year of a ownership/tenancy change, or face expropriation.

Re: Why Rent Control Doesn't Work

#63

Post by pixl97 »

esotericn wrote: post #60
MsMowz wrote: post #55

Earlier quoted context omitted.

That's not a popular opinion because it's functionally the same as saying only the people who can afford to buy a home or enter a long-term lease should have access to affordable, stable housing. Since politics is about who gets what, and since most people don't have much in terms of savings or leverage, it's in the interest of most people to oppose your viewpoint because it's against their interests. It's only emoti…

Yes, only people who can afford to enter into a long term lease have access to stable housing. There is no "should" here. It's definitional. That's literally what a long lease is, as opposed to a short lease. > It's only emotional pandering if you don't think politics should be a useful instrument to people without money. It's emotional pandering because it's devoid of actual logic. You've injected the 'people withou…

>The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.

One should realize that politics can be used to cement long terms societal stability, and not just make one rich as fast as possible.

Re: Why Rent Control Doesn't Work

#64

Post by scarface74 »

flukus wrote: post #56
scarface74 wrote: post #52

Earlier quoted context omitted.

Or both businesses and employees could move to other parts of the country where it is cheaper.

An leave everyone else without local goods and services? It would make sense for software shops to move, but the grocery store and the people stacking it's shelves need to be where the population is.

As people left, the cost of housing would come down as demand decreased. If people owning the stores saw they couldn’t make a profit there, they would not open businesses.

People wanting the goods and services wouldn’t be happy with what is available and they would leave.

Re: Why Rent Control Doesn't Work

#65

Post by Retra »

esotericn wrote: post #60
MsMowz wrote: post #55

Earlier quoted context omitted.

That's not a popular opinion because it's functionally the same as saying only the people who can afford to buy a home or enter a long-term lease should have access to affordable, stable housing. Since politics is about who gets what, and since most people don't have much in terms of savings or leverage, it's in the interest of most people to oppose your viewpoint because it's against their interests. It's only emoti…

Yes, only people who can afford to enter into a long term lease have access to stable housing. There is no "should" here. It's definitional. That's literally what a long lease is, as opposed to a short lease. > It's only emotional pandering if you don't think politics should be a useful instrument to people without money. It's emotional pandering because it's devoid of actual logic. You've injected the 'people withou…

Leases are only a mechanism for achieving housing. People will need homes for the rest of their lives, so the length of the lease is not 'definitional' for establishing anything. The length of the lease is only the length of a commitment to living in some particular place. The overall housing still needs to remain affordable in aggregate, and that doesn't happen if everyone is expecting rent to increase after their lease lapses.

Moreover, moving is expensive and can take months of planning. If rent prices rise beyond affordability, you're pushing a heavy burden on your tenants, and landlords should have an obligation to exercise that power responsibly.

Re: Why Rent Control Doesn't Work

#66

Post by hackeraccount »

Rent control is government setting the price on a good. I've always thought that price is metadata about a good or a service. Changing the price doesn't change that reality - it just hides it.

If the rent is too high why not just give people money and let them spend it on rent? That's probably idiotic but it makes more sense to me then telling the people renting out units that they have to charge a certain amount. At least in this case you still have a price signal - though if you toss money like it's nothing at a problem you tend to get inflation especially if you give people money and tell them they have to spend it on a single good.

A better fix is to increase the supply of housing and to the extent it's possible lower the fixed costs for building. If there's more of it the price will go down. I understand the argument that says "If we let them build more they'll only build for rich people" Sure. My answer to that is let them build more. It will take time but eventually the supply of units for non rich people will increase and when it does the price will go down.

That's all easy to say but I doubt any of that will happen.

Re: Why Rent Control Doesn't Work

#67

Post by esotericn »

pixl97 wrote: post #63
esotericn wrote: post #60

Earlier quoted context omitted.

Yes, only people who can afford to enter into a long term lease have access to stable housing. There is no "should" here. It's definitional. That's literally what a long lease is, as opposed to a short lease. > It's only emotional pandering if you don't think politics should be a useful instrument to people without money. It's emotional pandering because it's devoid of actual logic. You've injected the 'people withou…

>The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread. One should realize that politics can be used to cement long terms societal stability, and not just make one rich as fast as possible.

Sure.

It can't make a short term lease a long term lease though.

You can, of course, eliminate or curtail short term leases.

Whether such a thing is preferable is up for question.

Re: Why Rent Control Doesn't Work

#68

Post by pzone »

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…

What is the point here? Pointing out the damaging and paradoxical effects of rent control is mainstream economic fare, not contrarian or particularly creative.

Re: Why Rent Control Doesn't Work

#69

Post by avar »

rzwitserloot wrote: post #42
alexgmcm wrote: post #29

Earlier quoted context omitted.

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

Protected view is an oversimplification. As in, whilst the law names, and officially only ensures protected views, the actual effects of that law go a little further than that and I bet plenty in the law making profession are aware of this, but feel that the law as is is sufficient. Specifically: The protected view law reduces crowding. Without it, the # of folks living per square kilometer in London would be higher…

It is a stupid way to achieve the goal because if you're legitimately trying to mitigate other specific things you could tax for those things. E.g. for one example you mentioned allow new development, but set trash disposal fees at some absurd amount.

It also assumes a zero-sum economy. Once you have more population density you have more of a tax base to pay for all those things, and some fixed costs go down as density goes up.

The claim that public transit of all things is going to get worse with higher density is, frankly, ridiculous. If it really persists as a problem you can use the extra money from the new tax base to bring in urban planners from Tokyo.

> I have no solutions[...]

I have one to address NIMBY-ism everywhere: We say sure, you can have "protected views" or whatever, but then you need to pay market value for those things.

We'll see how long that lasts when people need to pay out of pocket for the opportunity cost of not constructing a skyscraper just to occasionally enjoy the view, as opposed to incumbents getting to vote for "free" and getting the direct benefit of their property values rising.

Re: Why Rent Control Doesn't Work

#70

Post by dv_dt »

rahimnathwani wrote: post #45
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…

"I can see it as yet another form of redistributing money "from rich to poor" Except that rent control is not usually means tested. If you've lived in a rent-controlled apartment in SF for 10 years, and worked as a software engineer all that time, you might choose to stay put even if you buy an apartment. You can pay rent at slightly above prices from 10 years ago, and receive market rent on your new place.

Sure, but the same thing happens to landlords. If they can afford the buy in, then they keep their properties and charge as high a rent as possible. Usually you find landlords slowly expand their holdings over time, and if your city can't support enough private buyers, then it becomes predominantly landlord owned and there are no affordable places anywhere.

So the question becomes, if not rent control, then what do we do to keep our cities livable to a range of people?

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