At the same time german tax office will give you trouble if you don't make enough profit as a landlord.
Source? Btw, landlords will be able to apply for excemptions, if it is necessary.
Berlin approves 5-year rent freeze
121–130 of 594 posts
Re: Berlin approves 5-year rent freeze
#122Earlier quoted context omitted.
Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply. Make other places more attractive or increase the supply available in this location.
> Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply. Greed is bad in this situation because you can make more money of luxury apartments than those suitable for people who are somewhere between the poverty line and upper middle class. Hence new apartments in major cities tend to be more and more expensive to satisfy the demand of wealthier people. Greed is also bad wh…
Upper middle class are usually not homeless, right now they occupy some pool of apartments in cities anyway. By building more luxury apartments you encourage them to move, thus leaving their old apartment behind, either by putting it on sale, or renting it out.
Think of this like a domino effect: those earning $10M per year buy luxury residence, leaving their old house for those earning $1M, who in turn leave their own houses to those earning $500K, who leave their apartments for those earning $200k, and so on, and so on.
In the end everybody benefits from new housing being built, even if it's only luxury housing.
Also, increasing supply keeps prices down, thus decreasing profitability of buying houses as investment, causing larger share of apartments to be bought by people who actually plan to live in them.
EDIT: yes, this effect might not work as described if is limited to just one city, because there might be a lot of people wanting to move from elswhere. Or more precisely: it will work, eventually, but it would require much more housing to be built to meet the demand.
Re: Berlin approves 5-year rent freeze
#123Does this mean that five years of natural price increases will just happen all at once when five years have passed?
I'd imagine that they hope the five years is enough time to sufficiently increase the supply such that prices can't rise that much.
Re: Berlin approves 5-year rent freeze
#124As a person born and raised in Soviet Union, I strongly believe that whoever thinks that a proper economic response to raising prices is literally to order them to stop raising , is a lunatic.
The same thing will happen there as has happened in California. Landlords exit the market, developers stop building new housing, and ten years later you have a housing crisis twice as bad as the current one.
Rent control doesn't apply to new construction in California.
Re: Berlin approves 5-year rent freeze
#125As a person born and raised in Soviet Union, I strongly believe that whoever thinks that a proper economic response to raising prices is literally to order them to stop raising , is a lunatic.
To be fair, this isn't their first or only response. They're building housing as fast as possible. Within a 5 minute walk from my apartment in the last year there has been 5 brand new housing towers built. They've also introduced laws to stop people from buying up apartments to rent out via Airbnb. Considering even with the law that limits how much they can raise their prices, they're just doing unneeded renovations…
People buying apartments to rent out via Airbnb is not inherently a bad thing - it just indicates there is existing unsatisfied demand for short term rentals, which cannot be fulfilled by hotel industry. And guess what - hotel industry is another example of an industry heavily regulated by government (zoning laws, construction permits etc.). So the Airbnb problem most likely has the same underlying root cause.
Re: Berlin approves 5-year rent freeze
#126As a person born and raised in Soviet Union, I strongly believe that whoever thinks that a proper economic response to raising prices is literally to order them to stop raising , is a lunatic.
I wasn't aware the Soviet Union allowed rich investors to buy up chunks of the housing supply and rent them out as hotels without a business license, while also bypassing the numerous regulations that hotels have to abide by.
No, they just declared housing to be affordable (in the $20/month ballpark region) and people had to apply 10 years in advance to move to a larger apartment. This is my parent's experience in east Germany, should be similar to Soviet Union.
Re: Berlin approves 5-year rent freeze
#127Earlier quoted context omitted.
The problem isn't developers at all - they make only a small margin. The people who are abusing the system are equity investors who demand a return on their investment within as little as 2-3 years, leading to unrealistically high rents. All rent control is doing in this case is forcing investors to take a longer period of return.
Did nobody think that to invest, you need to have liquidity? It's called LIQUID for a reason. If another place has better investment opportunities, the investment will simply cease. Why would anyone take their LIQUID assets and put it into real estate (in german it's called IMMOBILIEN, meaning immovables to make it clear) in a place that actively discourages return on invest?
In some cities that would absolutely be an issue. However in this specific case I don't believe Berlin will ever lack for real estate investment. In other popular cities we've just seen the type of investor change, from opportunistic to activist.
Re: Berlin approves 5-year rent freeze
#128Earlier quoted context omitted.
So basically creating an artificial demand stop is the solution to creating the "artificial" price increase?
The simplistic version of demand based economics do not take into account speculators who buy rental properties and do not rent them out to reduce supply and to help increase the price of the properties they are flipping.
Doesn't change that both are artificial.
Re: Berlin approves 5-year rent freeze
#129Earlier quoted context omitted.
The data disagrees with you, it has caused shortages. Especially pre-90s. Since I was downvoted for stating things that are factually observed: https://web.stanford.edu/~diamondr/DMQ.pdf https://www.bloomberg.com/opinion/articles/2018-01-18/yup-re... https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent... https://www.economist.com/the-economist-explains/2015/08/30/... http://iea.org.uk/sites/default/files/pub…
The goal of rent stabilization is to make neighborhoods more stable. The concept is right there in the name, and that's exactly what it does. It's not built to stop shortages, or to increase the availability of apartments for people moving to the city.
The problem with these types of price controls is that it’s inherently unfair. If you’re on the inside and lucky enough to get a rent controlled apartment, you win. Everyone else loses.
Re: Berlin approves 5-year rent freeze
#130As a person born and raised in Soviet Union, I strongly believe that whoever thinks that a proper economic response to raising prices is literally to order them to stop raising , is a lunatic.
I wasn't aware the Soviet Union allowed rich investors to buy up chunks of the housing supply and rent them out as hotels without a business license, while also bypassing the numerous regulations that hotels have to abide by.
Even if it was sooooo what? people are able to leverage the property and earn more money on it, because it's worth more because somebody is going to pay it. Of course they are going to do that one way or another despite regulation. And they should they are creating more for the economy. If you can't afford to live/work somewhere that's life ? Why on Earth should somebody else subsidize your costs to live there.
That being said I'm sure there are some anti competitive laws/regulations creating problems but the solution is not more bad regulations.