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Berlin approves 5-year rent freeze

reuters.com

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Re: Berlin approves 5-year rent freeze

#221

Post by jordanbeiber »

2T1Qka0rEiPr wrote: post #22

As much as I can sympathise with the predicament, this decision, and the Berlin housing market in general, absolutely baffles me. When I moved here I was warned of 100 people turning up to a flat viewing, and laughed it off as some hyperbole. Only later did I find out that it actually happens , albeit the maximum viewing I went to was around a meagre 50. Having come from the UK, I found the situation in Berlin to be…

It’s an interesting catch 22.

The housing you make margins off are expensive housing in expensive locations.

The reason to keep rents affordable is that it’s generally a good thing in terms of keeping gentrificarion and segregation in check.

Cap on rent can’t be the only policy though.

I see the exact same situation in Stockholm, and there’s a concensus that profit margins are not good enough.

How to solve it?

Either sprinkle lots of tax money in some shape or form or do a quatar fotball world cup kind of setup?

I’m curious, as I see this situation all over, and frankly no one seems to offer a complete solution.

Re: Berlin approves 5-year rent freeze

#222

Post by lostdog »

WalterSear wrote: post #159
lostdog wrote: post #124

Earlier quoted context omitted.

Rent control doesn't apply to new construction in California.

Requiring a portion of builds be below market rate is an equivalent disincentive from builders perspective.

Interesting point. It would only apply to the 15%-25% of below-market-rate units, so yes it would reduce supply, but not as much as making the entire building rent controlled (or below market rate).

Re: Berlin approves 5-year rent freeze

#223

Post by rchaud »

dgellow wrote: post #114
rchaud wrote: post #65

Earlier quoted context omitted.

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.

If you’re talking about Airbnb, as far as I know what you’re describing is not allowed in Berlin.

The ban was lifted in May 2018: https://www.citylab.com/life/2018/03/berlin-airbnb-vacation-...

Re: Berlin approves 5-year rent freeze

#224

Post by CPLX »

tathougies wrote: post #194
CPLX wrote: post #43

Earlier quoted context omitted.

As a person living in New York who thinks rent stabilization has been largely more successful than not at achieving its goals, I disagree.

Of course residents love rent stabilization. They like it for the same reason the rich enjoy greater returns on wealth. Rent control makes housing disproportionately cheap for those currently living in the city and disproportionately expensive or unavailable for those seeking to move in or youth seeking to move to their own place. In effect, it's a tax on the young and the migrant to subsidize the older, richer, and…

> In effect, it's a tax on the young and the migrant to subsidize the older, richer, and more entrenched.

That's not correct. It's a redistribution from landlords to tenants.

It's at least possible that there are also dynamic effects on the larger market, of course, but it's intentionally misleading to act like the "tax" is on people that aren't a party to the transaction. The cost/money that would have been captured by the landlord is instead captured by the tenant. The core of the mechanic is pretty straightforward.

Re: Berlin approves 5-year rent freeze

#225

Post by jlawson »

pure_ambition wrote: post #217

I think most people with an understanding of economics would agree that more supply is needed. The problem is, zoning laws are made by the cities themselves, which means they are ultimately made by the people who already live there. People who already live there don't want their neighborhoods bulldozed for luxury high rises, which is what happens when zoning is abolished. Then, there is the problem of the suburbs. A…

I wish someone with a deeper understanding would go to Japan and study how they got this so right. Their zoning laws don't separate uses, only nuisance levels, so you often see residential in commercial areas and small shops in residential neighborhoods. It's amazingly effective at reducing how far you need to go to get places, and gives the whole city a much more organic feel. Plus, there is actually housing if there's demand for it.

Is it just Japanese cultural collectivism that made this work? How did they make this happen when we failed so badly? I have no idea.

Re: Berlin approves 5-year rent freeze

#226

Post by WhompingWindows »

Y_Y wrote: post #11

At best you'll produce consumer surplus for lucky renters, and you'll produce sad outsiders who'd be willing to to pay even more but can't get in. Everyone knows this is an issue with insufficient supply (of housing or of nice alternative places to live) but it is popular to put a ban on symptoms.

Rather than think of it as insufficient supply, why not think of it as excessive demand? If there is a trend across the developed world of moving into city cores and working high-paying jobs, then it seems that demand is more at fault. These are very old cities with entrenched interests, do they have the political quickness to respond to these demand trends?

Re: Berlin approves 5-year rent freeze

#227

Post by tathougies »

CPLX wrote: post #224
tathougies wrote: post #194

Earlier quoted context omitted.

Of course residents love rent stabilization. They like it for the same reason the rich enjoy greater returns on wealth. Rent control makes housing disproportionately cheap for those currently living in the city and disproportionately expensive or unavailable for those seeking to move in or youth seeking to move to their own place. In effect, it's a tax on the young and the migrant to subsidize the older, richer, and…

> In effect, it's a tax on the young and the migrant to subsidize the older, richer, and more entrenched. That's not correct. It's a redistribution from landlords to tenants. It's at least possible that there are also dynamic effects on the larger market, of course, but it's intentionally misleading to act like the "tax" is on people that aren't a party to the transaction. The cost/money that would have been captured…

Hmm... I count not being able to afford a unit in the city you want to live in, and thus either having to commute (inconvenient) or find work in another city (opportunity cost), to be a kind of tax. Taxation is not just monetary.

The landlords are taxed; you're not wrong. But they're not the ones most hurt by these policies.

Re: Berlin approves 5-year rent freeze

#228

Post by CPLX »

chimeracoder wrote: post #210
Rebelgecko wrote: post #198

Earlier quoted context omitted.

> It's landlords that subsidize rent controlled tenants. Are there any studies showing the extent to which that is true? I would be curious to see what fraction of the rent control is paid for by landlords vs new tenants. My intuition would be that rent control reduces the supply of market-value housing, which would lead to prices increasing even more (even before you take into account a landlord wanting to compensat…

> Are there any studies showing the extent to which that is true? There are actually plenty of studies that show that it's not true. Some of them are linked elsewhere in this thread. Your intuition is, in fact, correct and supported by a vast body of empirical research. This is one of the least-controversial topics among economists. It's very difficult to find a topic on which there's more academic consensus than ren…

I have a degree in economics, I'm aware of the concepts being discussed.

Consensus changes. Right now many neoliberal market-fundamentalist theories are not holding up well in the context of history.

Several things that are taken as gospel by economists, such as free trade is always good, or that low unemployment is too dangerous because it causes inflation, appear now in retrospect to have caused a lot of misery for the middle and lower classes.

Re: Berlin approves 5-year rent freeze

#229

Post by s17n »

vtail wrote: post #3

As 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.

Capping rents isn't like capping bread prices or whatever - the money is just going to the land owners, there's no elasticity of supply and no marginal cost. Capping rents just means that instead of allocating the scarce housing to whoever can pay the most, and giving a bunch of free money to the rentiers, you allocate the scarce housing more or less randomly, and the renters in aggregate keep more of their money.

Re: Berlin approves 5-year rent freeze

#230

Post by galvin »

jaredklewis wrote: post #165
rchaud wrote: post #65

Earlier quoted context omitted.

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.

Well, if that’s the issue, as a non German who doesn’t understand the situation or surrounding political environment very well, wouldn’t a much better solution then be to crack down on illegal hotel businesses? Seems like this law is only going to make things worse: the rent freeze will make renting even less appealing to owners, only increasing their desire to run their property as a hotel. No?

Rent seeking behaviour causes prices to rise making the market inaccessible to homebuyers. Making property less attractive as an investment should help curb this tendency.
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