If affordable housing is an issue, then perhaps the government should provide it for its citizens, like building huge high-rises in Berlin. I used to rent in an expensive city but bought a cheap house in the suburbs (thankfully I work remotely). Everything is cheaper out here, from gas to utilities to food. But I did experience classism from my friends and family: there is status living in a world-class city. And hav…
> Government should provide it for its citizens And how do you expect government to pay for that? How do you decide who lives in these houses? It's not that easy. Government isn't a magic entity.
Government bonds. The affordable rent would go towards paying off those bonds. Tenants would be selected by income level and lottery. If cities can build huge stadiums, they can build huge housing complexes.
That's true for, say, bread . Or really any fungible good where labor makes up most of the price of the product. If you artificially suppress those prices, there isn't enough money to pay the farmers and bakers, and no bread will be made. This freeze actually exempts new construction, so the whole problem is mood. But it's still interesting to think it through, and the result is different than simple economics may ma…
Location location location. You seem to be asserting that the land value is arbitrary simply because it's located in a different area. The value is higher because the land is a lot more useful/productive / accessible/developed. You can't just wipe all that value away.
But you can arbitrarily depress it. Its value is the sum of all positive aspects (such as good infrastructure, nice views at a river) and all negative aspects (such as air pollution, noise). Implementing a restriction on rents adds a huge negative aspect that however is only negative for those interested in investing for appreciation, not at all for those who eventually live in that place. This should indeed depress the lands' value, just like it would happen if an airport opened up right next to it, but without all that noise. But as long as land costs plus construction costs are still lower than whatever you can get in return via rents, investors should still be inclined to invest in new buildings, they should just not be willing to pay too much for the land, because there's this big negative aspect connected to it.
One of the biggest costs of new rental construction is financing costs (on a 30 year loan it's often half of the cost). Given that it's cheaper for the government to borrow money than the private sector you can have the government simply build market rate housing, but wouldn't need to charge as much in rent. In this context, the government can essentially be a magic entity.
So you'll force tax payers to pay for it? Government doesn't have free money. Why should people be forced to pay for the construction of such housing?
The construction costs would be recouped by the renters. Are you being obtuse on purpose?
If affordable housing is an issue, then perhaps the government should provide it for its citizens, like building huge high-rises in Berlin. I used to rent in an expensive city but bought a cheap house in the suburbs (thankfully I work remotely). Everything is cheaper out here, from gas to utilities to food. But I did experience classism from my friends and family: there is status living in a world-class city. And hav…
> But many people want the status without having to pay the $$$ It's not just about the status. Every city needs people who do lower paying jobs. Someone has to clean those office buildings, someone has to take care of sick people at hospitals, someone has to drive taxis, buses, ... By not supplying those people with affordable housing within the city they're lives only become worse (more money and time spent commuti…
But there is limited amount of apartments in good places like city center. Are you suggesting they should be for people with low salary and talented people with good pay should live in a suburb without public transportation and spend hours in traffic jams? And tourists won't be happy with this too.
There are a lot of factors at play here: 1.) Supply is inelastic because construction work and building approvals are limited by current capacity. It is not feasible to expect the market to react as quickly as 600,000 new inhabitants over 10 years required. 2.) A lot of policy is still considering this to be a fad before cities become less popular again. Berlin's plans had for instance foreseen falling demand for sch…
> a fad before cities become less popular again
The only way this happens is if cities like Berlin putting rent freezes prevent construction that would increase capacity and lower prices to allow people to live in cities. There will be no new economic growth where people are spread thin - all future productivity will only emerge where people are. Any country trying to do anything but centralize their human capital in cities will find themselves at economic disadvantage going forward.
There are a lot of factors at play here: 1.) Supply is inelastic because construction work and building approvals are limited by current capacity. It is not feasible to expect the market to react as quickly as 600,000 new inhabitants over 10 years required. 2.) A lot of policy is still considering this to be a fad before cities become less popular again. Berlin's plans had for instance foreseen falling demand for sch…
Regarding 1: Germany's economy is doing well compared to the surrounding countries, so they're attracting many foreigners, especially in Berlin. These foreigners need a place to live, which is one big driver of rent increases.
Regarding 3: landlords are successfully invoking the "right of own use" to evict tenants. They are basically claiming that they need the apartment for themselves, a relative, etc. [1]
Furthermore, thanks a relatively recent law, the landlord can't raise the rent for older buildings indefinitely - there's a cap.
New buildings are exempt. For those rents start high and there's a standard ~2.5% increase per year.
There are a lot of factors at play here: 1.) Supply is inelastic because construction work and building approvals are limited by current capacity. It is not feasible to expect the market to react as quickly as 600,000 new inhabitants over 10 years required. 2.) A lot of policy is still considering this to be a fad before cities become less popular again. Berlin's plans had for instance foreseen falling demand for sch…
> Berlin at its peak (1944) had still more than half a million more people.
Yes, with 2 - 3 times more flats per every floor in a building. And with whole multi-generational families living in every one of them. Don't forget sharing one bathroom between all this families and sometimes toilets just being wooden huts outside.
Try visiting Mitte Museum in Gesundbrunnen, you'd see how miserable pre-war housing was, yes even in the very centre.
The area around Ackerstr. was much more dangerous than Alex or Kotti is today.
There are a lot of factors at play here: 1.) Supply is inelastic because construction work and building approvals are limited by current capacity. It is not feasible to expect the market to react as quickly as 600,000 new inhabitants over 10 years required. 2.) A lot of policy is still considering this to be a fad before cities become less popular again. Berlin's plans had for instance foreseen falling demand for sch…
Regarding 1: Germany's economy is doing well compared to the surrounding countries, so they're attracting many foreigners, especially in Berlin. These foreigners need a place to live, which is one big driver of rent increases. Regarding 3: landlords are successfully invoking the "right of own use" to evict tenants. They are basically claiming that they need the apartment for themselves, a relative, etc. [1] Furthermo…
> so they're attracting many foreigners, especially in Berlin.
Which is very ironic because Berlin is one of the least prosperous cities in the federation.
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…
Freezing rents is not meant to be a solution for a lack of housing. It’s a solution to the explosive increase of rents of existing ones. There are lots of people where the rents of their current apartment have increased so much, that they had to move out. This solution is trying to fix that. Also freezing rents doesn’t mean Berlin will stop building new houses. If there is big demand for housing in a city one needs b…
Pretty much every western nation has systemically failed to recognize or support the insanely high demand for high density living in the 21st century. That is where the future of economics is, where the future of humanity in general pretty much is, and every democracy is consistently demonstrating the total inability for legislatures to sacrifice the advantage of those lucky enough to inhabit cities as they exist now for the benefit of all those who would grow the economy and future in the cities tomorrow. Largely because those in the cities have the money and influence to buy the politicians.
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…
> I found the situation in Berlin to be absolutely ridiculous.
I totally agree with this assessment. I've never seen a city where you struggle to get a flat even if you have the money or can pay more.
The market is absolutely broken with literally everyone competing for the same pool of flats.