Earlier quoted context omitted.
This sounds a lot like land ownership.
It turns renters into a kind of owners, yes.
a kind, that enjoys the upsides, but can run away when there are downsides without any consequences?
Rent controls have split housing in Berlin into two distinct markets
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Re: Rent controls have split housing in Berlin into two distinct markets
#52"Price changes in the regulated market dropped relative to those in the 13 other cities. That’s because real estate loses value if its future cash flows to landlords are capped. There was also an acceleration of apartments going up for sale, as landlords tried to cash out of their now less profitable investments." & "And whenever somebody does move out — when moving to another city, for example — the landlord tends t…
So you're driving out renters, who are typically less affluent, in favor of the wealthy.
Whether or not you call that success or failure depends on what you're trying to achieve, but usually these sorts of actions are trying to create housing affordability. Taking most of the supply off the market for new renters (by selling to people who can afford to buy and by incentivizing those who were already renting to stay for as long as possible) definitely does not create an affordable situation for those who need it.
Without creating more supply, you end up with one of two problems for folks at the bottom. Either you don't regulate housing, and their prices go up too much for many to afford, or you do something like this and you keep the existing stock affordable but guarantee that there won't be nearly enough stock for all the people (at the bottom of the economic ladder, at least) who want it.
In this case, you're not helping poorer folks as a class, you're only helping the specific set of poorer folks who were already renters (and who don't need to move into a bigger place, since they can't leave their current rentals). If you want to move to Berlin and you're not rich, you're SOL.
That certainly doesn't seem to be the intended effect, so based on that I don't think it's fair to call it a massive success.
Re: Rent controls have split housing in Berlin into two distinct markets
#53Earlier quoted context omitted.
If they are finding homeowners which are not renting them, is that not a good thing?
The purpose of this regulation is to provide cheap rent for the poor. Not to enable "the rich" to acquire new real estate which they then proceed to not rent out at all ... Increasing the number of homeless. Now of course this legislation "prevented that", by refusing owners do this while tenants are in the apartments. Except the net result seems to be when tenants do leave, the apartments are taken out of the housin…
> the apartments are taken out of the housing market altogether
are the apartments just kept locked up?
Re: Rent controls have split housing in Berlin into two distinct markets
#54I expected to agree with that article, but honestly the tradeoff seems reasonable. Given just the data presented there, is it actually worse if rent controlled apartments are hard to get if lots of people are also paying much less rent? I'd really want to see some data about lots of people wanting to move to or within Berlin who are not able to due to lack of supply. That data may well exist but isn't presented here.
It remains to be seen whether they are just paying less rent, or there are other disadvantages. Beside the obvious maintenance issue (will landlords invest more than legally mandated?), a german-specific issue is that it is quite common in Germany that renters who want to end their lease search for their own successors. The reason is that apartments often come without kitchens, low-end apartments even without flooring. The renter needs to take care of that, and if you end your lease, your investment is lost. Unless you find a successor who is willing to pay for it, which is quite easy if you live in a desired, low-rent apartment. Where I live (outside Berlin), people pay several thousand euros "for kitchen and floors" to the previous tenant to get a city-owned, low-rent apartment. Often they pay more than the kitchen and floors are actually worth, even though legally they are not even required to pay for this. But it's the price to be chosen as successor among many applicants. Landlords usually play along, as it's less work for them and this process will ensure that they get only the most affluent renters. I expect that renters in Berlin will be willing to pay even more to get one of the regulated apartments, as they are even cheaper.
Re: Rent controls have split housing in Berlin into two distinct markets
#55The alternative proposed by the article is basically : let it unregulated, the market will provide. Which is how it was before. Was the problem solved? No. Maybe it is not the right solution but I doubt very much the author is concerned by the problem. The article says only some places have their rent capped so the rents of the uncapped ones are skyrocketing. I am not convinced it is a solution cause I don't claim to…
> The alternative proposed by the article is basically : let it unregulated, the market will provide. Which is how it was before. Was the problem solved? No. Sigh. Here's what the article actually says: > The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction. That's an alternative reform proposal, not going back to how things were before. I think…
So increase offer by deregulating even more? Zoning and urban policies actually have a purpose : A nice city to live in And I am ready to bet that red tape has been cut again and again everywhere without solving the problem. Sorry for misrepresenting the article reform proposal but it did not strike me as a very innovative solution. More like more of the same.
Re: Rent controls have split housing in Berlin into two distinct markets
#56> In a food shortage, for example, regulating the price of bread only trades one expression of scarcity (high prices) for another (empty shelves). This is the key statement to refute if you want to argue for rent control.
Why? That argument doesn’t address the fact that many cities have an absolute limit on supply in the form of space, and no amount of construction that starts today will bring prices down today.
Here are some arguments to refute if you want to oppose rent control, particularly the first one (copied and pasted directly from investopedia):
“Rental prices in many U.S. cities are rising far faster than wages for moderate-income jobs. [edit: note here that most of the US has banned rent control, and this is happening regardless]
“Rent control enables moderate-income families and elderly people on fixed incomes to live decently and without fear of a personally catastrophic rent hike.
“Neighborhoods are safer and more stable with a base of long-term residents in rent-controlled apartments.”
Re: Rent controls have split housing in Berlin into two distinct markets
#57I think this article is getting the interpretation of the facts all wrong. They point to the predictable drop in supply in the regulated market as if it was a bad thing, but they ignore where that supply is coming from. Those are not newly-built apartments, because the price controls don't apply for new construction. When an old apartment becomes available, it's because the previous occupant moved out, e.g. because t…
It also leads to fewer people being able to move. Have a kid and your one bedroom apartment is too small, but don't have enough cash to buy a bigger place? Unfortunately, you're going to have to move out of Berlin, because two- and three-bedrooms are being sold when their tenants move out, so there's no supply available for you to move into.
You're definitely one of the people this type of policy helps, but you're benefitting at the direct expense of less affluent people who want to move into bigger apartments and who want to move into your city from outside of it.
That's fine if it's what they intend with these policies, but they're almost always championed as helping poorer people, when that's too overbroad to be accurate, because they actually only help poorer people who are currently renters and don't need to move (and bear in mind they also help rich people who are currently renters and don't seem to move, which hardly seems to be the goal).
Re: Rent controls have split housing in Berlin into two distinct markets
#58Seems to me it is working as intended. Now the only thing remaining is to build a lot of public housing to increase supply at affordable prices.
Which means a comeback of Soviet-style blocks. Given that red-green-red coalition is basically a comeback of DDR socialist party, this feels like DDR strikes back in Berlin.
Re: Rent controls have split housing in Berlin into two distinct markets
#59Earlier quoted context omitted.
> The alternative proposed by the article is basically : let it unregulated, the market will provide. Which is how it was before. Was the problem solved? No. Sigh. Here's what the article actually says: > The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction. That's an alternative reform proposal, not going back to how things were before. I think…
So increase offer by deregulating even more? Zoning and urban policies actually have a purpose : A nice city to live in And I am ready to bet that red tape has been cut again and again everywhere without solving the problem. Sorry for misrepresenting the article reform proposal but it did not strike me as a very innovative solution. More like more of the same.
Shrug. If two million people want to live in a city which has room only for a million, something has to give. Rent control doesn't increase housing. You must either increase housing somehow, or leave a million people unhappy.
If you don't mind the other million, and only care about people already living in the city, you can make it honest by introducing a city-wide Tenant Permit issued only to current tenants. Rents stabilize due to fixed demand, people aren't tied to one apartment, and landlords are incentivized to offer better service. It has all the benefits of your plan and none of the drawbacks, right?
Re: Rent controls have split housing in Berlin into two distinct markets
#60"Price changes in the regulated market dropped relative to those in the 13 other cities. That’s because real estate loses value if its future cash flows to landlords are capped. There was also an acceleration of apartments going up for sale, as landlords tried to cash out of their now less profitable investments." & "And whenever somebody does move out — when moving to another city, for example — the landlord tends t…
> The caps represent a windfall to one group of tenants: those, whether rich or poor, who are already ensconced in regulated apartments. Simultaneously, they hurt all other groups — especially young people and those coming from other cities — by all but shutting them out of the market.
That’s not success, that’s picking winners and losers. Same as with SF Bay Area, Santa Monica (in LA) and any other place with rent control - being in place early makes you a winner. Finding a vacant rent stabilized place is like winning a lottery. Problem is what do you do with young people that should be moving out, or moving to the city for school?
Only real answer to housing is to build more of it. Else, you force people to move, pay more and/or cram ever more bodies into the same space. The latter is also what makes poor much more vulnerable, and not just in the pandemic.