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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

#61

Earlier 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…

Apartments aren't kept out of the housing market, actually. If they are, then the Vancouver solution is very effective - a 1% tax on the value of the property if not occupied.

The key thing here is supply and demand. If there is no profit to be made in renting out the property, then there is little reason to buy them up, in actuality. The exception is large companies that buy up a large amount of properties to manipulate the markets, but this has already been thinked of.

The main result of this if the unoccupied tax is used when necessary is a fall in the value of properties. This is a good thing for everyone that doesn't own a property that is unoccupied. This is what is wanted.

Re: Rent controls have split housing in Berlin into two distinct markets

#62
post #58

Seems 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.

Why would it have to be Soviet blocks?

There were actually two types of Soviet blocks in general terms. The first type was based on community and had a lot of greenery, a lot of community shops in walking distance, and those are actually worth quite a lot of money nowadays.

The rest were those that were built in order to rapidly provide housing to workers as industrial capacity was being massively built up.

In any case, in my city, the most iconic and beautiful housing structure was public housing, so if done right it can be beautiful and amazing to live in.

Otherwise, the private housing market is always there as competition.

If there's anyone I'd trust to get it right, it would be the Berlin lefties. Hopefully they are successful and set a good example for others to follow.

Re: Rent controls have split housing in Berlin into two distinct markets

#63

> 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.

Okay, I'll try.

Given the unmeasurable social costs of people starving and dying when there isn't enough food (you can say similarily for people not having houses and freezing to death when there's a blizzard, but also read the sidenote at the end), the capitalists involved in selling and distributing food should not be compensated equally in monetary terms (by selling at higher prices) when there is a shortage of food, since they are the ones at fault of not having reserve resources and prepare their production line from various disasters such as storms and droughts. Even people from the ancient times built and used granaries to store food for years and opened it up to their fellow villagers when storms/droughts happen (even without any profit motives, there wasn't even a notion of "profit" at all!) Capitalists in the current era should prepare far better than them, as our knowledge of biology, climate, and logistics are much more sophisticated than before; a shortage of food should be outright unimaginable given the advanced technology we have. Once there are empty food shelves, the disaster's already happened (at least in the short term you can't materialize food anymore by doing smart "economics"), and really at that dire point capitalists don't deserve the right to receive profit in the same way as normal times.

If the moral argument for this doesn't convince you - then there is a much more convincable political argument (of "dialectical materialism"), which basically goes as: once basic things like food and shelter aren't a given, and then capitalists gouge prices up creating an even bigger moral catastrophe among the poor, enough people would be fucking mad at them and band together wreck shit up, and some people would eventually have their heads cut off (as happened in many points in society, for example the French revolution). It's only that the current structures of power (the state & capital) are much more powerful than the past that this is more unlikely to happen, but if I were really in power I wouldn't dare try to steer closer to this event, as bloodshed doesn't really feel that good to participate. And that's the most uncontroversial center-wing take I can create.

Sidenote: I think your analogy of bread isn't really comparable to the housing problem though, since housing acts less of an ideal commodity than food in economic terms. Housing is far more troublesome if you approach it in a free-market lense, since it's far easier to create a natural monopoly on land than anything else, and thus it is hard for free markets to create a "fair" price that matches with the actual use-value. That's why even some libertarians in support of free markets also think economic rent from land is unfair business practice and should be controlled by heavy taxes (such as the economic ideology of Georgism: https://en.wikipedia.org/wiki/Georgism)

Re: Rent controls have split housing in Berlin into two distinct markets

#64
post #52
post #26

"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 f…

I learned a new word SOL (S*t outta luck)

Re: Rent controls have split housing in Berlin into two distinct markets

#65
I get that it's Bloomberg's duty to root for the landlords, but to me the data in the article shows a very clear win for renters.

If I'm reading the graphs right, price controls in Berlin have slashed rent price growth by nearly 60% for almost all of the city's apartment stock.

Meanwhile, rent for the remainder, those apartments built since 2014, is only growing 10% faster than the baseline.

So if we're gonna do the math: [lots of apartments * -60% inflation], against [fewer apartments * +10% inflation], equals a presumed windfall for renters, versus the alternative history where this rent control policy doesn't get enacted.

Re: Rent controls have split housing in Berlin into two distinct markets

#66
post #52
post #26

"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 f…

This is not how it works. Without the possibility to rent out or consolidate homeownership, the inflationary pressure on home prices collapses.

You create an insane level amount of supply for homeownership on this market. An absolutely insane level.

Indeed, the vast majority of increase in housing prices is because rents are so high that 7% YoY returns are possible. Without these returns, then there is no way to justify inflation in housing prices for simple homeowners.

If somehow millions of people do buy houses in Berlin, then you build public housing to undercut the price of housing.

The idea that your scenario will happen is not really rooted in fact. To me, it seems like a way to rationalize the principle that rent control must always fail - whereas in the real world it doesn't, see Vienna.

Homeownership in Berlin is very low, at 17% or so. The absolute majority of the housing market is based on renting out units. Before saturation of homeownership happens, a gulf remains.

Re: Rent controls have split housing in Berlin into two distinct markets

#67
post #57
post #46

I 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 be…

The proposed rent control in Berlin is sticky, in that the rentier cannot increase rent between renters beyond a certain amount.

The most likely scenario is that they will find a place to move into in a year or so, which will fit their family planning.

Otherwise, if they have enough for a modest downpayment as the collapse of the renting market leads to increased supply in bought housing, they can also buy a condo.

If even that doesn't happen, they can also go into public housing.

I live in a rent controlled city. The scenario you are describing doesn't happen. When I was a kid, we moved 7 times. All we had to do was look for housing a few months in advance, and move as our lease was up.

Re: Rent controls have split housing in Berlin into two distinct markets

#68
post #45

> 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.

If the bread price explodes, poor people will starve and the rest of the population ends up paying a boatload of money to the lucky few bakers. If the bread price remains stationary, people will starve randomly. People are going to starve either way, why not skip the whole "make the bakers filthy rich" part?

When the price explodes, bakers may hire more people and bake bread during night and day, increasing the supply.

Re: Rent controls have split housing in Berlin into two distinct markets

#70

Earlier quoted context omitted.

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?

Which downsides can they run away from? They pay for maintenance, property taxes, and so on. And still pay a premium over that.
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