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Rent controls have split housing in Berlin into two distinct markets

bloomberg.com

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

#71

Post by sudosysgen »

krcz wrote: post #68
crote wrote: post #45

Earlier quoted context omitted.

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.

Yes, they do this even if the price only goes up 3-4x, it's not needed for the price to increase thousandfold.

Also, this doesn't really apply to housing.

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

#72

Post by febeling »

The situation in Berlin before the policy change was that the city government had made it very hard to build apartments at all. Each time a project it developed, the developer is blackmailed into supporting various unrelated policies, being it parking space related, maximum stories, etc., and sometimes capriciously denied permission to build. This is how my green-leaning, government-trusting architect friends describe the situation.

This happened all the while time Berlin changed from being viewed as a forgotten backyard in Germany with few companies and high unemployment to the capital city of the dominant and richest country in Europe. Especially the great financial crisis accelerated this change of perception.

Consequently, many people moved to Berlin. For many years 100k people per year moved into a city of 4m. Stated in terms of economics, supply of apartments was very steady, and demand jumped up.

The sound response of a market is to signal that through price hikes. That should encourage investment in residential building. When this is being suppressed nothing can even get better. Only longtime renters are favored. People with already cheap and large apartments benefit. Losers are those young couples expecting a baby.

A solution that could potentially work would be to accept temporary pains from high prices, remove regulatory obstacles from new construction and let the industry find a new balance. Maybe accelerate the process by governmental subsidies, if you like that sort of policy.

But the current policy can't work in theory, it doesn't work in practice. And it only benefits old established interests who are privileged already.

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

#73

Post by La1n »

awillen wrote: post #52
crote wrote: 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…

>So you're driving out renters, who are typically less affluent, in favor of the wealthy.

But the landlords who owned (often own many) them were also wealthy. So you are replacing landlords with people who actually live there.

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

#74

Post by ahoy »

robertlagrant wrote: post #12
ahoy wrote: post #9

This is an opinion piece in bloomberg, a pro-business, pro-wealthy publication. Is there any surprise that they dislike rent controls?

This is true. Same logic goes for anti-vaxxers and doctors. Of COURSE doctors recommend going to doctors. They WOULD say that.

The difference is, of course, doctors provide healthcare services and landlords provide middleman-who-makes-housing-more-expensive services.

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

#75

Post by La1n »

foolinaround wrote: post #51
BurningFrog wrote: post #38

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?

>enjoys the upsides, but can run away when there are downsides without any consequences?

Isn't that why landlords argue they should make profit, because they carry the risk?

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

#76

Post by La1n »

krcz wrote: post #68
crote wrote: post #45

Earlier quoted context omitted.

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.

And Berlin needed rent control exactly because this didn't happen.

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

#77

Post by La1n »

robertlagrant wrote: post #13

> 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.

I think you would first need to show that bread and housing follow the same rules if you want to say that analogy applies to rent control

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

#78

Post by gruez »

sudosysgen wrote: post #66
awillen wrote: post #52

Earlier quoted context omitted.

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 just…

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

No, as we seen in north america that's not really true. Homes can go up on speculation alone.

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

Is homeownership a necessary component of this? Creating a insane level of supply for apartment rental achieves the same thing. If there are more units then there are renters, prices have to fall to meet demand.

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

#79

Post by La1n »

orloffm wrote: post #58
sudosysgen wrote: post #41

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.

Better soviet-style blocks than no housing.

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

#80

Post by gruez »

La1n wrote: post #73
awillen wrote: post #52

Earlier quoted context omitted.

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…

>So you're driving out renters, who are typically less affluent, in favor of the wealthy. But the landlords who owned (often own many) them were also wealthy. So you are replacing landlords with people who actually live there.

>So you are replacing landlords with people who actually live there.

...who are now saddled with decades of mortgage payments, and have a high percentage of their net worth being tied up in a not very well diversified asset class.

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