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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

#131

Post by fallingfrog »

If you’re going to argue that supply will only go up if you allow price to rise infinitely, you’re getting it backwards- the increase in supply is supposed to make the price go back down, that’s the whole idea. There is supposed to be a balance that develops that holds the price down to an affordable level.

Why does this never happen? Well, there are many areas of the United States where real estate prices are skyrocketing even though all the houses are vacant- because real estate is being used as a vehicle for speculation. And the same thing is happening in almost every city in the western world. It’s likely the same thing is happening in Berlin. The demand is not coming from renters so allowing the price to go up does not help renters, it’s all just a tidal wave of free money from central banks looking for somewhere to go.

Also the author of the article is an Ayn Rand free-market-as-magic-bullet ideologue with an axe to grind. He makes no pretense of trying to write a balanced analysis. He even appears to be framing things like rents and real estate prices falling as pure negatives when both those things are purely positive from the point of view of anyone but a real estate owner.

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

#132

Post by ProfessorLayton »

sudosysgen wrote: post #84
gruez wrote: post #78

Earlier quoted context omitted.

>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…

I'm not speculating at all. The article has the data to back the facts : house prices went down in Berlin. Yes, homes can go up on speculation alone, but this is a bubble that will pop. In North America, rising rents act as a backstop that prevent the bubble from popping, because of guaranteed rental incomes that protect you. It's not possible to create an insane level of supply for appartment rentals. There's two re…

>Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less.

Source?

This also hand waves the fact that a 1% decrease is still great in the face of say, a 4% increase, totaling a 5% spread — even more if factoring in inflation.

Sounds like increasing supply is still one of the best ways to keep prices in check.

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

#133

Post by weakfish »

0x1DEADCA0 wrote: post #98
tyree731 wrote: post #95

Earlier quoted context omitted.

Not necessarily and, historically, not true at sufficient scale.

So all of the software engineers out there being paid for their labor by companies flush with cash are... not, being paid? in your mind?

And what of the Amazon warehouse workers?

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

#134

Post by walshemj »

gruez wrote: post #80
La1n wrote: post #73

Earlier quoted context omitted.

>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.

But you are buying an asset instead of just paying rent.

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

#135

Post by cambalache »

0x1DEADCA0 wrote: post #90
aphextron wrote: post #88

>In a food shortage, for example, regulating the price of bread only trades one expression of scarcity (high prices) for another (empty shelves). Well sure. But the total amount of people who have some bread is now greater, versus a select few wealthy people getting all the bread they want, as the wretched masses stare longingly. You can either increase total happiness, or concentrate it to the powerful. It's pretty…

Once the evil rich pigs have lots of bread, more than even they can eat, do they then not start using it to purchase labor from the starving poor?

No, they use it to buy lands, resources, mercenaries to get more land and to keep the status quo. I suppose if you are a mercenary you will be fine (as long as your head is not split in 2)

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

#136

Post by yorwba »

awillen wrote: post #57
yorwba wrote: 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…

> you're benefitting at the direct expense of less affluent people who want to move into bigger apartments

Aren't you forgetting about the even less affluent people who wouldn't be able to afford a bigger apartment even at the same price per area as their current apartment and who'd be priced out of the market (a.k.a. forced to move out) by rising rents?

> and who want to move into your city from outside of it

I think not being able to move to your city of choice is less bad than being forced to leave it. The only way someone can move to Berlin without pushing others out is if the supply increases, which the rising prices for new apartments certainly incentivize. So the policy endures that the additional construction required to accommodate newcomers is paid for by them, rather than by all citizens.

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

#137

Post by tom_mellior »

gruez wrote: post #99
tom_mellior wrote: post #82

Earlier quoted context omitted.

> If there are more units then there are renters, prices have to fall to meet demand. Not if it's so cheap to keep empty apartments around that you would rather not make money now, in the hope that you will be able to make more money in the future. It's not exactly the same, but around here there is a huge oversupply of spaces for shops/restaurants. Owners prefer to keep them empty rather than have someone give them…

>Not if it's so cheap to keep empty apartments around that you would rather not make money now, in the hope that you will be able to make more money in the future. Ironically rent control laws that cause this. Accepting a lower rent now would mean locking in a lower monthly rate for the future, whereas if you left it empty you can hope that the rental market will recover and charge high rents in the future.

Commercial spaces aren't rent controlled here, and many of them are empty. Many apartments are rent controlled, and I've never heard of them being empty for any appreciable amount of time.

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

#138

Post by nicoburns »

davidw wrote: post #119
codeflo wrote: post #110

Earlier quoted context omitted.

I agree, although the toilet paper situation was a bit different IMO because the shortage wasn't in the supply chain -- it was absolutely clear that inventories would restock sooner or later. In that situation, higher prices wouldn't have incentivized more production. Still, supermarkets could have temporarily raised prices 10x and still sold their inventory. Why didn't more of them do it? Presumably, they made the r…

I think this is part of the nuance: we've gotten ourselves into such a bind with housing in so many places that it feels like we need the short term, crisis relief that rent control provides. For some people, it absolutely means not being kicked out into the streets. Go tell that mom and her kids about 'the market'. Yet at the same time, markets, supply and demand are real, and we need to bring them back into balance…

> Yet at the same time, markets, supply and demand are real, and we need to bring them back into balance by at the very least not artificially constraining housing supply in so many places.

Or we could just go ahead and find local governments to directly build houses like we used to (at least here in the UK). If you know what the desired result is then why not enact it directly rather than incentivising it. Markets are most useful when you don't what you (we) want.

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

#139

Post by rsj_hn »

aphextron wrote: post #88

>In a food shortage, for example, regulating the price of bread only trades one expression of scarcity (high prices) for another (empty shelves). Well sure. But the total amount of people who have some bread is now greater, versus a select few wealthy people getting all the bread they want, as the wretched masses stare longingly. You can either increase total happiness, or concentrate it to the powerful. It's pretty…

Yes, this cogent analysis describes why communist nations are known for food security whereas those capitalist nations are known for starvation.

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

#140

Post by el_nahual »

caseyross wrote: post #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…

The issue is that supply fell, so while there was a windfall for existing renters, anyone trying to join the renter class (by moving into the city, growing up and moving out of their parent's place, etc) is unable to find an apartment.

If you project this trend forward 10 or 20 years, you end up with a situation where most affordable rentals are being used by an aging population and the young have nowhere to live.

This also explains why these policies become entrenched: before, the world was divided into rich vs poor; now it's divided into (rich + old and poor) vs young and poor.

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