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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

#231

Post by awillen »

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…

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

You're completely ignoring the fact that homeownership, even if prices aren't incredibly high, requires a large down payment that many people don't have, which is why they rent. Those people still can't afford to buy and are pushed out, and they're the ones you're supposed to be helping.

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

This is where your argument totally loses steam. You can't just handwave and say you'll build public housing... that is an incredibly expensive and politically difficult thing to do. When your theoretical solution to the problem is something that is very much not guaranteed (or even likely), and you pretend it'll just be no problem at all, you're ignoring reality and not presenting a useful solution.

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

#232

Post by leetcrew »

kuschku wrote: post #105
_2d30 wrote: post #91

Earlier quoted context omitted.

Unclear on how claimed price controls would ensure equitable distribution of bread. Why is the price of bread being capped making it so that more people get bread? If I’m rich and the price of bread is artificially low, maybe I’ll just buy up even more bread and now fewer people get bread.

Because you can define the cap so e.g. it only applies for one apartment per person, so you can't use it to get multiple ones cheap.

you can still use it to get a 2BR or 3BR when you only need a studio.

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

#233

Post by vmception »

briffle wrote: post #160

In Oregon, they passed a statewide rent control. They pointed out repeatedly at how rent had gone up 30% over five years. The solution, is that now landlords can only increase rent 7% (plus inflation) per year. This year, its something like 9%. Apparently, someone forgot to figure out what >7% per year for 5 years is..... Its 40%, before the inflation numbers are added in.

More likely, someone did figure it out and convinced the legislature and public because they know they will react with emotion instead of math

In my experience, people don't have experience outside of their local bubble, so you can easily recycle policies from another city or slightly tweak them

Thats what they really mean by land of opportunity

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

#234

Post by awillen »

sudosysgen wrote: post #67
awillen wrote: post #57

Earlier quoted context omitted.

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. I…

I've also lived in rent controlled cities (like SF), and my experience runs counter to yours. Your experience is an anecdote, not data.

I get the impression you didn't actually read the article. It points out very clearly that when apartments go vacant in Berlin, they're being sold, not re-rented. If that's what happens when a renter leaves, then there's no stock for new renters to move into.

And just throwing in public housing as though it's a magical solution is wildly unrealistic, especially when you're dealing with large numbers of people.

I'm sure you live somewhere nice, but it's not reflective of the world.

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

#235

Post by Wohlf »

briffle wrote: post #160

In Oregon, they passed a statewide rent control. They pointed out repeatedly at how rent had gone up 30% over five years. The solution, is that now landlords can only increase rent 7% (plus inflation) per year. This year, its something like 9%. Apparently, someone forgot to figure out what >7% per year for 5 years is..... Its 40%, before the inflation numbers are added in.

I don't mind this as 7% per year seems like a reasonable safety measure to me. The issue is they need to make it much easier, cheaper, and faster to build more housing along with it. Portland is probably particularly bad about this, as I see plenty of new apartments and rowhouses going up in Hillsboro and Beaverton. Still, these units aren't what I'd consider affordable.

I think we need to seriously reconsider the effect some building requirements and property taxes have on housing prices. It may not be ideal but very small apartments with shared commons and no parking for a few hundred dollars a month would be better than living in an RV or on the streets. This is a pretty common setup in Japan, not to mention college and military dorms. This isn't even that different from having roommates.

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

#236

Post by bluGill »

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…

> It's not possible to create an insane level of supply for appartment rentals

This is technically true, but not for the reasons you list, and it isn't the case here.

You can always build up. 150 floor buildings are not possible - if rent goes high enough they are worth building. Nobody is going to build that if they don't expect a return on investment though.

It isn't a problem in reality because jobs face the same pressures. eventually some company will decide rent in those dense neighborhoods (sometimes cities as well) are too high, and move. That moves some housing demand with it.

Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less. Coupled with 4% rent increases over inflation every year, it's just not feasible to rely on additional supply.

That doesn't follow. To build more supply the question how much it costs to build vs how much you can rent for. A a landlord the total profit in rent for the city isn't my concern it is my marginal profit that matters. Even if we double the supply of apartments in the city, my building 100 more isn't going to make much a difference in that, but I get a larger share of that 10% decrease in price and so my profit is still higher building 100 apartments than zero.

I don't know what is going on in Berlin (I can guess). I know in San Francisco the city has for many years refused to allow building at anywhere close to demand. Thus more people want to live in the city than actually can get an apartment there. Plenty of builders are willing to build more supply, but they are not allowed to under reasonable terms so they don't. (as a result of this there is a lack of experienced people in construction and so even if SF allowed unlimited building in practice there would only be a gradual uptick in building over 10 years while the industry gets experienced people back)

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

#237

Post by kmeisthax »

aaronax wrote: post #158
davidw wrote: post #119

Earlier quoted context omitted.

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…

So if you wanted to apply the rationing strategy to housing, would high taxes on unoccupied be a way of doing that? I think I have heard of cities (Vancouver?) implementing such taxes.

That would be akin to banning people from hoarding toilet paper. Not a bad idea, but the reason why hoarding affects prices is because there's already scarcity to begin with. Unoccupied units are not driving up the cost of housing, increased demand is.

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

#238

Post by awillen »

yorwba wrote: post #136
awillen wrote: post #57

Earlier quoted context omitted.

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 thin…

"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?"

What? No... the whole point is the answer is supply, not rent control. Supply keeps prices down, rent control pushes prices up (for those units that hit the market, which are the only ones that matter in this case). Having a lot of supply on the market is what those people need, and rent control is what drives them out.

"I think not being able to move to your city of choice is less bad than being forced to leave it."

Okay, that's a fair preference, but the problem is it's never what anyone says they're trying to achieve when they enact rent control. The reasoning is always to help people who aren't well off financially, not to keep outsiders out of your city. If xenophobia is the goal, then by all means rent control away.

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

#239

Post by bhelkey »

fallingfrog wrote: post #209
bhelkey wrote: post #196

Earlier quoted context omitted.

I think you have the articles argument twisted. > 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. The article argues that the people who construct apartment bu…

Right, that works in theory, but in the real world it’s not happening. Once supply is increased, the price should go back to a lower equilibrium, right? So why isn’t that happening anywhere in the world ? Because it’s a real estate bubble and speculators are buying because the price is high. Real estate prices drive rents not the other way around. They don’t care if the buildings are half vacant as long as they can s…

> Right, that works in theory, but in the real world it’s not happening.

This is a fair reasonable and response to the article. In essence you are arguing: the housing market can act irrationally and is seemingly disconnected from the underlying asset. Furthermore, people get hurt by these spikes in prices.

The reason I responded to your original comment was not to pick apart who is right but because you seemed to be attacking a point that the article didn't make.

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

#240

Post by ska »

sudosysgen wrote: post #61
candiodari wrote: post #43

Earlier quoted context omitted.

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 manipu…

> If they are, then the Vancouver solution is very effective

Whatever is going on in Vancouver, it isn't effective (at controlling rent prices)

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