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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

#391

Post by 908B64B197 »

jariel wrote: post #385
908B64B197 wrote: post #380

Earlier quoted context omitted.

Would that explain why a lot of new constructions are condos and not rental units?

New builds are outside the scope of rent control, so I'm not sure it's a relevant factor in Berlin. I think a lot of this discussion may be around gentrification as much as anything. Some nice neighbourhoods in Berlin were on the E. Side and they were kind of run down, but over the last couple of decades the hipsters moved in, now the professionals.

I meant, for Ontario and Quebec. I don't know how much new rental units are added every year as compared to condos.

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

#392

Post by imtringued »

bdowling wrote: post #306
thesuitonym wrote: post #280

Earlier quoted context omitted.

I don't know how it is in Germany, but in the US, rent controlled buildings can only have the rent increased if the landlord upgrades the building, so it actually incentivizes them to do upgrades, as that's the only way they can increase rent.

In California the way this works is that a landlord takes a rental property off the market for 5 years, kicking out all of the existing tenants and leaving the property vacant, then remodels the building and rents the new luxury units to new tenants at market rate. The process is called "Ellissing", after the Ellis Act that allows it. When a property is full of rent-controlled tenants paying far below market rate, it…

The irony with rent control is that it ultimately benefits the landlord if he can stick around long enough. The worst enemy of a landlord is another landlord. If the housing market is less competitive and the landlord can eventually raise rents back to market rate his property will become a cash cow.

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

#393

Post by FDSGSG »

Xylakant wrote: post #312
el_nahual wrote: post #152

An issue that many commenters here are missing is that the problem with rent control will manifest more sharply in the future. Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply. But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to en…

A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents and still a stable supply of flats. One tweak they apply is that rent-control does not apply to new developments, so creating new flats is more lucrative than turning old buildings into luxury developments. The city also acts as a competitor, driving prices down by offering cheap flats. Th…

This also means that there are almost no nice flats in Vienna, so you probably wouldn't want to live there unless you are poor.

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

#394

Post by jariel »

908B64B197 wrote: post #391
jariel wrote: post #385

Earlier quoted context omitted.

New builds are outside the scope of rent control, so I'm not sure it's a relevant factor in Berlin. I think a lot of this discussion may be around gentrification as much as anything. Some nice neighbourhoods in Berlin were on the E. Side and they were kind of run down, but over the last couple of decades the hipsters moved in, now the professionals.

I meant, for Ontario and Quebec. I don't know how much new rental units are added every year as compared to condos.

I don't know the ratio, but it would be hard to determine anything from that because rules are broad and have been in place for some time.

What I do know is that construction is vast and booming. Driving through Toronto over the last 20 years it seems there's a ton of new buildings every time I am there.

There's entire area of Montreal that has gone vertical over the last few years (formerly industrial area).

That said, there is a lot of immigration to Canada.

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

#395

Post by mancerayder »

el_nahual wrote: post #152

An issue that many commenters here are missing is that the problem with rent control will manifest more sharply in the future. Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply. But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to en…

>This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.

Or a real estate broker who knows building owners willing to rent out the stabilized units (50 pct are stabilized, 50 free market more or less). Or you paid a broker fee to this broker. Or you sublet from a rent stabilized tenant who charges market rent..

No one talks about how easy corruption happens in these situations. The bifurcated market in NYC sucks - it should be all stabilized or all free market.

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

#396

Post by rsj_hn »

refurb wrote: post #376
rsj_hn wrote: post #343

Earlier quoted context omitted.

The Ellis act allows you to convert the unit to a live in residence, and it can no longer be used as a rental. Thus it is not attractive to investors who are developing rental stock, it is attracted to investors who are developing homes for owner-occupants.

Ellis Act allows you to remove the unit(s) from the rental market and remove the tenants. In an apartment building you may do this before condo conversation but cities like SF have almost stopped condo conversions. If you Ellis Act you can re-rent the units are market rate but only after 5 years (or else you have to rent it back to the original tenants at their old rate or new tenants at the old rate).

Ellis act Owner movein is for moving yourself or a relative into the unit so you can live in it. Condo conversion is separate from Ellis act and Owner* Move in, it has to do with splitting off units to sell them independently, for example turning a TIC into a condo.

Units that have been Ellised* or Owner Occupied* find it much more difficult to do a condo conversion, as there are laws about how long you need to wait and where you go in the lottery that determines if you get to condo or not. That lottery is itself a complex affair that involves giving more tickets to houses that failed in the past, and for all I know now, giving extra tickets based on victimhood points or something. Although right now I am hazy about the laws. SF housing laws are a labyrinth of absurdity, micromanagement, and graft. They are not even funny.

*updated for correction

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

#397

Post by toast0 »

JPKab wrote: post #322
el_nahual wrote: post #152

An issue that many commenters here are missing is that the problem with rent control will manifest more sharply in the future. Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply. But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to en…

There is plenty of scientific denialism on the right. Along with anti nuclear, the belief that rent control is a remotely good idea is an example of scientific denialism on the left. There are some decent arguments to be made against nuclear but rent control has always always caused more harm than good everywhere it's been tried.

I think the key thing with rent control is to have reasonable limits. If you limit rent increases to something between 5% and 10% annually, it provides stability without causing a significant distortion except when prices are rapidly climbing for several years in a row.

This is the same issue with Prop 13. The idea isn't bad; it's useful for people to have bounded future expenses. The problem is the bound is too low, and it distorts the market.

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

#398

Post by zamfi »

heterodoxxed wrote: post #377
koolba wrote: post #334

Earlier quoted context omitted.

It's a policy that is intended, or at least marketed, to lower the price of housing in the interests of the general public. The science denial aspect is refusing to look at every single instance of these policies leading to negative outcomes, some sooner than others.

| to lower the price of housing in the interests of the general public. Its purpose is to prevent displacement, especially of the poor and elderly for whom displacement is a major negative. For that purpose, it has done very well as a policy.

> For that purpose, it has done very well as a policy.

Well...for those who are not actually displaced, yes. But the ones that are displaced are often essentially banished by a dysfunctional housing market.

Rent control is not targeted towards the poor and elderly, and there are many others who benefit in the short-term (but then, again, are unable to move because the market rate has skyrocketed, though of course not just because of rent control).

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

#399

Post by imtringued »

vitno wrote: post #327
JPKab wrote: post #322

Earlier quoted context omitted.

There is plenty of scientific denialism on the right. Along with anti nuclear, the belief that rent control is a remotely good idea is an example of scientific denialism on the left. There are some decent arguments to be made against nuclear but rent control has always always caused more harm than good everywhere it's been tried.

calling this "scientific denialism" seems like a huge stretch to me. It's not a science, it's housing policy.

I don't think this is scientific denialism since the people involved have a pretty big stake inn the policy. After all they will get to stay in the city. The problem with rent control is that it is very populist and selfish.

However, I have seen some comments and articles that talk about how building more housing in the bay area will drive up demand, somehow ignoring that there is an overabundance of commercial real estate that is driving the demand in the first place. It also ignores housing pressure, namely the concept that people increasingly live with room mates or adult children keep living with their parents. These people are already in the city and are looking for an opportunity to move out. How is giving them a place to live a net loss? If anything parents might move to a smaller residence and thus free up supply for larger families that truly need a single house.

I don't know why people believe that the laws of supply and demand don't apply to the housing market. Maybe they are misapplying the idea of induced demand which is really poorly named or at least the name is not directly putting the spotlight on what is actually happening. It's basically the phenomenon that as you increase roads people will switch to their preferred mode of transport even if it is grossly inefficient. Cars carry fewer people than buses or subways so it basically has a neutral impact on traffic. The problem with applying this to the housing market is that developers actually control their plot of land. A street will just let any vehicle drive on it. A developer will instead focus on building the most efficient housing possible because he wants to optimize his bottom line. So no, he wouldn't buy a plot with a house for 2 million only to rent it out, he would try to upzone the plot and build a duplex or triplex since this will result in greater profits. The street on the other hand is fully subsidized for the people driving on it, so they end up using it wastefully.

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

#400

Post by tormeh »

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…

> 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.

The market is constrained by supply, which is constrained by regulation. If you want to see how this works without any rental market, look at Oslo. The prices are truly something else.

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