Rent controls have split housing in Berlin into two distinct markets • Hacker News Board

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

#481

Post by mxfh » Wed, Mar 03, 2021, 2:20 AM UTC

As a tenant living in Berlin, the lede is buried in the last paragraph.

To complicate Berlin’s situation further, Germany’s constitutional court is expected in the coming months to decide whether these rent controls are even legal. If the judges nix the legislation, lots of tenants in the formerly regulated sector could get hit by huge and even retroactive increases in their rents. That would create yet more chaos.

The current Berlin housing market Situation has little definite insights on the effects of rent control, but all about risk aversion and maximization of profits.

The current shortage of supply is all about landlords withholding their vacant listings until that final court order. Or they are cashing out by selling them after fantastic interest rates averging above 10% year over the last decades.

If you feel you have like a 60% chance of getting double the rent, you avoid it at literally at all costs, below that threshold, to rent out on unlimited terms, if you can affor it in any way possible.

Where you're stuck on the long established mandated single digit rent increments, if the current pratice of shadow contracts should prove to be not enforcable.

There simply is just so much more uncertainty than actual rent control happening for the time being.

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

#482

Post by sologoub » Wed, Mar 03, 2021, 2:20 AM UTC

sib wrote: post #345

neilparikh wrote: post #293

Earlier quoted context omitted.

The solution is make it so that no one benefits from this dynamic (via a land tax), rather than just expanding the group that gets the benefits (which will never expand to include everyone, since land is scarce).

And then, of course, California decided to pass Proposition 13 [1] which made sure that owners who got in early also "win" vs more recent buyers. There are owners of identical homes on the same block in San Francisco who pay 10x what their neighbors pay due only to when they bought (and the resultant purchase prices). This is unlike saner places in the country which reassess property values regularly. [1] https://en.…

That’s definitely picking winners and losers, but not inherent to the real estate itself. Just shows that populist polices are not new.

EDIT: also, why prop 13 applies to non-residential real estate is another issue.

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

#483

Post by shuckles » Wed, Mar 03, 2021, 2:21 AM UTC

refurb wrote: post #454

austhrow743 wrote: post #441

Earlier quoted context omitted.

I don’t understand how those things impacts each other. Are you saying that if old buildings didn’t have rent control then developers would build less profit maximising buildings?

If you only have 15 years of free pricing, then build the housing with the highest short term margins possible. If you have free pricing in perpetuity, then you can build housing that might have a lower margin near term but an overall high NPV over its lifetime.

I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.

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

#484

Post by shuckles » Wed, Mar 03, 2021, 2:23 AM UTC

mxfh wrote: post #481

As a tenant living in Berlin, the lede is buried in the last paragraph. To complicate Berlin’s situation further, Germany’s constitutional court is expected in the coming months to decide whether these rent controls are even legal. If the judges nix the legislation, lots of tenants in the formerly regulated sector could get hit by huge and even retroactive increases in their rents. That would create yet more chaos. T…

Can you point me to some evidence that vacancies are a problem in the rental market?

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

#485

Post by elihu » Wed, Mar 03, 2021, 2:24 AM UTC

ryan_j_naughton wrote: post #417

There is no reason why housing cannot be much much cheaper than it is now -- so cheap that it is nearly free. Larry Page, in an interview in 2014 discussed how. "Rather than exceeding $1m, there’s no reason why the median home in Palo Alto, in the heart of Silicon Valley, shouldn’t cost $50,000" [1] and attributed this entirely to a policy problem. The answer is continuously increasing supply in a manner that outpace…

$50,000 for a house in Palo Alto sounds implausible, simply because there are a lot of people who want to live there and not enough land to satisfy demand. But, I agree that houses can and should be a lot cheaper. We could just build houses in the middle of nowhere, but without jobs and infrastructure it's not attractive to most people. Desirable cities exploit network effects. People want to live there because other people they want to be around also want to live there. We need more of these desirable cities.

Sometimes I wonder if one possible solution would be a sort of kickstarter-type deal for bootstrapping new cities. In other words, find a large plot of cheap rural land big enough for a few tens of thousands of people that's close enough to another town to have access to basic necessities but not where it's going to become a suburb of some other city. Get a bunch of people who want to live there to put down an up-front deposit. Create a non-profit to manage the deposits and handle the logistics of buying the land, installing roads and utilities, creating lots, and so on. The people who put down deposits are given lots that they can build on. Leftover lots are sold over time to finance more infrastructure development. The non-profit is replaced by a city government once there's a sustainable population.

My assumption is that if you can buy rural land cheap (like a few thousand dollars an acre or something) and then convert it into residential lots that are still cheap by urban housing standards for a few tens of thousands per lot, maybe 3 or 4 per acre, that generates the necessary funds that can then pay for the infrastructure needed to turn that rural lot into a buildable city lot. Another assumption is that this is being done purely as a non-profit venture; I don't think it would work as a real-estate get rich quick scheme because the temptation to not put enough money back into the town would be too high.

Another necessary component is having at least a few employers who are willing to set up shop in this new city. (Perhaps a branch campus of a major university would be ideal.)

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

#486

Post by TylerE » Wed, Mar 03, 2021, 2:27 AM UTC

shuckles wrote: post #483

refurb wrote: post #454

Earlier quoted context omitted.

If you only have 15 years of free pricing, then build the housing with the highest short term margins possible. If you have free pricing in perpetuity, then you can build housing that might have a lower margin near term but an overall high NPV over its lifetime.

I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.

Aren't doormen pretty much only an NYC thing, anyway?

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

#487

Post by illirik » Wed, Mar 03, 2021, 2:29 AM UTC

TylerE wrote: post #486

shuckles wrote: post #483

Earlier quoted context omitted.

I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.

Aren't doormen pretty much only an NYC thing, anyway?

Chicago as well, at least buildings on Lake Shore Drive.

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

#488

Post by rbranson » Wed, Mar 03, 2021, 2:31 AM UTC

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?

I don’t know why I have to explain this, but I’m not aware of any situation in which a renter builds equity in the underlying asset either.

Under rent control the situation goes from being extremely advantageous to the landlord to just being regular advantageous.

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

#489

Post by skohan » Wed, Mar 03, 2021, 2:31 AM UTC

whatshisface wrote: post #476

skohan wrote: post #470

Earlier quoted context omitted.

why is this mutually exclusive?

Rent control could technically be done by handing money to tennants to then hand to landlords, but in practice it's done by taking money away from landlords. Obviously, that's going to keep landlords from being able to give that money to construction companies. Another possible solution would be to take money away from tenants and landlords both to give directly to construction companies. That's socialized housing. H…

Wouldn't Vienna be an obvious counterexample of your claim?

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

#490

Post by mjevans » Wed, Mar 03, 2021, 2:36 AM UTC

throwaway6734 wrote: post #468

skohan wrote: post #463

Earlier quoted context omitted.

The thing is, what's the alternative? I live in Berlin, and my neighbours are in their 70's. Should they be forced to find a new flat way outside the city because the rent triples over the course of a few years so young tech workers relocating from London can have a place in the cool part of town? The rental market is different in Germany than it is in other countries: less people own their homes, and getting a housi…

build more housing

Also minimize middle-persons and standardize the sales and transfer and ownership contacts (preferably at a state or higher level).

The goal should be to make it easier and more orderly to transfer property ownership, while also providing protection to those making the sales.

The standard contacts should also include enumerations of inspection agencies and what type of inspections were performed (and when), and the various types of insurance which might also be optional and cover protection for buyer / seller / etc.