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

#561

Post by kelnos » Wed, Mar 03, 2021, 5:41 AM UTC

thesuitonym wrote: post #280

908B64B197 wrote: post #248

Earlier quoted context omitted.

The beauty of it is it doesn't matter to the bureaucrats: since the 19 years old can't live in the city he also can't vote in the municipal elections! It also has bad impact on the type of buildings that get built. If you have to build some rent-controlled housing as part of your development project, and some jurisdictions will force developers to do that, it pushes you to build the rest of your building to be as ups…

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.

There is no "in the US" here; regulations vary by state and city.

For example, in San Francisco, landlords can usually pass on some portion of the cost of capital improvements on to their tenants, but not all of it, and only until that portion is paid off, after which the rent reverts to the previous amount.

So yes, the landlord gets the improvement done at something of a discount, but still has to shell out cash, and for not much benefit since the rent will still revert to the previous level. So there's not much incentive to do it until after the tenant moves out, if at all.

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

#562

Post by Ekaros » Wed, Mar 03, 2021, 5:42 AM UTC

WalterBright wrote: post #211

droopyEyelids wrote: post #190

Earlier quoted context omitted.

I don't quite understand how you're framing this. Oregon figured out a level of increase that would be too disruptive for its appetite, and had the legislature cap the rate to below that level. On average over the past five years, that cap would not have been reached, though it may have been reached in any one of those years. Is this a self own or mistake of some kind? Are you inferring that landlords will now raise…

If rent increases are capped at 7% per year, landlords will have an incentive to increase it at the max, because that gives them more flexibility the next year. For example, let's say the free market would raise rents 5% this year, and 8% next year. A cap of 7% means the rent will rise 7% this year, as the landlord won't want to have caps permanently reduce future rents.

And if landlord increases the rate too much renters will find cheaper place to live. In long run system balances itself.

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

#563

Post by kmeisthax » Wed, Mar 03, 2021, 5:43 AM UTC

neilparikh wrote: post #304

kmeisthax wrote: post #256

Earlier quoted context omitted.

The problem is that usually supply isn't the problem, it's demand. For example, America's main problem with agricultural products is finding enough people to buy and eat them. That's why the government spends lots of money on agricultural supports. Hell, even welfare programs, as inadequate as they are, help stabilize prices by basically injecting a minimum amount of demand into the system. So, usually, supply shocks…

> we basically displace everyone living in the city eventually to make way for larger buildings that can house more people In theory, this is true. In practicality, at least in America there's enough land with very little density, that a new building could be constructed while displacing basically no one (because the previous occupant of the land is already willing to move, it's just that the new seller isn't allowed…

I almost want to agree with you on the displacement point, but the problem is that building on empty land is how we got Phoenix. The ROI on dense buildings isn't great unless you're closer to the center of an already developed city, and then all the problems with displacement and NIMBYs apply. Also, building out to avoid zoning laws isn't great for the local environment.

That being said, displacement almost certainly shouldn't be used as an excuse not to build... but it is. I bring it up specifically to front-run certain left-NIMBY arguments against ever increasing housing supply. Equitable pro-growth city planning needs to assume that the short-term pain of growth will be borne on the backs of the poor; and then implement policies to ameliorate that pain while still promoting density. Just dismissing left-NIMBYs as crypto-Trumpist won't dismiss their otherwise valid concerns, as much as it really feels good to do so from behind a keyboard.

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

#564

Post by kelnos » Wed, Mar 03, 2021, 5:44 AM UTC

imtringued wrote: post #392

bdowling wrote: post #306

Earlier quoted context omitted.

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.

That's a bit of a weird thing to say. If I were a landlord, there is no situation in which I would prefer to own a rent-controlled unit vs. one where I'm free to increase the rent however much I like.

When a tenant moves out of a rent-controlled apartment, the owner raises the rent to market rates, not above market. They've lost out on cash they could either keep or invest in improving the property (which would command higher rents, if they were allowed to raise it).

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

#565

Post by JamesBarney » Wed, Mar 03, 2021, 5:46 AM UTC

donarb wrote: post #389

latchkey wrote: post #316

Earlier quoted context omitted.

Around 1994/5 I wanted to move to Berkeley. I had a very hard time finding a place. I looked at so many attics turned into bedrooms and other crappy places. Eventually, I found an ideal (relatively) place and there was a good 50+ people looking at the same apartment during a showing... I walked up to the landlord (who was a lawyer in his day job) and said... "I know you can't pick favorites, but I have a good salary…

Interesting that it took an essay contest to break the tie. Seattle now has an ordinance that they must rent to the first applicant who qualifies. This is to prevent discrimination against minorities.

I'd be surprised if this had the intended effect. I'd imagine it'd cause most landlords to increase their qualifications, and bar them from making exceptions to those qualifications.

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

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Post by kmeisthax » Wed, Mar 03, 2021, 5:50 AM UTC

stale2002 wrote: post #473

kmeisthax wrote: post #215

Earlier quoted context omitted.

You can't do #2 without doing #1 - most in-demand land is already occupied and unused land is typically not worth developing (or doing so would cause environmental harm). In an all-owner-occupant suburb, this isn't so much of a problem: you're literally paying people lots of money to accept the disruption of having to move. However, in almost every other kind of housing arrangement, ownership over the building is sep…

> you can't do #2 without doing #1 Of course you can. The law can be that normally rent control applies, but if you are building a new building, that doubles the amount of housing supply on the land, you can kick out the existing residents if you pay them a large payout. This would allow new housing to built in the obvious places where it should be, and the obvious cases where a huge amount of new housing is planned…

I'd actually totally love to see this proposed in more left-leaning city councils. This is sort of the idea I've had in my head for how to short-circuit the left-NIMBY trap, but I have no idea how good or bad it would actually be at moving the needle in favor of growth.

Part of the problem I could see right off the bat would be the fact that owners and occupants are inherently antagonized to one another; as in, the more money you require to be given as a displacement subsidy; the less is available to actually incentivize land development. Of course, in places like SF the market rate for housing is so hilariously high that there might actually be enough money for both parties, at least for a little while.

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

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Post by yokaze » Wed, Mar 03, 2021, 5:52 AM UTC

rsj_hn wrote: post #317

yokaze wrote: post #307

Earlier quoted context omitted.

> Do you really think that suppressing professional home builders to make room for homesteaders building their own homes by hand is a good idea for Berlin? No, and it isn't what I am suggesting. The point is that just that it becomes uninteresting for investors, it isn't for people actually living there. That doesn't exclude the professional execution of housing projects. I seriously doubt that people can build their…

Well if homes are not built by homesteaders then they will be built by for profit companies that are funded by investors. If your goal is to have more of something then you tax it less and impose fewer costs on it. If your goal is to create less of something, then you tax it more and impose more costs on it. People understand this with cigarette taxes and carbon taxes but suddenly when it comes to apartments the sign…

I agree with you that increasing the supply side will decrease the price.

However, housing is not a consumable (a large part of the houses are over 100 years old). It is not movable (a house in Hamburg does not satisfy demand in Berlin, Potsdam only to a limited degree). And it is a basic need (everyone needs exactly one).

However, the demand side is driven not only by local demand for housing, but also but "external" demand using housing as a source for investment and rent seeking.

The prospective home owner and tenant has to compete with their local salary and capital against international capital buying mostly existing property.

But all that money does not make new space appear. There is no factory to build "space".

So, like the cigarettes, we want to have less "consumers" of property, and that's why I think it makes sense to lower the demand side by making it less attractive to buy housing for investment. For the people living there, it is a basic need, and that will keep the demand from going to zero.

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

#568

Post by refurb » Wed, Mar 03, 2021, 6:03 AM UTC

nemothekid wrote: post #541

refurb wrote: post #527

Earlier quoted context omitted.

Pools are a bad example for SF, but here is an example of a luxury condo built in the last few years. I don't disagree that they don't add much to the cost, but they are high-margin offerings - people pay more rent for places that offer these. http://38doloressf.com/amenities/ Amenities: LEED Gold certified, butterfly garden, outdoor living room with fire pit

I'm not sure those are the amenities that would signify a high end apartment; which probably tracks with the dilution of the brand. Those amenities are pretty standard for most corporate housing, (ex. Avalon's 55 9th[1] has those amenities, but doesn't market itself has luxury). Compare that building with the 181 Fremont[2] in SOMA which has a several private lounges, a doorman, a building concierge, and valet parkin…

Maybe we have different opinions of what qualifies as luxury. My example is in a trendy location and above a whole foods. Based on the price (and the units sold quickly) there are no middle or lower class folks living in those apartments/condos. Like zero.

Contrast that with the more spartan apartment buildings building 30-40 years ago. Basic construction, laundry in the basement was the main amenity. These were clearly built for middle or lower class folks to live in.

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

#569

Post by whatshisface » Wed, Mar 03, 2021, 6:04 AM UTC

asdff wrote: post #524

whatshisface wrote: post #476

Earlier quoted context omitted.

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…

Is that how rent control is done in Europe? In the U.S. at least, rent control isn't taking money away from anyone. All rent control stipulates is that for the duration of your lease you cannot raise rent a certain percentage, such as 4% a year. Not having rent control allows rents to exceed earned wages for working people and pushes them to the street sooner than it pushes them out of the city.

That's taking money from landlords, (the point of reference is what everyone would have in the absence of a policy) and results in less money available for construction than would otherwise be. In the presence of supply problems you'd have to fix that either by taking money from tenants to give to construction companies (tax funded social housing) or by relaxing rent control so that the money goes tenant->landlord->construction.

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

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Post by ChuckNorris89 » Wed, Mar 03, 2021, 6:06 AM UTC

iamthemalto wrote: post #553

TedShiller wrote: post #437

Earlier quoted context omitted.

FYI, rents in Vienna are not "incredibly low". From someone who has rented there.

I think if you compare rents to a place like Munich, then Vienna is indeed quite low

If we keep moving the goal posts, workers in Munich also earn more.