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The redistribution of housing wealth caused by rent control (2023) [pdf]

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Re: The redistribution of housing wealth caused by rent control (2023) [pdf]

#11

Post by pksebben »

"Assessing effects of rent control on wealth is hard, so we threw most of that out and just used housing prices. Also, we're fairly sure that our results are good because there was nothing special happening in St. Paul in 2021 that we could figure. See this scatterplot that looks like inflation, note that the statistics we put just below it also don't look interesting but we've tied them to how rent controls are at the same time socialist and also evil and capitalist. We are objective parties to this because we say we are, please ignore the TLD we're serving this on."

You can almost hear yakitty sax playing in the background. I bet if you met the researchers you could honk their nose.

Re: The redistribution of housing wealth caused by rent control (2023) [pdf]

#12

Post by roenxi »

heylook wrote: post #6
roenxi wrote: post #3

> This paper studies the effects of rent control on the housing wealth of renters, landlords, and homeowners. Over the nine months following the passage of rent control in St. Paul, Minnesota in 2021, average property values fell by 4.4% to 5.8%. This seems like too short-term a study. The argument against artificially holding prices down is that people won't produce as much as they would otherwise and people won't b…

> But I doubt the impacts of rent control would appear in the market this quickly, it'd take years for the market signals to be measurable. Hard disagree. Rational investors have no problem whatsoever projecting the impact to future cash flows and adjusting the amount they're willing to pay now. That's like saying the stock market wouldn't respond quickly to changes in next year's tax law.

In a highly liquid commodity market full of professional traders, I'd agree. But the housing market isn't that liquid over 9 months and there are a lot of small timers. It seems more likely there'd be some sort of initial wobble as sophisticated participants reposition, then a period of calm, then the actual impacts set in over a few years.

It might not happen that way - someone does need to check - but at 9 months I wouldn't read much in to this study. The physical market would still be reorganising and it seems entirely possible that the eventual impacts are just different than what this study suggests. I'd want a period of more like 5 years to be confident that the data had given everyone in the market enough time to feel the impacts of artificially low rents and reposition appropriately.

Re: The redistribution of housing wealth caused by rent control (2023) [pdf]

#13

Post by SpicyLemonZest »

vlovich123 wrote: post #4

> Over the nine months following the passage of rent control in St. Paul, Minnesota in 2021, average property values fell by 4.4% to 5.8% This to me is the big one. So in addition to rents being more affordable (even if wealthier renters capture most of the gains) limiting the rental market profits also makes houses more affordable to buy? The paper is trying to argue this is bad, but I’m not seeing it. It’s almost l…

Where in the paper do the authors try to argue that this is bad?

Re: The redistribution of housing wealth caused by rent control (2023) [pdf]

#14

Post by theendisney »

hollerith wrote: post #5
vlovich123 wrote: post #4

> Over the nine months following the passage of rent control in St. Paul, Minnesota in 2021, average property values fell by 4.4% to 5.8% This to me is the big one. So in addition to rents being more affordable (even if wealthier renters capture most of the gains) limiting the rental market profits also makes houses more affordable to buy? The paper is trying to argue this is bad, but I’m not seeing it. It’s almost l…

It's worrying because it reduces the incentive to build more housing.

You can also accomplish lower prices by building more. People dont want that so one could argue it is good to make them pay for what they want.

Re: The redistribution of housing wealth caused by rent control (2023) [pdf]

#16

Post by pushcx »

heylook wrote: post #6
roenxi wrote: post #3

> This paper studies the effects of rent control on the housing wealth of renters, landlords, and homeowners. Over the nine months following the passage of rent control in St. Paul, Minnesota in 2021, average property values fell by 4.4% to 5.8%. This seems like too short-term a study. The argument against artificially holding prices down is that people won't produce as much as they would otherwise and people won't b…

> But I doubt the impacts of rent control would appear in the market this quickly, it'd take years for the market signals to be measurable. Hard disagree. Rational investors have no problem whatsoever projecting the impact to future cash flows and adjusting the amount they're willing to pay now. That's like saying the stock market wouldn't respond quickly to changes in next year's tax law.

The stock market has liquidity, fungibility, low transaction costs, etc etc. https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terri...

Re: The redistribution of housing wealth caused by rent control (2023) [pdf]

#18

Post by servo_sausage »

heylook wrote: post #6
roenxi wrote: post #3

> This paper studies the effects of rent control on the housing wealth of renters, landlords, and homeowners. Over the nine months following the passage of rent control in St. Paul, Minnesota in 2021, average property values fell by 4.4% to 5.8%. This seems like too short-term a study. The argument against artificially holding prices down is that people won't produce as much as they would otherwise and people won't b…

> But I doubt the impacts of rent control would appear in the market this quickly, it'd take years for the market signals to be measurable. Hard disagree. Rational investors have no problem whatsoever projecting the impact to future cash flows and adjusting the amount they're willing to pay now. That's like saying the stock market wouldn't respond quickly to changes in next year's tax law.

You probably won't see new commencement of building projects, but it probably doesn't mean ongoing projects would be scrapped...

And these things have a lead time of years

Re: The redistribution of housing wealth caused by rent control (2023) [pdf]

#19

Post by SpicyLemonZest »

dreambuffer wrote: post #9
hollerith wrote: post #5

Earlier quoted context omitted.

It's worrying because it reduces the incentive to build more housing.

How do you quantify "incentive"? Is a landlord really looking at 5% lower property value and deciding it's not worth investing? Is this even true in aggregate?

Yes. Since the source paper was written, St. Paul has realized that this is the case and rolled back rent control on new construction to hopefully solve the problem. (https://minnesotareformer.com/2025/05/08/st-paul-walks-back-...)
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