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

#141

Post by walshemj » Tue, Mar 02, 2021, 7:59 PM UTC

sologoub wrote: post #60

crote wrote: post #26

"Price changes in the regulated market dropped relative to those in the 13 other cities. That’s because real estate loses value if its future cash flows to landlords are capped. There was also an acceleration of apartments going up for sale, as landlords tried to cash out of their now less profitable investments." & "And whenever somebody does move out — when moving to another city, for example — the landlord tends t…

> The caps represent a windfall to one group of tenants: those, whether rich or poor, who are already ensconced in regulated apartments. Simultaneously, they hurt all other groups — especially young people and those coming from other cities — by all but shutting them out of the market. That’s not success, that’s picking winners and losers. Same as with SF Bay Area, Santa Monica (in LA) and any other place with rent c…

Which in a lot of cases will be brought by speculators see London sf and Vancouver

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

#142

Post by xvedejas » Tue, Mar 02, 2021, 8:00 PM UTC

kuschku wrote: post #101

xvedejas wrote: post #93

Earlier quoted context omitted.

In the short term, I'm in agreement without caveat, but in the long term letting the prices rise supports industrial growth. The wealthy buying all the bread they want funds the expansion of the farming industry, allows them to invest in more intensive farming practices, and even better encourages price discrimination, whereby the wealthy actually get the same amount of bread as everyone else but pay extra for the "a…

The issue is, there's only a limited supply (Berlin can't grow forever), and as result there's already many apartments left empty today to artificially increase the prices of apartments, as they're treated as investments in a bubble, with the intention to profit from increasing value, not from rent. Not regulating the price was tried for 30 years, and led to many families unable to afford housing, or spending 80%+ of…

Berlin is a small city on the global scale. It doesn't need to grow forever, it needs to grow to meet its local demand, which is apparently larger than the existing housing stock.

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

#143

Post by mtoner23 » Tue, Mar 02, 2021, 8:00 PM UTC

fallingfrog wrote: post #131

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. Why does this never happen? Well, there are many areas of the United States where real estate prices are skyro…

The demand is coming from renters though. People are moving to Berlin. They need to build more houses or prices will go. Markets dont solve everything but they do here. Just ask tokyo how they got out of their housing crisis. Build More.

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

#144

Post by codeflo » Tue, Mar 02, 2021, 8:00 PM UTC

sokoloff wrote: post #118

codeflo wrote: post #110

Earlier quoted context omitted.

I agree, although the toilet paper situation was a bit different IMO because the shortage wasn't in the supply chain -- it was absolutely clear that inventories would restock sooner or later. In that situation, higher prices wouldn't have incentivized more production. Still, supermarkets could have temporarily raised prices 10x and still sold their inventory. Why didn't more of them do it? Presumably, they made the r…

If the shortage of consumer form-factor toilet paper wasn't in the supply chain, where was it?

I don't like "gotcha" style discussions, but I admit I could have worded that more precisely.

What I meant is: There was no reduction in overall toilet paper production, and people didn't suddenly start to shit more. The shortage was mostly a distribution/packaging issue in the form of "not available in packaging X at location Y". Markets tend to solve that kind of problem incredibly quickly.

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

#145

Post by arebop » Tue, Mar 02, 2021, 8:01 PM UTC

nonsince wrote: post #113

sokoloff wrote: post #94

Earlier quoted context omitted.

Rationing bread would increase the number of people who have some bread. Regulating the price to a point well below the free market supply/demand driven price causes a decrease in the amount of bread supplied to the market (and probably increase hoarding/decrease the breadth of distribution). Think back to toilet paper shortages last spring. Rationing was arguably the best move (and was what local markets around me d…

Rental properties are inherently rationed by the fact that there is no reason to rent more than one flat in the same city.

15% of the units in my building are subleased by tenants who may well lease additional rent-controlled flats in the same city.

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

#146

Post by fallingfrog » Tue, Mar 02, 2021, 8:02 PM UTC

mtoner23 wrote: post #143

fallingfrog wrote: post #131

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. Why does this never happen? Well, there are many areas of the United States where real estate prices are skyro…

The demand is coming from renters though. People are moving to Berlin. They need to build more houses or prices will go. Markets dont solve everything but they do here. Just ask tokyo how they got out of their housing crisis. Build More.

The population of Germany is declining, (Berlin population has been stagnant since 1950), wages aren’t rising but housing prices are going up everywhere. And the same story is repeating in multiple countries all over the world. So clearly, must be supply and demand and not just a speculative bubble, right?

Berlin population 1950: 3,338,000

Berlin population 2021: 3,567,000

Germany birth rate: 9.5

Germany death rate: 11.5

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

#147

Post by sokoloff » Tue, Mar 02, 2021, 8:03 PM UTC

nonsince wrote: post #113

sokoloff wrote: post #94

Earlier quoted context omitted.

Rationing bread would increase the number of people who have some bread. Regulating the price to a point well below the free market supply/demand driven price causes a decrease in the amount of bread supplied to the market (and probably increase hoarding/decrease the breadth of distribution). Think back to toilet paper shortages last spring. Rationing was arguably the best move (and was what local markets around me d…

Rental properties are inherently rationed by the fact that there is no reason to rent more than one flat in the same city.

That part is true, but the decision to take roommates vs not affects the demand on rental properties. The decision to rent a 2 or 3 BR instead of a 1 BR as a single person working from home affects the demand as well.

In a rent-control environment, people have incentive to hoard their rent-controlled apartment as well, especially if rents reset on turnover. If I have a rent-controlled apartment that's well below its replacement cost to me, I'm going to be more inclined to keep it when I initially move in with a significant other. If that relationship fails, I can move back. If it were a market rate apartment, I'd have much less to almost no incentive to do that.

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

#148

Post by gruez » Tue, Mar 02, 2021, 8:05 PM UTC

tom_mellior wrote: post #137

gruez wrote: post #99

Earlier quoted context omitted.

>Not if it's so cheap to keep empty apartments around that you would rather not make money now, in the hope that you will be able to make more money in the future. Ironically rent control laws that cause this. Accepting a lower rent now would mean locking in a lower monthly rate for the future, whereas if you left it empty you can hope that the rental market will recover and charge high rents in the future.

Commercial spaces aren't rent controlled here, and many of them are empty. Many apartments are rent controlled, and I've never heard of them being empty for any appreciable amount of time.

>Commercial spaces aren't rent controlled here, and many of them are empty

AFAIK that's not due to government regulations, but due to how banks handle valuations. Leaving a property empty doesn't affect the valuation, but accepting a lower rent does. This has effects on the landlords, such as making it harder for them to get new loans, or triggering covenants on existing loans.

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

#149

Post by csunbird » Tue, Mar 02, 2021, 8:06 PM UTC

febeling wrote: post #72

The situation in Berlin before the policy change was that the city government had made it very hard to build apartments at all. Each time a project it developed, the developer is blackmailed into supporting various unrelated policies, being it parking space related, maximum stories, etc., and sometimes capriciously denied permission to build. This is how my green-leaning, government-trusting architect friends describ…

I moved to Berlin two years ago and the finding a house was incredibly exhausting. As the article mentions, there are two categories, rent capped apartments and non rent capped apartments.

For the first category, there are 2000+ applicants per day per apartment, making it impossible to actually have a chance to get the apartment. The odds getting that apartment as a foreigner that do not speak German is non existent, you actually have better odds on playing lottery and winning it, then buying a new apartment.

The second category is the overpriced apartments, the "landlords" (mostly the same three evil companies) are asking stupid amounts of rent for small apartments (1100 - 1200 cold rent for 50sqm ??). Those apartments are not accessible to 90% of the population. They are very happy to rent to the foreigners, since they can extract money from them, plus they do not know the local laws, so they can push newbies around.

Currently there are two categories of people living in the Berlin as well: The new comers, who are screwed and the old renters who rented for cheap, who landlords can not get rid of.

The first category are mostly expats, who are being screwed by landlords who do not want to rent to foreigners (especially if you are not from Europa), so they are pushed to new, non-rent capped apartments, making their lives even harder.

The second category is people rented huge apartments for 300 Euro per month 10 years ago, with 2% increases per year, who are not going to move soon.

Berlin wants to be the startup capital and an expat center, but it is not going to happen if they allow systematic exclusion* and abuse of expats that are trying to settle in the city.

I can go and rant for days but I think this post is already long enough.

* I did not want to use "racism" word here but it really feels like it is.

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

#150

Post by ggreer » Tue, Mar 02, 2021, 8:06 PM UTC

crote wrote: post #39

fallingknife wrote: post #15

Earlier quoted context omitted.

Is it worse if now there is a special class of people who happened to be in the right buildings at the right time when this law passed who will now forever get discounted rent, leaving everybody else to pay full price?

Exactly, it should be extended to all rental units. An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move.

> An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move.

Mumbai did this and it was a disaster: https://marginalrevolution.com/marginalrevolution/2017/04/tw...