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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]

#21

Post by PaulHoule »

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?

It is a major paradigm in economics that if you change this by X% it will change something else by Y% and to estimate that ratio. It may be that people don’t really think that way: economic growth seems to be continuous and exponential in character whereas economic dislocations are discontinuous in character.

I think of how I was absolutely shocked when a Big Mac meal was $10 during the pandemic (I think it cost about $2.50 the first time I bought it) and didn’t think I was going to buy 4% less of it but rather I skipped the fries.

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

#22

Post by hollerith »

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?

Well, there's 2 ways to become a landlord: to buy a house or to build a house. I was focused only on the second way.

The cost of the wood and the labor needed to build the house is unaffected by the rent control, so if cost remains the same, but the reward (or "revenue") from building the house decrease from $100K to $95K, then fewer houses will get built.

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

#23

Post by doctorpangloss »

i see nobody read the paper.

> Similarly, we need to consider any one-time confounding events in control cities. Most notably, Minneapolis would be a natural control for St. Paul. However, in addition to the ballot measure on rent control, Minneapolis’s ballot also included referenda on mayoral power and policing. These confounding events mean that if property values in St. Paul changed relative to Minneapolis, we could not attribute the change to rent control.

their mistake is that they excluded Minneapolis for a bullshit reason here. you might as well do the analysis and then tell us. of course, they did, and found all the same effects as st. paul despite no rent control, so they chose not to talk about it.

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

#25

Post by jhallenworld »

When Boston ended rent control in the late 90s, all of the sudden the landlords invested in their goldmine buildings and generally improved the city. It sucks for those trying to rent or buy (including me, I paid 60% more for a house in 2002 than what it was worth in 1996), but the city has certainly had a renaissance.

IMHO, the problem now is bad zoning. The rich car-centric suburbs are preventing denser housing- to their own financial detriment. A recent fight is that the state has forced them to allow higher density housing around commuter rail stops. Similar fights about rail trails, future abutters are afraid of change but they are valuable everywhere they exist- in that they are a desirable feature and raise your house's value.

Another problem is that they overbuilt $100/sqft bio-lab space. These are sitting empty, and the owners refuse to lower the rent.. I don't understand how the owners remain solvent.

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

#26

Post by varenc »

Important context: This paper is from 2023. In 2025, St. Paul massively rolled back rent control restrictions.

Their rent control used to have no exemptions, but now it's become very similar to SF rent control. Strict limit on how much rent can go up for current tenants, but can reset close to market rate when there's a 'just cause' vacancy. And all buildings built after X date are exempt entirely. (X=2004 in St. Paul, X=1979 in SF). Developers argued that any rent control at all limited their ability to finance housing projects.

I think results of studies like this were hugely influential to the changes in rent control that followed.

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

#28

Post by scelerat »

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…

I'm not picking up any subjective, simplistic labeling like "good" or "bad." Are we reading the same paper?

Haven't fully read the paper, just the introduction and skimmed through the rest, but it seems they're merely observing that a rent control law went into effect, and given some control variables, it seems like it depressed property values.

Their findings also suggest that while the wealth transfer of rent control factor is real -- that is, landlords are impacted more and existing renters see relative benefit -- that effect is greater among higher-income renters and less among lower income renters.

Second paragraph in the Conclusion:

"While the negative wealth effects for owners are large, our results show the positive effects of the law are poorly targeted. Though the intention is to benefit lower income renters, we find that the largest benefits are received in the neighborhoods of the city in which renters have higher incomes, are less likely to be minorities, and have more education. To the extent that price drops for rental properties reflect future rent savings, and thus housing wealth gains for tenants, our results suggest that the largest cost savings are going to be realized in the neighborhoods with the richest, most educated, and least diverse owners."

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

#29

Post by vannevar »

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…

The plot on page 39 certainly looks like the St Paul market turned somewhere around July of 2020, over a year before the rent control, and the downward trend accelerated over the next couple of years. I'm skeptical of the authors' ability to tease out the contribution of rent control to a process that had already begun well before the alleged causal event.

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

#30

Post by hnav »

jhallenworld wrote: post #25

When Boston ended rent control in the late 90s, all of the sudden the landlords invested in their goldmine buildings and generally improved the city. It sucks for those trying to rent or buy (including me, I paid 60% more for a house in 2002 than what it was worth in 1996), but the city has certainly had a renaissance. IMHO, the problem now is bad zoning. The rich car-centric suburbs are preventing denser housing- to…

The funding for the types of infrastructure that is made less efficient by sprawl needs to come from property taxes. Those taxes should then be scaled appropriately to reflect the amount of extra spending on sprawly infrastructure.
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