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Stanford paper says rent control is driving up cost of housing in San Francisco

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Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#211

Post by shawnee_ »

ThrustVectoring wrote: post #43

Another second-order effect of rent control is increased traffic. Suppose you have two residents with significantly below-market-rate housing at the same quality level, one in downtown SF and another in Mountain View. The former starts a new job at Google in Mountain View, the latter starts a new job at a trendy start-up in downtown SF. Since they're paying significantly below market rate, they're unable to trade apa…

> So, because you cannot trade apartments without spending significantly more money, there's a couple of hour-long commutes instead.

Here is where the analysis should happen. All of the "significantly more money" aspect boils down to transactional costs. Transactional costs in rentals will always, always be higher than transactional costs of ownership. Ownership's transactional costs get offset, (to only a small extent in the Bay area, but it is not nothing), by the equity the owner has accumulated.

Renters never accumulate equity to offset their transactional cost of "trading". The paper (and all of the anti rent control camp) constantly misconstrues lower-than-market rent as "savings". It is not savings; it's merely delaying the inevitable transactional cost of "trading".

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#212

Post by seanmcdirmid »

klipt wrote: post #208
seanmcdirmid wrote: post #156

Earlier quoted context omitted.

China is a bad example with its hukou system in place. Sure you can migrate to the city for a better job but you have to leave your kids behind (no public school without hukou). Labor mobility but at great costs.

Seems comparable to immigration controls between countries.

It’s more comparable to the movement controls of apartheid.

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#213

Post by kelnos »

This shouldn't be surprising; this is an obvious result of rent control.

If rent control isn't applied to all rental units (as is the case in SF), then the units not under rent control end up being higher than average to make up for the units under rent control.

Even if rent control is applied to all rental units, then you see large spikes in rent that are speculative to several years in the future whenever a tenant moves out and the unit is re-listed.

The problem is that you can't just kill rent control and expect everything to be ok overnight, especially in a place like SF where the housing supply is constrained. Two things:

1) Demand outstrips supply even at the high prices commanded by non-rent-controlled units, so if you were to kill rent control here, the only thing that would happen would be that the units that were previously subject to rent control will get price hikes. I wouldn't expect rents to fall for the units that were never subject to rent control, because there are still people willing to pay those prices to live here, even if they'd prefer something lower.

2) Even if I'm not entirely correct, and there is enough supply that the overall market rate actually would be lower than the current market rate for non-controlled units, we'd still lose a lot of lower-income residents; I would be very surprised to find many (if any) landlords in the city who wouldn't raise rents at least modestly if their units stopped being subject to rent control. Some of the less exploitative ones might work with their existing tenants so as not to force them out of the city, but there are a lot of people in SF in rent-controlled housing that can't afford much more in the way of increases than rent control allows.

We need to 1) build like crazy, 2) kill rent control, 3) have some sort of phase-out period where we subsidize housing for lower- and middle-income people hit hardest by post-#2 rent increases. (And probably other things; I'm no economist.)

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#214

Post by kelnos »

cowsandmilk wrote: post #97
nicholas73 wrote: post #38

Earlier quoted context omitted.

Landlords will rent at whatever they can a tenant to pay for, not some number in their mental ledger.

What your response misses is the time component of vacancy. If I have rent control, I will list at a higher price and let the property sit vacant for longer to find a tenant because the law says that I am limited in the ability to later adapt the rent to the market. Without rent control, there is much less incentive to leave a property vacant, looking for a tenant willing to pay a higher price point. Most microeconom…

Except that in SF, a landlord can get a tenant for nearly any price, because demand really is that high, and supply really is that low. On the occasion that a rent controlled apartment goes back into the market in SF, it's snapped up within a week, even if the listing price is set above market rate. A savvy renter (which you have to be, if you want to get a place in SF) will know that they're paying a higher price for a much more stable rent year over year.

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#215

Post by kelnos »

linkregister wrote: post #121
icelancer wrote: post #109

Earlier quoted context omitted.

No, not exactly. In the scenario above, the landlord obviously has to keep the property vacant for some time at $5000/month, much longer than at $3000/month. But because it is a near-certainty the real price would go to $5000/month in 5 years - but he is unable to increase rent to that if he rents out today at $3000/month due to rent control (and this is critical) - he would rather keep it vacant until someone comes…

I was going to refute your (uncited) comment, but it appears that San Francisco's vacancy rate has increased from 4.9% to 8.3% over ten years, affirming your position. http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty....

It's unclear from those stats the reason for the vacancies, though. I've read about a lot of foreign investment that is buying up properties and then intentionally leaving them vacant, or are using them as vacation homes or vacation rentals.

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#216

Post by kelnos »

icelancer wrote: post #109
linkregister wrote: post #64

Earlier quoted context omitted.

Exactly! If the landlord can get a tenant to pay $5000 per month, then the market rate for that particular unit is $5000 per month.

No, not exactly. In the scenario above, the landlord obviously has to keep the property vacant for some time at $5000/month, much longer than at $3000/month. But because it is a near-certainty the real price would go to $5000/month in 5 years - but he is unable to increase rent to that if he rents out today at $3000/month due to rent control (and this is critical) - he would rather keep it vacant until someone comes…

In a place with higher supply and less demand, I'd absolutely agree with you, but in SF, that property will get snapped up within a week regardless of whether it's listed at $3k or $5k.

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#217

Post by kelnos »

refurb wrote: post #186
olalonde wrote: post #88

Earlier quoted context omitted.

When I moved to SF, I was shocked to find out most 3000+$/month apartments didn't have their own washing machine.

That's the real kicker in SF. Ok, housing is expensive and I need a $800K mortgage. If your income is high enough you can swing that. But then you look at what $1.5M gets you! It's bottom of the barrel housing most other cities. You need to move up to $3M to get something modern that has things like double-paned windows and a decent kitchen.

The thing that baffles me, though, is that you can take a $1.5M house and update it for much, much less than another $1.5M. Sure, it's annoying: it takes time, and you either have to pay for two residences or live with the dust and noise while the renovation is in progress. And finding reliable contractors in the bay area has been getting harder and harder given the level of demand there as well, but it seems crazy to ignore the ability to do even some simple, targeted renovation when you purchase a new home.

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#218

Post by [deleted] »

rhino369 wrote: post #78
s73ver_ wrote: post #49

Earlier quoted context omitted.

"With rent control, people who might otherwise move, don't." I'm failing to see the problem. Unless those people would have moved for reasons other than soaring rent, them getting to keep their homes is a GOOD THING.

There are plenty of bad outcomes: say they no longer need a 3 bed apartment. But with rent controls, they might actually pay more if they moved to a 1 bed. Or they get a job in San Jose and are forced to commute instead of just moving because they are getting such a deal. But the bigger issue is that is artificially raises demand. That prices up for everyone else, which does more harm. It's a subsidy for older people…

[deleted]

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#219

Post by spike021 »

gonehome wrote: post #193
spike021 wrote: post #140

Earlier quoted context omitted.

I believe this is exactly my current dilemma: I live in San Jose, I commute to SF 3 days a week (super thankful for the chance to work remote 2x a week). My current apartment (a 1BR I live in by myself) costs a bit less than 1k a month and is rent-controlled. The equivalent in SJ is probably worth 2-2.5x as much per month, and in SF (or somewhere in-between) it can be worth anywhere from 2.5-4x as much. I've been hun…

Are you willing to live with housemates? That's the only way you're going to come anywhere near your current rent. As a bonus you'll get more space generally and some community.

Not particularly. I've had that experience before and much prefer being on my own now. I find my community elsewhere. I prefer to think of my apartment as my own space, whereas a house (or shared multi-room apartment) would require having a communal kitchen/living room.

Re: Stanford paper says rent control is driving up cost of housing in San Francisco

#220

Post by spike021 »

joejerryronnie wrote: post #194
spike021 wrote: post #140

Earlier quoted context omitted.

I believe this is exactly my current dilemma: I live in San Jose, I commute to SF 3 days a week (super thankful for the chance to work remote 2x a week). My current apartment (a 1BR I live in by myself) costs a bit less than 1k a month and is rent-controlled. The equivalent in SJ is probably worth 2-2.5x as much per month, and in SF (or somewhere in-between) it can be worth anywhere from 2.5-4x as much. I've been hun…

Real question, why not look for a different job closer to San Jose?

I'm relatively fresh out of school (just over a year full-time at my current job) so I don't know that it'd be as easy to just switch now without looking like I hop job to job.
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