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

#301

Post by AlexandrB » Tue, Mar 02, 2021, 9:57 PM UTC

robertlagrant wrote: post #13

> In a food shortage, for example, regulating the price of bread only trades one expression of scarcity (high prices) for another (empty shelves). This is the key statement to refute if you want to argue for rent control.

This is a silly simplification that posits that sticking the word "market" on something means that it will behave the same way and is beholden to the same forces. The bread "market" and the housing "market" are not comparable in this way. I think a lot more nuance is required for convincing case against (or for) rent control.

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

#302

Post by mjevans » Tue, Mar 02, 2021, 9:59 PM UTC

gruez wrote: post #99

tom_mellior wrote: post #82

Earlier quoted context omitted.

> If there are more units then there are renters, prices have to fall to meet demand. 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. It's not exactly the same, but around here there is a huge oversupply of spaces for shops/restaurants. Owners prefer to keep them empty rather than have someone give them…

>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.

This is exactly the BS that happens with houses in foreclosure / bank owned. The solution should be to raise taxes on units that are not presently being used or actively being refurbished / litigated / etc.

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

#303

Post by edbob » Tue, Mar 02, 2021, 10:01 PM UTC

vkou wrote: post #205

floren wrote: post #202

Earlier quoted context omitted.

"I'd like to move out of my rent-controlled apartment in Spandau because my job is in Eberswalde, but I don't want to walk away from this rate."

For every one person in that situation, there are nine who can't move out of their rent-controlled apartment, not because they don't want to walk away from their rate, but because they can't afford to. Well-off-techies who somehow stumbled into both getting a grandfathered rent controlled rate, and a job in the next city over might be a majority of posters on HN[1], but are a tiny minority of the population. You prob…

> For every one person in that situation, there are nine who can't

I'd be interested to know the actual numbers, but I doubt they happen to be 90%.

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

#304

Post by neilparikh » Tue, Mar 02, 2021, 10:01 PM UTC

kmeisthax wrote: post #256

ChuckMcM wrote: post #124

Earlier quoted context omitted.

I think this is something that is often overlooked in progressive circles. Markets treat high prices as signal to increase supply. When supplies cannot be increased you get market inequities. Rationing for goods like bread, paper, milk, gasoline, etc. Can be a stand-in while the problem that is preventing the market from responding by increasing supply is fixed.

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 to build anything).

Eventually, yes, we'll get to point where displacement is an issue, but right now it's not worth worrying about. Building dense really is a "free lunch" so to speak.

I probably agree with you overall, I just bring this up because a lot of NIMBY arguments use displacement as the boogeyman, and I'd rather not give them more support.

> The thing that really grinds my gears is that the solutions to housing scarcity effectively amount to building a wall around a city and making foreigners pay for it - and they're often championed by exactly the same kinds of people who otherwise are rightly opposed to immigration formalities.

Many of the arguments even go beyond that and sound like anti-immigration arguments: I've heard a lot of people say that techies/yuppies in SF should go back to the cities they came from.

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

#305

Post by jariel » Tue, Mar 02, 2021, 10:02 PM UTC

In Ontario and Quebec the entire economies are rent controlled to some extent - rents can only rise by a certain amount. It seems to work.

Also, with Berlin, perhaps it's an issue of splitting the areas that's bad, and also perhaps the excessive nature of the controls.

Finally, this may be related to an issue of low interest rates.

Low interest rates give much leverage to landed/owners so rents to up even if all other economic issues don't change.

Meaning that there is a kind of 'hidden inflation' which simply favours one class (owners) over the other.

Here are the Ontario regs [1]

[1] https://www.ontario.ca/page/residential-rent-increases

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

#306

Post by bdowling » Tue, Mar 02, 2021, 10:03 PM 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.

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 has a low value to most real estate investors. With the Ellis Act, however, the value of the property can actually go up as rents go out of sync with the market because it becomes an attractive investment to investors who would Ellis it.

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

#307

Post by yokaze » Tue, Mar 02, 2021, 10:03 PM UTC

rsj_hn wrote: post #154

yokaze wrote: post #50

Earlier quoted context omitted.

I don't know... maybe because you need an apartment for yourself, and you now can afford to actually buy the lot because you do not have to compete with investors expecting a dividend of 20% on their investment?

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? Why not get rid of greedy farmers so people can grow potatoes in their backyard? Why this longing to re-implement the failed policies of East Germany? Is it nostalgia for police states and shortages?

> 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 home with their own hands and comply with German regulations. Especially in cities.

Housing developers might expect a lower margin, and if the margin is too low for such a business, people can take on the risk themselves and contract professionals to execute a joined housing development. People are already doing that.

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

#308

Post by timdaub » Tue, Mar 02, 2021, 10:04 PM UTC

I live in Berlin. I've found a regulated appartment for rent last year.

The author clearly exposes his sentiment in their choice of words. There's lots of buzzwords thrown around and not much reporting from here. Was the author even in Berlin before writing?

Anyways, in Berlin it will now get even "worse" as an initiative is now starting to collect signatures to disown "Deutsche Wohnen" of hundrets of thousands of flats they own.

I can see that the market is "bad" from that article. My experience with renting a flat was different:

The law allowed me to reduce my rent to a price I indeed find reasonable. It's roughly 100€ less. I'm happy with that. And in case our supreme court overthrows the Berlin ruling, I've gotten read and saved the "shadow rent".

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

#309

Post by fock » Tue, Mar 02, 2021, 10:05 PM UTC

anothernewdude wrote: post #255

el_nahual wrote: post #152

An issue that many commenters here are missing is that the problem with rent control will manifest more sharply in the future. Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply. But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to en…

They'd be SOL anyway. Honestly there is no downside here, because this happens anyway.

totally agree: here's no rent control but a friend could see trickle-down economics at work from his office with half the condos (10years old building) across the yard being "under renovation" so that owners can just squeeze supply to artifically increase prices without being fined for this antisocial behavior...

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

#310

Post by jariel » Tue, Mar 02, 2021, 10:06 PM UTC

jdxcode wrote: post #259

vkou wrote: post #186

Earlier quoted context omitted.

Kicking people out of their homes doesn't solve the supply problem, because it doesn't create new housing. It just shuffles around who lives in existing houses. If you have a housing problem, and you want to solve it, you need to do two things. 1. Not kick people out of housing that they have. (Because it is incredibly disruptive to people's lives.) 2. Build new housing, until demand is met. Rent control accomplishes…

The major flaw in your argument is that you can't do #2 with rent control in the picture. From the economist[0]: > Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Even maintaining existing properties is discouraged because landlords see no return for their investme…

No, this is not the reasoning that helps your argument at all.

It's false to claim you need to kick people out of homes in order to have new developments. Though the notion of 'lack of investment in capped rentals' may be true, that has nothing to do with new housing.

The entirety of Ontario and Quebec (and I'm going to bet most of the rest of Canada) has a form of rent control, in that at least there are caps on the amount of rental increase.