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California Approves Statewide Rent Control

nytimes.com

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Re: California Approves Statewide Rent Control

#531

Post by clucas »

AmericanChopper wrote: post #474
human20190310 wrote: post #459

Earlier quoted context omitted.

> So when over-regulation drives up the costs, the appropriate response is to introduce new regulations to fight the other regulations? Yes. The effort to reduce regulations on construction has failed. As such, retaliating against the beneficiaries of those regulations with counter-regulations is appropriate. It's not pretty or efficient, this is a fight between different interests, not a group problem-solving effort…

If over regulation drove up prices, what exactly do you expect from more regulation?

It is possible for regulation to lower the cost of some things. For example, currently the regulatory environment in many California real estate market lowers the cost of holding rental property. In a more competitive, less regulated market, the opportunity cost of buildin developing now housing would be lower, so landlords would have more cost (indirectly through decreased rent or directly through more frequent renovations).

Hopefully this move leads relaxed zoning laws and regulations, allowing new development... People who want such things will gain political clout because capital will want return on investment, and rent control shifts the calculus for good ROI in the real estate market toward new development (marginally).

I'm sure hundreds of economists have written thousands of papers about this subject, each going its own idiosyncratic way, so maybe I've actually been proven wrong in this particular case, I don't know, but I have to say that the idea that regulation only ever increases costs is silly.

Re: California Approves Statewide Rent Control

#532

Post by rtpg »

dgzl wrote: post #402
jdavis703 wrote: post #341

There's three paths: 1) Rent cap landlords. The landlords will cry Big Government. 2) Abolish single family-only zoning and legalize backyard cottages, townhomes and small apartments. The homeowners will cry Big Government. 3) Do nothing. Watch as more people start living in tents or endure super-commutes that snarl your traffic and worsen climate change.

I'm not a landlord or homeowner, and 1 makes me cry Big Government. What if something crazy happens to the economy, say the dollar gets devalued, and all you have is rental property for income? Realistically you would raise your rental price.... But wait, there's a cap, and you can't. 2) "legalizing backyard cottages" is actually against Big Government, and I'm with you there. You're forgetting another option: deregu…

- If the dollar gets devalued, other things will drop in price as well

- Laws can change in this case, as they have here. laws are a dynamic system

- If you are making money from rental properties only, that means you own properties (as well as your own house in theory). Not only are you more well off than almost all the population, but you have goods that are worth a lot of money that you can sell (maybe at a loss but you still have a roof over your own head).

"deregulate and let the market compete" is the right answer. It's the owners that don't allow for it.

Re: California Approves Statewide Rent Control

#533

Post by fivre »

khawkins wrote: post #482
human20190310 wrote: post #377

Earlier quoted context omitted.

It hurts the owners who would be receiving the wealthy newcomers' money. It doesn't solve anything directly, but it's an attack on the prosperity of the people who are maintaining artificial restrictions on new construction. A laissez-faire approach to both construction and rent would probably be a better option. But that's already not happening, and it's not going to happen without pressuring homeowners and landlord…

Pernicious attacks on landlords because of some perceived collusion amongst them is ugly. The landlords aren't any more to blame for the lack of supply than their tenants or the politicians. There's obviously money to be had in leveling a block of houses and increasing the population density by 10-30 times the amount. The market demand is extremely high. Real estate developers would jump at the chance to do so if the…

They may not be some grand cabal, but if biggerpockets.com posts are anything to go by, I have no qualms with any pernicious attacks against them.

Ruthless capitalism and fundamental human needs do not mix well.

Re: California Approves Statewide Rent Control

#534

Post by crashedsnow »

refurb wrote: post #485
wahern wrote: post #440

Earlier quoted context omitted.

> What if something crazy happens to the economy, say the dollar gets devalued, and all you have is rental property for income? In San Francisco rent control is indexed to inflation. If the dollar is devalued, inflation increases, and you get to increase your rent more. The same is true for Oregon's new law, which permits 7% increases in addition to inflation . > You're forgetting another option: deregulate and let t…

SF is capped at 60% of CPI. Inflation is 10%, you can get 6%. Doesn’t take long for that to add up.

In which universe is inflation 10%?

https://www.bls.gov/regions/west/news-release/consumerpricei...

Re: California Approves Statewide Rent Control

#535

Post by quickthrower2 »

jeffdavis wrote: post #475
BurningFrog wrote: post #173

Earlier quoted context omitted.

If the marked could bear annual 7% increases, why didn't you make them before? What will probably happen is that you'll have a hard time filling your property after 1-2 years at the latest, and everything goes back to normal.

A new rent control law changes the market. If the tenant leaves, they will need to sign a new lease, and the leasor will build in extra rent because they are worried they won't be able to raise it enough later. In other words, it scares all the landlords at once, and they all raise prices a little because of it.

It all depends if tenants can afford it. On a scale this could be "happy with rent"->"rent too high but can afford"->"cannot afford rent, in arrears".

Are average renters getting 7% pay raises every year in perpetuity?

Re: California Approves Statewide Rent Control

#536

Post by tachyonbeam »

amahani wrote: post #152
bhauer wrote: post #21

I am a landlord in Oregon, but not California. The curious, although ultimately predictable, outcome of the new rent control measure in Oregon is that while I have historically had an arrangement with my property management to be restrained in annual rent increases, they are now advising a default annual increase of the maximum allowed (7 percent before inflation). This is because larger adjustments cannot be made if…

You are absolutely correct: rent control (1) increases upward pressure, and (2) decreases rental supplies (and therefore drives up the price of rent) , and (3) benefits high-income earners when not coupled with income limits. (1) Since rent control laws put limits on increases (and not decreases) every landlord understands that he/she should test the upper boundary at all times to avoid renting severly below market r…

In Montreal we've had universal rent control all my life, and it actually works quite well. The rents are comparatively low. We have a decent tech scene, but it's still an affordable, left-leaning city, where even struggling artists can scrape by if they want to dedicate themselves to artistic work. I'm sure some people would argue that apartments in Montreal are less well-maintained as a result of universal rent control, but I've lived in the bay area, been to San Francisco many times, and uh, a two-bedroom San Francisco shithole which rents for over 3000 USD/month would rent for about 700 CAD here (~550 USD). If you go to the 800USD/month+ range, you can find very nice apartments.

Funnily enough though, I would say that Montreal has less of a supply problem, despite being on an island with no room to expand into an infinite suburban sprawl like the bay area has. Construction still seems to happen here. People are bitching that too many condos are being built, but I think more supply is good.

Anyway, I think rent control can work pretty well, as exemplified by this Canadian city. At the very least measures to prevent surprise rent tripling while someone is renting an apartment are very much a good thing. Sidenote: I think that rent control can also help prevent property price explosions. It makes no sense to buy an apartment for over a million dollars when its rental value is only 1000/month.

Re: California Approves Statewide Rent Control

#537

Post by [deleted] »

human20190310 wrote: post #322

There is no functioning market to begin with. Housing prices and rent are through the roof in California, yet supply is not rising to meet demand, largely because existing owners oppose new construction. Turnabout is fair play. If owners organize politically to control supply, tenants can organize politically to control prices.

[deleted]

Re: California Approves Statewide Rent Control

#538

Post by refurb »

olliej wrote: post #116
WheelsAtLarge wrote: post #76

I agree that at this point rent control is a good option. Housing prices are going up so fast that rents need to go up too. The higher rents then give an incentive for house prices to go up. It becomes a cycle for both to increase. But rent control by itself is not enough. The other leg of the solution is to increase housing via governmental incentives. Otherwise, rent control will make the situation worse since ther…

The problem is that increasing rent has no restraint in CA. When a landlord increases rent by X% they are saying that the value of the property has increased by X%. Unfortunately businesses and landlords got together to push (and pass) prop 13 which amended the CA constitution to prevent assessed property value from increasing at more than 2% per year. That means any time a landlord increases rent by more than 2% the…

The cost of being a landlord is much more than just property taxes.

Re: California Approves Statewide Rent Control

#539

Post by rory096 »

gregs1986 wrote: post #68
bhauer wrote: post #21

I am a landlord in Oregon, but not California. The curious, although ultimately predictable, outcome of the new rent control measure in Oregon is that while I have historically had an arrangement with my property management to be restrained in annual rent increases, they are now advising a default annual increase of the maximum allowed (7 percent before inflation). This is because larger adjustments cannot be made if…

Landlords who choose to increase rents at the maximum rate permitted each year do so at the risk that they will be undercut by competing property owners who do not do so. Given this, I think that your property management company is offering you bad advice. Most landlords already increase rents at the maximum rate that the market will bear. Capping annual increases at 7% just ensures that in a year when the market wou…

>Landlords who choose to increase rents at the maximum rate permitted each year do so at the risk that they will be undercut by competing property owners who do not do so.

Price ceilings (even non-binding ones) can create market power for suppliers by providing a focal point for tacit collusion.

[0] Knittel and Stango (2003), Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards https://pdfs.semanticscholar.org/3848/b5c04ae02c17c0b5135841...

[1] DeYoung and Phillips (2009), Payday Loan Pricing https://pdfs.semanticscholar.org/c587/58d243ad0653b052b1c77a...

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