10 ms·

Do rent controls work?

39 points by realdlee 11y ago

jessaustin 11y ago
Perhaps "Betteridge" could be one of the pseudonymous Economist columnists?
dmfdmf 11y ago
Depends on what you mean by "work". They are not economically valid but today are a political means to use the power of govt force (i.e. the gun) to transfer benefits from the property owners to the renters.
- simoncion 11y ago
  Do you live in a district with rent control? If you do, are not very wealthy? (That is to say, are you unable to spend $2 million purchasing housing for yourself or your family?) Finally, are you a landlord? If the answers to the first two questions are "yes", and the last question is "no", then I'm actually quite interested in hearing your thoughts on rent control. :) I live in San Francisco [0], am not wealthy, and am trapped in my rent-controlled apartment by the skyrocketing rents of the non-rent-controlled (and reset-to-market-rate-after-vacancy) units around me. If it weren't for rent control, every rental in the city would be renting for at least $3000 per bedroom per month, [1] and I would have been pushed out of the city more than a year ago. [0] SF has a serious and inexplicable allergy to new housing construction. It is this refusal to build enough housing to meet even a fraction of housing demand that is the source of the obscene rents in the city. [1] That's at least $36,000 post-tax dollars a body must spend per bedroom per year. For reference, someone grossing $125k/year has ~$76k in post-tax dollars at their disposal. This means that someone making low six figures would be spending somewhere around half of their take-home pay on rent.
  - cperciva 11y ago
    every rental in the city would be renting for at least $3000 per bedroom per month No, because there aren't enough people who are willing to pay $3000. Rent controls push the average rent down temporarily (until supply drops to regain equilibrium), but it pushes the clearing price up because it means that instead of 1000 people chasing 900 units there's 150 people chasing 50 units.
    - jrochkind1 11y ago
      > No, because there aren't enough people who are willing to pay $3000. In S.F. there might be. In Manhattan too.
      - cperciva 11y ago
        If $3000 is the market-clearing price for people chasing 5% of SF's housing stock, I can guarantee you that the market-clearing price would be less than $3000 if 100% of SF's housing stock needed to be cleared.
        jrochkind1 11y ago
        Demand changes too though, don't forget. There are people living in the S.F bay area who would be living in S.F. proper if the prices went down, there is surplus demand waiting in the wings. S.F. and Manhattan are both geographically limited ultra-high-price islands within larger metro areas (and of course people can move in and out of entire metro areas in response to price too), which, among other things, seems like it should make the market more complex than a simple supply-demand curve from a micro-economics 101 textbook.
    - simoncion 11y ago
      > No, because there aren't enough people who are willing to pay $3000. There are. There are far more than enough, because... > Rent controls push the average rent down temporarily (until supply drops to regain equilibrium) ... there isn't enough supply to meet demand. There are literally _not_ _enough_ _apartments_ for the people who want to come into the city. There hasn't been enough supply to meet demand in SF for at least ten years. What little is being built will come nowhere close to meeting this year's influx, let alone next year's. In almost any other city, I would agree that rent controls are obscene. Here in SF, rent controls don't go far enough. Units built before 1970-mumble should not reset to "market rate" upon vacancy.
      - cperciva 11y ago
        There are literally not enough apartments for the people who want to come into the city "Want to come into the city" isn't a yes/no proposition. How much are those people willing to pay to come into the city? I'm sure there are plenty of people who are living in SF right now who are not willing to pay $3000 to live there. Lucky for them, they don't have to, because their rent is controlled at a lower price than that. In a free rental market, you would see some current SF residents leave because they're not willing to pay market rates, but the market rate would drop as a result. In other words, long time residents would move out to make space for the people who want to move in and are willing to pay for the privilege.
  - cynicalkane 11y ago
    > If it weren't for rent control, every rental in the city would be renting for at least $3000 per bedroom per month The balance of supply and demand would remain the same if there was a vast increase of supply?
    - xenadu02 11y ago
      No, it would just cause all rents to increase at a slower rate. SF's problem remains zoning and NIMBYism, from both the "my view!!!!1" types and the "only 100% affordable housing!!!!1" types. I also suspect a number of these groups are being funded by property developers and landlords looking to drive prices even higher.
      - simoncion 11y ago
        > ...it would just cause all rents to increase at a slower rate. Rents increasing at the same rate as inflation is 100% okay. I don't think that anyone thinks that this is a bad idea. (Indeed, the SF Rent Board allows an annual rent increase for rent controlled apartments that is slaved to the CPI for the area.) Rents increasing by 75% per year, every single year is not okay.
  - tsotha 11y ago
    >I live in San Francisco [0], am not wealthy, and am trapped in my rent-controlled apartment by the skyrocketing rents of the non-rent-controlled (and reset-to-market-rate-after-vacancy) units around me. You're not trapped anywhere. You can no longer afford to live in San Francisco, and you're forcing someone else to pick up your tab instead of moving to a city you can afford.
    - nosuchthing 11y ago
      >you're forcing someone else to pick up your tab Circumstantial scarcity of housing aside, unless the landlord is paying more in building maintenance and property taxes, the assumed loss of revenue due to inflated land costs is not actually "costing" anything. If instead of rent control the federal government forced cities to build an ample supply of housing for the local population within commutable distance, causing the price of investment land / buildings to drop, the cost of maintaining that land remains the same.
      - Frozenlock 11y ago
        > the assumed lost of revenue due to inflated land costs is not actually "costing" anything. Sure it is. It even has a name: opportunity cost. If I had the opportunity to sell my underwear for 1000$, but I chose not to, this decision cost me 1000$. Say you make $300 a day. One morning, I wave my gun in front of your front lawn and strongly suggest you don't go to work today. Your daily expenditure will be somewhat the same as every other day (mortgage, food, electricy, etc) ... Will you say I didn't cost you anything?
        timr 11y ago
        Opportunity cost is the loss of potential gains from other choices when you make a decision. It is not the theoretical amount you're pissed off about "losing" but for the existence of a law you don't happen to like. People who owned property with a certificate of occupancy prior to June 13, 1979 (i.e. a rent-controlled property in SF) can genuinely grouse that they bought an asset with a different expectation of return than what they got. Everyone else bought into a system knowing the rules of the game. It's no more "opportunity cost" than someone who buys a suburban property with land-use restrictions complaining that the laws prevent him from using his land to start a refinery. If you buy a rent-controlled building today, you know that you're buying a building with a defined revenue stream. It is not "opportunity cost", except in the sense that you chose to buy the building in the first place.
  - bradleyjg 11y ago
    Yes, yes, no. (NYC) I didn't win the rent regulated lottery and so face higher costs in the unrestricted market due to constriction of supply. It's an incumbent protection mechanism at a cost to newcomers. Those new housing restrictions you don't like are the same thing for owners. Finally, as I understand it SF is different than New York in that it is physically small and only contains a small fraction of the MSA. Thus when you say you couldn't live in the city, the upshot is closer to saying you couldn't live in Manhattan.
    - simoncion 11y ago
      Thing is, the entire Bay Area is seriously affected by the failure to build in SF. You can think of the SF Bay Area as a lower-population NYC with really shitty public transit. > ...the upshot is closer to saying you couldn't live in Manhattan. I'm not sure what you mean by "The upshot"? Edit: I'm asking this question because I can't reply to the rest of your comment until I have its answer. I'm not snarking or trolling; I'm trying to have a productive conversation about a touchy topic with folks who probably don't share my views. I don't want to misinterpret what you were trying to say and say something incredibly dumb. :)
      - bradleyjg 11y ago
        Sorry if the upshot line wasn't clear. What I meant was, given the size differences it makes sense for a New Yorker to translate "there would be no apartments in SF under $3k" to roughly "there would be no apartments in Manhattan under $3k" rather than "there would no apartments in New York City under $3k". The latter would be dire, but the former not a particularly big deal. No needs to live in the trendy part of town.
        simoncion 11y ago
        Thanks for clarifying what you meant by "the upshot"! :) From what I understand, folks in NYC can deal with hour-long commutes because of the reliability and continuous operation of the area's public transit systems. Perhaps I am mistaken? The public transit situation in the Bay Area is far more dire. Because I have next-to-no knowledge of the character of each of NYC's boroughs, please excuse any such inaccuracies in the following hypothetical alternate-universe scenario: Imagine that you live in The Bronx, and work and party in Manhattan. In order to get home from Manhattan in the late evening you either have to * Be on the subway before midnight (because the subway shuts down from shortly after midnight till 04:00 every day of the week) [This assumes that you're lucky enough to live within walking distance of a subway stop] (the same caveats apply to the commuter heavy rail system), * Hail and pay for a cab/Uber/Whatever, then spend 30->45 minutes inside of it, * Or, -if you're spectacularly lucky- spend 45->90 minutes inside a bus, then walk for another 15->45 minutes to your apartment. Your commute to work will be somewhat awful. Both the subway and the heavy rail is not infrequently late. The subway runs once every twenty minutes. [0] During rush hour, the heavy rail runs once every 15 minutes to once every 30. Outside of rush hour, it runs runs once per hour. Either system will be unable to get you to work at least twice a year due to service outages. Once you disembark from the subway or heavy rail, pray that your connecting bus is actually on time. If it's not, and your destination is within a 30 minute walk, you're almost certainly better off walking than waiting for the next bus. The absolute best one-way doorstep-to-doorstep commute you can reasonably hope for here is 30 minutes, [1] but then -because of proximity to a subway station that's very close to Manhattan- your rent is almost the same as living in Manhattan. If you decide to drive, remember that everyone wants to get into Manhattan, and that there are exactly three roads that serve the borough. If you don't like sitting in traffic for literal hours, make sure that you have a schedule that allows you to avoid the two+ hour stretch of rush hour traffic. Also, pray that there's not yet another accident on the damn road. ;) Also, make sure you can afford $3600/year in garage fees, as street parking is effectively impossible. As an aside: I know that most of this can be considered #firstworldproblems complaining. I spent most of my life in both rural and urban Alabama. The best public transit available in the state was a few bus lines in Huntsville that took folks from downtown to the indoor shopping mall and back. ;) I know that the Bay Area has far better services for car-less people than most parts of the country. My reason for explaining all of this is to illustrate what I understand to be the vast gulf separating Bay Area public transit and public transit in many other major metropolitan areas, but NYC in particular. [0] If you're lucky enough to live near a subway station that has multiple lines pass through it, this interval will be smaller. [1] My absolute best one-way doorstep-to-doorstep commute time [2] was 90 minutes. My typical time was more like 120->150 minutes. [2] Admittedly, from SF to a workplace ten to fifteen minutes away from a heavy rail station in San Mateo. However, reversing the commute direction would have had little-to-no impact on its total time, and surprisingly little impact on the rent I was paying.
  - fffernan 11y ago
    I know someone who just got a 1 br for $2050 in NOPA. $3000 per bedroom is more like SOMA area. Outer Sunset/Richmond have plenty of cheaper apartments.
  - fossuser 11y ago
    Rent control ends up having the new people that move in essentially subsidize the rents of people that have been there a while. If it was uncontrolled there would be a new market price likely between the high prices now and the low rent controlled prices. Whether it's morally bad for new people in the community to have to incur this extra 'tax' is an exercise left for the reader.
    - gd2 11y ago
      So, if the new people to the community do stay around enough of years, do they become the lucky "been there a while" people, and get the subsidy that they paid for earlier back in reduced rents?
      - kelnos 11y ago
        Only if they're lucky enough to have moved into rent-controlled housing, which, given the current market, isn't super likely.
  - majormajor 11y ago
    Just for the heck of it: Yes, Yes, No. Though I'm paying market rate (but not in SF). Neither rent control as usually implemented nor construction seems like much of a silver bullet, though. I completely understand why cities are reluctant to change construction policies on short-term trends. Building a ton of new stock for a boom, and then running into a bust, could lead to massive vacancies that would ultimately impact the quality of the city for everyone left there after the people the boom attracted are gone. It's also obvious that current residents will prioritize themselves over future replacement residents. And this doesn't seem too unreasonable to me. If you think their government policies are so terrible, you should take that into account in your calculations of what you'd be willing to pay to live there. So I support rent control for existing tenants, so that long-term residents who never had a job that let them build enough capital to buy don't get forced out just by the vagaries of the market. Affordable housing programs can be useful too to enable lower-income workers to still live locally, but in my experience this is more commonly abused in new-construction situations where much more attention is paid to the letter of the law than the spirit; rent control is a more practical alternative.
    - simoncion 11y ago
      This housing pressure has been -with the possible exception of a blip during 2008- near-constant for at least the past ten years. How long must a trend persist before it is no longer short-term? :)
  - baxterross 11y ago
    I'll bet some of those SF voters would approve new developments if they didn't have rent control keeping THEIR prices down.
    - simoncion 11y ago
      I benefit from rent control. I rabidly support every new apartment development. Trinity Towers (across the street from the main branch of the SF Library) should be a model for how these things work: * Remove rent controlled tenants. They will be displaced for 6->12 months. * Tear down old building. * Build Phase 1 of new, far denser building, as quickly as possible. * Move rent-controlled tenants back into their new units at the same rate they had when they were displaced. Those units are covered by rent control forever. The rest of the building is at "market rate". * Build the rest of the building at your leisure. The only thing I might add to the plan is city-sponsored housing to put the displaced residents.
      - timr 11y ago
        I didn't know that was how Trinity Towers was done, but that's been my suggestion for a while now: bulldoze the Mission and start over if you like, but every damned one of those people had better come back in on the same or better terms than what they had when they left -- and they'd better be housed in the meantime, too. Too often, the debate about development ignores those people, or makes great promises but fails to deliver.
        simoncion 11y ago
        Angelo Sangiacomo is a goddamned saint. He probably caused the start of rent control in SF with his "promise" to increase rents in his buildings by something like 100% per year, every single year. [0] AIUI, he never sells buildings; he buys or builds them to rent apartments to people. And now, there's the Trinity Towers deal! He's rich as fuck from the landlording business, but -from what I know of him- he deserves every penny. > Too often, the debate about development ignores those people, or makes great promises but fails to deliver. The city's schizophrenic attitudes with regards to housing development confuse me. Something stinks in this city, and it's not just the Combined Sewer System. ;) [0] IIRC, the story goes that he publicly made this proclamation shortly after the passage of Prop 13.
  - deleted 11y ago
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  - thephyber 11y ago
    yes, yes, no (San Jose, CA) TL;DR: I think San Francisco rent control (1979) and (seemingly unrelated) California Prop 13 (1978?) are short term political stopgaps which are almost certainly doomed to fail the citizens they aim to protect in the long term. Rent control in San Jose is weaker than San Francisco, but they both suffer from the same common problems. Ultimately they do nothing to reduce demand or increase supply, while rent control may actually increase demand somewhat (by allowing people who might otherwise be priced out of a high demand area to stay). I've met many people who were interested in adopting a dog (I volunteer with local animal rescues), but couldn't/wouldn't because they were stuck in their rent controlled place with no leverage to negotiate a dog into their rental contract and didn't want to risk irritating their landlord. Shopping for a rent-controlled place is a cut-throat proposition so making two tiers of rental properties will necessarily lead to abuse of tenants in the more restrictive one. San Francisco's rent control has giant loopholes which work against the tenants the law was designed to protect: * Any property built after 1979 is exempt so there is a shrinking supply. Rent controlled tenants will be in progressively more cutt-throat competition. * Apartments and rental rooms in single-family homes are categorized differently so someone converting an existing apartment building into a single family home to be able to jack up rents to market rates which effectively was an eviction notice (a HN article covered this scenario a few months ago). * Your landlord may evict you in order to sell the property, whereby the new landlord can rebuild the property, eliminating the 1979 rent control grandfathering. San Francisco also has some of the strongest tenant support laws in the nation. While they are beneficial to tenants, they are also a hidden tax on landlords which increase the risk associated with owning a rental property in SF. San Francisco is at the middle of a perfect storm of multiple sources of housing demand: * Large, established Asian immigrant community making it desirable for new Asian immigrants (including a current influx of Chinese real estate investment cash) * Liberal politics which attract liberals fleeing rural red states in a self-sorting mechanism many sociologists have observed about US migration patterns (partially responsible for hyper-polarization) * Tech (web and biotech) sectors * City and state tax incentives for businesses to start up in certain districts * Coastal population centers like LA, NYC, Miami have long attracted young adults leaving their boring small towns after school My observation is that most municipalities which seek to enact some form of rent control do so as a short term political fix for some other systemic issue that voters & politicians are unwilling to address. San Francisco's rent control is an attempt to counter the shortage of housing you mentioned, but is entirely its own doing. The supply of housing is restricted: * San Francisco is nearly fully built and is surrounded by water on 3 sides. * NIMBYs prevent rezoning for high density and/or 4+ stories in most parts of the city * NIMBYs prevent alteration of the waterfront skyline * NIMBYs prevent demolition of Victorians Prop 13 (1978?, the California property tax growth cap) has loopholes. Prevent property tax is re-assessed at market rates if a property is transferred, but not if the transfer is between family members. Prop 13 also imposes a penalty on real estate transactions because to buy a new property would be to get your property tax set at current (IMHO inflated) rates. It is self-reinforcing because the existence of Prop 13 inflates real estate values by suppressing many property taxes. Prop 13 is also partly to blame for the housing shortage because it's possible that a long-time homeowner in San Francisco would rather leave a house vacant than sell it (because to sell and "take profits" would mean that another real estate purchase would come with a high recurring tax). Ultimately California is very expensive to live in, especially if you are on a fixed income. I, personally, would rather not underfund schools, police, and fire departments for the sake of a politically powerful minority who are property-wealthy but cash poor. There are plenty of small towns that need investment and demand and could provide a vastly cheaper cost of living than a very high demand + low supply city.
  - dalore 11y ago
    Did you read the article though, it's arguing that the rent control is causing the very thing you're complaining about, that it it discourages from building new housing. So less housing is built which makes the existing housing more scarce and drives up the price.
    - simoncion 11y ago
      Rent control in SF is not the primary cause of the failure to build to meet demand. Anti-development zoning laws, anti-development rhetoric, an obscenely convoluted permitting process, and NIMBY protests of questionable motivation are currently the source of the city's woes. Consider: * New construction is not subject to rent control. * Newly built units are renting for $2,200 -> $3,000+ per bedroom per month. * Again, those rates are not subject to rent control and may be increased at any time. * Folks with apartments to rent often hold hours-long open houses where dozens of people attend to be interviewed, present their proof of financial stability, and jockey to make the best offer (read: pay the most) to their prospective new roommate/landlord. [0] In any reasonably managed city, I would agree that rent control stifles construction. In this city, rent control is hardly even a bump in the road; there's no rational reason not to build. [0] Source: I recently had a friend attempt to find a vaguely affordable place to live in the city. fully 80% of the places she looked at (and she was looking at at least one a week) did this.
tsotha 11y ago
> Interestingly some evidence shows that those living in rent-controlled flats in New York also tend to have higher median incomes than those who rent market-rate apartments. This isn't surprising at all. Whenever you have a constrained resource with a price cap you still pay more. It's just that you don't pay more in money (at least, not directly). It becomes a matter of who you know, and people with money are better able to get to know people.
- bradleyjg 11y ago
  You have to be careful when looking at NYC. We have a small program called rent control and a much much larger program called rent stabilization (plus some other odds and ends). So a stat specifically about rent control units is just talking about a few tens of thousand of mostly very old people.
- dllthomas 11y ago
  Also, it may be that those with higher incomes have a more stable situation, and are less likely to need to move, and thus are more likely to benefit from rent control.
philsnow 11y ago
There's a similar mechanism in place for owners in California, 1978 California "Prop 13" [0]. Among other things, this limits the amount that the "assessed value" of a property can increase to 2% per year, unless the property changes hands, in which case it can reset to "market" value. It has contributed to people staying in their houses a lot longer than they'd otherwise be able to. This increases the amount of NIMBYism as older people don't vote (in general) for things which change the "character" of the places they've lived in for 40 years. Proponents will say that it increases stability of communities, taking as an article of faith that community stability is something that should be optimized for. Among other things such as lack of effective regional public transit, I consider Prop 13 to be a sizeable disadvantage to the bay area's continued viability as a tech hub over the next 20 years, as it even further constrains the amount of housing available, "affordable" or not. Anyway, this is of course probably old news to you if you have ever considered buying property here, but for people who are not from around here, it bears mentioning. Are there such controls elsewhere in the world? [0] https://en.wikipedia.org/wiki/California_Proposition_13_(1978) https://en.wikipedia.org/wiki/California_Proposition_13_(197...
- capkutay 11y ago
  Maybe the hidden advantage of Tim Draper's plan to split California into 6 states [0] was reversing rent control. 0: https://en.wikipedia.org/wiki/Six_Californias https://en.wikipedia.org/wiki/Six_Californias
  - thephyber 11y ago
    Rent control in San Francisco was a local ordinance in San Francisco. There are many, many factors involved in dividing up an existing government into 6 new governments. Existing laws (namely Prop 13), significantly more abridged state Constitutions, existing contractual liability obligations (CALPERS & CALSTERS retirement plans), and other contracts would likely be renegotiated in light of a different set of laws. The only thing I particularly liked about this is that California's population base is currently an outlier and our US Senate representation is vastly underpowered in proportion to other states. I don't think the founding fathers knew that one state would have 69x the population of another state without the people voting to change either the state composition or the method of calculation of senators.
guyzero 11y ago
While I agree that building housing is a better solution, it's hardly trivial. It's very capital intensive and in a lot of cases no one is willing to put that kind of capital up. Turn detached single family homes into denser townhouses? GOod luck. Turning industrial land into high rises is easy enough but that doesn't really cover the entire spectrum of housing types. What cities in the Bay Area really need to do is tear down 60's suburbs and rebuild as if they were 1860's London. But that's not going to happen.
- FelixP 11y ago
  There is TONS of investment capital sitting on the sidelines looking for decent returns at the moment. Capital availability is not the issue here.
njs12345 11y ago
A land value tax ( https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax ) is an economically interesting alternative to rent controls that doesn't seem to suffer from the same perverse incentives that rent controls sometimes do. FWIW, the housing market is pretty far from a free market, so well-implemented rent controls could be a good thing. I think like all government policies, really it comes down to implementation - I can imagine Germany doing a much better job than the USA here.
arikrak 11y ago
Rent Control (absolute caps on prices) doesn't make sense. In NYC, a small number of apartments are under it and have ridiculously low rent. Rent Stabilization (limiting how much landlords can raise rent on existing tenants) sounds like a bad idea economically, but it can be very hard on tenants to have their rent raised dramatically so they're forced out of their homes. The initial rent prices are set by the market, so it shouldn't discourage investment and development of buildings.
clarkmoody 11y ago
The State loves control, especially when it is packaged as "fairness." In the case of rent control, it's simply "fair" that you should be able to afford a place to live in the city and not have the evil capitalists prey upon the middle class. As the article mentions, price controls are nearly universally understood as inefficient among economists. The inefficiency expresses itself as a shortage of housing. Those who are able to find a place will enjoy cheap rent and then thank the politician who gave it to them. The rest will need to commute so they are out of the voting district anyway :-) The article mentions building limits. Call it "zoning" or "neighborhood preservation" or "green belts" but it's all State control over what should be private property decisions made by individuals. Artificially limiting supply through a restrictive building permitting process will drive up costs. Hence, the need for rent controls. So the State controls both the supply and price of housing in these metro areas. Any public figure or pundit who blames "capitalists" or "failure of the free market" for the housing woes should be laughed out of the room. How can we solve the problem? Stop trying to fix it with government. Allow rents to equalize at the market rate and allow supply to be determined by the market. Until the statists relinquish control, the problem will never be resolved. But the upside is that we will get to read these nice Economist articles forever.
- ConfuciusSay 11y ago
  There's two other major factors beyond rent control and zoning. One is cheap credit, insured by the government, and the second is the massive flow of foreign money coming into NA real estate. If you don't take care of all those factors together, you won't get true price discovery. The other thing is, the moment you do get true price discovery, you're popping a giant financialized bubble, and potentially triggering another self-reinforcing downward cycle (we'll be facing that soon anyways though).
umeshunni 11y ago
The saddest thing about this article was the linked NYT article by Krugman on San Fransisco's housing crisis .. From 2000! http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-... Looks like nothing has improved in the last 15 years
joeevans1000 11y ago
This is an absurd editorial. The cited arguments against rent control assume that rent control is just about capping rents. Rent control is about much more than that: it often is about capping rent for long time residents. If your grandmother has lived in her apartment for 65 years, she should not be tossed out just because a 19 year IT worker can pay more. Rent control takes in many factors, and is not just about capping rents in a region. However, I don't expect The Economist or it's reader demographic to care much about those affected by the rabid efforts to dismantle what protects many, just so that people can better profit on their properties.
- mc32 11y ago
  I don't think it's absurd. There are definitely some hard policy questions. However, that said, Krugman, an economist many populists like to cite agrees with their position. Rent control is short-term good, long-term bad. The solution is one of two things, more housing units, or fewer residents in a given area --look at any town/city where there is a pronounced long-term population decline, do you see a similar, "minimum rent" control? No, but you do see rent go down and typically the place suffers many ills. All it comes down to is everyone wants in when the going is good and everyone wants out when the going gets bad.
JohnSz 11y ago
Montreal has rent control. The result is that its financially inadvisable to renovate. Part of the rent control is you can raise the rent $31/year per $1,000 of renovation. That's a 30 YEAR payback. You can be replacing a roof the second time before you've recovered the costs for the first time, even forgetting about inflation and opportunity costs. Other provisions of the rent controls are just as restrictive. The result is rental buildings here are in poor shape, as owners let their buildings degrade and then sell them. Few are being built. Well ... there are more rental voters than landlord voters.
- ConfuciusSay 11y ago
  But in Montreal, as in SF, if the tenant leaves you can adjust the rent back to "market rates", which does benefit a landlord who renovates. Also, a good percentage of the new "condo" towers going up are specifically rental only. The more perverse side effect of rent control shows up in the cases where rental tenants on a 30 year old lease, paying peanuts per month is posting their apartment (or multiple apartments) on AirBnB at market rates. All the while, the property gets much more wear and tear, increasing maintenance costs.

39 points by realdlee 11y ago

Perhaps "Betteridge" could be one of the pseudonymous Economist columnists?

Depends on what you mean by "work". They are not economically valid but today are a political means to use the power of govt force (i.e. the gun) to transfer benefits from the property owners to the renters.

simoncion 11y ago
Do you live in a district with rent control? If you do, are not very wealthy? (That is to say, are you unable to spend $2 million purchasing housing for yourself or your family?) Finally, are you a landlord? If the answers to the first two questions are "yes", and the last question is "no", then I'm actually quite interested in hearing your thoughts on rent control. :) I live in San Francisco [0], am not wealthy, and am trapped in my rent-controlled apartment by the skyrocketing rents of the non-rent-controlled (and reset-to-market-rate-after-vacancy) units around me. If it weren't for rent control, every rental in the city would be renting for at least $3000 per bedroom per month, [1] and I would have been pushed out of the city more than a year ago. [0] SF has a serious and inexplicable allergy to new housing construction. It is this refusal to build enough housing to meet even a fraction of housing demand that is the source of the obscene rents in the city. [1] That's at least $36,000 post-tax dollars a body must spend per bedroom per year. For reference, someone grossing $125k/year has ~$76k in post-tax dollars at their disposal. This means that someone making low six figures would be spending somewhere around half of their take-home pay on rent.
- cperciva 11y ago
  every rental in the city would be renting for at least $3000 per bedroom per month No, because there aren't enough people who are willing to pay $3000. Rent controls push the average rent down temporarily (until supply drops to regain equilibrium), but it pushes the clearing price up because it means that instead of 1000 people chasing 900 units there's 150 people chasing 50 units.
  - jrochkind1 11y ago
    > No, because there aren't enough people who are willing to pay $3000. In S.F. there might be. In Manhattan too.
    - cperciva 11y ago
      If $3000 is the market-clearing price for people chasing 5% of SF's housing stock, I can guarantee you that the market-clearing price would be less than $3000 if 100% of SF's housing stock needed to be cleared.
      - jrochkind1 11y ago
        Demand changes too though, don't forget. There are people living in the S.F bay area who would be living in S.F. proper if the prices went down, there is surplus demand waiting in the wings. S.F. and Manhattan are both geographically limited ultra-high-price islands within larger metro areas (and of course people can move in and out of entire metro areas in response to price too), which, among other things, seems like it should make the market more complex than a simple supply-demand curve from a micro-economics 101 textbook.
  - simoncion 11y ago
    > No, because there aren't enough people who are willing to pay $3000. There are. There are far more than enough, because... > Rent controls push the average rent down temporarily (until supply drops to regain equilibrium) ... there isn't enough supply to meet demand. There are literally _not_ _enough_ _apartments_ for the people who want to come into the city. There hasn't been enough supply to meet demand in SF for at least ten years. What little is being built will come nowhere close to meeting this year's influx, let alone next year's. In almost any other city, I would agree that rent controls are obscene. Here in SF, rent controls don't go far enough. Units built before 1970-mumble should not reset to "market rate" upon vacancy.
    - cperciva 11y ago
      There are literally not enough apartments for the people who want to come into the city "Want to come into the city" isn't a yes/no proposition. How much are those people willing to pay to come into the city? I'm sure there are plenty of people who are living in SF right now who are not willing to pay $3000 to live there. Lucky for them, they don't have to, because their rent is controlled at a lower price than that. In a free rental market, you would see some current SF residents leave because they're not willing to pay market rates, but the market rate would drop as a result. In other words, long time residents would move out to make space for the people who want to move in and are willing to pay for the privilege.
- cynicalkane 11y ago
  > If it weren't for rent control, every rental in the city would be renting for at least $3000 per bedroom per month The balance of supply and demand would remain the same if there was a vast increase of supply?
  - xenadu02 11y ago
    No, it would just cause all rents to increase at a slower rate. SF's problem remains zoning and NIMBYism, from both the "my view!!!!1" types and the "only 100% affordable housing!!!!1" types. I also suspect a number of these groups are being funded by property developers and landlords looking to drive prices even higher.
    - simoncion 11y ago
      > ...it would just cause all rents to increase at a slower rate. Rents increasing at the same rate as inflation is 100% okay. I don't think that anyone thinks that this is a bad idea. (Indeed, the SF Rent Board allows an annual rent increase for rent controlled apartments that is slaved to the CPI for the area.) Rents increasing by 75% per year, every single year is not okay.
- tsotha 11y ago
  >I live in San Francisco [0], am not wealthy, and am trapped in my rent-controlled apartment by the skyrocketing rents of the non-rent-controlled (and reset-to-market-rate-after-vacancy) units around me. You're not trapped anywhere. You can no longer afford to live in San Francisco, and you're forcing someone else to pick up your tab instead of moving to a city you can afford.
  - nosuchthing 11y ago
    >you're forcing someone else to pick up your tab Circumstantial scarcity of housing aside, unless the landlord is paying more in building maintenance and property taxes, the assumed loss of revenue due to inflated land costs is not actually "costing" anything. If instead of rent control the federal government forced cities to build an ample supply of housing for the local population within commutable distance, causing the price of investment land / buildings to drop, the cost of maintaining that land remains the same.
    - Frozenlock 11y ago
      > the assumed lost of revenue due to inflated land costs is not actually "costing" anything. Sure it is. It even has a name: opportunity cost. If I had the opportunity to sell my underwear for 1000$, but I chose not to, this decision cost me 1000$. Say you make $300 a day. One morning, I wave my gun in front of your front lawn and strongly suggest you don't go to work today. Your daily expenditure will be somewhat the same as every other day (mortgage, food, electricy, etc) ... Will you say I didn't cost you anything?
      - timr 11y ago
        Opportunity cost is the loss of potential gains from other choices when you make a decision. It is not the theoretical amount you're pissed off about "losing" but for the existence of a law you don't happen to like. People who owned property with a certificate of occupancy prior to June 13, 1979 (i.e. a rent-controlled property in SF) can genuinely grouse that they bought an asset with a different expectation of return than what they got. Everyone else bought into a system knowing the rules of the game. It's no more "opportunity cost" than someone who buys a suburban property with land-use restrictions complaining that the laws prevent him from using his land to start a refinery. If you buy a rent-controlled building today, you know that you're buying a building with a defined revenue stream. It is not "opportunity cost", except in the sense that you chose to buy the building in the first place.
- bradleyjg 11y ago
  Yes, yes, no. (NYC) I didn't win the rent regulated lottery and so face higher costs in the unrestricted market due to constriction of supply. It's an incumbent protection mechanism at a cost to newcomers. Those new housing restrictions you don't like are the same thing for owners. Finally, as I understand it SF is different than New York in that it is physically small and only contains a small fraction of the MSA. Thus when you say you couldn't live in the city, the upshot is closer to saying you couldn't live in Manhattan.
  - simoncion 11y ago
    Thing is, the entire Bay Area is seriously affected by the failure to build in SF. You can think of the SF Bay Area as a lower-population NYC with really shitty public transit. > ...the upshot is closer to saying you couldn't live in Manhattan. I'm not sure what you mean by "The upshot"? Edit: I'm asking this question because I can't reply to the rest of your comment until I have its answer. I'm not snarking or trolling; I'm trying to have a productive conversation about a touchy topic with folks who probably don't share my views. I don't want to misinterpret what you were trying to say and say something incredibly dumb. :)
    - bradleyjg 11y ago
      Sorry if the upshot line wasn't clear. What I meant was, given the size differences it makes sense for a New Yorker to translate "there would be no apartments in SF under $3k" to roughly "there would be no apartments in Manhattan under $3k" rather than "there would no apartments in New York City under $3k". The latter would be dire, but the former not a particularly big deal. No needs to live in the trendy part of town.
      - simoncion 11y ago
        Thanks for clarifying what you meant by "the upshot"! :) From what I understand, folks in NYC can deal with hour-long commutes because of the reliability and continuous operation of the area's public transit systems. Perhaps I am mistaken? The public transit situation in the Bay Area is far more dire. Because I have next-to-no knowledge of the character of each of NYC's boroughs, please excuse any such inaccuracies in the following hypothetical alternate-universe scenario: Imagine that you live in The Bronx, and work and party in Manhattan. In order to get home from Manhattan in the late evening you either have to * Be on the subway before midnight (because the subway shuts down from shortly after midnight till 04:00 every day of the week) [This assumes that you're lucky enough to live within walking distance of a subway stop] (the same caveats apply to the commuter heavy rail system), * Hail and pay for a cab/Uber/Whatever, then spend 30->45 minutes inside of it, * Or, -if you're spectacularly lucky- spend 45->90 minutes inside a bus, then walk for another 15->45 minutes to your apartment. Your commute to work will be somewhat awful. Both the subway and the heavy rail is not infrequently late. The subway runs once every twenty minutes. [0] During rush hour, the heavy rail runs once every 15 minutes to once every 30. Outside of rush hour, it runs runs once per hour. Either system will be unable to get you to work at least twice a year due to service outages. Once you disembark from the subway or heavy rail, pray that your connecting bus is actually on time. If it's not, and your destination is within a 30 minute walk, you're almost certainly better off walking than waiting for the next bus. The absolute best one-way doorstep-to-doorstep commute you can reasonably hope for here is 30 minutes, [1] but then -because of proximity to a subway station that's very close to Manhattan- your rent is almost the same as living in Manhattan. If you decide to drive, remember that everyone wants to get into Manhattan, and that there are exactly three roads that serve the borough. If you don't like sitting in traffic for literal hours, make sure that you have a schedule that allows you to avoid the two+ hour stretch of rush hour traffic. Also, pray that there's not yet another accident on the damn road. ;) Also, make sure you can afford $3600/year in garage fees, as street parking is effectively impossible. As an aside: I know that most of this can be considered #firstworldproblems complaining. I spent most of my life in both rural and urban Alabama. The best public transit available in the state was a few bus lines in Huntsville that took folks from downtown to the indoor shopping mall and back. ;) I know that the Bay Area has far better services for car-less people than most parts of the country. My reason for explaining all of this is to illustrate what I understand to be the vast gulf separating Bay Area public transit and public transit in many other major metropolitan areas, but NYC in particular. [0] If you're lucky enough to live near a subway station that has multiple lines pass through it, this interval will be smaller. [1] My absolute best one-way doorstep-to-doorstep commute time [2] was 90 minutes. My typical time was more like 120->150 minutes. [2] Admittedly, from SF to a workplace ten to fifteen minutes away from a heavy rail station in San Mateo. However, reversing the commute direction would have had little-to-no impact on its total time, and surprisingly little impact on the rent I was paying.
- fffernan 11y ago
  I know someone who just got a 1 br for $2050 in NOPA. $3000 per bedroom is more like SOMA area. Outer Sunset/Richmond have plenty of cheaper apartments.
- fossuser 11y ago
  Rent control ends up having the new people that move in essentially subsidize the rents of people that have been there a while. If it was uncontrolled there would be a new market price likely between the high prices now and the low rent controlled prices. Whether it's morally bad for new people in the community to have to incur this extra 'tax' is an exercise left for the reader.
  - gd2 11y ago
    So, if the new people to the community do stay around enough of years, do they become the lucky "been there a while" people, and get the subsidy that they paid for earlier back in reduced rents?
    - kelnos 11y ago
      Only if they're lucky enough to have moved into rent-controlled housing, which, given the current market, isn't super likely.
- majormajor 11y ago
  Just for the heck of it: Yes, Yes, No. Though I'm paying market rate (but not in SF). Neither rent control as usually implemented nor construction seems like much of a silver bullet, though. I completely understand why cities are reluctant to change construction policies on short-term trends. Building a ton of new stock for a boom, and then running into a bust, could lead to massive vacancies that would ultimately impact the quality of the city for everyone left there after the people the boom attracted are gone. It's also obvious that current residents will prioritize themselves over future replacement residents. And this doesn't seem too unreasonable to me. If you think their government policies are so terrible, you should take that into account in your calculations of what you'd be willing to pay to live there. So I support rent control for existing tenants, so that long-term residents who never had a job that let them build enough capital to buy don't get forced out just by the vagaries of the market. Affordable housing programs can be useful too to enable lower-income workers to still live locally, but in my experience this is more commonly abused in new-construction situations where much more attention is paid to the letter of the law than the spirit; rent control is a more practical alternative.
  - simoncion 11y ago
    This housing pressure has been -with the possible exception of a blip during 2008- near-constant for at least the past ten years. How long must a trend persist before it is no longer short-term? :)
- baxterross 11y ago
  I'll bet some of those SF voters would approve new developments if they didn't have rent control keeping THEIR prices down.
  - simoncion 11y ago
    I benefit from rent control. I rabidly support every new apartment development. Trinity Towers (across the street from the main branch of the SF Library) should be a model for how these things work: * Remove rent controlled tenants. They will be displaced for 6->12 months. * Tear down old building. * Build Phase 1 of new, far denser building, as quickly as possible. * Move rent-controlled tenants back into their new units at the same rate they had when they were displaced. Those units are covered by rent control forever. The rest of the building is at "market rate". * Build the rest of the building at your leisure. The only thing I might add to the plan is city-sponsored housing to put the displaced residents.
    - timr 11y ago
      I didn't know that was how Trinity Towers was done, but that's been my suggestion for a while now: bulldoze the Mission and start over if you like, but every damned one of those people had better come back in on the same or better terms than what they had when they left -- and they'd better be housed in the meantime, too. Too often, the debate about development ignores those people, or makes great promises but fails to deliver.
      - simoncion 11y ago
        Angelo Sangiacomo is a goddamned saint. He probably caused the start of rent control in SF with his "promise" to increase rents in his buildings by something like 100% per year, every single year. [0] AIUI, he never sells buildings; he buys or builds them to rent apartments to people. And now, there's the Trinity Towers deal! He's rich as fuck from the landlording business, but -from what I know of him- he deserves every penny. > Too often, the debate about development ignores those people, or makes great promises but fails to deliver. The city's schizophrenic attitudes with regards to housing development confuse me. Something stinks in this city, and it's not just the Combined Sewer System. ;) [0] IIRC, the story goes that he publicly made this proclamation shortly after the passage of Prop 13.
- deleted 11y ago
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- thephyber 11y ago
  yes, yes, no (San Jose, CA) TL;DR: I think San Francisco rent control (1979) and (seemingly unrelated) California Prop 13 (1978?) are short term political stopgaps which are almost certainly doomed to fail the citizens they aim to protect in the long term. Rent control in San Jose is weaker than San Francisco, but they both suffer from the same common problems. Ultimately they do nothing to reduce demand or increase supply, while rent control may actually increase demand somewhat (by allowing people who might otherwise be priced out of a high demand area to stay). I've met many people who were interested in adopting a dog (I volunteer with local animal rescues), but couldn't/wouldn't because they were stuck in their rent controlled place with no leverage to negotiate a dog into their rental contract and didn't want to risk irritating their landlord. Shopping for a rent-controlled place is a cut-throat proposition so making two tiers of rental properties will necessarily lead to abuse of tenants in the more restrictive one. San Francisco's rent control has giant loopholes which work against the tenants the law was designed to protect: * Any property built after 1979 is exempt so there is a shrinking supply. Rent controlled tenants will be in progressively more cutt-throat competition. * Apartments and rental rooms in single-family homes are categorized differently so someone converting an existing apartment building into a single family home to be able to jack up rents to market rates which effectively was an eviction notice (a HN article covered this scenario a few months ago). * Your landlord may evict you in order to sell the property, whereby the new landlord can rebuild the property, eliminating the 1979 rent control grandfathering. San Francisco also has some of the strongest tenant support laws in the nation. While they are beneficial to tenants, they are also a hidden tax on landlords which increase the risk associated with owning a rental property in SF. San Francisco is at the middle of a perfect storm of multiple sources of housing demand: * Large, established Asian immigrant community making it desirable for new Asian immigrants (including a current influx of Chinese real estate investment cash) * Liberal politics which attract liberals fleeing rural red states in a self-sorting mechanism many sociologists have observed about US migration patterns (partially responsible for hyper-polarization) * Tech (web and biotech) sectors * City and state tax incentives for businesses to start up in certain districts * Coastal population centers like LA, NYC, Miami have long attracted young adults leaving their boring small towns after school My observation is that most municipalities which seek to enact some form of rent control do so as a short term political fix for some other systemic issue that voters & politicians are unwilling to address. San Francisco's rent control is an attempt to counter the shortage of housing you mentioned, but is entirely its own doing. The supply of housing is restricted: * San Francisco is nearly fully built and is surrounded by water on 3 sides. * NIMBYs prevent rezoning for high density and/or 4+ stories in most parts of the city * NIMBYs prevent alteration of the waterfront skyline * NIMBYs prevent demolition of Victorians Prop 13 (1978?, the California property tax growth cap) has loopholes. Prevent property tax is re-assessed at market rates if a property is transferred, but not if the transfer is between family members. Prop 13 also imposes a penalty on real estate transactions because to buy a new property would be to get your property tax set at current (IMHO inflated) rates. It is self-reinforcing because the existence of Prop 13 inflates real estate values by suppressing many property taxes. Prop 13 is also partly to blame for the housing shortage because it's possible that a long-time homeowner in San Francisco would rather leave a house vacant than sell it (because to sell and "take profits" would mean that another real estate purchase would come with a high recurring tax). Ultimately California is very expensive to live in, especially if you are on a fixed income. I, personally, would rather not underfund schools, police, and fire departments for the sake of a politically powerful minority who are property-wealthy but cash poor. There are plenty of small towns that need investment and demand and could provide a vastly cheaper cost of living than a very high demand + low supply city.
- dalore 11y ago
  Did you read the article though, it's arguing that the rent control is causing the very thing you're complaining about, that it it discourages from building new housing. So less housing is built which makes the existing housing more scarce and drives up the price.
  - simoncion 11y ago
    Rent control in SF is not the primary cause of the failure to build to meet demand. Anti-development zoning laws, anti-development rhetoric, an obscenely convoluted permitting process, and NIMBY protests of questionable motivation are currently the source of the city's woes. Consider: * New construction is not subject to rent control. * Newly built units are renting for $2,200 -> $3,000+ per bedroom per month. * Again, those rates are not subject to rent control and may be increased at any time. * Folks with apartments to rent often hold hours-long open houses where dozens of people attend to be interviewed, present their proof of financial stability, and jockey to make the best offer (read: pay the most) to their prospective new roommate/landlord. [0] In any reasonably managed city, I would agree that rent control stifles construction. In this city, rent control is hardly even a bump in the road; there's no rational reason not to build. [0] Source: I recently had a friend attempt to find a vaguely affordable place to live in the city. fully 80% of the places she looked at (and she was looking at at least one a week) did this.

tsotha 11y ago

> Interestingly some evidence shows that those living in rent-controlled flats in New York also tend to have higher median incomes than those who rent market-rate apartments. This isn't surprising at all. Whenever you have a constrained resource with a price cap you still pay more. It's just that you don't pay more in money (at least, not directly). It becomes a matter of who you know, and people with money are better able to get to know people.

bradleyjg 11y ago
You have to be careful when looking at NYC. We have a small program called rent control and a much much larger program called rent stabilization (plus some other odds and ends). So a stat specifically about rent control units is just talking about a few tens of thousand of mostly very old people.
dllthomas 11y ago
Also, it may be that those with higher incomes have a more stable situation, and are less likely to need to move, and thus are more likely to benefit from rent control.

philsnow 11y ago

There's a similar mechanism in place for owners in California, 1978 California "Prop 13" [0]. Among other things, this limits the amount that the "assessed value" of a property can increase to 2% per year, unless the property changes hands, in which case it can reset to "market" value. It has contributed to people staying in their houses a lot longer than they'd otherwise be able to. This increases the amount of NIMBYism as older people don't vote (in general) for things which change the "character" of the places they've lived in for 40 years. Proponents will say that it increases stability of communities, taking as an article of faith that community stability is something that should be optimized for. Among other things such as lack of effective regional public transit, I consider Prop 13 to be a sizeable disadvantage to the bay area's continued viability as a tech hub over the next 20 years, as it even further constrains the amount of housing available, "affordable" or not. Anyway, this is of course probably old news to you if you have ever considered buying property here, but for people who are not from around here, it bears mentioning. Are there such controls elsewhere in the world? [0] https://en.wikipedia.org/wiki/California_Proposition_13_(1978) https://en.wikipedia.org/wiki/California_Proposition_13_(197...

capkutay 11y ago
Maybe the hidden advantage of Tim Draper's plan to split California into 6 states [0] was reversing rent control. 0: https://en.wikipedia.org/wiki/Six_Californias https://en.wikipedia.org/wiki/Six_Californias
- thephyber 11y ago
  Rent control in San Francisco was a local ordinance in San Francisco. There are many, many factors involved in dividing up an existing government into 6 new governments. Existing laws (namely Prop 13), significantly more abridged state Constitutions, existing contractual liability obligations (CALPERS & CALSTERS retirement plans), and other contracts would likely be renegotiated in light of a different set of laws. The only thing I particularly liked about this is that California's population base is currently an outlier and our US Senate representation is vastly underpowered in proportion to other states. I don't think the founding fathers knew that one state would have 69x the population of another state without the people voting to change either the state composition or the method of calculation of senators.

guyzero 11y ago

While I agree that building housing is a better solution, it's hardly trivial. It's very capital intensive and in a lot of cases no one is willing to put that kind of capital up. Turn detached single family homes into denser townhouses? GOod luck. Turning industrial land into high rises is easy enough but that doesn't really cover the entire spectrum of housing types. What cities in the Bay Area really need to do is tear down 60's suburbs and rebuild as if they were 1860's London. But that's not going to happen.

FelixP 11y ago
There is TONS of investment capital sitting on the sidelines looking for decent returns at the moment. Capital availability is not the issue here.

njs12345 11y ago

A land value tax ( https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax ) is an economically interesting alternative to rent controls that doesn't seem to suffer from the same perverse incentives that rent controls sometimes do. FWIW, the housing market is pretty far from a free market, so well-implemented rent controls could be a good thing. I think like all government policies, really it comes down to implementation - I can imagine Germany doing a much better job than the USA here.

arikrak 11y ago

Rent Control (absolute caps on prices) doesn't make sense. In NYC, a small number of apartments are under it and have ridiculously low rent. Rent Stabilization (limiting how much landlords can raise rent on existing tenants) sounds like a bad idea economically, but it can be very hard on tenants to have their rent raised dramatically so they're forced out of their homes. The initial rent prices are set by the market, so it shouldn't discourage investment and development of buildings.

clarkmoody 11y ago

The State loves control, especially when it is packaged as "fairness." In the case of rent control, it's simply "fair" that you should be able to afford a place to live in the city and not have the evil capitalists prey upon the middle class. As the article mentions, price controls are nearly universally understood as inefficient among economists. The inefficiency expresses itself as a shortage of housing. Those who are able to find a place will enjoy cheap rent and then thank the politician who gave it to them. The rest will need to commute so they are out of the voting district anyway :-) The article mentions building limits. Call it "zoning" or "neighborhood preservation" or "green belts" but it's all State control over what should be private property decisions made by individuals. Artificially limiting supply through a restrictive building permitting process will drive up costs. Hence, the need for rent controls. So the State controls both the supply and price of housing in these metro areas. Any public figure or pundit who blames "capitalists" or "failure of the free market" for the housing woes should be laughed out of the room. How can we solve the problem? Stop trying to fix it with government. Allow rents to equalize at the market rate and allow supply to be determined by the market. Until the statists relinquish control, the problem will never be resolved. But the upside is that we will get to read these nice Economist articles forever.

ConfuciusSay 11y ago
There's two other major factors beyond rent control and zoning. One is cheap credit, insured by the government, and the second is the massive flow of foreign money coming into NA real estate. If you don't take care of all those factors together, you won't get true price discovery. The other thing is, the moment you do get true price discovery, you're popping a giant financialized bubble, and potentially triggering another self-reinforcing downward cycle (we'll be facing that soon anyways though).

umeshunni 11y ago

The saddest thing about this article was the linked NYT article by Krugman on San Fransisco's housing crisis .. From 2000! http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-... Looks like nothing has improved in the last 15 years

joeevans1000 11y ago

This is an absurd editorial. The cited arguments against rent control assume that rent control is just about capping rents. Rent control is about much more than that: it often is about capping rent for long time residents. If your grandmother has lived in her apartment for 65 years, she should not be tossed out just because a 19 year IT worker can pay more. Rent control takes in many factors, and is not just about capping rents in a region. However, I don't expect The Economist or it's reader demographic to care much about those affected by the rabid efforts to dismantle what protects many, just so that people can better profit on their properties.

mc32 11y ago
I don't think it's absurd. There are definitely some hard policy questions. However, that said, Krugman, an economist many populists like to cite agrees with their position. Rent control is short-term good, long-term bad. The solution is one of two things, more housing units, or fewer residents in a given area --look at any town/city where there is a pronounced long-term population decline, do you see a similar, "minimum rent" control? No, but you do see rent go down and typically the place suffers many ills. All it comes down to is everyone wants in when the going is good and everyone wants out when the going gets bad.

JohnSz 11y ago

Montreal has rent control. The result is that its financially inadvisable to renovate. Part of the rent control is you can raise the rent $31/year per $1,000 of renovation. That's a 30 YEAR payback. You can be replacing a roof the second time before you've recovered the costs for the first time, even forgetting about inflation and opportunity costs. Other provisions of the rent controls are just as restrictive. The result is rental buildings here are in poor shape, as owners let their buildings degrade and then sell them. Few are being built. Well ... there are more rental voters than landlord voters.

ConfuciusSay 11y ago
But in Montreal, as in SF, if the tenant leaves you can adjust the rent back to "market rates", which does benefit a landlord who renovates. Also, a good percentage of the new "condo" towers going up are specifically rental only. The more perverse side effect of rent control shows up in the cases where rental tenants on a 30 year old lease, paying peanuts per month is posting their apartment (or multiple apartments) on AirBnB at market rates. All the while, the property gets much more wear and tear, increasing maintenance costs.