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There are two kinds of real estate "prices": rental rates and property sales prices. Ceilings on property sales prices are very rare. Probably the most common

by spikels 10y ago

There are two kinds of real estate "prices": rental rates and property sales prices. Ceilings on property sales prices are very rare. Probably the most common example is resale price caps on government sponsored housing for lower income buyers. Price ceilings on rent are more common but still rare. This is commonly known as rent control. Like all price caps the result is shortages in varying degrees depending on how binding the ceiling is. If the rent/price is set below operating/construction costs you will see very little avalabilty/construction. On the other hand if the ceiling is set well above the "natural" rent/price there will be little if any impact. In between you will see increasing shortages as the ceiling decreases. This is generally basic economics but can get pretty complex depending on the details of the specific policy. Taking thsee details into account as well as the unusual nature or real estate (durability, immobility, etc.) the actual results have lined up very well with the theoretical predictions.

didibus 10y ago
Hum, interesting. I think of rent control differently, but maybe the way you describe it is what is normally meant. When I hear rent control, I hear controlled increase in rent over time for existing rental units. You make sure all rental units are profitable, but you protect existing tenants from being able to afford their rent to not being able to in a year, simply because a neighborhood has increased in desirability. So you force the market to either build new construction to profit from the boom, or to make remodeling to old buildings to justify rent increase.
- PrimalDual 10y ago
  The point is that you still end up misallocating housing units. The marginal Googler at San Francisco may end up taking a lower paying job elsewhere in the country reducing overall productivity. If the renter moves because they can't afford the rent they may find a place where costs are more favorable to their earnings. It's part of the difficult changes introduced by market-based economies but I thought the consensus was that in the long run everyone benenfits.
- superuser2 10y ago
  You protect existing tenants from new tenants. Existing units leave the equation for people moving or coming of age, who face much higher prices than they would if they were allowed to compete with existing residents.

by spikels 10y ago

didibus 10y ago

Hum, interesting. I think of rent control differently, but maybe the way you describe it is what is normally meant. When I hear rent control, I hear controlled increase in rent over time for existing rental units. You make sure all rental units are profitable, but you protect existing tenants from being able to afford their rent to not being able to in a year, simply because a neighborhood has increased in desirability. So you force the market to either build new construction to profit from the boom, or to make remodeling to old buildings to justify rent increase.

PrimalDual 10y ago
The point is that you still end up misallocating housing units. The marginal Googler at San Francisco may end up taking a lower paying job elsewhere in the country reducing overall productivity. If the renter moves because they can't afford the rent they may find a place where costs are more favorable to their earnings. It's part of the difficult changes introduced by market-based economies but I thought the consensus was that in the long run everyone benenfits.
superuser2 10y ago
You protect existing tenants from new tenants. Existing units leave the equation for people moving or coming of age, who face much higher prices than they would if they were allowed to compete with existing residents.