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> Have there been any experiments in legislating ceilings for housing prices? If so, what has been the effect? As Assar Lindbeck put it, "next to bombing, rent

> Have there been any experiments in legislating ceilings for housing prices? If so, what has been the effect? As Assar Lindbeck put it, "next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities." For instance, in 1970s when the Bronx was burning, a major contributing factor was New York City rent control. In some neighborhoods of the Bronx and in Harlem, fully a third of the housing stock was literally abandoned by its owners: it was easier to just walk away and let the building rot than to take any action to repair it and continue to collect rent-controlled rents. Even notoriously planned-economy San Francisco has backpedalled from the price-ceiling approach, favoring instead a mandatory "right to lease at the same inflation-adjusted price forever" in all its housing contracts.

PhantomGremlin 10y ago
it was easier to just walk away and let the building rot than to take any action to repair it and continue to collect rent-controlled rents. My parents and I lived in a rent-controlled apt in Manhattan in the early 1970s. Rent was $80/month. The 1973 oil embargo happened and heating oil prices went up. Oh, did I forget to mention that the $80 rent included heat?!!!! Basically things were so bad for the landlord that it cost as much to heat the average apt in the building as that apt paid in rent. Clearly not a sustainable situation. We moved out of the city the next year. But in retrospect we should have bought our apt (for about $7,000) when the building went coop/condo. So the tenants not only enjoyed below market rents for decades, but after the landlord was bled dry they were able buy their apts for a pittance. Hmmm ... 12 apts, maybe two voters each, vs an older couple, the landlords, only two votes. I wonder why rent control existed for so long? (that was sarcasm, I know exactly why it existed!). As Maggie Thatcher said, the problem with socialism is that eventually you run out of other people's money. I'm sure the tenants saw some large cost increases once they went coop, because now they had to pay 100% of all the building costs. But that only moved them into fair value territory. All the money they "stole" from the old landlord in the previous decades would never be paid back.
- chimeracoder 10y ago
  Ironically, rent control may have been the single biggest factor leading to the consolidation of ownership of New York real estate by the ultra-wealthy. If you were a landlord, you couldn't afford to pay enough to buy your tenants out of their apartments. But massively wealthy investors and big banks could - and they did. They bought the rent-controlled apartments that were money pits for small landlords, and then paid large sums of cash (under the table) to the tenants to get them to leave. Once the tenants had left, the apartments could be easily converted back to unregulated, market-rate apartments. Small landlords literally couldn't afford to own the buildings, because they had to spend money to operate them and received next-to-nothing in rent. So, they had no choice but to sell them to the investors and banks who were well-capitalized enough to negotiate these buyouts, resulting in the mass consolidation of real-estate by a relatively small number of owners. And of course, the original goal of rent control (ensuring that long-time residents would continue living in the same neighborhoods) went completely out the window, because it was in their best financial interest at that point to move. And the secondary goal (providing "affordable" housing) was gone long before that > We moved out of the city the next year. But in retrospect we should have bought our apt (for about $7,000) when the building went coop/condo. In retrospect, you should probably have kept living there as tenants. If you were there in the early 1970s, you'd have been grandfathered into rent control, and rent control in New York (as opposed to rent stabilization) is insanely profitable for the tenants, even if you weren't offered the type of buyout that I described above. It'd have taken you 7 years just to break even on the savings in rent by itself, but between maintenance costs (which your landlord was required to give you for free) and property taxes (easily more than you were paying in rent), you'd probably still come out ahead today if you'd just stayed on as tenants. Of course, you'd have to live there continuously and never move, and the apartment wouldn't be yours to pass on in inheritance. But the money you'd save would be worth way more than that.
  - pmoriarty 10y ago
    "Once the tenants had left, the apartments could be easily converted back to unregulated, market-rate apartments." This is why rent-controlled apartments should never be allowed to go back to "market rates". They should remain rent controlled in perpetuity. Problem solved.
davidgay 10y ago
> As Assar Lindbeck put it, "next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities." Doesn't seem to have had much success in destroying Swiss cities. Maybe the neutrality helps prevent bombing-like effects? https://sites.tufts.edu/uep284chsustainabilities/files/2015/11/Home-ownership-and-rent-control-in-Switzerland.pdf https://sites.tufts.edu/uep284chsustainabilities/files/2015/... for some discussion...
- chimeracoder 10y ago
  > Doesn't seem to have had much success in destroying Swiss cities. Maybe the neutrality helps prevent bombing-like effects? When talking about policies like price floors and ceilings (ie, rent control), scale is critical. The city of New York has a population roughly equal to the entire country of Switzerland. The largest Swiss city (Zurich) is smaller than the smallest borough of New York City (Staten Island), and about one-fifth the size of the Bronx (the borough mentioned in fennecfoxen's comment). So comparing the effect of rent regulation in New York City to the effect of rent regulation in various cities in Switzerland isn't really meaningful, because the economies of cities in a country whose total population is roughly 8 million can't be compared with the economy of a city whose metropolitan region is two and a half times that size (20 million).
pmoriarty 10y ago
"In some neighborhoods of the Bronx and in Harlem, fully a third of the housing stock was literally abandoned by its owners: it was easier to just walk away and let the building rot than to take any action to repair it and continue to collect rent-controlled rents." It's absolutely scandolous that landlords would be allowed to get away with doing that. They should be taxed severely if they don't rent out the property within a certain amount of time, or perhaps just have the government take over ownership in that case.
- dlp211 10y ago
  It's scandalous that it was a better investment to simply walk away then lose money on every transaction? And then you think they should be taxed because the government is forcing them to lose money? I'm not some anti-government zealot, but think about what you are saying/asking for here.
  - pmoriarty 10y ago
    If they still own the building and don't let people live there, then that is scandalous. I'll stand by that.
    - PrimalDual 10y ago
      I don't think there are mustache twirling landlords that buy buildings only to leave them empty and refuse to let people live in them. Frankly it's appalling that government regulation could get bad enough that a landlord's only choice to minimize his losses is to leave a building unoccupied. I really hope the parent's comment is an exaggeration or a myth. What is even worse is that people actually think it's somehow the landlord's fault.

PhantomGremlin 10y ago

it was easier to just walk away and let the building rot than to take any action to repair it and continue to collect rent-controlled rents. My parents and I lived in a rent-controlled apt in Manhattan in the early 1970s. Rent was $80/month. The 1973 oil embargo happened and heating oil prices went up. Oh, did I forget to mention that the $80 rent included heat?!!!! Basically things were so bad for the landlord that it cost as much to heat the average apt in the building as that apt paid in rent. Clearly not a sustainable situation. We moved out of the city the next year. But in retrospect we should have bought our apt (for about $7,000) when the building went coop/condo. So the tenants not only enjoyed below market rents for decades, but after the landlord was bled dry they were able buy their apts for a pittance. Hmmm ... 12 apts, maybe two voters each, vs an older couple, the landlords, only two votes. I wonder why rent control existed for so long? (that was sarcasm, I know exactly why it existed!). As Maggie Thatcher said, the problem with socialism is that eventually you run out of other people's money. I'm sure the tenants saw some large cost increases once they went coop, because now they had to pay 100% of all the building costs. But that only moved them into fair value territory. All the money they "stole" from the old landlord in the previous decades would never be paid back.

chimeracoder 10y ago
Ironically, rent control may have been the single biggest factor leading to the consolidation of ownership of New York real estate by the ultra-wealthy. If you were a landlord, you couldn't afford to pay enough to buy your tenants out of their apartments. But massively wealthy investors and big banks could - and they did. They bought the rent-controlled apartments that were money pits for small landlords, and then paid large sums of cash (under the table) to the tenants to get them to leave. Once the tenants had left, the apartments could be easily converted back to unregulated, market-rate apartments. Small landlords literally couldn't afford to own the buildings, because they had to spend money to operate them and received next-to-nothing in rent. So, they had no choice but to sell them to the investors and banks who were well-capitalized enough to negotiate these buyouts, resulting in the mass consolidation of real-estate by a relatively small number of owners. And of course, the original goal of rent control (ensuring that long-time residents would continue living in the same neighborhoods) went completely out the window, because it was in their best financial interest at that point to move. And the secondary goal (providing "affordable" housing) was gone long before that > We moved out of the city the next year. But in retrospect we should have bought our apt (for about $7,000) when the building went coop/condo. In retrospect, you should probably have kept living there as tenants. If you were there in the early 1970s, you'd have been grandfathered into rent control, and rent control in New York (as opposed to rent stabilization) is insanely profitable for the tenants, even if you weren't offered the type of buyout that I described above. It'd have taken you 7 years just to break even on the savings in rent by itself, but between maintenance costs (which your landlord was required to give you for free) and property taxes (easily more than you were paying in rent), you'd probably still come out ahead today if you'd just stayed on as tenants. Of course, you'd have to live there continuously and never move, and the apartment wouldn't be yours to pass on in inheritance. But the money you'd save would be worth way more than that.
- pmoriarty 10y ago
  "Once the tenants had left, the apartments could be easily converted back to unregulated, market-rate apartments." This is why rent-controlled apartments should never be allowed to go back to "market rates". They should remain rent controlled in perpetuity. Problem solved.

davidgay 10y ago

> As Assar Lindbeck put it, "next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities." Doesn't seem to have had much success in destroying Swiss cities. Maybe the neutrality helps prevent bombing-like effects? https://sites.tufts.edu/uep284chsustainabilities/files/2015/11/Home-ownership-and-rent-control-in-Switzerland.pdf https://sites.tufts.edu/uep284chsustainabilities/files/2015/... for some discussion...

chimeracoder 10y ago
> Doesn't seem to have had much success in destroying Swiss cities. Maybe the neutrality helps prevent bombing-like effects? When talking about policies like price floors and ceilings (ie, rent control), scale is critical. The city of New York has a population roughly equal to the entire country of Switzerland. The largest Swiss city (Zurich) is smaller than the smallest borough of New York City (Staten Island), and about one-fifth the size of the Bronx (the borough mentioned in fennecfoxen's comment). So comparing the effect of rent regulation in New York City to the effect of rent regulation in various cities in Switzerland isn't really meaningful, because the economies of cities in a country whose total population is roughly 8 million can't be compared with the economy of a city whose metropolitan region is two and a half times that size (20 million).

pmoriarty 10y ago

"In some neighborhoods of the Bronx and in Harlem, fully a third of the housing stock was literally abandoned by its owners: it was easier to just walk away and let the building rot than to take any action to repair it and continue to collect rent-controlled rents." It's absolutely scandolous that landlords would be allowed to get away with doing that. They should be taxed severely if they don't rent out the property within a certain amount of time, or perhaps just have the government take over ownership in that case.

dlp211 10y ago
It's scandalous that it was a better investment to simply walk away then lose money on every transaction? And then you think they should be taxed because the government is forcing them to lose money? I'm not some anti-government zealot, but think about what you are saying/asking for here.
- pmoriarty 10y ago
  If they still own the building and don't let people live there, then that is scandalous. I'll stand by that.
  - PrimalDual 10y ago
    I don't think there are mustache twirling landlords that buy buildings only to leave them empty and refuse to let people live in them. Frankly it's appalling that government regulation could get bad enough that a landlord's only choice to minimize his losses is to leave a building unoccupied. I really hope the parent's comment is an exaggeration or a myth. What is even worse is that people actually think it's somehow the landlord's fault.