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The Consumer Price Index for Rent of Primary Residence, compiled by the United States Bureau of Labor Statistics and corrected for inflation, went up only 8 per

The Consumer Price Index for Rent of Primary Residence, compiled by the United States Bureau of Labor Statistics and corrected for inflation, went up only 8 percent in 1997 to 2005, so unmet demand for housing services can’t explain the huge increase in real home prices. In a free market, this would be true. But rent controls make prices sticky, diminishing their utility as an indicator of the balance between supply and demand. In the worst case, you can see rents staying completely flat -- and a large unmet demand for housing because those flat rents take away any incentive to add supply.

eridius 9y ago
> and a large unmet demand for housing because those flat rents take away any incentive to add supply Rent control generally only applies to existing housing, not new housing.
- oculusthrift 9y ago
  all rent-controlled housing was once new. what does that tell you will eventually happen to the housing you build?
- ww520 9y ago
  Lower rent on the rent controlled housing depress market rent across the board, discouraging new housing investment.
- cperciva 9y ago
  True, but building new units is a slow process. High rents on existing units move the supply curve much faster -- people take roommates, people move away and free up units, etc.
conistonwater 9y ago
You could try checking the rental vacancy rate (https://fred.stlouisfed.org/series/RRVRUSQ156N https://fred.stlouisfed.org/series/RRVRUSQ156N), it seems it was high back then. You would expect to see unmet demand there, at least. I think the conclusion is okay. Also, sticky prices is something else entirely, rent controls are typically price ceilings.
dsjoerg 9y ago
Any idea how much of the Consumer Price Index for Rent of Primary Residence consists of rent-controlled housing?
- cperciva 9y ago
  No idea. But my impression is that it tends to be more common in the cities which have seen the largest increases in property values.
- smacktoward 9y ago
  It depends on whether you use the figure for rent of primary residence (where the sample they use to calculate it includes rent-controlled units) or owner's equivalent rent of residence (where it doesn't). See https://www.bls.gov/cpi/cpifacnewrent.pdf https://www.bls.gov/cpi/cpifacnewrent.pdf for details on how each figure is calculated. The two figures tend to track each other closely in practice, though, so if you're primarily interested in observing trends the distinction is mostly academic. Here's a graph with data for both indicators going back to 1981: https://fred.stlouisfed.org/graph/?g=dM2A https://fred.stlouisfed.org/graph/?g=dM2A
ceejayoz 9y ago
There's not much rent control outside a few major cities like NYC and SF. I doubt it does too much to the national stat.
- stupidhn 9y ago
  >There's not much rent control outside a few major cities like NYC and SF. Rent control, or other regulation, takes many forms. For example, my locale has regulations regarding the amount of window space is required in a basement dwelling, which goes beyond how most homes are built. Therefore renting out your basement becomes impossible without major renovations.
  - pcwalton 9y ago
    That reminds me of in-law restrictions in SF that were widely ignored prior to the repeal. Is that effectively enforced?
    - stupidhn 9y ago
      >Is that effectively enforced? As far as I understand, yes, based on the fact that nobody seems to rent out their basement unless their home was specifically built to accommodate the regulation. IANAL, but with the balance of power tilted towards tenants here in Canada, I don't think you'd do well to shun it. I lived in a few basement apartments as a student. They're generally more affordable, with shared utilities. I think it really hurts the market.
      - emodendroket 9y ago
        They're pretty common in US cities where they are illegal, but maybe Canadian municipalities are more serious about regulation.
  - conistonwater 9y ago
    That would make rent more expensive, due to artificially reduced supply, but that is not what rent control means.
emodendroket 9y ago
How many American cities actually have rent control anymore?

eridius 9y ago

> and a large unmet demand for housing because those flat rents take away any incentive to add supply Rent control generally only applies to existing housing, not new housing.

oculusthrift 9y ago
all rent-controlled housing was once new. what does that tell you will eventually happen to the housing you build?
ww520 9y ago
Lower rent on the rent controlled housing depress market rent across the board, discouraging new housing investment.
cperciva 9y ago
True, but building new units is a slow process. High rents on existing units move the supply curve much faster -- people take roommates, people move away and free up units, etc.

conistonwater 9y ago

You could try checking the rental vacancy rate (https://fred.stlouisfed.org/series/RRVRUSQ156N https://fred.stlouisfed.org/series/RRVRUSQ156N), it seems it was high back then. You would expect to see unmet demand there, at least. I think the conclusion is okay. Also, sticky prices is something else entirely, rent controls are typically price ceilings.

dsjoerg 9y ago

Any idea how much of the Consumer Price Index for Rent of Primary Residence consists of rent-controlled housing?

cperciva 9y ago
No idea. But my impression is that it tends to be more common in the cities which have seen the largest increases in property values.
smacktoward 9y ago
It depends on whether you use the figure for rent of primary residence (where the sample they use to calculate it includes rent-controlled units) or owner's equivalent rent of residence (where it doesn't). See https://www.bls.gov/cpi/cpifacnewrent.pdf https://www.bls.gov/cpi/cpifacnewrent.pdf for details on how each figure is calculated. The two figures tend to track each other closely in practice, though, so if you're primarily interested in observing trends the distinction is mostly academic. Here's a graph with data for both indicators going back to 1981: https://fred.stlouisfed.org/graph/?g=dM2A https://fred.stlouisfed.org/graph/?g=dM2A

ceejayoz 9y ago

There's not much rent control outside a few major cities like NYC and SF. I doubt it does too much to the national stat.

stupidhn 9y ago
>There's not much rent control outside a few major cities like NYC and SF. Rent control, or other regulation, takes many forms. For example, my locale has regulations regarding the amount of window space is required in a basement dwelling, which goes beyond how most homes are built. Therefore renting out your basement becomes impossible without major renovations.
- pcwalton 9y ago
  That reminds me of in-law restrictions in SF that were widely ignored prior to the repeal. Is that effectively enforced?
  - stupidhn 9y ago
    >Is that effectively enforced? As far as I understand, yes, based on the fact that nobody seems to rent out their basement unless their home was specifically built to accommodate the regulation. IANAL, but with the balance of power tilted towards tenants here in Canada, I don't think you'd do well to shun it. I lived in a few basement apartments as a student. They're generally more affordable, with shared utilities. I think it really hurts the market.
    - emodendroket 9y ago
      They're pretty common in US cities where they are illegal, but maybe Canadian municipalities are more serious about regulation.
- conistonwater 9y ago
  That would make rent more expensive, due to artificially reduced supply, but that is not what rent control means.

emodendroket 9y ago

How many American cities actually have rent control anymore?