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Rent control is a failed experiment. All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market

Rent control is a failed experiment. All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases. Basically, if the real market price of an apartment is ~$3,000/mo, but in 5 years it realistically would be $5,000, they will simply list it for $5,000 now, to mitigate the loss. My mother-in-law is a land lord in Los Angeles (a very fair one at that), and is also about as bleeding heart liberal as you can get. She is a staunch opponent of rent control.

bendmorris 9y ago
>My mother-in-law is a land lord in Los Angeles ... She is a staunch opponent of rent control. Is this supposed to be surprising...? Regardless of whether it works for tenants, obviously rent control isn't there for the landlord's benefit.
- paulgb 9y ago
  Having read up on some of the building purchases in my own neighborhood (East Village of NYC), it seems that rent control is bad for honest landlords and good for the slimey ones who are willing to "encourage" people to leave. And thanks to Coase's theorem the building sales are usually in that direction.
  - ardit33 9y ago
    agreed, lived in apt in the East Village, and while my apt. was really nice, the common areas were in shambles and it looked like the managing company didn't care about its exterior either. The reason was that almost half of the apt. in the building were rent controlled (grandfathered in). I think a mix of limited rent control (i.e. 5 years, max) plus building more apt for people that can't afford it, is a better combo on keeping a stability and folks being able to afford and live closer to work. The only way to build more affordable apartments, is to allow for building more market rate apartments as well. Right now this current older (baby boomer) generation is screwing hard the upcoming one.
  - deleted 9y ago
    [deleted]
  - noobermin 9y ago
    Wouldn't the fix be to stop the slimey ones from "encouraging" people to leave in the first place? It sounds like blaming the game rather than striking out against those who abuse it.
    - BearGoesChirp 9y ago
      Is that possible? The good landlords aren't pulling out every technically not illegal trick to make more money because they value things more than just being in the clear legally, but they do value being in the clear legally. The slimy landlords don't care about other effects, as long as they are legally in the clear. If you increase punishment/enforcement of the laws, you will hit both the good and the slimy landlords harder, with the slimy ones still taking a lead because they don't care about factors like a good reputation or having a clean conscious (yes, I'm somewhat stereotyping the good and slimy groups). That the slimy ones know and practice working around the law may even mean that the good landlords get hit harder from a crackdown. In some way the government can't focus on the slimy landlords because by their very being they avoid government focus more than the good landlords.
    - jules 9y ago
      It's not a question of blame, it's a question of the results of a particular policy. Rent control creates an incentive for landlords to bully their tenants. You can create another government agency to police this, but in reality that is extremely difficult because you can do a lot of bad things legally, and trying to police that will have negative unintended consequences in itself. It also causes bad behavior that would be impossible or incredibly undesirable to police, such as simply neglecting the state of the housing and shared spaces. We've already learned decades ago that rent controlled housing rapidly deteriorates. Perhaps another example: the drug war. Making marihuana illegal creates criminal activity other than just selling it. You could say "okay, so just police that", but that's not so easy in the real world, and we've seen the negative consequences of attempting it. A lot of problems would be solved if politicians thought less about the intentions of their policies and more about the incentives those policies create. Too many policies make bad behavior rational. Even worse is that once you do that it's not just that good people start behaving badly, but also that bad actors out compete the good ones. A good policy aligns self interest with the common interest.
- theduro 9y ago
  Agreed. I guess what I was getting at was, given her particularly less than favorable views on deregulation and hyper free-market views in other respects, I find her opinion on this interesting.
  - bendmorris 9y ago
    No offense, but I don't think it's especially surprising when people support one set of political views when it affects other people, but deviate from it when it affects their own bottom line. See for example the powerful in Silicon Valley, who are mostly "progressive" until it comes to economic issues that affect their personal finances.
- lern_too_spel 9y ago
  I know several slumlords who have made a killing off of rent control. It rewards bad actors disproportionately more than bleeding hearts like GP's mother. Because slumlords are better able to extract profits from rent controlled properties, they are willing to buy them for more than they are worth to bleeding hearts. All rent controlled properties will be managed by slumlords in the long run.
  - kemiller 9y ago
    Yes, this, exactly. And I suspect that this is partially behind its persistence in the face of evidence it doesn't work.
michaelchisari 9y ago
My mother-in-law is a land lord in Los Angeles I'm a tenant in Los Angeles, and a staunch supporter of rent control. Knowing that my rent (which is already high) can only go up so much year-over-year provides some bit of stability as the tech industry devours eastward from Santa Monica.
- Gibbon1 9y ago
  I've been paying attention to what economists say fairly rigorously for the last ten years and they have some huge blind spots. One of them is they completely and utterly ignore the importance of income and social stability. Which is they see any expenditures needed to provide those as a unacceptable drag on society.
  - rayiner 9y ago
    > they ignore the importance of income and social stability They don't ignore it, they're just not ignorant about the costs of income and social stability. For example: I grew up in a relatively modest house (3BR, 1,100 square feet) about 40 minutes outside of D.C. Growing up, there were quite a few young families in our neighborhood. Average household income was probably about $70k/year in today's money--relatively well off but not even what you'd call "upper middle class." Today, you'd need about $130k/year to afford to live in the same house. You're talking about a completely different class of people at those two income levels. It's two people with average jobs (maybe even without a four-year degree), versus two people with mid-level white-collar jobs (GS-11, since this is D.C.). It's people who had kids in their 20s versus people who put off having kids for 5-10 years to focus on their careers. Today, the people I know starting families in the area are professionals making multiples of what my parents and our neighbors made at a similar stage in their lives. Instead of playing the housing bubble game, my wife and I commute in 60+ minutes each way. Partly because it enables us to raise our kids in a neighborhood with young families. But also just out of spite. All this "stability" is a huge drag on young people that proponents of things like rent control ignore. That grandma living in her rent-controlled apartment is displacing some family that now has to live out further and end up seeing the kids they put off having for fewer hours each day.
classwarsteve 9y ago
>All it does is force land lords to massively increase rent amounts Ah yes, the landlords are forced to massively raise rents, unlike the tenants, who are allowed to choose whatever price they want. Simple reliance on a profit model for housing is never going to adequately meet housing needs.
- AnimalMuppet 9y ago
  > Simple reliance on a profit model for housing is never going to adequately meet housing needs. Can you give something to justify that statement, something more than just a bare assertion? To me, it looks like reliance on something other than the profit motive (that is, rent control) is what's causing the problems here.
  - classwarsteve 9y ago
    A start would be the pervasiveness of homelessness throughout the history of the United States as contrasted with its abolition in the USSR and its dramatic return with post-soviet privatization.
    - jules 9y ago
      Why don't you start a communist commune? You can do that in a capitalist system. You can't set up a capitalist commune in a communist system because they'll put you in the gulag.
      - classwarsteve 9y ago
        Actually you should check out the long history of western capitalist supported right wing death squads that have been sent to break up communist governments. https://www.globalresearch.ca/a-timeline-of-cia-atrocities/5348804 https://www.globalresearch.ca/a-timeline-of-cia-atrocities/5...
        AnimalMuppet 9y ago
nicholas73 9y ago
Landlords will rent at whatever they can a tenant to pay for, not some number in their mental ledger.
- linkregister 9y ago
  Exactly! If the landlord can get a tenant to pay $5000 per month, then the market rate for that particular unit is $5000 per month.
  - icelancer 9y ago
    No, not exactly. In the scenario above, the landlord obviously has to keep the property vacant for some time at $5000/month, much longer than at $3000/month. But because it is a near-certainty the real price would go to $5000/month in 5 years - but he is unable to increase rent to that if he rents out today at $3000/month due to rent control (and this is critical) - he would rather keep it vacant until someone comes along and pays the higher amount. If not for rent control, he would charge $3000/month now at market-clearing rates, get a tenant in there in 30 days, and increase rent by the standard market price every 12 months. But due to rent control undercutting profits, he can't do this, so he keeps it open at a higher price.
    - linkregister 9y ago
      I was going to refute your (uncited) comment, but it appears that San Francisco's vacancy rate has increased from 4.9% to 8.3% over ten years, affirming your position. http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty.htm http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty....
      - icelancer 9y ago
        There's really no citation available so to speak for my comment, unless you want citations in Economics texts. It's fairly rational activity by landlords (or anyone who has controlled supply of any good/service) to take. The vacancy rates aren't surprising to me but there are other effects that cause that number to rise/fall, not just rent control (though the arrow is in the expected direction based on policy).
pmoriarty 9y ago
"Rent control is a failed experiment. All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases." Forces them? As if they wouldn't raise rents as much as they felt they could get away with anyway. Or as if without rent control landlords would keep rents low, merely out of the goodness of their hearts.
- aero142 9y ago
  This isn't as obvious as you make it sound. If all landlord realized they will have a future loss, they are looking for a way to recoup this. If they believe other landlords are going to do the same thing, they know they can raise prices without getting undercut because others know the same thing they do. Quips about the goodness of their hearts isn't as deep a thought as you think.
- lern_too_spel 9y ago
  It is an economic certainty. If more of the housing supply is tied up by rent controlled tenants who won't move out, supply and demand places the equilibrium price for available units far higher than it would be without rent control. When you institute rent control, you save existing teachers some money, but when they retire, good luck finding new teachers willing to work in the new market with much higher rents.
- JamesBarney 9y ago
  In commercial real estate there are two types of contracts. I agree to rent this place for a year. I agree to rent this place for a year, and I'm paying for the option to re-rent it at the same rate for the next 5 years. You can imagine that in commercial real estate one of these contracts is more expensive per month than the other. Especially in markets with rising rents. Basically rent control bans the first type of contract, and requires the second. And therefore increases rental rates.
hindsightbias 9y ago
I'm all for getting rid of rent control - as long as she gives up Prop 13 too.
- lern_too_spel 9y ago
  Get rid of both, but there's no reason to gate one on the other.
kinkrtyavimoodh 9y ago
Nothing against your MIL but it is extremely common for people to not walk the talk. It's much easier to talk in pure abstract models when it is someone else's life and money on the line. I am sure most people here who claim that the likes of Google and Apple should not 'avoid' taxes take every possible tax deduction in their personal lives so as to minimize their tax liability. There's a reason the young are such idealists. It's easy to preach in the abstract about how OTHER parents should raise THEIR kids. Or how OTHER landlords should manage THEIR property investments. When these people become parents and homeowners themselves is when the rubber hits the road, and most just regress to the mean.
- closeparen 9y ago
  The young are not going to become homeowners or start families if they can’t afford it. It’s not a wait your turn, stages of life kind of thing. There is no path for someone who is in their 20s now to ever own a $2m home. Indeed, household formation and fertility are low and declining compared to previous generations at the same point in their lives.
Spooky23 9y ago
When the earthquake levels half the city and your mother in law is bankrupt because here tenants have no connection to the community and jet, I’m sure she will be very interested in government asssitance.
balthasar 9y ago
Yr right. Rent control doesn't make sense in a bull or bear market. Only when the market is stable.
pfooti 9y ago
The real failed experiment is that of renting property in general. If nobody were allowed to own more homes than they could live in, or derive income from rentals, there'd be a much bigger supply of housing on the market for buyers, and a much more liquid market for buying and selling as people's jobs shifted.
gozur88 9y ago
>All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases. Depends on the scheme in place. There are a lot of places where the amount the landlord can raise the rent between tenants is capped. There are two big problems with rent control: It results in a constriction of supply over time, and it causes degradation in housing stock quality. There's no reason to put one cent more into your rent controlled place than required by law.

bendmorris 9y ago

>My mother-in-law is a land lord in Los Angeles ... She is a staunch opponent of rent control. Is this supposed to be surprising...? Regardless of whether it works for tenants, obviously rent control isn't there for the landlord's benefit.

paulgb 9y ago
Having read up on some of the building purchases in my own neighborhood (East Village of NYC), it seems that rent control is bad for honest landlords and good for the slimey ones who are willing to "encourage" people to leave. And thanks to Coase's theorem the building sales are usually in that direction.
- ardit33 9y ago
  agreed, lived in apt in the East Village, and while my apt. was really nice, the common areas were in shambles and it looked like the managing company didn't care about its exterior either. The reason was that almost half of the apt. in the building were rent controlled (grandfathered in). I think a mix of limited rent control (i.e. 5 years, max) plus building more apt for people that can't afford it, is a better combo on keeping a stability and folks being able to afford and live closer to work. The only way to build more affordable apartments, is to allow for building more market rate apartments as well. Right now this current older (baby boomer) generation is screwing hard the upcoming one.
- deleted 9y ago
  [deleted]
- noobermin 9y ago
  Wouldn't the fix be to stop the slimey ones from "encouraging" people to leave in the first place? It sounds like blaming the game rather than striking out against those who abuse it.
  - BearGoesChirp 9y ago
    Is that possible? The good landlords aren't pulling out every technically not illegal trick to make more money because they value things more than just being in the clear legally, but they do value being in the clear legally. The slimy landlords don't care about other effects, as long as they are legally in the clear. If you increase punishment/enforcement of the laws, you will hit both the good and the slimy landlords harder, with the slimy ones still taking a lead because they don't care about factors like a good reputation or having a clean conscious (yes, I'm somewhat stereotyping the good and slimy groups). That the slimy ones know and practice working around the law may even mean that the good landlords get hit harder from a crackdown. In some way the government can't focus on the slimy landlords because by their very being they avoid government focus more than the good landlords.
  - jules 9y ago
    It's not a question of blame, it's a question of the results of a particular policy. Rent control creates an incentive for landlords to bully their tenants. You can create another government agency to police this, but in reality that is extremely difficult because you can do a lot of bad things legally, and trying to police that will have negative unintended consequences in itself. It also causes bad behavior that would be impossible or incredibly undesirable to police, such as simply neglecting the state of the housing and shared spaces. We've already learned decades ago that rent controlled housing rapidly deteriorates. Perhaps another example: the drug war. Making marihuana illegal creates criminal activity other than just selling it. You could say "okay, so just police that", but that's not so easy in the real world, and we've seen the negative consequences of attempting it. A lot of problems would be solved if politicians thought less about the intentions of their policies and more about the incentives those policies create. Too many policies make bad behavior rational. Even worse is that once you do that it's not just that good people start behaving badly, but also that bad actors out compete the good ones. A good policy aligns self interest with the common interest.
theduro 9y ago
Agreed. I guess what I was getting at was, given her particularly less than favorable views on deregulation and hyper free-market views in other respects, I find her opinion on this interesting.
- bendmorris 9y ago
  No offense, but I don't think it's especially surprising when people support one set of political views when it affects other people, but deviate from it when it affects their own bottom line. See for example the powerful in Silicon Valley, who are mostly "progressive" until it comes to economic issues that affect their personal finances.
lern_too_spel 9y ago
I know several slumlords who have made a killing off of rent control. It rewards bad actors disproportionately more than bleeding hearts like GP's mother. Because slumlords are better able to extract profits from rent controlled properties, they are willing to buy them for more than they are worth to bleeding hearts. All rent controlled properties will be managed by slumlords in the long run.
- kemiller 9y ago
  Yes, this, exactly. And I suspect that this is partially behind its persistence in the face of evidence it doesn't work.

michaelchisari 9y ago

My mother-in-law is a land lord in Los Angeles I'm a tenant in Los Angeles, and a staunch supporter of rent control. Knowing that my rent (which is already high) can only go up so much year-over-year provides some bit of stability as the tech industry devours eastward from Santa Monica.

Gibbon1 9y ago
I've been paying attention to what economists say fairly rigorously for the last ten years and they have some huge blind spots. One of them is they completely and utterly ignore the importance of income and social stability. Which is they see any expenditures needed to provide those as a unacceptable drag on society.
- rayiner 9y ago
  > they ignore the importance of income and social stability They don't ignore it, they're just not ignorant about the costs of income and social stability. For example: I grew up in a relatively modest house (3BR, 1,100 square feet) about 40 minutes outside of D.C. Growing up, there were quite a few young families in our neighborhood. Average household income was probably about $70k/year in today's money--relatively well off but not even what you'd call "upper middle class." Today, you'd need about $130k/year to afford to live in the same house. You're talking about a completely different class of people at those two income levels. It's two people with average jobs (maybe even without a four-year degree), versus two people with mid-level white-collar jobs (GS-11, since this is D.C.). It's people who had kids in their 20s versus people who put off having kids for 5-10 years to focus on their careers. Today, the people I know starting families in the area are professionals making multiples of what my parents and our neighbors made at a similar stage in their lives. Instead of playing the housing bubble game, my wife and I commute in 60+ minutes each way. Partly because it enables us to raise our kids in a neighborhood with young families. But also just out of spite. All this "stability" is a huge drag on young people that proponents of things like rent control ignore. That grandma living in her rent-controlled apartment is displacing some family that now has to live out further and end up seeing the kids they put off having for fewer hours each day.

classwarsteve 9y ago

>All it does is force land lords to massively increase rent amounts Ah yes, the landlords are forced to massively raise rents, unlike the tenants, who are allowed to choose whatever price they want. Simple reliance on a profit model for housing is never going to adequately meet housing needs.

AnimalMuppet 9y ago
> Simple reliance on a profit model for housing is never going to adequately meet housing needs. Can you give something to justify that statement, something more than just a bare assertion? To me, it looks like reliance on something other than the profit motive (that is, rent control) is what's causing the problems here.
- classwarsteve 9y ago
  A start would be the pervasiveness of homelessness throughout the history of the United States as contrasted with its abolition in the USSR and its dramatic return with post-soviet privatization.
  - jules 9y ago
    Why don't you start a communist commune? You can do that in a capitalist system. You can't set up a capitalist commune in a communist system because they'll put you in the gulag.
    - classwarsteve 9y ago
      Actually you should check out the long history of western capitalist supported right wing death squads that have been sent to break up communist governments. https://www.globalresearch.ca/a-timeline-of-cia-atrocities/5348804 https://www.globalresearch.ca/a-timeline-of-cia-atrocities/5...
      - AnimalMuppet 9y ago

nicholas73 9y ago

Landlords will rent at whatever they can a tenant to pay for, not some number in their mental ledger.

linkregister 9y ago
Exactly! If the landlord can get a tenant to pay $5000 per month, then the market rate for that particular unit is $5000 per month.
- icelancer 9y ago
  No, not exactly. In the scenario above, the landlord obviously has to keep the property vacant for some time at $5000/month, much longer than at $3000/month. But because it is a near-certainty the real price would go to $5000/month in 5 years - but he is unable to increase rent to that if he rents out today at $3000/month due to rent control (and this is critical) - he would rather keep it vacant until someone comes along and pays the higher amount. If not for rent control, he would charge $3000/month now at market-clearing rates, get a tenant in there in 30 days, and increase rent by the standard market price every 12 months. But due to rent control undercutting profits, he can't do this, so he keeps it open at a higher price.
  - linkregister 9y ago
    I was going to refute your (uncited) comment, but it appears that San Francisco's vacancy rate has increased from 4.9% to 8.3% over ten years, affirming your position. http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty.htm http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty....
    - icelancer 9y ago
      There's really no citation available so to speak for my comment, unless you want citations in Economics texts. It's fairly rational activity by landlords (or anyone who has controlled supply of any good/service) to take. The vacancy rates aren't surprising to me but there are other effects that cause that number to rise/fall, not just rent control (though the arrow is in the expected direction based on policy).

pmoriarty 9y ago

"Rent control is a failed experiment. All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases." Forces them? As if they wouldn't raise rents as much as they felt they could get away with anyway. Or as if without rent control landlords would keep rents low, merely out of the goodness of their hearts.

aero142 9y ago
This isn't as obvious as you make it sound. If all landlord realized they will have a future loss, they are looking for a way to recoup this. If they believe other landlords are going to do the same thing, they know they can raise prices without getting undercut because others know the same thing they do. Quips about the goodness of their hearts isn't as deep a thought as you think.
lern_too_spel 9y ago
It is an economic certainty. If more of the housing supply is tied up by rent controlled tenants who won't move out, supply and demand places the equilibrium price for available units far higher than it would be without rent control. When you institute rent control, you save existing teachers some money, but when they retire, good luck finding new teachers willing to work in the new market with much higher rents.
JamesBarney 9y ago
In commercial real estate there are two types of contracts. I agree to rent this place for a year. I agree to rent this place for a year, and I'm paying for the option to re-rent it at the same rate for the next 5 years. You can imagine that in commercial real estate one of these contracts is more expensive per month than the other. Especially in markets with rising rents. Basically rent control bans the first type of contract, and requires the second. And therefore increases rental rates.

hindsightbias 9y ago

I'm all for getting rid of rent control - as long as she gives up Prop 13 too.

lern_too_spel 9y ago
Get rid of both, but there's no reason to gate one on the other.

kinkrtyavimoodh 9y ago

Nothing against your MIL but it is extremely common for people to not walk the talk. It's much easier to talk in pure abstract models when it is someone else's life and money on the line. I am sure most people here who claim that the likes of Google and Apple should not 'avoid' taxes take every possible tax deduction in their personal lives so as to minimize their tax liability. There's a reason the young are such idealists. It's easy to preach in the abstract about how OTHER parents should raise THEIR kids. Or how OTHER landlords should manage THEIR property investments. When these people become parents and homeowners themselves is when the rubber hits the road, and most just regress to the mean.

closeparen 9y ago
The young are not going to become homeowners or start families if they can’t afford it. It’s not a wait your turn, stages of life kind of thing. There is no path for someone who is in their 20s now to ever own a $2m home. Indeed, household formation and fertility are low and declining compared to previous generations at the same point in their lives.

Spooky23 9y ago

When the earthquake levels half the city and your mother in law is bankrupt because here tenants have no connection to the community and jet, I’m sure she will be very interested in government asssitance.

balthasar 9y ago

Yr right. Rent control doesn't make sense in a bull or bear market. Only when the market is stable.

pfooti 9y ago

The real failed experiment is that of renting property in general. If nobody were allowed to own more homes than they could live in, or derive income from rentals, there'd be a much bigger supply of housing on the market for buyers, and a much more liquid market for buying and selling as people's jobs shifted.

gozur88 9y ago

>All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases. Depends on the scheme in place. There are a lot of places where the amount the landlord can raise the rent between tenants is capped. There are two big problems with rent control: It results in a constriction of supply over time, and it causes degradation in housing stock quality. There's no reason to put one cent more into your rent controlled place than required by law.