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Another second-order effect of rent control is increased traffic. Suppose you have two residents with significantly below-market-rate housing at the same qualit

Another second-order effect of rent control is increased traffic. Suppose you have two residents with significantly below-market-rate housing at the same quality level, one in downtown SF and another in Mountain View. The former starts a new job at Google in Mountain View, the latter starts a new job at a trendy start-up in downtown SF. Since they're paying significantly below market rate, they're unable to trade apartments with each other without paying a significant amount of money. So, because you cannot trade apartments without spending significantly more money, there's a couple of hour-long commutes instead. This is part of a general pattern - messing with prices doesn't help, since the market still has to clear. You just start paying in things other than money. Paying for things with money is great in general, since then someone else has the money. Paying for things with a longer commute is terrible, since there's no beneficiary.

hangonhn 9y ago
Is this a well known problem? It has never occured to me that this could happen but it makes a lot of intuitive sense. Do you know if anyone has measures this effect? Very curious how much this contributes to the Bay Area traffic problems.
- ThrustVectoring 9y ago
  Second-order effects are difficult to study in general. My comment was driven entirely by fundamental economic modeling: price controls generate harms by forbidding beneficial trades, and people move to reduce their commute. There are other reasons why people move, and I expect to find these situations as well. For instance, people tend to downsize their housing after their children move out, but who would downsize when the smaller apartment is more expensive?
Spooky23 9y ago
That’s a real stretch. End of the day, short term leases make rents float at the cost of making renters second class citizens who cannot stay in any one place or area. Rent control is a way to deal with that. It exists because voters care deeply about it.
- civilian 9y ago
  But rent control only benefits the renters already in place. It hurts new renters to the area, by driving up costs. You've got to address a moral judgement you've implicitly made: What makes the current renters of a city more deserving than the future renters who might move to the city?
  - waqf 9y ago
    To be fair, GP did address that point: the current renters of a city have votes [in local government], and the future renters do not.
    - jtuente 9y ago
      Let's apply that same logic to refugees (red-lining, migrant workers, or really any topic of im/e/migration). Current citizens have votes and decide that refugees aren't welcome, refugees don't have votes and so cannot be welcomed.
    - BearGoesChirp 9y ago
      I feel this response is confusing right with might. Just because some group has the political might to make laws that benefit them does not make those laws right, does it?
      - nradov 9y ago
        Right and wrong are almost entirely subjective on issues like this. What is the right level of political boundaries for people to have a vote in these decisions? Should residents of San Diego be able to influence housing policy in San Francisco? How about residents of Chicago, or Madrid, or Karachi?
        civilian 9y ago
        I don't like the idea of residents of far-away cities having a say in housing policy in my city. But I'd also support a federal-level ban on rent control policies, based on the idea that it's a net-good if we encourage people to move to more efficiently allocate housing. But I totally see how this is kind of hypocritical. I just want things my way, everywhere. :-] idk! I suppose that the next-best thing is to have local control with freedom of movement. The United States and cities are kind of like this--- it allows for states and cities to try out different policies, and compete based on policy.
kinkrtyavimoodh 9y ago
There is a lot of stickiness and inelasticity when it comes to housing, especially when other factors such as kids and schools and spouse's commute and all come up.
- delphinius81 9y ago
  Right, but everyone knows that if you have a spouse or kids you probably shouldn't be living in the bay area anyway unless you a rich. /s
- noobermin 9y ago
  Can a free-marketeer address this? I thought stuff like this were obvious rebuttals but look at the top posts in this comment section. It's starting to feel like articles and posts like this aren't driven by discussion or curiosity but just political fights.
  - mjevans 9y ago
    The major issue is that the market is NOT free. This market can't ever be free. There are building codes, zoning, planning, approvals, etc. All of that red tape related to building the level and quality of housing that an area needs already distorts the market. Thus the underlying issue is that there has not been proper correction and guidance from the governance structures established by the people in the area; mostly because the rising home prices and status-quo of neighborhoods generally benefit those people. It's going to take state or federal level correction to fix this issue and the "best" way of doing that would be to sour the use of housing as an investment.
  - rayiner 9y ago
    Address what? A vague reference to "stickiness and inelasticity when it comes to housing?" I suspect you're misunderstanding what the "swap houses" example means. It's not actually about two people who might want to swap their houses. It's just a "bottom up" way of showing how housing restrictions create inefficiencies by limiting choice. It might help to think of it in a "top down" fashion. Imagine laying out housing for everyone in a metro area as an optimization problem, where you're trying to maximize a value function over things like amount of space, proximate to peoples' workplaces, quality of schools, affordability, etc. Housing restrictions add additional constraints that make the solutions worse for everyone. E.g. say some group of people with kids are willing to live in a duplex on 1/8 of an acre rather than a detached home on 1/4 of an acre in order to reduce their commutes and see their kids more often. But they're not willing to live in a city apartment with their kids and pets. Housing restrictions basically eliminate that part of the solution space by making it illegal to construct such housing. That group of people get punted to their less-preferred alternatives, and the resulting solutions are worse for everyone.
JustAnotherPat 9y ago
They're going in different directions though, so traffic is actually halved.
- ThrustVectoring 9y ago
  How so? If they swapped apartments they'd just walk to work and not have any contribution to traffic.
DougN7 9y ago
That's a really great insight. The fact that such good intentions often lead to bigger problems is what concerns me about UBI - it will surely have huge second-order effects. I'm not sure what they will be, but rent control in a city is tiny compared to the effect a universal change like UBI would introduce.
- knodi123 9y ago
  > UBI - it will surely have huge second-order effects I absolutely agree, and I think these justifiable and yet ill-defined concerns are shared by a lot of UBI opponents. I just hope anyone trying to come to an informed decision remembers to include unrestrained capitalism's second-order effects on the pro/con list.
  - CryptoPunk 9y ago
    >>unrestrained capitalism It sounds scary when put like that but it just means people free to interact, while secure from other social actors in their person and property. By the nature of voluntary configuration, interactions have a tendency toward being mutually beneficial, and there are corrective feedback loops that naturally exist in a voluntary society to reduce those that aren't (e.g. scammy operators increasingly excluded by increasing consumer vigilance and growing reputation markets). And you can still have governments provisioning economic resources that qualify as public goods, like basic research, public information resources, policing and national defense, in such a setting, so there is no fundamental deficiency in unrestrained capitalism, aka an absolute free market.
    - knodi123 9y ago
      > so there is no fundamental deficiency in unrestrained capitalism Except a tendency toward consolidation and monopolies. And, inherent in the word "unrestrained", a tendency to use corporate money to unduly influence politics to benefit the corporation at the expense of the public interest. > it just means people free to interact, while secure from other social actors in their person and property It's kind of irrelevant anyway, all I really meant was UBI should be evaluated in comparison to "the status quo", whatever you choose to label it.
tmalsburg2 9y ago
Interesting. But it would be good to have some data showing whether this effect on traffic is real and, if yes, what magnitude it has. However, even if the data supports the idea, the conclusion that rent control in general is bad is not really supported because rent control could be implemented in different ways that do not hinder mobility. Germany recently introduced a new rent control law the goal of which is precisely that.
hardtke 9y ago
Another second order effect is the reduced supply of family sized units. Many 3+ bedroom units are occupied by older couples and single people who raised their kids there and no longer need the space but would find it much more expensive to downsize. This drives families out of the city (among other things). Prop. 13 solves this by allowing people older than 55 to transfer their property tax break to a smaller house.
- jclulow 9y ago
  Prop. 13 also creates problems with housing supply for people who haven't yet been able to transition to home ownership. It's difficult to strike a good balance here.
- deleted 9y ago
  [deleted]
spike021 9y ago
I believe this is exactly my current dilemma: I live in San Jose, I commute to SF 3 days a week (super thankful for the chance to work remote 2x a week). My current apartment (a 1BR I live in by myself) costs a bit less than 1k a month and is rent-controlled. The equivalent in SJ is probably worth 2-2.5x as much per month, and in SF (or somewhere in-between) it can be worth anywhere from 2.5-4x as much. I've been hunting for an apartment more on the peninsula since I don't necessarily need or want to live right in the city, just closer (especially in case I switch jobs eventually), but I definitely want to halve the commute time at least (Caltrain plus door to door is nearly 1.75hrs each way). But why would I want to leave my rent-controlled steal and be spending over half my monthly income for the equivalent? It's ridiculous. So now it's a matter of figuring out the cost analysis of moving into a better area that's closer to work, and therefore an increased quality of life, or stay where I'm at where I can save much more money and have a rather crappy quality of life (I don't care for where I live now strictly other than the cheap price of the rent).
- fossuser 9y ago
  Are you willing to live with housemates? That's the only way you're going to come anywhere near your current rent. As a bonus you'll get more space generally and some community.
  - spike021 9y ago
    Not particularly. I've had that experience before and much prefer being on my own now. I find my community elsewhere. I prefer to think of my apartment as my own space, whereas a house (or shared multi-room apartment) would require having a communal kitchen/living room.
- joejerryronnie 9y ago
  Real question, why not look for a different job closer to San Jose?
  - adrianratnapala 9y ago
    And here we see nerfhammer@ point being made. Your question is good. And that shows that the laws discourage people from seeking work far from where they currently live.
Y7ZCQtNo39 9y ago
Are there that many people in rent-controlled apartments for this to be a serious enough issue or cause of traffic?
- deleted 9y ago
  [deleted]
- arebop 9y ago
  A third of rentable dwellings in San Francisco are rent-controlled, so yes.
nerfhammer 9y ago
The term for this is called "labor mobility". Instead of increasing commute times, more typically it involves simply not taking jobs that are further away. Restricting labor mobility is really bad for obvious reasons: people not being able to move where the jobs are means jobs not being filled even as unemployment increases. There is overwhelming evidence that labor mobility has gotten drastically worse in recent decades, and local NIMBYism is one of the major causes: http://neighborhoodeffects.mercatus.org/2017/01/26/why-the-lack-of-labor-mobility-in-the-u-s-is-a-problem-and-how-we-can-fix-it/ http://neighborhoodeffects.mercatus.org/2017/01/26/why-the-l... Compare this to China, which has had tens of millions of people flock to brand new megacities for the new job opportunities there.
- deleted 9y ago
  [deleted]
- seanmcdirmid 9y ago
  China is a bad example with its hukou system in place. Sure you can migrate to the city for a better job but you have to leave your kids behind (no public school without hukou). Labor mobility but at great costs.
  - adrianratnapala 9y ago
    China is a bad example of a place getting policy right to favour labour mobility. It is an extreme example of a place where labour mobility is so valuable it happens in spite of restraints. In fact it is so extreme that it is hard to draw lessons for modern western countries (although it has obvious resemblances to urbanisation in Europe a few centuries ago).
  - klipt 9y ago
    Seems comparable to immigration controls between countries.
    - seanmcdirmid 9y ago
      It’s more comparable to the movement controls of apartheid.
shawnee_ 9y ago
> So, because you cannot trade apartments without spending significantly more money, there's a couple of hour-long commutes instead. Here is where the analysis should happen. All of the "significantly more money" aspect boils down to transactional costs. Transactional costs in rentals will always, always be higher than transactional costs of ownership. Ownership's transactional costs get offset, (to only a small extent in the Bay area, but it is not nothing), by the equity the owner has accumulated. Renters never accumulate equity to offset their transactional cost of "trading". The paper (and all of the anti rent control camp) constantly misconstrues lower-than-market rent as "savings". It is not savings; it's merely delaying the inevitable transactional cost of "trading".
muzz 9y ago
Mountain View only adopted rent control very recently, and only for apartments that existed before 1995. Not sure if anyone pointed this out, but this problem of labor mobility exists for all of those who own their home as well.
pm24601 9y ago
Home ownership causes the same problem. So does: * good quality schools, rather commute long distances than change schools; * a really good city with a nice downtown; * a spouse's job location; * friends' location; * ... point is there are many reasons for someone to not want move closer to the current job.

hangonhn 9y ago

Is this a well known problem? It has never occured to me that this could happen but it makes a lot of intuitive sense. Do you know if anyone has measures this effect? Very curious how much this contributes to the Bay Area traffic problems.

ThrustVectoring 9y ago
Second-order effects are difficult to study in general. My comment was driven entirely by fundamental economic modeling: price controls generate harms by forbidding beneficial trades, and people move to reduce their commute. There are other reasons why people move, and I expect to find these situations as well. For instance, people tend to downsize their housing after their children move out, but who would downsize when the smaller apartment is more expensive?

Spooky23 9y ago

That’s a real stretch. End of the day, short term leases make rents float at the cost of making renters second class citizens who cannot stay in any one place or area. Rent control is a way to deal with that. It exists because voters care deeply about it.

civilian 9y ago
But rent control only benefits the renters already in place. It hurts new renters to the area, by driving up costs. You've got to address a moral judgement you've implicitly made: What makes the current renters of a city more deserving than the future renters who might move to the city?
- waqf 9y ago
  To be fair, GP did address that point: the current renters of a city have votes [in local government], and the future renters do not.
  - jtuente 9y ago
    Let's apply that same logic to refugees (red-lining, migrant workers, or really any topic of im/e/migration). Current citizens have votes and decide that refugees aren't welcome, refugees don't have votes and so cannot be welcomed.
  - BearGoesChirp 9y ago
    I feel this response is confusing right with might. Just because some group has the political might to make laws that benefit them does not make those laws right, does it?
    - nradov 9y ago
      Right and wrong are almost entirely subjective on issues like this. What is the right level of political boundaries for people to have a vote in these decisions? Should residents of San Diego be able to influence housing policy in San Francisco? How about residents of Chicago, or Madrid, or Karachi?
      - civilian 9y ago
        I don't like the idea of residents of far-away cities having a say in housing policy in my city. But I'd also support a federal-level ban on rent control policies, based on the idea that it's a net-good if we encourage people to move to more efficiently allocate housing. But I totally see how this is kind of hypocritical. I just want things my way, everywhere. :-] idk! I suppose that the next-best thing is to have local control with freedom of movement. The United States and cities are kind of like this--- it allows for states and cities to try out different policies, and compete based on policy.

kinkrtyavimoodh 9y ago

There is a lot of stickiness and inelasticity when it comes to housing, especially when other factors such as kids and schools and spouse's commute and all come up.

delphinius81 9y ago
Right, but everyone knows that if you have a spouse or kids you probably shouldn't be living in the bay area anyway unless you a rich. /s
noobermin 9y ago
Can a free-marketeer address this? I thought stuff like this were obvious rebuttals but look at the top posts in this comment section. It's starting to feel like articles and posts like this aren't driven by discussion or curiosity but just political fights.
- mjevans 9y ago
  The major issue is that the market is NOT free. This market can't ever be free. There are building codes, zoning, planning, approvals, etc. All of that red tape related to building the level and quality of housing that an area needs already distorts the market. Thus the underlying issue is that there has not been proper correction and guidance from the governance structures established by the people in the area; mostly because the rising home prices and status-quo of neighborhoods generally benefit those people. It's going to take state or federal level correction to fix this issue and the "best" way of doing that would be to sour the use of housing as an investment.
- rayiner 9y ago
  Address what? A vague reference to "stickiness and inelasticity when it comes to housing?" I suspect you're misunderstanding what the "swap houses" example means. It's not actually about two people who might want to swap their houses. It's just a "bottom up" way of showing how housing restrictions create inefficiencies by limiting choice. It might help to think of it in a "top down" fashion. Imagine laying out housing for everyone in a metro area as an optimization problem, where you're trying to maximize a value function over things like amount of space, proximate to peoples' workplaces, quality of schools, affordability, etc. Housing restrictions add additional constraints that make the solutions worse for everyone. E.g. say some group of people with kids are willing to live in a duplex on 1/8 of an acre rather than a detached home on 1/4 of an acre in order to reduce their commutes and see their kids more often. But they're not willing to live in a city apartment with their kids and pets. Housing restrictions basically eliminate that part of the solution space by making it illegal to construct such housing. That group of people get punted to their less-preferred alternatives, and the resulting solutions are worse for everyone.

JustAnotherPat 9y ago

They're going in different directions though, so traffic is actually halved.

ThrustVectoring 9y ago
How so? If they swapped apartments they'd just walk to work and not have any contribution to traffic.

DougN7 9y ago

That's a really great insight. The fact that such good intentions often lead to bigger problems is what concerns me about UBI - it will surely have huge second-order effects. I'm not sure what they will be, but rent control in a city is tiny compared to the effect a universal change like UBI would introduce.

knodi123 9y ago
> UBI - it will surely have huge second-order effects I absolutely agree, and I think these justifiable and yet ill-defined concerns are shared by a lot of UBI opponents. I just hope anyone trying to come to an informed decision remembers to include unrestrained capitalism's second-order effects on the pro/con list.
- CryptoPunk 9y ago
  >>unrestrained capitalism It sounds scary when put like that but it just means people free to interact, while secure from other social actors in their person and property. By the nature of voluntary configuration, interactions have a tendency toward being mutually beneficial, and there are corrective feedback loops that naturally exist in a voluntary society to reduce those that aren't (e.g. scammy operators increasingly excluded by increasing consumer vigilance and growing reputation markets). And you can still have governments provisioning economic resources that qualify as public goods, like basic research, public information resources, policing and national defense, in such a setting, so there is no fundamental deficiency in unrestrained capitalism, aka an absolute free market.
  - knodi123 9y ago
    > so there is no fundamental deficiency in unrestrained capitalism Except a tendency toward consolidation and monopolies. And, inherent in the word "unrestrained", a tendency to use corporate money to unduly influence politics to benefit the corporation at the expense of the public interest. > it just means people free to interact, while secure from other social actors in their person and property It's kind of irrelevant anyway, all I really meant was UBI should be evaluated in comparison to "the status quo", whatever you choose to label it.

tmalsburg2 9y ago

Interesting. But it would be good to have some data showing whether this effect on traffic is real and, if yes, what magnitude it has. However, even if the data supports the idea, the conclusion that rent control in general is bad is not really supported because rent control could be implemented in different ways that do not hinder mobility. Germany recently introduced a new rent control law the goal of which is precisely that.

hardtke 9y ago

Another second order effect is the reduced supply of family sized units. Many 3+ bedroom units are occupied by older couples and single people who raised their kids there and no longer need the space but would find it much more expensive to downsize. This drives families out of the city (among other things). Prop. 13 solves this by allowing people older than 55 to transfer their property tax break to a smaller house.

jclulow 9y ago
Prop. 13 also creates problems with housing supply for people who haven't yet been able to transition to home ownership. It's difficult to strike a good balance here.
deleted 9y ago
[deleted]

spike021 9y ago

I believe this is exactly my current dilemma: I live in San Jose, I commute to SF 3 days a week (super thankful for the chance to work remote 2x a week). My current apartment (a 1BR I live in by myself) costs a bit less than 1k a month and is rent-controlled. The equivalent in SJ is probably worth 2-2.5x as much per month, and in SF (or somewhere in-between) it can be worth anywhere from 2.5-4x as much. I've been hunting for an apartment more on the peninsula since I don't necessarily need or want to live right in the city, just closer (especially in case I switch jobs eventually), but I definitely want to halve the commute time at least (Caltrain plus door to door is nearly 1.75hrs each way). But why would I want to leave my rent-controlled steal and be spending over half my monthly income for the equivalent? It's ridiculous. So now it's a matter of figuring out the cost analysis of moving into a better area that's closer to work, and therefore an increased quality of life, or stay where I'm at where I can save much more money and have a rather crappy quality of life (I don't care for where I live now strictly other than the cheap price of the rent).

fossuser 9y ago
Are you willing to live with housemates? That's the only way you're going to come anywhere near your current rent. As a bonus you'll get more space generally and some community.
- spike021 9y ago
  Not particularly. I've had that experience before and much prefer being on my own now. I find my community elsewhere. I prefer to think of my apartment as my own space, whereas a house (or shared multi-room apartment) would require having a communal kitchen/living room.
joejerryronnie 9y ago
Real question, why not look for a different job closer to San Jose?
- adrianratnapala 9y ago
  And here we see nerfhammer@ point being made. Your question is good. And that shows that the laws discourage people from seeking work far from where they currently live.

Y7ZCQtNo39 9y ago

Are there that many people in rent-controlled apartments for this to be a serious enough issue or cause of traffic?

deleted 9y ago
[deleted]
arebop 9y ago
A third of rentable dwellings in San Francisco are rent-controlled, so yes.

nerfhammer 9y ago

The term for this is called "labor mobility". Instead of increasing commute times, more typically it involves simply not taking jobs that are further away. Restricting labor mobility is really bad for obvious reasons: people not being able to move where the jobs are means jobs not being filled even as unemployment increases. There is overwhelming evidence that labor mobility has gotten drastically worse in recent decades, and local NIMBYism is one of the major causes: http://neighborhoodeffects.mercatus.org/2017/01/26/why-the-lack-of-labor-mobility-in-the-u-s-is-a-problem-and-how-we-can-fix-it/ http://neighborhoodeffects.mercatus.org/2017/01/26/why-the-l... Compare this to China, which has had tens of millions of people flock to brand new megacities for the new job opportunities there.

deleted 9y ago
[deleted]
seanmcdirmid 9y ago
China is a bad example with its hukou system in place. Sure you can migrate to the city for a better job but you have to leave your kids behind (no public school without hukou). Labor mobility but at great costs.
- adrianratnapala 9y ago
  China is a bad example of a place getting policy right to favour labour mobility. It is an extreme example of a place where labour mobility is so valuable it happens in spite of restraints. In fact it is so extreme that it is hard to draw lessons for modern western countries (although it has obvious resemblances to urbanisation in Europe a few centuries ago).
- klipt 9y ago
  Seems comparable to immigration controls between countries.
  - seanmcdirmid 9y ago
    It’s more comparable to the movement controls of apartheid.

shawnee_ 9y ago

> So, because you cannot trade apartments without spending significantly more money, there's a couple of hour-long commutes instead. Here is where the analysis should happen. All of the "significantly more money" aspect boils down to transactional costs. Transactional costs in rentals will always, always be higher than transactional costs of ownership. Ownership's transactional costs get offset, (to only a small extent in the Bay area, but it is not nothing), by the equity the owner has accumulated. Renters never accumulate equity to offset their transactional cost of "trading". The paper (and all of the anti rent control camp) constantly misconstrues lower-than-market rent as "savings". It is not savings; it's merely delaying the inevitable transactional cost of "trading".

muzz 9y ago

Mountain View only adopted rent control very recently, and only for apartments that existed before 1995. Not sure if anyone pointed this out, but this problem of labor mobility exists for all of those who own their home as well.

pm24601 9y ago

Home ownership causes the same problem. So does: * good quality schools, rather commute long distances than change schools; * a really good city with a nice downtown; * a spouse's job location; * friends' location; * ... point is there are many reasons for someone to not want move closer to the current job.