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Rent Control: An Old, Bad Idea That Won't Go Away
- romed 8y agoA Koch brothers opinion piece on the front page of HN.
- XCabbage 8y agoDo you have any evidence for this you'd like to share, or do you just accuse any publications of libertarian viewpoints of being orchestrated by the Kochs?
- overthemoon 8y agoIt's by folks from Cato Institute, which is a thinktank founded by Charles Koch. OP was a little imprecise, but that's about it. https://en.wikipedia.org/wiki/Cato_Institute https://en.wikipedia.org/wiki/Cato_Institute
- posixplz 8y agoSeriously? Both authors work for the Cato Institute. The Cato Institute was founded by Charles Koch, and originally called The Charles Koch Foundation. https://en.m.wikipedia.org/wiki/Cato_Institute https://en.m.wikipedia.org/wiki/Cato_Institute
- refurb 8y agoThe response wasn't that it's not an opinion piece by the Koch brothers, but rather, does the OP have any evidence to suggest the opinion piece is incorrect other than who the author is (why isn't a very convincing argument).
- IvyMike 8y agoThat's not my reading. Can you diagram the original question in a way that makes this apparent?
- XCabbage 8y agoNo, my response was very much meant an expression of skepticism at the idea that there was any connection between the piece and the Kochs. The comments here (that make clear that there is, at least, a loose connection that can be traced between the two) are entirely relevant responses.
- XCabbage 8y agoThanks, that's useful information; I was unaware of the Cato-Koch connection. I'm not sure why the "Seriously?" is there or what I'm supposed to make of it. It seems to me that there's still a considerable gap between a Koch having founded Cato and any opinion piece produced by Cato today being a "Koch opinion piece". A quick Google suggests to me that Cato is far from being under total Koch control - indeed, they've been involved in legal battles with each other in recent history.
- deleted 8y ago[deleted]
- romed 8y agoYou’re kidding right?
- XCabbage 8y agoNo, I was entirely serious. In future, you may find that you persuade people better by actually presenting some relevant facts (as others have now done) rather than making assertions and then sneering at anyone who asks for an explanation.
- IvyMike 8y agoThe piece was authored by two employees of the Cato institute, which was founded as the Charles Koch Foundation. The Kochs appear to have at least a 50% ownership of the Institute, although as this article says, "who knew a nonprofit can have shareholders?" https://www.forbes.com/sites/lauriebennett/2012/03/02/who-knew-that-cato-had-shareholders/ https://www.forbes.com/sites/lauriebennett/2012/03/02/who-kn...
- RandomNick 8y agoYou don't have to be a libertarian to oppose the folly of rent control. "In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing." Assar Lindbeck, Swedish Economist and Socialist
- CalChris 8y agoDo you have any evidence that Lindbeck is a socialist? I looked and all I found was the same phrase Swedish economist (and socialist) Assar Lindbeck repeated over and over on right wing websites.
- JamesBarney 8y agoThe belief that rent control is counter productive isn't a fringe conservative belief. It's held by economists across the polticial spectrum, and is the closest thing to a consensus opinion in economics.
- romed 8y agoGreat. So let’s have some academic papers on the front page instead of this junk.
- Bartweiss 8y agoI'm curious if there's a specific criticism here? I mean, the piece goes out of its way to cite Krugman calling it "among the best-understood issues in all of economics". HN generally discourages old content by labelling it, and the audience-appeal of this piece isn't the authors, it's that it specifically addresses a 2018 California ballot initiative. I don't think we're going to get a great academic source on the current ballot initiative, because the consensus is that there's nothing new to say! G Sternlieb, The Urban Housing Dilemma (1972) isn't going to hit the front page, but everybody from the Cato Institute to Krugman is working off the same old bases.
- romed 8y agoThe consensus exists only on the thin slice of debate that pertains to economics. Economists agree that rent control, all other things held equal, reduces housing supply. Nobody seriously debates. However there are moral and ethical and sociological dimensions to the question. For example: allowing rents to rise to whatever the market will bear effectively rewards landlords for creating scarcity. Should landlords be rewarded for creating scarcity? Or should they be punished for it? Do long-domiciled tenants who have contributed to the desirability of a place have a legitimate interest in being allowed to stay there? My main beef with this piece is that HN pretends to keep politics off the front page but here we have right-wing propaganda masquerading as science on election day where the issue is on the ballot in California. If we're going to allow advocacy then the mods should stop automatically flagging whole classes of posts.
- nimbius 8y agoI dont understand what the argument of this article is. As someone who has tried to maintain a blue collar job in a large city (im an engine mechanic) Its nearly impossible to live anywhere near your job without rent control. It was good work and good pay, but spending 65% of it on rent? what incentive do i have to stay when the median home price is a million dollars or more? the thing this article does not take into account is the fact that without rent control or some form of affordable housing, that "amazing city" you live in grinds to a halt pretty fast. Try living in a city where the bus system never sees regular maintenance because the motor pool is 2 hours away. broken down garbage trucks just sit in the road because wrecker crews cant afford to live anywhere near the metropolis. Ambulances and fire trucks might, or might not, make it to a destination because the fleet techs with diesel certification like myself dont live in your city. pipefitters and machinists need a place in your city if you want clean healthy water and sewage service. And the next time a drunk backs over a telephone pole, you're going to need a lineman or three to fix it.
- refurb 8y agoI think the point of the article is that rent control, although it may help a select few people, generally decreases the supply of housing, so is actually bad if your goal is to create more housing at an affordable price.
- konceptz 8y agoThe way you worded this implies that it helps a very small number compared to how much housing it takes away. Isn’t it the same number?
- Bartweiss 8y agoThat depends almost entirely on what kind of rent control gets implemented. If you only ever rent control 100 units, then yeah, it should only affect the owners of those units. You might have some other problems with it, it incentivizes slumlording, but it shouldn't be a systematic disincentive to build housing. But that also only helps 100 people. If you expand rent control onto more existing properties or mandate that new units be built under rent control (or even just have credible candidates talking about doing that), it's a disincentive to anyone looking at offering rental properties - especially cheap rental properties, which are much more likely to become a net loss as prices rise.
- occamrazor 8y agonany rent control laws only limit the possibility for the landlords to increase the rent on existing contracts. Their main objective is to avoid that tenants be “priced out” of their own apartment and forcibly evicted. Considering the large negative externalities of evictions, there are good reasons to argue that some form of rent control is good for the society at large, even if it causes some distortion in the real estate market. On the other hand, to provide _new_ affordable housing the only long term solution is an increase in the stock of buildings available for rent.
- JamesBarney 8y agoWhat are the large externalities to rental contracts ending?
- floatrock 8y ago"rental contracts ending" is a cute way of saying "evictions" and a way that allows you to mentally distance yourself from the messy gooey people problems that arise -- grandma getting thrown out on the street, communities being disrupted, etc. I'm generally against rent control, but I still acknowledge that housing is more than a technical business contract. It IS exactly just that to some people, but if you refuse to acknowledge the people on the other end, the only people you're going to bring to your side are your buddies at the country club.
- JamesBarney 8y agoEviction is a very specific legal process which is different than a rental contract ending. It's what happens if I don't vacate a property once the rental contract ends.
- westbywest 8y agoLegal expenses, if the eviction sees court challenge. Especially if any claims of discrimination are sustained against the landlord. Also, labor cost of emptying the unit, repair/cleaning to make the unit ready for a new tenant, etc. Folks being evicted usually aren't in a cheery mode about it, so stuff might get broken.
- cwmma 8y agoFor the record, rent subsidies are the thing that actually accomplishes the thing that rent control tries to do, but is often a much harder sell because the costs are much more upfront compared to something like rent control.
- JamesBarney 8y agoExactly. Rental subsidies increase incentives to build new buildings and rentable stock. But of course once you talk about transferring income to the less fortunate why ear mark it for rent? Why not let them choose to spend it how they want?
- twtw 8y agoMuch like wage subsidies vs. minimum wage?
- jayd16 8y agoIt doesn't accomplish anything except paying the land lord more money. If the same tenant gets to stay, it doesn't increase housing availability. And in fact, house prices up because the market is propped up higher by subsidies. If the same tenant is priced out, it doesn't protect the renter.
- cwmma 8y ago> It doesn't accomplish anything except paying the land lord more money. well yes this is the idea, and then more people want to be land lords to get the sweet sweet rent subsidy money, which ideally would then cause more homes to be built because of all the money coming in as rent, and which would then cause rents to fall. Compare to absolute rent control (i.e. there is a global cap on rents), now landlords get less money, they don't have any incentive to invest in their property because they can't get any money out of it, nobody wants to get into the landlord business because its hard to make any money in it so there isn't any incentive to build new apartments. Or compare this to the rent control where you aren't allowed to raise rents on specific tenants. If you have an apartment now, congrats you have a deal, as long as you never have to move in which case you are screwed. Also woe to anyone new to the market because you're rent is going to be higher in order to subsidize the people that the people that have been there forever.
- justizin 8y agoDid a rent write this?
- barrow-rider 8y agoDo rents write anything?
- pytester 8y agoA counter point, for those who are interested: https://www.nakedcapitalism.com/2014/03/17-million-reasons-rent-control-efficient.html https://www.nakedcapitalism.com/2014/03/17-million-reasons-r...
- cbdumas 8y agoThis article doesn't address the central point of the original essay at all
- pytester 8y agoThe central point of the original essay appeared to be that it was bad for renters. The point of the article was that it simply shifts the distribution of economic rents from property developers to renters.
- cbdumas 8y agoThe article OP linked is about the systemic effect of rent control, which is claimed to be negative for low income renters overall even if it benefits a small group of lucky low income renters in particular. I would love to see a well argued opposing position, which is why I read your link, but I don't think it really engages with the point about the systemic effect of rent control.
- travisoneill1 8y agoNot a very good one. The author's point that negotiating with each individual tenant is fundamentally the same as negotiating with the landlord so there is no inefficiency is academic garbage. Negotiating separate deals with hundreds of tenants with a strange prisoners dilemma incentive structure is massively more complicated and uncertain in outcome than simply negotiating a price with the owner.
- pytester 8y agoThe author's point wasn't that. The point was that the main outcome of rent control was simply to shift the distribution of economic rents. Instead of the landlord capturing all of it, the renter got a large chunk of it. The transaction costs are a red herring.
- flagfeedingusa 8y agoHear that poor people? You are a bunch of terrible people for taking advantage of the one bone the upper class has thrown to you! What about market signals and what about all the people who own multiple houses? Why aren't you thinking about them? The nerve of yuppies on this site calling rent control a problem. How about the problem that investors have no incentive to make new apartments in major cities for low and middle income families. The big cost isnt construction, its the land. Why would they build new buildings and charge half of what they could be getting? How about start building new low income buildings smack dab in the middle of big cities, THEN talk about eliminating rent control, not the other way around.
- Nelkins 8y agoRent control does not always reduce the supply of housing. See this article/study: http://www.latimes.com/opinion/op-ed/la-oe-painter-rent-control-economist-20181031-story.html http://www.latimes.com/opinion/op-ed/la-oe-painter-rent-cont... The argument is that rent-control can spur the creation of new housing, as landlords are unable to make the same amount of money from their existing units. Of course, this is predicated on the fact that developers/landlords have the option of creating those new units (which they usually don't). That's why I'm not against rent control per se, but I'm usually not in favor since it tends to be suggested in areas with severe restrictions on building new housing.
- emtel 8y agoThis argument doesn't make any sense. If there are profits to be made from building new housing and renting it out, some one is going to do that. The higher those profits are, the higher the incentive to do so. People aren't going to respond to artificially suppressed profit margins by doubling down. This article is also full of other strange arguments. Consider: "The fact that real estate developers have funded an anti-Proposition 10 campaign to the tune of $45 million suggests that they are eager to defend their market power. If California were a truly competitive housing market where home builders operated with slim margins, they’d load up their cranes and build in some other state. But it’s clear these developers benefit from the status quo and are fighting hard to keep it." Selling retail gasoline is a low margin business. But you can bet that if there was legislation to impose a price cap, gas stations and oil companies would be opposed. In other words, everyone everywhere is always going to be opposed to legislation that reduces how much they can charge for their product. You don't need to posit other factors such as the existence of market power or lack of competitiveness to explain the opposition.
- frgtpsswrdlame 8y agoThe quote isn't a contradiction and the argument makes perfect sense. Developers want to make money so they build and they rent. Rent control can be used to bring margins down and incentivize developers to build more if they want to keep making the same profit. What is the difficulty there? I thought the article linked above did an excellent job.
- emtel 8y agoThe whole debate about rent control drives me nuts. It's framed as callous libertarians vs compassionate progressives. But the debate conflates means and ends in an obvious way that no one ever seems to notice. If you are concerned about the ability of lower-income people to afford housing, then give them a rent subsidy! As a mechanism, this is superior in just about every way. It doesn't suppress housing supply, and it can be means-tested so that high income people aren't occupying rent-controlled apartments (which happens all the time now). It also gives low income people the freedom to move without losing their rent controlled status.
- gwright 8y agoSubsidies just increase the market price of the properties. The subsidy will be sucked up by the landlord, which of course leads to rent control. Which provides disincentives on capital improvements. This is similar to the way that student loans have resulted in higher tuition/housing that once again just gets sucked up by the institutions. The recent appeal for "free college" funded by the taxpayer will almost certainly result in increased tuition. If only we had a simple mechanism that balanced supply and demand. I think there are areas where government regulation is necessary and appropriate (safety, fraud avoidance, pollution, health, etc.) but regulating prices is almost always a failure that leads to an ever expanding Rube Goldberg collection of incentives, subsidies, rules, tax loopholes, and so on that are much worse than just letting prices float naturally.
- emtel 8y agoThere are numerous examples of subsidies in the real world that haven't led to price controls. And yes, subsidies distort the market. I'm pretty sure 99% of economists will agree that subsidies are less distortionary than price controls though.