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Bizarre to not mention the long-standing, broad consensus among economists that rent controls do more harm than good. Courtesy Wikipedia, here’s Paul Krugman i

Bizarre to not mention the long-standing, broad consensus among economists that rent controls do more harm than good. Courtesy Wikipedia, here’s Paul Krugman in 2000: https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent... Surely if economists were so widely in support of such policies, the Times would have highlighted that fact.

yaks_hairbrush 8y ago
That's the big thing that jumps out at me. There are very, very few serious economic policies that have this level of agreement among economists. Greg Mankiw did a list a while back about what economists agree on: https://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html https://gregmankiw.blogspot.com/2009/02/news-flash-economist...
- koolba 8y ago
  That’s an amazing list. I wish it went further to show the even less popular ideas. In particular I’m curious what shows up at the 50% mark.
anigbrowl 8y ago
And yet the market seems not to have magically provided a supply of housing that is adequate for the market to reach an affordable equilibrium. I agree the article should have mentioned it and am also skeptical about the efficacy of rent control, but other approaches don't seem to be working out as hoped.
- beaner 8y ago
  Is there local regulation or NIMBY-ism that prevents the market from providing new housing?
  - anigbrowl 8y ago
    I suggest you form your own assessment and see if other people find it plausible and actionable.
  - wahern 8y ago
    In San Francisco rent control only applies to pre-1979 buildings. Ceteris paribus, this incentivizes new construction to replace rent-controlled buildings. So why isn't there more supply? Because of zoning, approval, and the NIMBY activism that has captured those processes. Removing or abstaining from rent control wouldn't address the fundamental problems. Indeed, I'd argue that expanded rent control could be used as a stick to pull the renters lobby away from NIMBY activists who have convinced renters that any new construction is against their interests. Rent control can be viewed as a type of wealth transfer (social welfare) that all economists implicitly presume will be used to ameliorate distribution and dislocation inequities. Because "tax" is a four letter word in our society and cash transfers both stigmatized and disfavored, we rely on regulatory machinations like rent control or trade tariffs to implement the kind of wealth transfers that economists all presume would be done with taxes and cash payments.
- hanging 8y ago
  The broad market is in equilibrium. SV doesn't define the broad market, nor does Flint MI or Gary IN.
fspeech 8y ago
One has to look at the policy details. At 7 percent + CPI it is not going to create abandoned properties over the long term. It is more like preventing Uber style surge pricing. There is a reason why the association for the landlords are neutral on the limit.
wahern 8y ago
Economists also universally agree that free trade creates the most wealth. But this assumes that distribution and dislocation effects are ameliorated with wealth transfers on the side. Nobody disagrees that rent control increases the average rent. The question is whether it's a worthwhile trade-off. I tend to see it as a tax on the young for the benefit of families and the elderly. In a city like San Francisco a worthwhile trade-off. In reality, turnover tends to be relatively high in cities, and especially in San Francisco. For large apartment buildings the marginal increase in rents induced by rent control are very small. For smaller apartment buildings the risk to the landlord is greater (potentially less turnover, fewer opportunities to reset baseline to market prices). This is why I think that rent control should go hand-in-hand with density. Rent control also increases the appeal of renting relative to purchasing as it provides the same ongoing expenditure stability. If we get rid of rent control we should simultaneously remove all incentives for home ownership. But we all know that the latter is politically infeasible. Why should we expect rent control to be any less politically infeasible? Because we tend to perceive the proponents and beneficiaries of rent control as starry-eyed liberals? In a city like San Francisco the biggest culprit of high rents, aside from sheer demand, is zoning and the arduous approval process. All this finger wagging over rent control is counterproductive and tone deaf. If we remove rent control the biggest problems will remain. If we address the biggest problems then the "problem" of rent control will largely recede. The same logic applies to Georgist Land Value Taxes. Conceptually they're the best way to maximize efficient use of land. But we know that they're politically infeasible. No Georgist LVT system has ever survived without exceptions and loopholes making the system honored only in the breach. We cannot underestimate the social value of price stability for something as important as housing. If you ignore the fundamental need, bad things will happen like Proposition 13.
jdavis703 8y ago
While it’s true that rent control is Econ 101, what’s being proposed now a days is not a strict price cap. It allows for increases above and beyond inflation, and generally above the kind of returns one could get on the stock market (in Oregon’s case it’s 7% plus CPI). There’s also a carve out for new construction. That incentivizes capital to go to increasing supply, as opposed to the current situation where flippers add a new coat of paint, buy some stainless steel appliances and then jack up the rent.

yaks_hairbrush 8y ago

That's the big thing that jumps out at me. There are very, very few serious economic policies that have this level of agreement among economists. Greg Mankiw did a list a while back about what economists agree on: https://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html https://gregmankiw.blogspot.com/2009/02/news-flash-economist...

koolba 8y ago
That’s an amazing list. I wish it went further to show the even less popular ideas. In particular I’m curious what shows up at the 50% mark.

anigbrowl 8y ago

And yet the market seems not to have magically provided a supply of housing that is adequate for the market to reach an affordable equilibrium. I agree the article should have mentioned it and am also skeptical about the efficacy of rent control, but other approaches don't seem to be working out as hoped.

beaner 8y ago
Is there local regulation or NIMBY-ism that prevents the market from providing new housing?
- anigbrowl 8y ago
  I suggest you form your own assessment and see if other people find it plausible and actionable.
- wahern 8y ago
  In San Francisco rent control only applies to pre-1979 buildings. Ceteris paribus, this incentivizes new construction to replace rent-controlled buildings. So why isn't there more supply? Because of zoning, approval, and the NIMBY activism that has captured those processes. Removing or abstaining from rent control wouldn't address the fundamental problems. Indeed, I'd argue that expanded rent control could be used as a stick to pull the renters lobby away from NIMBY activists who have convinced renters that any new construction is against their interests. Rent control can be viewed as a type of wealth transfer (social welfare) that all economists implicitly presume will be used to ameliorate distribution and dislocation inequities. Because "tax" is a four letter word in our society and cash transfers both stigmatized and disfavored, we rely on regulatory machinations like rent control or trade tariffs to implement the kind of wealth transfers that economists all presume would be done with taxes and cash payments.
hanging 8y ago
The broad market is in equilibrium. SV doesn't define the broad market, nor does Flint MI or Gary IN.

fspeech 8y ago

One has to look at the policy details. At 7 percent + CPI it is not going to create abandoned properties over the long term. It is more like preventing Uber style surge pricing. There is a reason why the association for the landlords are neutral on the limit.

wahern 8y ago

Economists also universally agree that free trade creates the most wealth. But this assumes that distribution and dislocation effects are ameliorated with wealth transfers on the side. Nobody disagrees that rent control increases the average rent. The question is whether it's a worthwhile trade-off. I tend to see it as a tax on the young for the benefit of families and the elderly. In a city like San Francisco a worthwhile trade-off. In reality, turnover tends to be relatively high in cities, and especially in San Francisco. For large apartment buildings the marginal increase in rents induced by rent control are very small. For smaller apartment buildings the risk to the landlord is greater (potentially less turnover, fewer opportunities to reset baseline to market prices). This is why I think that rent control should go hand-in-hand with density. Rent control also increases the appeal of renting relative to purchasing as it provides the same ongoing expenditure stability. If we get rid of rent control we should simultaneously remove all incentives for home ownership. But we all know that the latter is politically infeasible. Why should we expect rent control to be any less politically infeasible? Because we tend to perceive the proponents and beneficiaries of rent control as starry-eyed liberals? In a city like San Francisco the biggest culprit of high rents, aside from sheer demand, is zoning and the arduous approval process. All this finger wagging over rent control is counterproductive and tone deaf. If we remove rent control the biggest problems will remain. If we address the biggest problems then the "problem" of rent control will largely recede. The same logic applies to Georgist Land Value Taxes. Conceptually they're the best way to maximize efficient use of land. But we know that they're politically infeasible. No Georgist LVT system has ever survived without exceptions and loopholes making the system honored only in the breach. We cannot underestimate the social value of price stability for something as important as housing. If you ignore the fundamental need, bad things will happen like Proposition 13.

jdavis703 8y ago

While it’s true that rent control is Econ 101, what’s being proposed now a days is not a strict price cap. It allows for increases above and beyond inflation, and generally above the kind of returns one could get on the stock market (in Oregon’s case it’s 7% plus CPI). There’s also a carve out for new construction. That incentivizes capital to go to increasing supply, as opposed to the current situation where flippers add a new coat of paint, buy some stainless steel appliances and then jack up the rent.