4 ms·

This would only be true if rent wasn't already (relatively) way above the cost of new construction and if the freeze applied to new buildings too.

Roritharr 7y ago
Why aren't you asking why cost of new construction is this inflated? Why aren't we trying to fix the supply problems, instead of trying to... what are we trying? I don't understand the whole ideology that sees any reasoning that could lead to this.
andy_ppp 7y ago
Land values rise to make the margins developers work within very small. Land is a problem everywhere and someone owns it and will always try to extract the best price if you have planning permission for it. So maybe capping land prices and forcing sales for desirable schemes would work better. It will of course never happen as ownership is fundamental to our thinking in the west. I actually find the idea of the government forcing me to sell land I own at below market value quite offensive. I understand that is irrational. Maybe this problem is quite complicated?
- closetohome 7y ago
  The problem isn't developers at all - they make only a small margin. The people who are abusing the system are equity investors who demand a return on their investment within as little as 2-3 years, leading to unrealistically high rents. All rent control is doing in this case is forcing investors to take a longer period of return.
  - Roritharr 7y ago
    Did nobody think that to invest, you need to have liquidity? It's called LIQUID for a reason. If another place has better investment opportunities, the investment will simply cease. Why would anyone take their LIQUID assets and put it into real estate (in german it's called IMMOBILIEN, meaning immovables to make it clear) in a place that actively discourages return on invest?
    - closetohome 7y ago
      In some cities that would absolutely be an issue. However in this specific case I don't believe Berlin will ever lack for real estate investment. In other popular cities we've just seen the type of investor change, from opportunistic to activist.
      - ghostly_s 7y ago
        I'm curious about this, which cities with those be?
  - Consultant32452 7y ago
    If you flush the market with supply, you get the same result. You also get the side benefit of more poor people have access to housing. The rent control model means a small portion of the poor wins the artificially low rent lottery.
- lostdog 7y ago
  We should consider a 75% capital gains rate on land value increases. After all, the owner typically had little effect on their own land value. A big effect comes from their neighbors building shops and offices and the biggest effect comes from the city building roads and transit and other infrastructure. Land "investment" is the least productive form of investment. If you built a building, then yes, profit from that, but benefits from increases in land value should go to the city.
  - nielsole 7y ago
    The georgist approach. I was pondering a high annual ground tax instead of a capital gains tax
    - username444 7y ago
      Otherwise known as "property tax". Something neat I've noticed locally is that condos with high property management fees have proportionally lower selling prices. If all 2 bedroom units in an area/city are $3000/month and one building had property management fees of $1000 instead of $500, the unit's value is $500/month lower (approx. $100,000 selling price). I'm not sure how that would be implemented on a city scale though. For density: If you drastically raise property taxes to be proportional to square footage instead of appraised value, you instantly incentivize higher density building. If you're paying $1000 tax per square foot of ground floor, you can spread that over a single floor, or 40 floors. Was that your thought?
      - nielsole 7y ago
        Yes. But The tax needs to be high enough to capture most of the value not created by the landlord. As I am no property owner I am not too deep into this, but right now I think we are far from that. Property tax is just now being redone in Germany. Unfortunately it seems that it might end up depending on the square meters of the house, not the underlying property.
- southerndrift 7y ago
  The new law about the property tax links the tax amount to the value of the area. If done right, this forces house owners to rebuild their property and adjust the density if they want to remain profitable.
  - chopin 7y ago
    This accelerates gentrification I am not sure whether this is desirable.

Roritharr 7y ago

Why aren't you asking why cost of new construction is this inflated? Why aren't we trying to fix the supply problems, instead of trying to... what are we trying? I don't understand the whole ideology that sees any reasoning that could lead to this.

andy_ppp 7y ago

Land values rise to make the margins developers work within very small. Land is a problem everywhere and someone owns it and will always try to extract the best price if you have planning permission for it. So maybe capping land prices and forcing sales for desirable schemes would work better. It will of course never happen as ownership is fundamental to our thinking in the west. I actually find the idea of the government forcing me to sell land I own at below market value quite offensive. I understand that is irrational. Maybe this problem is quite complicated?

closetohome 7y ago
The problem isn't developers at all - they make only a small margin. The people who are abusing the system are equity investors who demand a return on their investment within as little as 2-3 years, leading to unrealistically high rents. All rent control is doing in this case is forcing investors to take a longer period of return.
- Roritharr 7y ago
  Did nobody think that to invest, you need to have liquidity? It's called LIQUID for a reason. If another place has better investment opportunities, the investment will simply cease. Why would anyone take their LIQUID assets and put it into real estate (in german it's called IMMOBILIEN, meaning immovables to make it clear) in a place that actively discourages return on invest?
  - closetohome 7y ago
    In some cities that would absolutely be an issue. However in this specific case I don't believe Berlin will ever lack for real estate investment. In other popular cities we've just seen the type of investor change, from opportunistic to activist.
    - ghostly_s 7y ago
      I'm curious about this, which cities with those be?
- Consultant32452 7y ago
  If you flush the market with supply, you get the same result. You also get the side benefit of more poor people have access to housing. The rent control model means a small portion of the poor wins the artificially low rent lottery.
lostdog 7y ago
We should consider a 75% capital gains rate on land value increases. After all, the owner typically had little effect on their own land value. A big effect comes from their neighbors building shops and offices and the biggest effect comes from the city building roads and transit and other infrastructure. Land "investment" is the least productive form of investment. If you built a building, then yes, profit from that, but benefits from increases in land value should go to the city.
- nielsole 7y ago
  The georgist approach. I was pondering a high annual ground tax instead of a capital gains tax
  - username444 7y ago
    Otherwise known as "property tax". Something neat I've noticed locally is that condos with high property management fees have proportionally lower selling prices. If all 2 bedroom units in an area/city are $3000/month and one building had property management fees of $1000 instead of $500, the unit's value is $500/month lower (approx. $100,000 selling price). I'm not sure how that would be implemented on a city scale though. For density: If you drastically raise property taxes to be proportional to square footage instead of appraised value, you instantly incentivize higher density building. If you're paying $1000 tax per square foot of ground floor, you can spread that over a single floor, or 40 floors. Was that your thought?
    - nielsole 7y ago
      Yes. But The tax needs to be high enough to capture most of the value not created by the landlord. As I am no property owner I am not too deep into this, but right now I think we are far from that. Property tax is just now being redone in Germany. Unfortunately it seems that it might end up depending on the square meters of the house, not the underlying property.
southerndrift 7y ago
The new law about the property tax links the tax amount to the value of the area. If done right, this forces house owners to rebuild their property and adjust the density if they want to remain profitable.
- chopin 7y ago
  This accelerates gentrification I am not sure whether this is desirable.