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> Lawmakers passed a first-in-the-nation cap on rent increases Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make h

by sampo 7y ago

> Lawmakers passed a first-in-the-nation cap on rent increases Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent... https://www.governing.com/gov-institute/voices/col-rent-control-bad-idea-making-comeback.html https://www.governing.com/gov-institute/voices/col-rent-cont... > in an effort to spur new homebuilding, became the only state to eliminate single-family-only zoning in many of its residential neighborhoods But this is good. Allowing to build new homes will obviously help with the housing crisis. Usually decision makers just won't allow enough new construction, so its effect will usually stay too small.

throw0101a 7y ago
> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. I always found it odd that rent control always seems to be an all-or-nothing policy: either things are tamped down on, or it's a laissez faire system. Does any locality have a "hybrid" approached. Something like: * buildings 0-5 years old, allow up to 3x inflation rent increases * buildings 5-10 years old, allow up to 2x inflation * 10+ years old, allow only at inflation This would (in theory?) encourage the construction of new rental units by allowing investors to recoup their costs sooner and counter the risk of any unforeseen expenses. But as the buildings get older, and costs (theoretically) become more predictable, stabilize prices for renters.
- wiremaus 7y ago
  A tiered system much like you describe is exactly what Oregon passed. New developments are largely unrestricted.
  - yardie 7y ago
    I can imagine this can have a domino effect. Older buildings require more maintenance. A landlord who plans poorly may find themselves squeezed at the bottom from deferred maintenance and from the top due to rent restrictions.
    - spoonie 7y ago
      Those landlords should go out of business in a free market. Not properly accounting for maintenance costs is a business failure, not the tenant’s fault. If property prices are higher than rents that’s a market failure, not a cost to be passed onto tenants.
      - briandear 7y ago
        So a landlord should be subject to the free market, but tenants shouldn’t be? Tenants should be protected from rent increases, but property owners shouldn’t be protected against cost increases? That isn’t the free market.
        jdavis703 7y ago
        One way to look at this is, land owners are generally wealthier than renters. According to the Federal Reserve Survey of Consumer Finances landowners are 44 times wealthier. It makes sense that the government protects people who are less able to deal with financial instability.
        roenxi 7y ago
        It makes sense, but it is also a bad idea. If someone can't afford the cost of living, they should relocate to somewhere else where they can. Western civilisation has had phenomenal results with the principle that when there isn't enough of something then the owner of that thing gets to decide who goes without. Housing is not so special that it deserves an exemption. Squeezing landlords is one of several ways to lock a housing shortage in for the long term. It has been established that letting people make big profits doing something is a great way to get more of the something - and that applies to renting out houses too. The only role for the government in making sure it is easy to build more houses and that everyone sticks to what they signed when it comes to contracts.
        spoonie 7y ago
        I agree, except that housing right now isn’t a free market precisely because of zoning rules that artificially limit what can be built and where. Until existing land owners lose the right to rig the market, markets should be rigged in favour of tenants who have less power. Where it’s easy to build new housing supply I’m in favour of looser rent control or removing rent control because it’ll be redundant.
- ISL 7y ago
  This would encourage tearing down old rental units in order to build new rental units in their place.
  - s_Hogg 7y ago
    Are you saying that because you think it's a good thing or a bad thing? Seems to me like either (or both) of these could be the case.
    - jessaustin 7y ago
      In most situations it would be good for rich renters and bad for poor renters, for an older building with apartment sizes and amenities that are typical of older buildings to be replaced by a new building with apartment sizes and amenities that are typical of new buildings.
      - sampo 7y ago
        It would be bad for those poor renters who already had apartment. But good for those poor renters who are just entering the market and looking for a home.
        jessaustin 7y ago
        Poor tenants are not renting new apartments. In general, you could say that new apartments are added to the overall stock so that's good for all renters. ITT however we're specifically talking about the kind of apartments that are rented by the poor being replaced on the same site by the kind of apartments that are rented by wealthier tenants. That is actually good for one group and bad for another group. Widely anticipated wonderful new laws are usually chock-full of this kind of crap. Lobbyists don't try to step in front of oncoming political trains. They do successfully redirect those trains to their own purposes.
  - jdavis703 7y ago
    In California there are tough demolition protections in the highest demand cities. Proposed state-wide legislation (SB 50) designed to spur homebuilding will actually make it illegal to demolish any home where a no-fault eviction has occurred. So at least in California I'm not too concerned about this particular side-effect.
- Mountain_Skies 7y ago
  Older buildings have all kinds of maintenance issues. Even if predictable, they're still an added expense, especially for major systems. Without allowing rental unit owners to pass those costs along to the renters, either the units will be taken off the rental market or they will be allowed to disintegrate over time until they're no longer habitable.
  - shams93 7y ago
    Yeah my la landlord just sat on my problems until my place was so bad it was unlivable then I lost my job and was forced into the street.
  - spoonie 7y ago
    That assumes that the market is able to bear those costs. What do landlords do in stable markets where rents are flat or track inflation? Are all rentals dilapidated in those markets?
  - thepangolino 7y ago
    In most of Europe building maintenance costs are counted outside of rent. This makes it difficult to hunt and compare flats as those costs can greatly vary.
  - boomlinde 7y ago
    Combine it with laws that protect a decent standard for apartments and make it much harder to kick tenants out without a good reason. I.e. enforce basic tenants' protection instead of worrying about what incentives landlords have. It shouldn't matter whether the landlord wants to take a unit off the market if the tenants aren't willing or can't move. Then it lies on the landlord to create an incentive for tenants to move out, for example by extracting less rent from uncontrolled units to make them more affordable. Another good idea is for tenants to unionize and share the legal costs of e.g. questioning the legitimacy of a lease termination or challenging sub-standard living conditions.
    - gamblor956 7y ago
      You've literally just described LAs renters protections and tenants rights organisations in a nutshell...
- ajross 7y ago
  > I always found it odd that rent control always seems to be an all-or-nothing policy: either things are tamped down on, or it's a laissez faire system. It's not. Rent control argument on the internet looks like that because it's always a bunch of strawman arguments about political philosophy. In fact the Oregon laws in question have features exactly like what you're talking about.
  - throw0101a 7y ago
    What are some other jurisdictions that have this tiered approach?
- ethbro 7y ago
  How would you avoid only high-rent housing being built in place of any torn down units? This seems like it would still be rent-inflationary in nature, you just end up with younger average housing stock.
- briandear 7y ago
  Out of curiosity, have you ever owned a building? I might suggest that your opinions might change once you have. Owning rental property isn’t a tidy math problem. Newer buildings have more predictable costs, definitely not older buildings. It’s pretty much the opposite of what you said in the real world. Newer buildings can lease to higher quality tenants at higher rates with lower eviction/non-payment/damage risk. Older buildings can run the gamut. You can have an older building filled with stable senior citizens that runs perfectly for decades or you can have an older building filled with tenants who constantly break things, are late on rent, run meth labs, or simply trash a place and vacate in the middle of the night. You might have to evict someone and the process could take a year. Air conditioners fail randomly and expensively. Roof leaks develop and tenants might not even report it for months (yes, that sort of thing happens all the time. As a building gets older, the risks increase, but the rent you can charge decreases compared to a new building. My suggestion is to actually ask people who have owned building exactly why they oppose rent control so fiercely and the answers aren’t going to be about greed but about increased financial risk.
  - jdavis703 7y ago
    If we can agree that profit is essentially what we call "greed," any financial risk means deceased profits, in other words less opportunity for greed. I'm not a communist so I'm not against profit, but in Marxist theory this kind of profit is seen as the problem with capitalism.
    - roenxi 7y ago
      You might want to re-read your Marx; one of his more famous and less controversial observations was that the rate of profit tends to decrease over time in a healthy market. High rates of profit wasn't the problem, it was the negative effects that were theorised to occur when the rate of profits, inevitably, fell too low.
  - throw0101a 7y ago
    > Owning rental property isn’t a tidy math problem. I'm not talking about owning, but about encouragement of building. If income is limited to CPI, regardless market characteristics, what incentive is there to take a risk and build?
oposa 7y ago
Of course it is easier to change zoning or make reforms when you address people's concerns. Thinking that there can be development when everyone is either fearing having to move or have most of their assets in housing is what doesn't work.
wpietri 7y ago
> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. It depends on the kind of rent control. Housing has important asymmetries it's reasonable to address through legislation. One is asymmetry in scale: you have one unit; landlords have many more. This gives them stronger negotiating power. Another is cost of change. It's much more expensive for me in time and money to move than it is for a landlord turn over a new unit. That means a landlord can extract money well above a true market rate. A third is of interest. Individuals and the community have a interest in healthy social bonds, while absentee lords mainly want to extract cash. I understand free-market fundamentalists hate all rent control, but Oregon's rent control laws are designed to preserve incentives to construct new housing: https://www.npr.org/2019/02/27/698509957/oregon-set-to-pass-the-first-statewide-rent-control-bill https://www.npr.org/2019/02/27/698509957/oregon-set-to-pass-... The first 15 years of a new building are free from rent control, and after that they can increase rent at 7% above CPI, meaning in real terms rents can still double circa every 10 years. And if a tenant moves out, landlords can raise rents as much as they like. For this to affect construction today, a builder would have to be betting on a very tight market continuing unabated during the 2035-2045 period. But that's a ridiculous bet to make, rent control laws or not. Anybody building new housing will want to be sure the economics work if rent increases return to their long-term average, which is well below 7% above CPI: https://www.apartmentlist.com/rentonomics/rent-growth-since-1960/ https://www.apartmentlist.com/rentonomics/rent-growth-since-...
- bko 7y ago
  > It depends on the kind of rent control. Housing has important asymmetries it's reasonable to address through legislation. One is asymmetry in scale: you have one unit; landlords have many more. Not necessarily true. Sure , the landlord knows more about the apartment but you know more about yourself as a tenant. Landlord takes a huge risk in terms of allowing someone rent, especially given protections afforded to that individual. Most experienced landlord will cite tenant selection as very important and a huge risk. One tenant that refuses to pay rent or damages property can wipe out the return of 9 other units. > This gives them stronger negotiating power. I have more options as to where to move. The landlord owns a very expensive illiquid property. He can't just sell it tomorrow but I could easily choose another rental. > Another is cost of change. It's much more expensive for me in time and money to move than it is for a landlord turn over a new unit. Its very expensive to fill a rental. A landlord usually needs at least a month to find another tenant. That's a month of foregone rent > That means a landlord can extract money well above a true market rate. Market rate is the rate the landlord can get. If a transaction happens at that rate, that's the market rate. > A third is of interest. Individuals and the community have a interest in healthy social bonds, while absentee lords mainly want to extract cash. Not sure what "absentee lords mainly want to extract cash" means. Yes, most landlords manage properties as an investment. Landlords also have an interest in the community as they own equity in that community that would appreciate if the neighborhood gets nicer. I don't see your point.
ransom1538 7y ago
" > Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse." I couldn't agree more. Proposal: Current* property owners love new commercial property and HATE new residential units. (This is how you game the system to get prices up). What state governments should be doing is requiring new residential property on all approved new commercial property. This way, if a local city board really wants that new "Panera Bread" - they must approve new housing.
TulliusCicero 7y ago
> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. Agreed. However, there is an orthogonal reason to be pro-rent control: housing stability. Housing stability, as in people's freedom to remain in their home, even if their landlord, for whatever reason would rather they not. This is often a big reason why people in the US want to buy their own home, but there's no reason you couldn't give comparable stability to renters, as other countries have already done, by only letting tenants be kicked out for a handful of specific reasons (e.g. non-payment, destruction of property, etc.). The one catch is that you can't have housing stability clauses without rent control, because otherwise the landlord could always "soft evict" by simply raising the rent until the current tenant leaves.
SomeOldThrow 7y ago
It’s not clear what the rent control will do in conjunction with the zoning changes. I’m hopeful.
PunksATawnyFill 7y ago
Why abet this perception of a “housing crisis?” It’s not as if the country is physically full. People behave as though it’s a human right to pile on top of one another in a few places. Why pander to that, and reduce people’s chance to live in a house? No housing? Then go where there is housing or space to build it!
creato 7y ago
> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. I agree in general, but Oregon's law only limits increases to 7% per year. In the long run, that should easily be enough to keep up with inflation, even in a hot market. If San Francisco's law were 7% and not 1-2%, I doubt it would be nearly as much of an issue as it is today (where you have people with rents effectively from decades ago, because that isn't enough to keep up with the market). The 7% limit seems designed to limit extreme short term increases, but still allow rents to reflect market value in the long term. I think this is a politically smart strategy, without the long term damage of holding rents below market value. edit: and combined with the zoning changes... I'd say the open market approach to managing housing supply and demand came out way ahead with this law.
- RussianCow 7y ago
  Small nitpick, but the actual cap seems higher than 7%: > The resulting legislation would cap rents statewide at 7% annually plus inflation Which, if I'm reading that correctly, would put the real cap closer to 9-10%. I don't have a strong opinion about this, but a 10% cap on rent increases seems reasonable to me, keeping in mind that this only applies to existing tenants—if the tenant leaves, you can increase rent by however much you want. This seems like a fair way to help reduce the number of people that are priced out of their homes, without significantly impacting landlords. That said, I'm personally more excited about the zoning changes; single-family zoning was never a good idea IMO, and it's great to see Oregon slowly moving away from that.
motu 7y ago
Yes but lawmakers are idiots and people like Kate Brown can’t put 2 and 2 together.
asdff 7y ago
Rent control does little to discourage building in fact (1). One of the biggest, and imo only agreeable argument, against rent control is that leads to higher rents on uncontrolled units. However, if an entire region is under the same rent control, that just wont happen. A 7% cap I think is still very generous for landlords. It's probably still well above the rate of wage growth, though. https://dornsife.usc.edu/assets/sites/242/docs/Rent_Matters_PERE_Report_Web.pdf https://dornsife.usc.edu/assets/sites/242/docs/Rent_Matters_...
WalterBright 7y ago
Generally, when the government interferes with the market price of things, the result is a glut or a shortage, often with the emergence of a black market. If the price difference between the government price and the market price is large enough, criminal gangs step in to take advantage of the opportunity.
nostrademons 7y ago
Limits on rent increases (at levels well beyond the rate of inflation) don't have the same negative effects as rent controls. To actually resolve the housing crisis, you need there to be sufficient profit potential that private landlords are incentivized to build more housing. Rent control forbids this. Limits on rent increases, however, don't, really. Building a new apartment complex usually takes 3-4 years from permitting to completion to move-in. If rent increases are capped at 7% annually, then by the time your new project is ready for move-in, you can count on rents having gone up by 30-40%, assuming that that's where the market-clearing price would be. And if they haven't, they'll be higher the next year, and so on, until they equilibrate. The idea behind caps on rent increases is to slow the bleeding and minimize disruption to families - having your rent go up 7% for 5 years is a lot less of a problem than having it go up 35% in one year and getting a month to decide whether to renew your lease, because it gives you time to look for alternatives and figure out what else in your life needs to change to make the numbers work.
- kspaans 7y ago
  Yup, this is how "rent stabilization" works in Ontario, Canada. When a tenant has a lease, rent increases are capped to a rate set by the government. When a tenant leaves, there is "rent decontrol" and the landlord can charge whatever the market will bear for the next tenant. Similarly newly built units for rent get market rates. No one dictates what a landlord can charge, only how much they can increase rents for existing tenants. Of course this does lead to shenanigans to get old tenants out, but it's not rent control in the sense that all rents are everywhere anytime are set by the government.

by sampo 7y ago

throw0101a 7y ago

> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. I always found it odd that rent control always seems to be an all-or-nothing policy: either things are tamped down on, or it's a laissez faire system. Does any locality have a "hybrid" approached. Something like: * buildings 0-5 years old, allow up to 3x inflation rent increases * buildings 5-10 years old, allow up to 2x inflation * 10+ years old, allow only at inflation This would (in theory?) encourage the construction of new rental units by allowing investors to recoup their costs sooner and counter the risk of any unforeseen expenses. But as the buildings get older, and costs (theoretically) become more predictable, stabilize prices for renters.

wiremaus 7y ago
A tiered system much like you describe is exactly what Oregon passed. New developments are largely unrestricted.
- yardie 7y ago
  I can imagine this can have a domino effect. Older buildings require more maintenance. A landlord who plans poorly may find themselves squeezed at the bottom from deferred maintenance and from the top due to rent restrictions.
  - spoonie 7y ago
    Those landlords should go out of business in a free market. Not properly accounting for maintenance costs is a business failure, not the tenant’s fault. If property prices are higher than rents that’s a market failure, not a cost to be passed onto tenants.
    - briandear 7y ago
      So a landlord should be subject to the free market, but tenants shouldn’t be? Tenants should be protected from rent increases, but property owners shouldn’t be protected against cost increases? That isn’t the free market.
      - jdavis703 7y ago
        One way to look at this is, land owners are generally wealthier than renters. According to the Federal Reserve Survey of Consumer Finances landowners are 44 times wealthier. It makes sense that the government protects people who are less able to deal with financial instability.
        roenxi 7y ago
        It makes sense, but it is also a bad idea. If someone can't afford the cost of living, they should relocate to somewhere else where they can. Western civilisation has had phenomenal results with the principle that when there isn't enough of something then the owner of that thing gets to decide who goes without. Housing is not so special that it deserves an exemption. Squeezing landlords is one of several ways to lock a housing shortage in for the long term. It has been established that letting people make big profits doing something is a great way to get more of the something - and that applies to renting out houses too. The only role for the government in making sure it is easy to build more houses and that everyone sticks to what they signed when it comes to contracts.
        spoonie 7y ago
        I agree, except that housing right now isn’t a free market precisely because of zoning rules that artificially limit what can be built and where. Until existing land owners lose the right to rig the market, markets should be rigged in favour of tenants who have less power. Where it’s easy to build new housing supply I’m in favour of looser rent control or removing rent control because it’ll be redundant.
ISL 7y ago
This would encourage tearing down old rental units in order to build new rental units in their place.
- s_Hogg 7y ago
  Are you saying that because you think it's a good thing or a bad thing? Seems to me like either (or both) of these could be the case.
  - jessaustin 7y ago
    In most situations it would be good for rich renters and bad for poor renters, for an older building with apartment sizes and amenities that are typical of older buildings to be replaced by a new building with apartment sizes and amenities that are typical of new buildings.
    - sampo 7y ago
      It would be bad for those poor renters who already had apartment. But good for those poor renters who are just entering the market and looking for a home.
      - jessaustin 7y ago
        Poor tenants are not renting new apartments. In general, you could say that new apartments are added to the overall stock so that's good for all renters. ITT however we're specifically talking about the kind of apartments that are rented by the poor being replaced on the same site by the kind of apartments that are rented by wealthier tenants. That is actually good for one group and bad for another group. Widely anticipated wonderful new laws are usually chock-full of this kind of crap. Lobbyists don't try to step in front of oncoming political trains. They do successfully redirect those trains to their own purposes.
- jdavis703 7y ago
  In California there are tough demolition protections in the highest demand cities. Proposed state-wide legislation (SB 50) designed to spur homebuilding will actually make it illegal to demolish any home where a no-fault eviction has occurred. So at least in California I'm not too concerned about this particular side-effect.
Mountain_Skies 7y ago
Older buildings have all kinds of maintenance issues. Even if predictable, they're still an added expense, especially for major systems. Without allowing rental unit owners to pass those costs along to the renters, either the units will be taken off the rental market or they will be allowed to disintegrate over time until they're no longer habitable.
- shams93 7y ago
  Yeah my la landlord just sat on my problems until my place was so bad it was unlivable then I lost my job and was forced into the street.
- spoonie 7y ago
  That assumes that the market is able to bear those costs. What do landlords do in stable markets where rents are flat or track inflation? Are all rentals dilapidated in those markets?
- thepangolino 7y ago
  In most of Europe building maintenance costs are counted outside of rent. This makes it difficult to hunt and compare flats as those costs can greatly vary.
- boomlinde 7y ago
  Combine it with laws that protect a decent standard for apartments and make it much harder to kick tenants out without a good reason. I.e. enforce basic tenants' protection instead of worrying about what incentives landlords have. It shouldn't matter whether the landlord wants to take a unit off the market if the tenants aren't willing or can't move. Then it lies on the landlord to create an incentive for tenants to move out, for example by extracting less rent from uncontrolled units to make them more affordable. Another good idea is for tenants to unionize and share the legal costs of e.g. questioning the legitimacy of a lease termination or challenging sub-standard living conditions.
  - gamblor956 7y ago
    You've literally just described LAs renters protections and tenants rights organisations in a nutshell...
ajross 7y ago
> I always found it odd that rent control always seems to be an all-or-nothing policy: either things are tamped down on, or it's a laissez faire system. It's not. Rent control argument on the internet looks like that because it's always a bunch of strawman arguments about political philosophy. In fact the Oregon laws in question have features exactly like what you're talking about.
- throw0101a 7y ago
  What are some other jurisdictions that have this tiered approach?
ethbro 7y ago
How would you avoid only high-rent housing being built in place of any torn down units? This seems like it would still be rent-inflationary in nature, you just end up with younger average housing stock.
briandear 7y ago
Out of curiosity, have you ever owned a building? I might suggest that your opinions might change once you have. Owning rental property isn’t a tidy math problem. Newer buildings have more predictable costs, definitely not older buildings. It’s pretty much the opposite of what you said in the real world. Newer buildings can lease to higher quality tenants at higher rates with lower eviction/non-payment/damage risk. Older buildings can run the gamut. You can have an older building filled with stable senior citizens that runs perfectly for decades or you can have an older building filled with tenants who constantly break things, are late on rent, run meth labs, or simply trash a place and vacate in the middle of the night. You might have to evict someone and the process could take a year. Air conditioners fail randomly and expensively. Roof leaks develop and tenants might not even report it for months (yes, that sort of thing happens all the time. As a building gets older, the risks increase, but the rent you can charge decreases compared to a new building. My suggestion is to actually ask people who have owned building exactly why they oppose rent control so fiercely and the answers aren’t going to be about greed but about increased financial risk.
- jdavis703 7y ago
  If we can agree that profit is essentially what we call "greed," any financial risk means deceased profits, in other words less opportunity for greed. I'm not a communist so I'm not against profit, but in Marxist theory this kind of profit is seen as the problem with capitalism.
  - roenxi 7y ago
    You might want to re-read your Marx; one of his more famous and less controversial observations was that the rate of profit tends to decrease over time in a healthy market. High rates of profit wasn't the problem, it was the negative effects that were theorised to occur when the rate of profits, inevitably, fell too low.
- throw0101a 7y ago
  > Owning rental property isn’t a tidy math problem. I'm not talking about owning, but about encouragement of building. If income is limited to CPI, regardless market characteristics, what incentive is there to take a risk and build?

oposa 7y ago

Of course it is easier to change zoning or make reforms when you address people's concerns. Thinking that there can be development when everyone is either fearing having to move or have most of their assets in housing is what doesn't work.

wpietri 7y ago

> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. It depends on the kind of rent control. Housing has important asymmetries it's reasonable to address through legislation. One is asymmetry in scale: you have one unit; landlords have many more. This gives them stronger negotiating power. Another is cost of change. It's much more expensive for me in time and money to move than it is for a landlord turn over a new unit. That means a landlord can extract money well above a true market rate. A third is of interest. Individuals and the community have a interest in healthy social bonds, while absentee lords mainly want to extract cash. I understand free-market fundamentalists hate all rent control, but Oregon's rent control laws are designed to preserve incentives to construct new housing: https://www.npr.org/2019/02/27/698509957/oregon-set-to-pass-the-first-statewide-rent-control-bill https://www.npr.org/2019/02/27/698509957/oregon-set-to-pass-... The first 15 years of a new building are free from rent control, and after that they can increase rent at 7% above CPI, meaning in real terms rents can still double circa every 10 years. And if a tenant moves out, landlords can raise rents as much as they like. For this to affect construction today, a builder would have to be betting on a very tight market continuing unabated during the 2035-2045 period. But that's a ridiculous bet to make, rent control laws or not. Anybody building new housing will want to be sure the economics work if rent increases return to their long-term average, which is well below 7% above CPI: https://www.apartmentlist.com/rentonomics/rent-growth-since-1960/ https://www.apartmentlist.com/rentonomics/rent-growth-since-...

bko 7y ago
> It depends on the kind of rent control. Housing has important asymmetries it's reasonable to address through legislation. One is asymmetry in scale: you have one unit; landlords have many more. Not necessarily true. Sure , the landlord knows more about the apartment but you know more about yourself as a tenant. Landlord takes a huge risk in terms of allowing someone rent, especially given protections afforded to that individual. Most experienced landlord will cite tenant selection as very important and a huge risk. One tenant that refuses to pay rent or damages property can wipe out the return of 9 other units. > This gives them stronger negotiating power. I have more options as to where to move. The landlord owns a very expensive illiquid property. He can't just sell it tomorrow but I could easily choose another rental. > Another is cost of change. It's much more expensive for me in time and money to move than it is for a landlord turn over a new unit. Its very expensive to fill a rental. A landlord usually needs at least a month to find another tenant. That's a month of foregone rent > That means a landlord can extract money well above a true market rate. Market rate is the rate the landlord can get. If a transaction happens at that rate, that's the market rate. > A third is of interest. Individuals and the community have a interest in healthy social bonds, while absentee lords mainly want to extract cash. Not sure what "absentee lords mainly want to extract cash" means. Yes, most landlords manage properties as an investment. Landlords also have an interest in the community as they own equity in that community that would appreciate if the neighborhood gets nicer. I don't see your point.

ransom1538 7y ago

" > Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse." I couldn't agree more. Proposal: Current* property owners love new commercial property and HATE new residential units. (This is how you game the system to get prices up). What state governments should be doing is requiring new residential property on all approved new commercial property. This way, if a local city board really wants that new "Panera Bread" - they must approve new housing.

TulliusCicero 7y ago

> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. Agreed. However, there is an orthogonal reason to be pro-rent control: housing stability. Housing stability, as in people's freedom to remain in their home, even if their landlord, for whatever reason would rather they not. This is often a big reason why people in the US want to buy their own home, but there's no reason you couldn't give comparable stability to renters, as other countries have already done, by only letting tenants be kicked out for a handful of specific reasons (e.g. non-payment, destruction of property, etc.). The one catch is that you can't have housing stability clauses without rent control, because otherwise the landlord could always "soft evict" by simply raising the rent until the current tenant leaves.

SomeOldThrow 7y ago

It’s not clear what the rent control will do in conjunction with the zoning changes. I’m hopeful.

PunksATawnyFill 7y ago

Why abet this perception of a “housing crisis?” It’s not as if the country is physically full. People behave as though it’s a human right to pile on top of one another in a few places. Why pander to that, and reduce people’s chance to live in a house? No housing? Then go where there is housing or space to build it!

creato 7y ago

> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse. I agree in general, but Oregon's law only limits increases to 7% per year. In the long run, that should easily be enough to keep up with inflation, even in a hot market. If San Francisco's law were 7% and not 1-2%, I doubt it would be nearly as much of an issue as it is today (where you have people with rents effectively from decades ago, because that isn't enough to keep up with the market). The 7% limit seems designed to limit extreme short term increases, but still allow rents to reflect market value in the long term. I think this is a politically smart strategy, without the long term damage of holding rents below market value. edit: and combined with the zoning changes... I'd say the open market approach to managing housing supply and demand came out way ahead with this law.

RussianCow 7y ago
Small nitpick, but the actual cap seems higher than 7%: > The resulting legislation would cap rents statewide at 7% annually plus inflation Which, if I'm reading that correctly, would put the real cap closer to 9-10%. I don't have a strong opinion about this, but a 10% cap on rent increases seems reasonable to me, keeping in mind that this only applies to existing tenants—if the tenant leaves, you can increase rent by however much you want. This seems like a fair way to help reduce the number of people that are priced out of their homes, without significantly impacting landlords. That said, I'm personally more excited about the zoning changes; single-family zoning was never a good idea IMO, and it's great to see Oregon slowly moving away from that.

motu 7y ago

Yes but lawmakers are idiots and people like Kate Brown can’t put 2 and 2 together.

asdff 7y ago

Rent control does little to discourage building in fact (1). One of the biggest, and imo only agreeable argument, against rent control is that leads to higher rents on uncontrolled units. However, if an entire region is under the same rent control, that just wont happen. A 7% cap I think is still very generous for landlords. It's probably still well above the rate of wage growth, though. https://dornsife.usc.edu/assets/sites/242/docs/Rent_Matters_PERE_Report_Web.pdf https://dornsife.usc.edu/assets/sites/242/docs/Rent_Matters_...

WalterBright 7y ago

Generally, when the government interferes with the market price of things, the result is a glut or a shortage, often with the emergence of a black market. If the price difference between the government price and the market price is large enough, criminal gangs step in to take advantage of the opportunity.

nostrademons 7y ago

Limits on rent increases (at levels well beyond the rate of inflation) don't have the same negative effects as rent controls. To actually resolve the housing crisis, you need there to be sufficient profit potential that private landlords are incentivized to build more housing. Rent control forbids this. Limits on rent increases, however, don't, really. Building a new apartment complex usually takes 3-4 years from permitting to completion to move-in. If rent increases are capped at 7% annually, then by the time your new project is ready for move-in, you can count on rents having gone up by 30-40%, assuming that that's where the market-clearing price would be. And if they haven't, they'll be higher the next year, and so on, until they equilibrate. The idea behind caps on rent increases is to slow the bleeding and minimize disruption to families - having your rent go up 7% for 5 years is a lot less of a problem than having it go up 35% in one year and getting a month to decide whether to renew your lease, because it gives you time to look for alternatives and figure out what else in your life needs to change to make the numbers work.

kspaans 7y ago
Yup, this is how "rent stabilization" works in Ontario, Canada. When a tenant has a lease, rent increases are capped to a rate set by the government. When a tenant leaves, there is "rent decontrol" and the landlord can charge whatever the market will bear for the next tenant. Similarly newly built units for rent get market rates. No one dictates what a landlord can charge, only how much they can increase rents for existing tenants. Of course this does lead to shenanigans to get old tenants out, but it's not rent control in the sense that all rents are everywhere anytime are set by the government.