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Europe embraces rent controls, a policy that never works

63 points by jseliger 7y ago

PaulHoule 7y ago
It seems rent control is popular in many places. I read recently that people in California think that rent control is a better solution to the housing crisis than building more housing by a large margin. It startles me a little because if there is one thing all economists agree on (even the Richard K. Galbraith and Paul Krguman kind of economists) it is that rent control is a bad policy.
- standardUser 7y ago
  If you take the worst version of a policy then it is very easy to criticize and get a consensus. That doesn't mean it's not possible to have a rent stabilization policy that can both enhance housing stability without dramatically distorting the market.
  - malandrew 7y ago
    Can you cite an example of a rent stabilization policy that doesn't dramatically distort the market?
- pizza 7y ago
  Why is it so hard to build in California, anyway? And why is it so hard to change the reason it is hard to build?
  - icelancer 7y ago
    NIMBYism, and NIMBYism, respectively.
  - User23 7y ago
    Primus, the people with the 20 million dollar Malibu mansions don't want their view spoiled by a 20 story affordable housing tower. So they use ecological impact studies and similar tools to enforce an impenetrable NIMBY shield. Secondus, the people with the 20 million dollar Malibu mansions are the ones who pay for the politicians' campaigns.
    - localcrisis 7y ago
      my dude why're you talking in latin this ain't pompeii
  - et-al 7y ago
    California housing discussions are common here. Plenty has been said about it in yesterday's Approaching Peak Housing Dysfunction in California thread: https://news.ycombinator.com/item?id=20527867 https://news.ycombinator.com/item?id=20527867 If you want a simple answer, carapace's comment stood out to me: - - - It's because we're hella young out here. Relative to the East Coast anyway (I mean, London has Roman ruins...) Do an image search for old timey SF and you'll see: the Sunset was sand dunes until about last Tuesday, etc. Dudes used to pan for gold out by Lake Merced. Also, this was the weirdo town. Bohemia on the Bay. Serious folk didn't really come here to be serious and sane. The old line was, "All the crazy people move to California, and all the crazy people in California move to San Francisco." To which residents add, "And all the people too crazy for San Francisco move to Berkeley." So yeah, you've got a young town full of nuts and flakes that no one really paid much attention to until the last ~50 years or so, whadda ya expect, eh? - - - Before Web 2.0, only the weird Ivy League graduates would consider moving out to the Bay Area. Now the secret's out and everyone wants to move here.
    - StavrosK 7y ago
      > I mean, London has Roman ruins... Wait until you hear what Rome has!
  - harimau777 7y ago
    I personally think that a lot of it is because, other than preventing all development there is no way to insure that the building next to your house won't be some soulless, concrete eyesore or something else that lowers property value. I'd like to see less efforts to demonize NIMBYism and more efforts to eliminate the factors that make NIMBYism necessary.
    - icelancer 7y ago
      >> I personally think that a lot of it is because, other than preventing all development there is no way to insure that the building next to your house won't be some soulless, concrete eyesore or something else that lowers property value. This is the definition of NIMBYism.
  - mrep 7y ago
    Simple, Americans want large single family homes and california cities cannot sprawl in all directions due to water and mountains.
- User23 7y ago
  This is because economists are shills that collect their paychecks from the rentier class or their cronies. People that actually understand markets and business don't work as economists, they are too busy getting rich by trading or creating. Unearned income is obviously a net economic drag. I'm not saying there shouldn't be any, I want to retire some day too. In fact in German the word for retiree is "rentner." The problem comes when there is a permanent rentier class that simply extracts rents from the working economy. They are parasites. Most of the valid criticisms of capitalism are actually just criticisms of excessive rent-seeking. And that can exist under any economic system.
- tj-teej 7y ago
  Why is it rent-control OR building new apartments? Houses don't appear immediately and isn't it a good idea to keep people in their homes while the supply grows (building new houses) and the economy stabilizes?
  - aeternus 7y ago
    No, because rent-control disincentives new development.
    - cj 7y ago
      How so? Many rent control policies exclude new development from rent control.
      - krapht 7y ago
        If I buy a property to rent out, the net present value to me is lessened due to rent control. If (x = net present value) < (y = cost to develop) then I don't build.
      - refurb 7y ago
        It drives prices higher making building new building less profitable. And more importantly, disincentivizes maintenance and upgrades to older buildings.
  - otterley 7y ago
    > isn't it a good idea to keep people in their homes while the supply grows Maybe, maybe not. It seems like a foregone conclusion among many people, but isn't backed by evidence or data.
- otterley 7y ago
  It's a well-known observation among behaviorists and economists that people usually act based on their selfish interests, as opposed to the best interests of society. If you stand to benefit personally from rent control, you're much more likely to be in favor of it, regardless of its negative net consequences. This is especially true if you're not impacted by those negative consequences. A recent turning point is that the number of adult renters in major U.S. population centers is beginning to exceed the number of homeowners. As they age, they begin to participate more in the political process (despite the voting age being 18) and carry more clout. You end up with two major blocs of political power: (1) city council members vested in the status quo who want to strictly regulate new housing to preserve "neighborhood character" (i.e., property values); and (2) renters demanding rent control. Strange bedfellows they may seem, but the two kind of go hand in hand in the sense that they've already got a sweet deal and want to protect it.
  - nhumrich 7y ago
    I think you just summed up politics for me, and why it seems more divided than it should be.
- hn_throwaway_99 7y ago
  TBH, I'm very surprised (disheartened?) that your comment has been downvoted. Your last sentence is very true - economists on the most "conservative" and "liberal" sides of the profession all agree that rent control is counter productive. You know where housing is still pretty affordable and you can make a decent living even if you're poor? Houston, which famously doesn't have zoning. Granted, this can cause lots of other problems (many attribute a lot of the flood damage caused by Hurricane Harvey to overbuilding), but it seems very clear that if you want to have affordable housing, you have to build an f-ton of housing, and Houston has done that, while all of these over-regulated housing-crisis cities clearly have not.
  - qarlow 7y ago
    > Your last sentence is very true - economists on the most "conservative" and "liberal" sides of the profession all agree that rent control is counter productive. No, I wouldn't say it is true. The things is most people on hacker news would agree that it is so because you have read it so many times before. But they can't actually specify what that actually is because that isn't really known. All that economists really agree on is rent control is unsurprisingly a worse way to allocate resources based on money. But that says little to nothing about the political and social costs which makes the economic discussion largely irrelevant. If rent control decreases market efficiency by 5%, but increases political efficiency orders of magnitude because people no longer fear that building more will force them to move, it is a worthy trade off. Similarly to achieve affordable housing without rent control in an already hot market requires the government to implement changes to the direct detriment of landlords and land owners, which usually isn't popular. Economics isn't a field like others. It is very overtly political. Unless you know exactly what they can and can't prove, and to what degree they can prove it, it might not be relevant. Which isn't something you will actually find most of the time, because it often isn't.
hak8or 7y ago
Sadly as populism continues to rally across Europe, I cannot imagine this getting better anymore soon. Especially since populism tends to lean heavily towards very short term and shallow solutions instead of long term permanent ones.
- toomuchtodo 7y ago
  Why is quality of life and levels of happiness so much higher in Europe then (EDIT: compared to other first world countries)?
  - falcrist 7y ago
    That really depends on where you're comparing Europe to...
    - point78 7y ago
      The rest of the world? EU tops rankings for quality of life and standard of living every year. Sprinkle in some canadian, Australian Japanese and new Zealand cities an there is your top 50.
      - deleted 7y ago
        [deleted]
      - rizzom5000 7y ago
        According to Mercer, who conducts - 'The quality of living survey is conducted to help governments and major companies place employees on international assignments. The survey also identifies those cities with the highest personal safety ranking based upon internal stability, crime, effectiveness of law enforcement and relationships with other countries. In this case, Luxembourg is top, followed by Bern, Helsinki and Zürich, all equally placed at number 2.' 'Countries with cities commonly ranked in the top 50 include Austria, Switzerland, New Zealand, Germany, Canada, Denmark, Finland, Australia, Sweden and the United States. Vienna (Austria) has been ranked first for ten consecutive years.' I mean, sure, Germany has more cities on the list than the US; but Germany isn't the EU. Most of the EU has zero cities in the top 50.
Havoc 7y ago
>, a policy that never works This might seem a little more credible if it came from someone other than the economist. The bastions of free capitalism aren't exactly doing great on affordable rent either...
- malandrew 7y ago
  Within of few years of enactment, every place without rent control and capitalism is doing better than every place with rent control and capitalism in terms of median rent.
  - deleted 7y ago
    [deleted]
- krapht 7y ago
  FWIW, rent control is one of the few economic topics that everybody in the field agrees suppresses housing supply.
- LaGrange 7y ago
  I mean, if you present rent control as something that just happens in isolation, as the last policy ever, then sure, it wouldn't work. Otherwise you might have to confront the idea that government might, say, establish rent control _and_ build houses. Shocking.
munk-a 7y ago
If the government feel that housing should be subsidized for a certain segment of the population (like workers employed locally in the city) then the government should implement direct subsidies in the form of cost reimbursements distributed to renters/owners without the knowledge of property managers - every other scheme for rent reduction that I've seen has been critically flawed.
tutuca 7y ago
So funny downvotes in this thread...
deathanatos 7y ago
> Landlords who want to make renovations that would push up prices by more than €0.50 per square metre will have to seek approval. So, basically any renovation then. €0.50 per square metre is 5¢/sq ft!
- TrackerFF 7y ago
  On the other side: I live in a country where you can only raise the rent by the rate of inflation, so not a whole lot. However, if you do renovations, you can raise the rent to whatever you want. So what happens is that home-owners re-paint the interior every 2-3 years, and set the rent to match the market. I have friends who have gotten the notice of renovations (you can break/complete a contract if it's for renovation), and then 3 months later gotten the option of renting the same space - but only with a 30%-50% markup. Only difference? Fresh coat of painting.
- munk-a 7y ago
  This particular constraint seems poorly thought out, any property that has suffered from poor maintenance will need to seek approval before renovating - including issues that will compound depreciation. Bad pipes in a building significantly lower the value of a building (since that's super pricey to fix) - but that value drop is multiplied over time as water damage becomes more frequent and widespread. I would hope that any board would provide no resistance when health related renovations are on the table - slum lord apartments with mold problems can have life long effects on any occupants forced into the living situation by their income.
nostromo 7y ago
It's interesting to me how we decide which price-control schemes we like and don't like. In general, if you think price-controls are bad, you should dislike a wide arrange of programs: farm subsidies, minimum wage, medicare expansion, rent control, executive pay limits, etc. But it's interesting that most people I talk to support some of those, but oppose the others.
- malandrew 7y ago
  I oppose all of those as they all distort the market and make it less efficient. Price-controls have all sorts of second and third order effects that are never considered by those advocating for them.
  - krastanov 7y ago
    Efficient markets are great for people that have the money to participate in the market. If you do not have resources, an efficient market will ensure you will have a very hard time gaining resources.
    - darawk 7y ago
      In what way do you think an efficient market prevents people from gaining resources?
      - krastanov 7y ago
        How do you participate in the market without initial resources? Even if you have some minimal initial resource, how do you act efficiently in the market when you do not have the resources to buy the information that lets you act efficiently? If there is no regulation, rather just the most efficient trading, how do you compete with the gigantic entities that hoard inelastic goods to manipulate the price. It takes a lot of capital to efficiently counter their maneuvers. The problem is that 1) you are not in the market to exploit arbitrage opportunities, you are there to buy something you need 2) you do not have the capital to exploit that type of arbitrage opportunities and remain solvent. You know that silly saying "The market can stay irrational longer than you can stay solvent"? What is a rational market for a large entity with capital is very different from what is rational for a small entity with little resources.
colechristensen 7y ago
I am of the strong opinion that governments should have a finger on the scale to a much higher degree than rent control, with the desired effect of making owning real estate somebody else uses a minimally attractive investment. Control the rent by controlling the price of real estate by removing investors as competition for the purchase of land and buildings for home and business.
- munk-a 7y ago
  I think this general sort of approach is highly flawed due to the difficulty you'd find in allocating and expecting new property demand. I, personally, would love to see a working command economy and look forward to the day we can actually accomplish one though technology... but we're not quite there yet. In the mean time... I have difficulty pointing out specific reasons this always fails due to the weird involvement of racism in public housing in the US tainting my primary experience of such a system, but I believe it does have flaws even if implemented in a manner that isn't intentionally trying to ghettoize portions of a city.
  - colechristensen 7y ago
    There really isn't any difficulty in allocating resources. I'm talking about eliminating real estate investors, not property ownership by end-users. There would still be a fine market economy but it would be much less common for someone to be buying real estate they weren't intending to use themselves. Command economies are ridiculous because human nature. They aren't stable because they involve a small number of people being in control of resource allocation and the benefits for "cheating" and making those decisions to benefit yourself and your goals make it far too likely that the power will be abused.
- fzeroracer 7y ago
  As a thought exercise, free markets exist on the basis of everyone behaving like a rational actor, working in their own self-interest which results in the market becoming more and more optimized. Mind you, I'm talking pure free market theory. This means if you were to consider renters, land owners etc within a free market, the rational option is to take actions which improve their lot. This may be short term solutions, but it's the result of people behaving in their own rational self-interest. If a city has 50+% of people renting; then they will take action to lower the costs of renting. Similarly, if a city has a large amount of people owning property, then people will take action to increase the value of their property. The only action to stop this would be...government intervention. Which means then the government is responsible for regulating the market against the whims of the people it's supposed to represent. In the case of renting and home ownership, I don't think a free market can ever truly exist.
deleted 7y ago
[deleted]
dfeojm-zlib 7y ago
Rent controls work if and only if there's sufficient authority and incentives to motivate developers to grow housing inventory vertically (skyscrapers) and/or horizontally (sprawl + public transport) just enough to not have a glut while aiming to approximate the desired rent-controlled price(s) such that there's less arbitrage, gaming, property owner loss and/or exploitation. (In effect, rent-controlling with structural market policies, while providing rent controls as a secondary guaranty layer to protect renters, especially vulnerable populations.) Housing is one of the more inelastic markets because everyone needs it, and so even minor constraints in supply can rapidly lead to price spikes.
- malandrew 7y ago
  If there were sufficient authority and incentives to motivate developers to grow housing inventory, rent control wouldn't be advocated for in the first place.
  - sitkack 7y ago
    Are you sure the choice is binary?
  - ngngngng 7y ago
    So rent control is cheating? Let's keep prices low without allowing supply to grow to meet demand by zoning for larger buildings and cheaper dwellings.
  - munk-a 7y ago
    Why should developers be incentivized to grow housing inventory over independent owners? Large scale developers already have quite a lot of assets to distribute as needed - I do agree that onerous construction impediments should be lowered (those sourced from NIMBYism - not general sustainability and environment concerned) and those impediments - or outright blocks - are responsible for a lot of the housing crises we can observe today.
TomMckenny 7y ago
The cities listed as having rent control are Berlin, Barcelona, Amsterdam and Paris. And you can add New York. When one thinks of failed cities, these do not come to mind. In fact, one could do worse than being more like them. And clearly rent control does not kill a city or economy or quality of life. And actually, a list of the most miserable cities is going to be overwhelmingly rent control free. Edit: for clarification, I am claiming there is _no_ evidence for a causal relationship between the presence or absence of rent control. Any inferred relationship is entirely conjectural and completely unsupported by evidence: cities obviously prosper perfectly well with rent control.
- kahnjw 7y ago
  You're suggesting there is some causal relation here that I'm not sure exists. Desirable cities have housing crises. Those cities implement policies to attempt to abate these crises. Ironically, theory says that restrictions like this make the crises worse: what incentive does it give renters except to hold their leases, thereby further restricting supply? That theory seems to hold up in a most cities, see SF, LA, London, NY etc. The introduction of rent control did nothing but to reduce housing availability and increase prices.
  - TomMckenny 7y ago
    On the contrary, I claim there is no causal relationship. In particular, no actual evidence that it hurts a city. For example: on what evidence would we say NYC was hurt by rent control? Rent control started in the 1920s and was quite strong for decades, yet NYC continued to out grow dozens of potential competitor cities without it. Therefore at worst, rent control had no measurable effect on growth.
    - pzone 7y ago
      Here is a relatively famous study on rent control in Cambridge, Massachusetts. It identifies billions of dollars that resulted from the end of rent control in 1994, controlling for other economic trends. https://www.nber.org/digest/oct12/w18125.html https://www.nber.org/digest/oct12/w18125.html Although the year 1994 in a city a few miles away isn't exactly the same as New York, it seems far fetched to argue we wouldn't observe the same thing if we ended rent control here today.
gpm 7y ago
As someone who just moved to the bay area for the summer, I think rent control has worked pretty well, I've met multiple Uber drivers who would have had their lives upturned due to rising rents if not for rent control. The don't build tall building policies however...
d1zzy 7y ago
Never say never. This type of policies depend on many factors and while they may not work in some circumstance (time and place) they can be more effective in others. The problem is recognizing when that is AND re-evaluating the situation. The latter I feel is almost never done. For regulations like this it's important to put in the law text that requires a full re-evaluation of its efficacy and roll back when there are more drawbacks than benefits, just because the policy worked at one time it doesn't mean it will continue to be effective forever.
drtillberg 7y ago
It's a problem caused by 20 years of monetary stimulus and 40 years of complete freedom by central banks and governments to manage the money supply. Monetary policy has bid up leveraged assets like real estate many times over. Supply follows money, not people, and money has been concentrated in the hands of fewer people. Any intelligent conversation about this needs to include monetary policy. When people live in little piggy banks....
- bhangi 7y ago
  I'm not sure why you're downvoted, but I think that this nails the biggest reason for runaway inflation in housing prices. When money supply is cheap, asset prices will be bid up. The only people who can afford the assets and profit from further increases in their prices are those with the means... in other words, the rich get richer while others are left behind.
  - neilwilson 7y ago
    It's downvoted because it puts the cart before the horse. Monetary policy intervention interferes with the market by forcing interbank interest rates to be higher than they would be in a free market. As any banker will tell you the price of interbank reserves in a free market is zero - as there are more than are required to clear the banking system. In a free market asset prices are naturally determined by the last creditworthy person prepared to pay the current price of money who visits a bank. Which will be higher than zero because ordinary people have no access to the interbank, and therefore the bank can put their risk and cost mark up on the price of money. You can hardly argue against rent controls but for interest rate controls. Why favour bankers over property occupiers?
    - drtillberg 7y ago
      Oh, a simple misunderstanding! I was arguing against the central bank controls on interest rates that have so distorted to the property market. Glad we cleared that up! In fact, my post said nothing about interest rates currently being set on a free-market basis, because the whole point was that central bank interventions are distorting and setting those rates in a way that generates huge inflation in the property markets that is then treated as insignificant for purposes of calculating inflation statistics. Property inflation --> Rent inflation. Concentration of wealth + Rent inflation --> Rent control | Homelessness.
nisten 7y ago
I can't comment on whether it works or not because most of the article is paywalled for me, but what I can comment on is on a logical observation of the free market. It is not free, it's expensive to be poor. It's always cheaper to be an investor, your taxes get a lot lower due to better access of off-shore services you get. The less rich you are the more expensive your financial overhead fees get. Thus there is no level playing field. In a basic free market you only need to enforce 2 rules. No fraud, and no monopoly. Instead what you see in many big cities is sketchy capital flying in and a virtual monopoly dominated by Airbnb and their fleet of landlord contractors causing an artificial shortage that results in over half the units being empty by midweek. If the competition was level then the rental prices and even property prices would be actually be reasonably matching the average incomes of the local population. This means that rent control is merely a bandaid measure that should be removed once we ensure that everyone in the market is actually paying their fair share. Given the current status quo I personally think it's better to have rent control than not to have it, even as a just a temporary patch on this problem; but by no means do I think it will solve the problem for good.
reillyse 7y ago
Taken with a grain of salt. Supporting free trade is literally one of the founding reasons for this publication. From wikipedia "The Economist was founded by the British businessman and banker James Wilson in 1843, to advance the repeal of the Corn Laws, a system of import tariffs.[17] A prospectus for the "newspaper" from 5 August 1843 enumerated thirteen areas of coverage that its editors wanted the publication to focus on:[18] Original leading articles, in which free-trade principles will be most rigidly applied to all the important questions of the day."
- ChickeNES 7y ago
  Why would anyone be opposed to free trade in this day and age?
  - krastanov 7y ago
    I think the words "free trade" are a bit overloaded, at least in the way OP used them. I am very much a globalist and think free trade between countries is very important. I am also very much against unregulated markets (which I assume is what OP meant by "free trade", i.e. free trade / unregulated market on the scale of a city and its housing market).
  - dredmorbius 7y ago
    I'd strongly recommend Ha-Joon Chang's Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism: Chang argued uncomfortable truth of capitalism and criticizes globalization represented by the book "The Lexus and the Olive Tree" in the first chapter. He argued that there are errors in theories regarded as established theory related to economic development and refuted them with economic theory, and historical and current data. In the later chapter, Chang claimed that "Market and democracy clash at the fundamental level." In epilogue, he wrote about Brazil in 2037 that faced gloomy future as a consequence of reckless beliefs in neo-liberalism policies. Finally, he made the case for new strategies for a more prosperous world that may appall the 'Bad Samaritans'. https://en.wikipedia.org/wiki/Bad_Samaritans:_The_Myth_of_Free_Trade_and_the_Secret_History_of_Capitalism https://en.wikipedia.org/wiki/Bad_Samaritans:_The_Myth_of_Fr... An interesting digression of views is evident in a dispute between publishers of the English an American editions of Chambers Encyclopaedia: Free Trade (American Edition), 'a dogma of modern growth, industriously taught by British manufacturers and their commercial agents. For many years certain political economists have laboured to establish this theory upon a reliable basis, and have asserted that the doctrine represents an important truth; but no nation has attained substantial prosperity except by protection to native industry, whether avowed or disavowed. The doctrine had no foothold in the policy of any nation, and had no legislative birth until put forth by Sir R. Peel in 1846. While it was in the interest of Great Britain to protect her industry, she imposed sufficient duties; and when, by this means, her producers of wealth became strong, and able to compete with those of other countries, protection yielded to reciprocity; and even at the present time, the nations most clamorous for free trade rely upon it in theory only, reciprocity in fact, and protection in principle. Even the most strenuous advocates of the theory dare not put it to the test of experience in its fullness. The teachers, therefore, remain self-deceived. The cloistered sophists of their schools, and the propagandists of free-trade, are doubtless as learned as the sophists of any age, and practically as useless. Free-trade expressions need Americanising, as they are utterly hostile to our prosperity, and subversive of scientific truth. Whenever an advocate of this dogma, schooled in their errors, has found devolving upon himself the responsibility of dealing with practical questions, he finds their supposed cardinal truths as groundless as the mythical Arcadias and Utopias of romance. The sophistries of free trade are put forth to lull the suspicions of the deluded purveyors to the wealth of England, and are advocated most strenuously by agents of British manufacturing houses and foreign residents in our cities, whose chief aim is the accumulation of wealth by extensive sales of foreign products, regardless of the injury they may inflict on American interests.' With a great deal more on the same purpose --- an entire perversion of the original. https://old.reddit.com/r/dredmorbius/comments/4xe2k1/chambers_encyclopaedia_editorial_statement/ https://old.reddit.com/r/dredmorbius/comments/4xe2k1/chamber...
xkgt 7y ago
Free market works only as long as both parties have the freedom to bail out. In case of essential commodities like housing or healthcare, this isn't the case. Even if a deal is beyond your budget, you can't turn it down and live in the streets. The other option to live further away has upper bounds in terms of practicality. And this power imbalance, creates a reinforcement loop which would spiral out of control without any external corrective measures like Government interference or workforce/business exodus.
- pzone 7y ago
  If this is true, then what about clothing? You can't go around unclothed, you always have to pick some sort of clothing to wear. Does this mean clothing manufacturers have some sort of special power over you, and must be regulated by the government? Just like picking what clothes to wear, you can pick your apartment, pick how much and what quality of medical care to receive, and this is enough to ensure a reasonably well functioning and competitive market without special rules. These markets aren't that special or different.
  - internet_user 7y ago
    Land markets are very unique. Location, Location, Location. Unlike Fruit of the Loom underwear, you can't get 12-pack of NYC or Paris next day. A land value tax is does not cause economic inefficiency, and it tends to reduce inequality. https://www.economist.com/free-exchange/2015/04/01/why-henry-george-had-a-point https://www.economist.com/free-exchange/2015/04/01/why-henry...
    - pzone 7y ago
      While that is true, it is a separate issue than what GP raised. In fact, the point you raises goes in the opposite direction - it makes rent control far worse and more damaging! Locking in pre-existing claims to land (renters being allowed to stay as long as they want at cheap prices) and restrictive zoning laws BOTH serve to constrict the housing supply. Because land is already a finite resource, any restriction on how many housing units per parcel of land can be built is an even more harmful policy.
neonate 7y ago
http://archive.is/unc4f http://archive.is/unc4f
bassman9000 7y ago
Thomas Sowell on rent control https://youtu.be/dnj2WRIG11U https://youtu.be/dnj2WRIG11U Edit: and more from Stanford https://www.brookings.edu/research/what-does-economic-evidence-tell-us-about-the-effects-of-rent-control/ https://www.brookings.edu/research/what-does-economic-eviden... . Taking all of these points together, it appears rent control has actually contributed to the gentrification of San Francisco, the exact opposite of the policy’s intended goal. Indeed, by simultaneously bringing in higher income residents and preventing displacement of minorities, rent control has contributed to widening income inequality of the city.

63 points by jseliger 7y ago

It seems rent control is popular in many places. I read recently that people in California think that rent control is a better solution to the housing crisis than building more housing by a large margin. It startles me a little because if there is one thing all economists agree on (even the Richard K. Galbraith and Paul Krguman kind of economists) it is that rent control is a bad policy.

standardUser 7y ago
If you take the worst version of a policy then it is very easy to criticize and get a consensus. That doesn't mean it's not possible to have a rent stabilization policy that can both enhance housing stability without dramatically distorting the market.
- malandrew 7y ago
  Can you cite an example of a rent stabilization policy that doesn't dramatically distort the market?
pizza 7y ago
Why is it so hard to build in California, anyway? And why is it so hard to change the reason it is hard to build?
- icelancer 7y ago
  NIMBYism, and NIMBYism, respectively.
- User23 7y ago
  Primus, the people with the 20 million dollar Malibu mansions don't want their view spoiled by a 20 story affordable housing tower. So they use ecological impact studies and similar tools to enforce an impenetrable NIMBY shield. Secondus, the people with the 20 million dollar Malibu mansions are the ones who pay for the politicians' campaigns.
  - localcrisis 7y ago
    my dude why're you talking in latin this ain't pompeii
- et-al 7y ago
  California housing discussions are common here. Plenty has been said about it in yesterday's Approaching Peak Housing Dysfunction in California thread: https://news.ycombinator.com/item?id=20527867 https://news.ycombinator.com/item?id=20527867 If you want a simple answer, carapace's comment stood out to me: - - - It's because we're hella young out here. Relative to the East Coast anyway (I mean, London has Roman ruins...) Do an image search for old timey SF and you'll see: the Sunset was sand dunes until about last Tuesday, etc. Dudes used to pan for gold out by Lake Merced. Also, this was the weirdo town. Bohemia on the Bay. Serious folk didn't really come here to be serious and sane. The old line was, "All the crazy people move to California, and all the crazy people in California move to San Francisco." To which residents add, "And all the people too crazy for San Francisco move to Berkeley." So yeah, you've got a young town full of nuts and flakes that no one really paid much attention to until the last ~50 years or so, whadda ya expect, eh? - - - Before Web 2.0, only the weird Ivy League graduates would consider moving out to the Bay Area. Now the secret's out and everyone wants to move here.
  - StavrosK 7y ago
    > I mean, London has Roman ruins... Wait until you hear what Rome has!
- harimau777 7y ago
  I personally think that a lot of it is because, other than preventing all development there is no way to insure that the building next to your house won't be some soulless, concrete eyesore or something else that lowers property value. I'd like to see less efforts to demonize NIMBYism and more efforts to eliminate the factors that make NIMBYism necessary.
  - icelancer 7y ago
    >> I personally think that a lot of it is because, other than preventing all development there is no way to insure that the building next to your house won't be some soulless, concrete eyesore or something else that lowers property value. This is the definition of NIMBYism.
- mrep 7y ago
  Simple, Americans want large single family homes and california cities cannot sprawl in all directions due to water and mountains.
User23 7y ago
This is because economists are shills that collect their paychecks from the rentier class or their cronies. People that actually understand markets and business don't work as economists, they are too busy getting rich by trading or creating. Unearned income is obviously a net economic drag. I'm not saying there shouldn't be any, I want to retire some day too. In fact in German the word for retiree is "rentner." The problem comes when there is a permanent rentier class that simply extracts rents from the working economy. They are parasites. Most of the valid criticisms of capitalism are actually just criticisms of excessive rent-seeking. And that can exist under any economic system.
tj-teej 7y ago
Why is it rent-control OR building new apartments? Houses don't appear immediately and isn't it a good idea to keep people in their homes while the supply grows (building new houses) and the economy stabilizes?
- aeternus 7y ago
  No, because rent-control disincentives new development.
  - cj 7y ago
    How so? Many rent control policies exclude new development from rent control.
    - krapht 7y ago
      If I buy a property to rent out, the net present value to me is lessened due to rent control. If (x = net present value) < (y = cost to develop) then I don't build.
    - refurb 7y ago
      It drives prices higher making building new building less profitable. And more importantly, disincentivizes maintenance and upgrades to older buildings.
- otterley 7y ago
  > isn't it a good idea to keep people in their homes while the supply grows Maybe, maybe not. It seems like a foregone conclusion among many people, but isn't backed by evidence or data.
otterley 7y ago
It's a well-known observation among behaviorists and economists that people usually act based on their selfish interests, as opposed to the best interests of society. If you stand to benefit personally from rent control, you're much more likely to be in favor of it, regardless of its negative net consequences. This is especially true if you're not impacted by those negative consequences. A recent turning point is that the number of adult renters in major U.S. population centers is beginning to exceed the number of homeowners. As they age, they begin to participate more in the political process (despite the voting age being 18) and carry more clout. You end up with two major blocs of political power: (1) city council members vested in the status quo who want to strictly regulate new housing to preserve "neighborhood character" (i.e., property values); and (2) renters demanding rent control. Strange bedfellows they may seem, but the two kind of go hand in hand in the sense that they've already got a sweet deal and want to protect it.
- nhumrich 7y ago
  I think you just summed up politics for me, and why it seems more divided than it should be.
hn_throwaway_99 7y ago
TBH, I'm very surprised (disheartened?) that your comment has been downvoted. Your last sentence is very true - economists on the most "conservative" and "liberal" sides of the profession all agree that rent control is counter productive. You know where housing is still pretty affordable and you can make a decent living even if you're poor? Houston, which famously doesn't have zoning. Granted, this can cause lots of other problems (many attribute a lot of the flood damage caused by Hurricane Harvey to overbuilding), but it seems very clear that if you want to have affordable housing, you have to build an f-ton of housing, and Houston has done that, while all of these over-regulated housing-crisis cities clearly have not.
- qarlow 7y ago
  > Your last sentence is very true - economists on the most "conservative" and "liberal" sides of the profession all agree that rent control is counter productive. No, I wouldn't say it is true. The things is most people on hacker news would agree that it is so because you have read it so many times before. But they can't actually specify what that actually is because that isn't really known. All that economists really agree on is rent control is unsurprisingly a worse way to allocate resources based on money. But that says little to nothing about the political and social costs which makes the economic discussion largely irrelevant. If rent control decreases market efficiency by 5%, but increases political efficiency orders of magnitude because people no longer fear that building more will force them to move, it is a worthy trade off. Similarly to achieve affordable housing without rent control in an already hot market requires the government to implement changes to the direct detriment of landlords and land owners, which usually isn't popular. Economics isn't a field like others. It is very overtly political. Unless you know exactly what they can and can't prove, and to what degree they can prove it, it might not be relevant. Which isn't something you will actually find most of the time, because it often isn't.

hak8or 7y ago

Sadly as populism continues to rally across Europe, I cannot imagine this getting better anymore soon. Especially since populism tends to lean heavily towards very short term and shallow solutions instead of long term permanent ones.

toomuchtodo 7y ago
Why is quality of life and levels of happiness so much higher in Europe then (EDIT: compared to other first world countries)?
- falcrist 7y ago
  That really depends on where you're comparing Europe to...
  - point78 7y ago
    The rest of the world? EU tops rankings for quality of life and standard of living every year. Sprinkle in some canadian, Australian Japanese and new Zealand cities an there is your top 50.
    - deleted 7y ago
      [deleted]
    - rizzom5000 7y ago
      According to Mercer, who conducts - 'The quality of living survey is conducted to help governments and major companies place employees on international assignments. The survey also identifies those cities with the highest personal safety ranking based upon internal stability, crime, effectiveness of law enforcement and relationships with other countries. In this case, Luxembourg is top, followed by Bern, Helsinki and Zürich, all equally placed at number 2.' 'Countries with cities commonly ranked in the top 50 include Austria, Switzerland, New Zealand, Germany, Canada, Denmark, Finland, Australia, Sweden and the United States. Vienna (Austria) has been ranked first for ten consecutive years.' I mean, sure, Germany has more cities on the list than the US; but Germany isn't the EU. Most of the EU has zero cities in the top 50.

Havoc 7y ago

>, a policy that never works This might seem a little more credible if it came from someone other than the economist. The bastions of free capitalism aren't exactly doing great on affordable rent either...

malandrew 7y ago
Within of few years of enactment, every place without rent control and capitalism is doing better than every place with rent control and capitalism in terms of median rent.
- deleted 7y ago
  [deleted]
krapht 7y ago
FWIW, rent control is one of the few economic topics that everybody in the field agrees suppresses housing supply.
LaGrange 7y ago
I mean, if you present rent control as something that just happens in isolation, as the last policy ever, then sure, it wouldn't work. Otherwise you might have to confront the idea that government might, say, establish rent control _and_ build houses. Shocking.

munk-a 7y ago

If the government feel that housing should be subsidized for a certain segment of the population (like workers employed locally in the city) then the government should implement direct subsidies in the form of cost reimbursements distributed to renters/owners without the knowledge of property managers - every other scheme for rent reduction that I've seen has been critically flawed.

tutuca 7y ago

So funny downvotes in this thread...

deathanatos 7y ago

> Landlords who want to make renovations that would push up prices by more than €0.50 per square metre will have to seek approval. So, basically any renovation then. €0.50 per square metre is 5¢/sq ft!

TrackerFF 7y ago
On the other side: I live in a country where you can only raise the rent by the rate of inflation, so not a whole lot. However, if you do renovations, you can raise the rent to whatever you want. So what happens is that home-owners re-paint the interior every 2-3 years, and set the rent to match the market. I have friends who have gotten the notice of renovations (you can break/complete a contract if it's for renovation), and then 3 months later gotten the option of renting the same space - but only with a 30%-50% markup. Only difference? Fresh coat of painting.
munk-a 7y ago
This particular constraint seems poorly thought out, any property that has suffered from poor maintenance will need to seek approval before renovating - including issues that will compound depreciation. Bad pipes in a building significantly lower the value of a building (since that's super pricey to fix) - but that value drop is multiplied over time as water damage becomes more frequent and widespread. I would hope that any board would provide no resistance when health related renovations are on the table - slum lord apartments with mold problems can have life long effects on any occupants forced into the living situation by their income.

nostromo 7y ago

It's interesting to me how we decide which price-control schemes we like and don't like. In general, if you think price-controls are bad, you should dislike a wide arrange of programs: farm subsidies, minimum wage, medicare expansion, rent control, executive pay limits, etc. But it's interesting that most people I talk to support some of those, but oppose the others.

malandrew 7y ago
I oppose all of those as they all distort the market and make it less efficient. Price-controls have all sorts of second and third order effects that are never considered by those advocating for them.
- krastanov 7y ago
  Efficient markets are great for people that have the money to participate in the market. If you do not have resources, an efficient market will ensure you will have a very hard time gaining resources.
  - darawk 7y ago
    In what way do you think an efficient market prevents people from gaining resources?
    - krastanov 7y ago
      How do you participate in the market without initial resources? Even if you have some minimal initial resource, how do you act efficiently in the market when you do not have the resources to buy the information that lets you act efficiently? If there is no regulation, rather just the most efficient trading, how do you compete with the gigantic entities that hoard inelastic goods to manipulate the price. It takes a lot of capital to efficiently counter their maneuvers. The problem is that 1) you are not in the market to exploit arbitrage opportunities, you are there to buy something you need 2) you do not have the capital to exploit that type of arbitrage opportunities and remain solvent. You know that silly saying "The market can stay irrational longer than you can stay solvent"? What is a rational market for a large entity with capital is very different from what is rational for a small entity with little resources.

colechristensen 7y ago

I am of the strong opinion that governments should have a finger on the scale to a much higher degree than rent control, with the desired effect of making owning real estate somebody else uses a minimally attractive investment. Control the rent by controlling the price of real estate by removing investors as competition for the purchase of land and buildings for home and business.

munk-a 7y ago
I think this general sort of approach is highly flawed due to the difficulty you'd find in allocating and expecting new property demand. I, personally, would love to see a working command economy and look forward to the day we can actually accomplish one though technology... but we're not quite there yet. In the mean time... I have difficulty pointing out specific reasons this always fails due to the weird involvement of racism in public housing in the US tainting my primary experience of such a system, but I believe it does have flaws even if implemented in a manner that isn't intentionally trying to ghettoize portions of a city.
- colechristensen 7y ago
  There really isn't any difficulty in allocating resources. I'm talking about eliminating real estate investors, not property ownership by end-users. There would still be a fine market economy but it would be much less common for someone to be buying real estate they weren't intending to use themselves. Command economies are ridiculous because human nature. They aren't stable because they involve a small number of people being in control of resource allocation and the benefits for "cheating" and making those decisions to benefit yourself and your goals make it far too likely that the power will be abused.
fzeroracer 7y ago
As a thought exercise, free markets exist on the basis of everyone behaving like a rational actor, working in their own self-interest which results in the market becoming more and more optimized. Mind you, I'm talking pure free market theory. This means if you were to consider renters, land owners etc within a free market, the rational option is to take actions which improve their lot. This may be short term solutions, but it's the result of people behaving in their own rational self-interest. If a city has 50+% of people renting; then they will take action to lower the costs of renting. Similarly, if a city has a large amount of people owning property, then people will take action to increase the value of their property. The only action to stop this would be...government intervention. Which means then the government is responsible for regulating the market against the whims of the people it's supposed to represent. In the case of renting and home ownership, I don't think a free market can ever truly exist.

deleted 7y ago

[deleted]

dfeojm-zlib 7y ago

Rent controls work if and only if there's sufficient authority and incentives to motivate developers to grow housing inventory vertically (skyscrapers) and/or horizontally (sprawl + public transport) just enough to not have a glut while aiming to approximate the desired rent-controlled price(s) such that there's less arbitrage, gaming, property owner loss and/or exploitation. (In effect, rent-controlling with structural market policies, while providing rent controls as a secondary guaranty layer to protect renters, especially vulnerable populations.) Housing is one of the more inelastic markets because everyone needs it, and so even minor constraints in supply can rapidly lead to price spikes.

malandrew 7y ago
If there were sufficient authority and incentives to motivate developers to grow housing inventory, rent control wouldn't be advocated for in the first place.
- sitkack 7y ago
  Are you sure the choice is binary?
- ngngngng 7y ago
  So rent control is cheating? Let's keep prices low without allowing supply to grow to meet demand by zoning for larger buildings and cheaper dwellings.
- munk-a 7y ago
  Why should developers be incentivized to grow housing inventory over independent owners? Large scale developers already have quite a lot of assets to distribute as needed - I do agree that onerous construction impediments should be lowered (those sourced from NIMBYism - not general sustainability and environment concerned) and those impediments - or outright blocks - are responsible for a lot of the housing crises we can observe today.

TomMckenny 7y ago

The cities listed as having rent control are Berlin, Barcelona, Amsterdam and Paris. And you can add New York. When one thinks of failed cities, these do not come to mind. In fact, one could do worse than being more like them. And clearly rent control does not kill a city or economy or quality of life. And actually, a list of the most miserable cities is going to be overwhelmingly rent control free. Edit: for clarification, I am claiming there is _no_ evidence for a causal relationship between the presence or absence of rent control. Any inferred relationship is entirely conjectural and completely unsupported by evidence: cities obviously prosper perfectly well with rent control.

kahnjw 7y ago
You're suggesting there is some causal relation here that I'm not sure exists. Desirable cities have housing crises. Those cities implement policies to attempt to abate these crises. Ironically, theory says that restrictions like this make the crises worse: what incentive does it give renters except to hold their leases, thereby further restricting supply? That theory seems to hold up in a most cities, see SF, LA, London, NY etc. The introduction of rent control did nothing but to reduce housing availability and increase prices.
- TomMckenny 7y ago
  On the contrary, I claim there is no causal relationship. In particular, no actual evidence that it hurts a city. For example: on what evidence would we say NYC was hurt by rent control? Rent control started in the 1920s and was quite strong for decades, yet NYC continued to out grow dozens of potential competitor cities without it. Therefore at worst, rent control had no measurable effect on growth.
  - pzone 7y ago
    Here is a relatively famous study on rent control in Cambridge, Massachusetts. It identifies billions of dollars that resulted from the end of rent control in 1994, controlling for other economic trends. https://www.nber.org/digest/oct12/w18125.html https://www.nber.org/digest/oct12/w18125.html Although the year 1994 in a city a few miles away isn't exactly the same as New York, it seems far fetched to argue we wouldn't observe the same thing if we ended rent control here today.

gpm 7y ago

As someone who just moved to the bay area for the summer, I think rent control has worked pretty well, I've met multiple Uber drivers who would have had their lives upturned due to rising rents if not for rent control. The don't build tall building policies however...

d1zzy 7y ago

Never say never. This type of policies depend on many factors and while they may not work in some circumstance (time and place) they can be more effective in others. The problem is recognizing when that is AND re-evaluating the situation. The latter I feel is almost never done. For regulations like this it's important to put in the law text that requires a full re-evaluation of its efficacy and roll back when there are more drawbacks than benefits, just because the policy worked at one time it doesn't mean it will continue to be effective forever.

drtillberg 7y ago

It's a problem caused by 20 years of monetary stimulus and 40 years of complete freedom by central banks and governments to manage the money supply. Monetary policy has bid up leveraged assets like real estate many times over. Supply follows money, not people, and money has been concentrated in the hands of fewer people. Any intelligent conversation about this needs to include monetary policy. When people live in little piggy banks....

bhangi 7y ago
I'm not sure why you're downvoted, but I think that this nails the biggest reason for runaway inflation in housing prices. When money supply is cheap, asset prices will be bid up. The only people who can afford the assets and profit from further increases in their prices are those with the means... in other words, the rich get richer while others are left behind.
- neilwilson 7y ago
  It's downvoted because it puts the cart before the horse. Monetary policy intervention interferes with the market by forcing interbank interest rates to be higher than they would be in a free market. As any banker will tell you the price of interbank reserves in a free market is zero - as there are more than are required to clear the banking system. In a free market asset prices are naturally determined by the last creditworthy person prepared to pay the current price of money who visits a bank. Which will be higher than zero because ordinary people have no access to the interbank, and therefore the bank can put their risk and cost mark up on the price of money. You can hardly argue against rent controls but for interest rate controls. Why favour bankers over property occupiers?
  - drtillberg 7y ago
    Oh, a simple misunderstanding! I was arguing against the central bank controls on interest rates that have so distorted to the property market. Glad we cleared that up! In fact, my post said nothing about interest rates currently being set on a free-market basis, because the whole point was that central bank interventions are distorting and setting those rates in a way that generates huge inflation in the property markets that is then treated as insignificant for purposes of calculating inflation statistics. Property inflation --> Rent inflation. Concentration of wealth + Rent inflation --> Rent control | Homelessness.

nisten 7y ago

I can't comment on whether it works or not because most of the article is paywalled for me, but what I can comment on is on a logical observation of the free market. It is not free, it's expensive to be poor. It's always cheaper to be an investor, your taxes get a lot lower due to better access of off-shore services you get. The less rich you are the more expensive your financial overhead fees get. Thus there is no level playing field. In a basic free market you only need to enforce 2 rules. No fraud, and no monopoly. Instead what you see in many big cities is sketchy capital flying in and a virtual monopoly dominated by Airbnb and their fleet of landlord contractors causing an artificial shortage that results in over half the units being empty by midweek. If the competition was level then the rental prices and even property prices would be actually be reasonably matching the average incomes of the local population. This means that rent control is merely a bandaid measure that should be removed once we ensure that everyone in the market is actually paying their fair share. Given the current status quo I personally think it's better to have rent control than not to have it, even as a just a temporary patch on this problem; but by no means do I think it will solve the problem for good.

reillyse 7y ago

Taken with a grain of salt. Supporting free trade is literally one of the founding reasons for this publication. From wikipedia "The Economist was founded by the British businessman and banker James Wilson in 1843, to advance the repeal of the Corn Laws, a system of import tariffs.[17] A prospectus for the "newspaper" from 5 August 1843 enumerated thirteen areas of coverage that its editors wanted the publication to focus on:[18] Original leading articles, in which free-trade principles will be most rigidly applied to all the important questions of the day."

ChickeNES 7y ago
Why would anyone be opposed to free trade in this day and age?
- krastanov 7y ago
  I think the words "free trade" are a bit overloaded, at least in the way OP used them. I am very much a globalist and think free trade between countries is very important. I am also very much against unregulated markets (which I assume is what OP meant by "free trade", i.e. free trade / unregulated market on the scale of a city and its housing market).
- dredmorbius 7y ago
  I'd strongly recommend Ha-Joon Chang's Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism: Chang argued uncomfortable truth of capitalism and criticizes globalization represented by the book "The Lexus and the Olive Tree" in the first chapter. He argued that there are errors in theories regarded as established theory related to economic development and refuted them with economic theory, and historical and current data. In the later chapter, Chang claimed that "Market and democracy clash at the fundamental level." In epilogue, he wrote about Brazil in 2037 that faced gloomy future as a consequence of reckless beliefs in neo-liberalism policies. Finally, he made the case for new strategies for a more prosperous world that may appall the 'Bad Samaritans'. https://en.wikipedia.org/wiki/Bad_Samaritans:_The_Myth_of_Free_Trade_and_the_Secret_History_of_Capitalism https://en.wikipedia.org/wiki/Bad_Samaritans:_The_Myth_of_Fr... An interesting digression of views is evident in a dispute between publishers of the English an American editions of Chambers Encyclopaedia: Free Trade (American Edition), 'a dogma of modern growth, industriously taught by British manufacturers and their commercial agents. For many years certain political economists have laboured to establish this theory upon a reliable basis, and have asserted that the doctrine represents an important truth; but no nation has attained substantial prosperity except by protection to native industry, whether avowed or disavowed. The doctrine had no foothold in the policy of any nation, and had no legislative birth until put forth by Sir R. Peel in 1846. While it was in the interest of Great Britain to protect her industry, she imposed sufficient duties; and when, by this means, her producers of wealth became strong, and able to compete with those of other countries, protection yielded to reciprocity; and even at the present time, the nations most clamorous for free trade rely upon it in theory only, reciprocity in fact, and protection in principle. Even the most strenuous advocates of the theory dare not put it to the test of experience in its fullness. The teachers, therefore, remain self-deceived. The cloistered sophists of their schools, and the propagandists of free-trade, are doubtless as learned as the sophists of any age, and practically as useless. Free-trade expressions need Americanising, as they are utterly hostile to our prosperity, and subversive of scientific truth. Whenever an advocate of this dogma, schooled in their errors, has found devolving upon himself the responsibility of dealing with practical questions, he finds their supposed cardinal truths as groundless as the mythical Arcadias and Utopias of romance. The sophistries of free trade are put forth to lull the suspicions of the deluded purveyors to the wealth of England, and are advocated most strenuously by agents of British manufacturing houses and foreign residents in our cities, whose chief aim is the accumulation of wealth by extensive sales of foreign products, regardless of the injury they may inflict on American interests.' With a great deal more on the same purpose --- an entire perversion of the original. https://old.reddit.com/r/dredmorbius/comments/4xe2k1/chambers_encyclopaedia_editorial_statement/ https://old.reddit.com/r/dredmorbius/comments/4xe2k1/chamber...

xkgt 7y ago

Free market works only as long as both parties have the freedom to bail out. In case of essential commodities like housing or healthcare, this isn't the case. Even if a deal is beyond your budget, you can't turn it down and live in the streets. The other option to live further away has upper bounds in terms of practicality. And this power imbalance, creates a reinforcement loop which would spiral out of control without any external corrective measures like Government interference or workforce/business exodus.

pzone 7y ago
If this is true, then what about clothing? You can't go around unclothed, you always have to pick some sort of clothing to wear. Does this mean clothing manufacturers have some sort of special power over you, and must be regulated by the government? Just like picking what clothes to wear, you can pick your apartment, pick how much and what quality of medical care to receive, and this is enough to ensure a reasonably well functioning and competitive market without special rules. These markets aren't that special or different.
- internet_user 7y ago
  Land markets are very unique. Location, Location, Location. Unlike Fruit of the Loom underwear, you can't get 12-pack of NYC or Paris next day. A land value tax is does not cause economic inefficiency, and it tends to reduce inequality. https://www.economist.com/free-exchange/2015/04/01/why-henry-george-had-a-point https://www.economist.com/free-exchange/2015/04/01/why-henry...
  - pzone 7y ago
    While that is true, it is a separate issue than what GP raised. In fact, the point you raises goes in the opposite direction - it makes rent control far worse and more damaging! Locking in pre-existing claims to land (renters being allowed to stay as long as they want at cheap prices) and restrictive zoning laws BOTH serve to constrict the housing supply. Because land is already a finite resource, any restriction on how many housing units per parcel of land can be built is an even more harmful policy.

neonate 7y ago

http://archive.is/unc4f http://archive.is/unc4f

bassman9000 7y ago

Thomas Sowell on rent control https://youtu.be/dnj2WRIG11U https://youtu.be/dnj2WRIG11U Edit: and more from Stanford https://www.brookings.edu/research/what-does-economic-evidence-tell-us-about-the-effects-of-rent-control/ https://www.brookings.edu/research/what-does-economic-eviden... . Taking all of these points together, it appears rent control has actually contributed to the gentrification of San Francisco, the exact opposite of the policy’s intended goal. Indeed, by simultaneously bringing in higher income residents and preventing displacement of minorities, rent control has contributed to widening income inequality of the city.