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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

by 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.
  - TomMckenny 7y ago
    It raised land prices by billions of dollars, it did not produce wealth or additional housing (as seen by a flat population growth). The economy did not leap forward and far from easing housing shortage, it simply raised the cost of existing stock. The only change was a spurt in home owner improvements likely financed by mortgages against increased valuation It is indeed a fine example of how eliminating rent control does not result in new housing. So yes, if you eliminate what rent control there is in NY (which is limited to old buildings), their value would sky rocket along with rental income and the incentive to replace them with larger buildings would disappear.
    - kahnjw 7y ago
      The point isn’t about the supply of new construction but rather about supply of open leases. Rent control incentivized renters to stay put thereby reducing supply for potential residents. Limiting supply increases prices which further incentivized renters to stay put. And on and on. Removing rent control hurts current renters in the short term. It also removes restrictions on supply that improve the overall health of the market over a longer time horizon.
      - TomMckenny 7y ago
        >Removing rent control hurts current renters in the short term. It also removes restrictions on supply that improve the overall health of the market over a longer time horizon. I'm just seeking proof of that. There are limitless alternative even contradictory theories. Why, other than matching preconceived world views, do we choose one over the other without evidence? In the Cambridge example 25 years have passed but there is, as you say, no additional housing and prices have risen further. Nor was there any burst of economic growth. In what way and to what end has the market become healthier? And if it does not increase supply of new construction then it is zero sum gain. It merely benefits one group, in this case landlords and new residents, over old residents and tenants generally. And the harm done is not temporary, the increased outlay in housing is permanent regardless of who is paying it. And wealth is transferred to unproductive literal rent seeking from productive activities such as consumption, employment and businesses (who now have bigger payrolls just to pass through employees to housing). And now, with transient population replacing a permanent one, interest in long term undertakings such as mass transit and community undertakings such as environment, homelessness or even economic stimulus also wane. The correct solution is to add more housing which evidently is unconnected to rent control. Certainly on existing units.
        kahnjw 7y ago
        There is ample research supporting the notion that rent control increases prices and gentrifies neighborhoods [1][2][3]... The reason I believe this is economics 101. People want simple solutions to difficult problems. If prices are too high, we create laws that keep them low (so simple!). Problem is that supply is finite, even with new units being constructed cities have been unable to keep up with the influx of new residents. In many cases this is due to other similar suffocating regulations around building height, density, inability to pay out current residents for new construction etc. When supply is sparse and prices are often 50% less than market rate for long term renters, you increase their incentive to stay. That further restricts supply and prices go up for anyone not under contract. If you have an alternative theory of how this would work, I'm curious about it. What are the dynamics, beyond "prices are cheaper"? How does rent control reduce or solve a housing crisis? >And if it does not increase supply of new construction then it is zero sum gain. That's a hard thing to prove but I'd wager that isn't the case. Playing forward the rent control dynamic, it's likely that landlords could extract more money per unit on average than they would have in a less supply restricted market. The housing market is far from perfectly competitive without rent control. Landlords have many tools at their disposal to jack up prices beyond what the fair market value is with and without rent control. If the turnover rate is lower, those tools become easier to use. There are fewer comps and almost zero competition. That leaves a wider lane for price gouging on everything from rent to parking to laundry. [1] 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... [2] http://freakonomics.com/podcast/rent-control/ http://freakonomics.com/podcast/rent-control/ [3] https://www.city-journal.org/html/does-rent-control-help-poor-12772.html https://www.city-journal.org/html/does-rent-control-help-poo...
omegaworks 7y ago
>Ironically, theory says that restrictions like this make the crises worse The economic theory alluded to doesn't take into account intangible factors like community cohesiveness, economic precarity and the effects of that on mental health. These things are real and have an impact on the wellbeing of residents. Housing security is the foundation on which an individual's ability to produce and prosper is based. Housing isn't a commodity to the people living in it and economic theory that reduces the complexities of housing to market-based supply and demand are intentionally selling a value system that prioritizes the transfer and accumulation of capital above all other needs.
- nerfhammer 7y ago
  supply is how much of a thing is available to be had; demand is how much people want that thing. If there isn't much of a thing and people want it a lot, it will be difficult to get. Acting offended at the reference to the existence of these variables does not eliminate their effects.
  - omegaworks 7y ago
    >Acting offended at the reference to the existence of these variables does not eliminate their effects. That you take my statement of fact as an expression of offense speaks to your limited understanding of the qualitative aspects of housing.

by kahnjw 7y ago

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.
- TomMckenny 7y ago
  It raised land prices by billions of dollars, it did not produce wealth or additional housing (as seen by a flat population growth). The economy did not leap forward and far from easing housing shortage, it simply raised the cost of existing stock. The only change was a spurt in home owner improvements likely financed by mortgages against increased valuation It is indeed a fine example of how eliminating rent control does not result in new housing. So yes, if you eliminate what rent control there is in NY (which is limited to old buildings), their value would sky rocket along with rental income and the incentive to replace them with larger buildings would disappear.
  - kahnjw 7y ago
    The point isn’t about the supply of new construction but rather about supply of open leases. Rent control incentivized renters to stay put thereby reducing supply for potential residents. Limiting supply increases prices which further incentivized renters to stay put. And on and on. Removing rent control hurts current renters in the short term. It also removes restrictions on supply that improve the overall health of the market over a longer time horizon.
    - TomMckenny 7y ago
      >Removing rent control hurts current renters in the short term. It also removes restrictions on supply that improve the overall health of the market over a longer time horizon. I'm just seeking proof of that. There are limitless alternative even contradictory theories. Why, other than matching preconceived world views, do we choose one over the other without evidence? In the Cambridge example 25 years have passed but there is, as you say, no additional housing and prices have risen further. Nor was there any burst of economic growth. In what way and to what end has the market become healthier? And if it does not increase supply of new construction then it is zero sum gain. It merely benefits one group, in this case landlords and new residents, over old residents and tenants generally. And the harm done is not temporary, the increased outlay in housing is permanent regardless of who is paying it. And wealth is transferred to unproductive literal rent seeking from productive activities such as consumption, employment and businesses (who now have bigger payrolls just to pass through employees to housing). And now, with transient population replacing a permanent one, interest in long term undertakings such as mass transit and community undertakings such as environment, homelessness or even economic stimulus also wane. The correct solution is to add more housing which evidently is unconnected to rent control. Certainly on existing units.
      - kahnjw 7y ago
        There is ample research supporting the notion that rent control increases prices and gentrifies neighborhoods [1][2][3]... The reason I believe this is economics 101. People want simple solutions to difficult problems. If prices are too high, we create laws that keep them low (so simple!). Problem is that supply is finite, even with new units being constructed cities have been unable to keep up with the influx of new residents. In many cases this is due to other similar suffocating regulations around building height, density, inability to pay out current residents for new construction etc. When supply is sparse and prices are often 50% less than market rate for long term renters, you increase their incentive to stay. That further restricts supply and prices go up for anyone not under contract. If you have an alternative theory of how this would work, I'm curious about it. What are the dynamics, beyond "prices are cheaper"? How does rent control reduce or solve a housing crisis? >And if it does not increase supply of new construction then it is zero sum gain. That's a hard thing to prove but I'd wager that isn't the case. Playing forward the rent control dynamic, it's likely that landlords could extract more money per unit on average than they would have in a less supply restricted market. The housing market is far from perfectly competitive without rent control. Landlords have many tools at their disposal to jack up prices beyond what the fair market value is with and without rent control. If the turnover rate is lower, those tools become easier to use. There are fewer comps and almost zero competition. That leaves a wider lane for price gouging on everything from rent to parking to laundry. [1] 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... [2] http://freakonomics.com/podcast/rent-control/ http://freakonomics.com/podcast/rent-control/ [3] https://www.city-journal.org/html/does-rent-control-help-poor-12772.html https://www.city-journal.org/html/does-rent-control-help-poo...

omegaworks 7y ago

>Ironically, theory says that restrictions like this make the crises worse The economic theory alluded to doesn't take into account intangible factors like community cohesiveness, economic precarity and the effects of that on mental health. These things are real and have an impact on the wellbeing of residents. Housing security is the foundation on which an individual's ability to produce and prosper is based. Housing isn't a commodity to the people living in it and economic theory that reduces the complexities of housing to market-based supply and demand are intentionally selling a value system that prioritizes the transfer and accumulation of capital above all other needs.

nerfhammer 7y ago
supply is how much of a thing is available to be had; demand is how much people want that thing. If there isn't much of a thing and people want it a lot, it will be difficult to get. Acting offended at the reference to the existence of these variables does not eliminate their effects.
- omegaworks 7y ago
  >Acting offended at the reference to the existence of these variables does not eliminate their effects. That you take my statement of fact as an expression of offense speaks to your limited understanding of the qualitative aspects of housing.