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HN: According to the simple laws of supply and demand, housing prices would go down if we just increased supply to meet demand. Also HN: These rent controls ar

HN: According to the simple laws of supply and demand, housing prices would go down if we just increased supply to meet demand. Also HN: These rent controls are just going to make the housing problem in this state even worse. I don't get it. If the situation were really as simple as the first statement implies, then if this particular law was really going to have a catastrophic effect on housing, that would just mean people would leave and demand would go down and prices would fall, right? Is it possible that California's housing problems are maybe a little more complex than a few out-of-context pull-quotes from Wealth of Nations would suggest?

quixoticelixer- 7y ago
Rent control decreases the supply of housing
- cryptoz 7y ago
  This phrase is repeated frequently throughout these comments but never with an explanation. I think the opposite of that phrase is true; that in these circumstances, rent control is part of what will enable an increase in the supply of housing. The inequality gap must be lessened for there to be sustainable growth in the housing construction market; this rent control is part of that.
  - kec 7y ago
    Rent control decreases the liquidity of the rental market because anyone currently renting is strongly incentivized to stay put in order to keep their low rate.
    - cryptoz 7y ago
      I still don't understand this. Most people are motivated by a lot more than the desire to pay less rent. Jobs change, people move, they go upward in their careers, etc. Is there any evidence to suggest that rent prices are actually "strong incentives" to not move? I think this isn't true. I think people are much more motivated by their social circles, their job prospects, upward social mobility by working hard, or starting a business, etc. There are so many factors that go into choosing where to live that I find it difficult to believe that simple rent control like this would "strongly incentivize" people at large to not move. Especially in California. Anecdotally, I have voluntarily left 5+ rent-controlled apartments without even a thought to them being rent controlled and my next place being unknown. It simply has not mattered, because the amount saved by rent is often far less important than the other aspects of life.
      - kec 7y ago
        Your experience may be exceptional. When money is tight, people make what can send to be strange decisions. Also anecdotally, I don’t know anyone in SF living in a tent controlled apartment whose name is actually on the lease, they’re all illegally subletting from the actual named tenant to keep the rate locked in.
        cryptoz 7y ago
        > because anyone currently renting Not everyone who is renting has tight money situation. Your complement states that everyone who is renting will have a tight money situation and then follow the 'strong incentives' that you have prescribed to them without knowing who they are. You don't know what incentivizes those people. It sure as heck isn't primarily saving on rent, especially in SF. > Also anecdotally, I don’t know anyone in SF living in a tent controlled apartment whose name is actually on the lease, they’re all illegally subletting from the actual named tenant to keep the rate locked in. Well that seems like an entirely separate issue. Go after the people doing illegal things that are hurting your rental market. Stop that activity from happening if it's illegal, don't use some existent, illegal activity to then set into stone why passing new laws is bad. That doesn't make any sense.
  - michaelkeenan 7y ago
    The NYT article we're all commenting on explains: "Studies in San Francisco and elsewhere show that price caps often prompt landlords to abandon the rental business by converting their units to owner-occupied homes." There's a literature on this; there's no need to speculate. Another thing worth checking is the IGM Economic Experts Panel, which covered rent control in 2012: http://www.igmchicago.org/surveys/rent-control http://www.igmchicago.org/surveys/rent-control
Litmus2336 7y ago
I think you're intentionally misrepresenting the opposing viewpoint. If rent control artificially reduces the price of housing, more people will want to live in CA. Less houses will be built, as less profit is being made. Therefore, prices will be lower for those already housed, yet more people will be unable to purchase a home. Of course the million dollar question is how many less units will be built if they're less profitable, and how many people will be enticed to move or stay in CA because of rent controls.
- thaumaturgy 7y ago
  > If rent control artificially reduces the price of housing, more people will want to live in CA. There were two other comments in this same subthread pointing out that people are in fact moving out of California. (One of them has been deleted.) It's almost as if f(california_net_migration) is multivariate. > Less houses will be built, as less profit is being made. Residential construction in California has been approximately steadily climbing since 2008 [1]. Even if I believed your premise -- which I don't -- reality disagrees with it. The conditions surrounding new residential construction are so much more complex than merely "omg rent control". A San Jose Mercury News article published last year discussed some of the influences in new residential construction: https://extras.mercurynews.com/blame/ https://extras.mercurynews.com/blame/ Strangely absent from that article though is that people don't want to just "live in California"; they want to live in the same places where everyone else is already living. There is plenty of affordable land in the central valley, in Kern County, and lots of other places with stagnant economies and depressing downtowns. But if you want to live in San Francisco, expect to pay a stupid amount of money for a vacant lot [2]. Again: this is not a situation that rent control is going to have any effect on whatsoever. > Therefore, prices will be lower for those already housed, yet more people will be unable to purchase a home. Funny, this sounds quite a bit like the situation that Proposition 13 created back in 1978 [3]. And yet, proposition 13 is rarely cited as a significant contributor to California's housing issues, especially by the "this is simple supply and demand" crowd. Personally, while I suspect proposition 13 has contributed, there are lots of other factors, including foreign investment [4]. But maybe we'll soon see just how much of an effect that particular factor has had in housing costs [5]. Sure though, rent control is gonna have a huge impact on California's housing prices. Totally. [1]: https://journal.firsttuesday.us/the-rising-trend-in-california-construction-starts/17939/ https://journal.firsttuesday.us/the-rising-trend-in-californ... [2]: https://sanfrancisco.cbslocal.com/2016/10/21/san-francisco-vacant-lots-millions/ https://sanfrancisco.cbslocal.com/2016/10/21/san-francisco-v... [3]: https://en.wikipedia.org/wiki/1978_California_Proposition_13 https://en.wikipedia.org/wiki/1978_California_Proposition_13 [4]: https://calmatters.org/housing/2018/03/data-dig-are-foreign-investors-driving-up-real-estate-in-your-california-neighborhood/ https://calmatters.org/housing/2018/03/data-dig-are-foreign-... [5]: https://www.cnbc.com/2019/07/17/foreign-purchases-of-american-homes-plunge-36percent-as-chinese-buyers-flee.html https://www.cnbc.com/2019/07/17/foreign-purchases-of-america...
maxk42 7y ago
https://lao.ca.gov/LAOEconTax/Article/Detail/265 https://lao.ca.gov/LAOEconTax/Article/Detail/265
deleted 7y ago
[deleted]
someguydave 7y ago
>Is it possible that California's housing problems are maybe a little more complex than a few out-of-context pull-quotes from Wealth of Nations would suggest? Yes, which is why a rent-control law is too simplistic to be a solution.

quixoticelixer- 7y ago

Rent control decreases the supply of housing

cryptoz 7y ago
This phrase is repeated frequently throughout these comments but never with an explanation. I think the opposite of that phrase is true; that in these circumstances, rent control is part of what will enable an increase in the supply of housing. The inequality gap must be lessened for there to be sustainable growth in the housing construction market; this rent control is part of that.
- kec 7y ago
  Rent control decreases the liquidity of the rental market because anyone currently renting is strongly incentivized to stay put in order to keep their low rate.
  - cryptoz 7y ago
    I still don't understand this. Most people are motivated by a lot more than the desire to pay less rent. Jobs change, people move, they go upward in their careers, etc. Is there any evidence to suggest that rent prices are actually "strong incentives" to not move? I think this isn't true. I think people are much more motivated by their social circles, their job prospects, upward social mobility by working hard, or starting a business, etc. There are so many factors that go into choosing where to live that I find it difficult to believe that simple rent control like this would "strongly incentivize" people at large to not move. Especially in California. Anecdotally, I have voluntarily left 5+ rent-controlled apartments without even a thought to them being rent controlled and my next place being unknown. It simply has not mattered, because the amount saved by rent is often far less important than the other aspects of life.
    - kec 7y ago
      Your experience may be exceptional. When money is tight, people make what can send to be strange decisions. Also anecdotally, I don’t know anyone in SF living in a tent controlled apartment whose name is actually on the lease, they’re all illegally subletting from the actual named tenant to keep the rate locked in.
      - cryptoz 7y ago
        > because anyone currently renting Not everyone who is renting has tight money situation. Your complement states that everyone who is renting will have a tight money situation and then follow the 'strong incentives' that you have prescribed to them without knowing who they are. You don't know what incentivizes those people. It sure as heck isn't primarily saving on rent, especially in SF. > Also anecdotally, I don’t know anyone in SF living in a tent controlled apartment whose name is actually on the lease, they’re all illegally subletting from the actual named tenant to keep the rate locked in. Well that seems like an entirely separate issue. Go after the people doing illegal things that are hurting your rental market. Stop that activity from happening if it's illegal, don't use some existent, illegal activity to then set into stone why passing new laws is bad. That doesn't make any sense.
- michaelkeenan 7y ago
  The NYT article we're all commenting on explains: "Studies in San Francisco and elsewhere show that price caps often prompt landlords to abandon the rental business by converting their units to owner-occupied homes." There's a literature on this; there's no need to speculate. Another thing worth checking is the IGM Economic Experts Panel, which covered rent control in 2012: http://www.igmchicago.org/surveys/rent-control http://www.igmchicago.org/surveys/rent-control

Litmus2336 7y ago

I think you're intentionally misrepresenting the opposing viewpoint. If rent control artificially reduces the price of housing, more people will want to live in CA. Less houses will be built, as less profit is being made. Therefore, prices will be lower for those already housed, yet more people will be unable to purchase a home. Of course the million dollar question is how many less units will be built if they're less profitable, and how many people will be enticed to move or stay in CA because of rent controls.

thaumaturgy 7y ago
> If rent control artificially reduces the price of housing, more people will want to live in CA. There were two other comments in this same subthread pointing out that people are in fact moving out of California. (One of them has been deleted.) It's almost as if f(california_net_migration) is multivariate. > Less houses will be built, as less profit is being made. Residential construction in California has been approximately steadily climbing since 2008 [1]. Even if I believed your premise -- which I don't -- reality disagrees with it. The conditions surrounding new residential construction are so much more complex than merely "omg rent control". A San Jose Mercury News article published last year discussed some of the influences in new residential construction: https://extras.mercurynews.com/blame/ https://extras.mercurynews.com/blame/ Strangely absent from that article though is that people don't want to just "live in California"; they want to live in the same places where everyone else is already living. There is plenty of affordable land in the central valley, in Kern County, and lots of other places with stagnant economies and depressing downtowns. But if you want to live in San Francisco, expect to pay a stupid amount of money for a vacant lot [2]. Again: this is not a situation that rent control is going to have any effect on whatsoever. > Therefore, prices will be lower for those already housed, yet more people will be unable to purchase a home. Funny, this sounds quite a bit like the situation that Proposition 13 created back in 1978 [3]. And yet, proposition 13 is rarely cited as a significant contributor to California's housing issues, especially by the "this is simple supply and demand" crowd. Personally, while I suspect proposition 13 has contributed, there are lots of other factors, including foreign investment [4]. But maybe we'll soon see just how much of an effect that particular factor has had in housing costs [5]. Sure though, rent control is gonna have a huge impact on California's housing prices. Totally. [1]: https://journal.firsttuesday.us/the-rising-trend-in-california-construction-starts/17939/ https://journal.firsttuesday.us/the-rising-trend-in-californ... [2]: https://sanfrancisco.cbslocal.com/2016/10/21/san-francisco-vacant-lots-millions/ https://sanfrancisco.cbslocal.com/2016/10/21/san-francisco-v... [3]: https://en.wikipedia.org/wiki/1978_California_Proposition_13 https://en.wikipedia.org/wiki/1978_California_Proposition_13 [4]: https://calmatters.org/housing/2018/03/data-dig-are-foreign-investors-driving-up-real-estate-in-your-california-neighborhood/ https://calmatters.org/housing/2018/03/data-dig-are-foreign-... [5]: https://www.cnbc.com/2019/07/17/foreign-purchases-of-american-homes-plunge-36percent-as-chinese-buyers-flee.html https://www.cnbc.com/2019/07/17/foreign-purchases-of-america...

maxk42 7y ago

https://lao.ca.gov/LAOEconTax/Article/Detail/265 https://lao.ca.gov/LAOEconTax/Article/Detail/265

deleted 7y ago

[deleted]

someguydave 7y ago

>Is it possible that California's housing problems are maybe a little more complex than a few out-of-context pull-quotes from Wealth of Nations would suggest? Yes, which is why a rent-control law is too simplistic to be a solution.