5 ms·

So ... you are arguing rent control is good? Or that this isn't rent control? Or that some rent control is good, but more is really bad?

ac29 7y ago
The point was that this CA statewide bill is quite different from places like SF. New state law: 5% + inflation SF: 60% of inflation. This has has never been over 2.9% a year since the law changed in 1992 from a fixed 4% [0]. I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restriction, while limiting increases to significantly below inflation is not. [0] https://sfrb.org/sites/default/files/Document/Form/571%20Allowable%20Annual%20Increases%2019-20.pdf https://sfrb.org/sites/default/files/Document/Form/571%20All...
- adamsb6 7y ago
  What if the market clearing price increases at greater than 5% plus inflation? This isn’t a free lunch, the tradeoff of a price cap is under provision of a good.
  - namesbc 7y ago
    We currently have a drastic under provision of a good to the tune of 3.5 million homes in CA alone. This under provision is not because building new homes isn't profitable, it is because realtors, landlords and homeowners are actively blocking new supply in order to extract above market rents from desperate people. Adding a rent cap of MORE THAN DOUBLE inflation will have no affect on supply, it is ridiculously profitable to rent out your property right now. CA would have to do something like cap rents at less than $500 per bedroom before profit margins would affect supply.
    - jjav 7y ago
      > it is ridiculously profitable to rent out your property right now I'd be curious if you can share specific numbers on where this is true? Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance? A link to the MLS listing would be appreciated. Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out.
      - brohee 7y ago
        renting is profitable if you can rent for more than interest_on_mortgage+insurance+taxes+maintenance-raise_in_house_valuation no? If your formula was the one, renting would never make any sense...
        deleted 7y ago
        [deleted]
        moduspol 7y ago
        There's always risk your tenant could disappear, stop paying and lawyer up, and/or trash the place.
      - mattbreeden 7y ago
        > Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out. 'Maybe' in the case of buying a new property now to rent. But it's clearly the case for many or there wouldn't be places to rent.
      - hcknwscommenter 7y ago
        "Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance?" Anecdata for sure, but I know of more than a handful of landlords in SF that charge more rent (and get more rental income) than mortgage+insurance+taxes+maintenance. Moreover, that equation ignores the increase in value of the property. You are confusing cashflow with making money, which are two very different things. My current landlord just bought our entirely rent-controlled building three years ago. As part of the sale/marketing, gross income from the building was made available at a very granular level. It is certain that our landlord is losing money in terms of income-(mortgage+insurance+taxes+maintenance). However, it is equally certain that the landlord has profited greatly. First you have the fact that the building itself has increased in value by about 20% over the last three years. Accordingly, the landlord has made a profit in the low seven figures. Second, you have the straightline depreciation, which is a massive tax benefit if you have other appreciable income.
  - deleted 7y ago
    [deleted]
  - azernik 7y ago
    Market-wide price increases of 5%+inflation are rare; sustained market-wide price increases of 5%+inflation are very rare. This forces landlords to do two things: * When there is a sustained rise in fair market rent, they will need to implement that increase over time instead of falling behind, and then raising it all at once 5 years later when they realize they're leaving 20% on the table. This allows people being priced out advance warning. * When there is a spike in fair market rent, like the 8-10% spikes of '14-'15 in the Bay, they will need to spread that rise over multiple years. Since this doesn't affect the profits of new units brought onto the market in response to the demand spike, it should have minimal if any effect on supplier behavior. (And what happens when market clearing price does increase at 5%+inflation for years on end? Then housing will come to dominate the CPI, and the "inflation" term will more and more closely track housing prices.)
    - rdtwo 7y ago
      This will still affect new units as it changes the forecasted rates over the lifetime of the loan (usually 10 year balloon) so instead of being able to forecast market rate increases the max value is now 7%. And maybe less if all units aren’t filled right away and you miss a year of increases. It’s not a huge impact but it does put a cap on the upside profits against potential huge losses
      - deleted 7y ago
        [deleted]
      - azernik 7y ago
        > sustained market-wide price increases of 5%+inflation are very rare. No sane investor forecasts an increase in rent of over 5% over a decade. > if all units aren’t filled right away and you miss a year of increases If a unit isn't filled, then you don't miss out; when it is filled you can immediately charge market rates.
- macspoofing 7y ago
  It is still rent control. The problems you see will not be fixed by the law. >I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restrictio Based on what data? And no, it's not a 'sane' argument: 1) if 5% + inflation is above market rates then this rent control is either a no-op or detrimental because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes. 2) if it is below market rates, then it's just rent control and it comes with all the same baggage and detrimental effects we always see. Rent control does not work. I don't understand the appeal to continue experimenting.
  - eru 7y ago
    > [...] because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes. Relatively unlikely to have a big impact. Even without such a law they already have an incentive to raise rents as how as possible: profit. Mostly the law should be a no-op. I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily?
    - macspoofing 7y ago
      >Mostly the law should be a no-op. Mostly? Uh huh. Sorry - then why are we wasting time with this law in then? Because OP and supporters certainly don't think it's a no-op. California doesn't think it's a no-op. >Even without such a law they already have an incentive to raise rents as how as possible: profit. That is such a shallow, nonsensical argument. By your logic explain why Starbucks isn't charging $5000 for a coffee ... because after all: profit. I'm sure landlords would love to raise prices to astronomical levels. I'm sure tenants would love to live in the apartment for free. So tell me, why doesn't that happen? Why is it that prices in a market will tend to stable point? >I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily? They can. That's called a 'lease'. It's common.
      - 7y ago
rolltiide 7y ago
Why does someone have to be arguing anything? They wrote what happened and described it adequately with no disclaimers or partisan copy-pasta to assign favor to any mob.

ac29 7y ago

The point was that this CA statewide bill is quite different from places like SF. New state law: 5% + inflation SF: 60% of inflation. This has has never been over 2.9% a year since the law changed in 1992 from a fixed 4% [0]. I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restriction, while limiting increases to significantly below inflation is not. [0] https://sfrb.org/sites/default/files/Document/Form/571%20Allowable%20Annual%20Increases%2019-20.pdf https://sfrb.org/sites/default/files/Document/Form/571%20All...

adamsb6 7y ago
What if the market clearing price increases at greater than 5% plus inflation? This isn’t a free lunch, the tradeoff of a price cap is under provision of a good.
- namesbc 7y ago
  We currently have a drastic under provision of a good to the tune of 3.5 million homes in CA alone. This under provision is not because building new homes isn't profitable, it is because realtors, landlords and homeowners are actively blocking new supply in order to extract above market rents from desperate people. Adding a rent cap of MORE THAN DOUBLE inflation will have no affect on supply, it is ridiculously profitable to rent out your property right now. CA would have to do something like cap rents at less than $500 per bedroom before profit margins would affect supply.
  - jjav 7y ago
    > it is ridiculously profitable to rent out your property right now I'd be curious if you can share specific numbers on where this is true? Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance? A link to the MLS listing would be appreciated. Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out.
    - brohee 7y ago
      renting is profitable if you can rent for more than interest_on_mortgage+insurance+taxes+maintenance-raise_in_house_valuation no? If your formula was the one, renting would never make any sense...
      - deleted 7y ago
        [deleted]
      - moduspol 7y ago
        There's always risk your tenant could disappear, stop paying and lawyer up, and/or trash the place.
    - mattbreeden 7y ago
      > Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out. 'Maybe' in the case of buying a new property now to rent. But it's clearly the case for many or there wouldn't be places to rent.
    - hcknwscommenter 7y ago
      "Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance?" Anecdata for sure, but I know of more than a handful of landlords in SF that charge more rent (and get more rental income) than mortgage+insurance+taxes+maintenance. Moreover, that equation ignores the increase in value of the property. You are confusing cashflow with making money, which are two very different things. My current landlord just bought our entirely rent-controlled building three years ago. As part of the sale/marketing, gross income from the building was made available at a very granular level. It is certain that our landlord is losing money in terms of income-(mortgage+insurance+taxes+maintenance). However, it is equally certain that the landlord has profited greatly. First you have the fact that the building itself has increased in value by about 20% over the last three years. Accordingly, the landlord has made a profit in the low seven figures. Second, you have the straightline depreciation, which is a massive tax benefit if you have other appreciable income.
- deleted 7y ago
  [deleted]
- azernik 7y ago
  Market-wide price increases of 5%+inflation are rare; sustained market-wide price increases of 5%+inflation are very rare. This forces landlords to do two things: * When there is a sustained rise in fair market rent, they will need to implement that increase over time instead of falling behind, and then raising it all at once 5 years later when they realize they're leaving 20% on the table. This allows people being priced out advance warning. * When there is a spike in fair market rent, like the 8-10% spikes of '14-'15 in the Bay, they will need to spread that rise over multiple years. Since this doesn't affect the profits of new units brought onto the market in response to the demand spike, it should have minimal if any effect on supplier behavior. (And what happens when market clearing price does increase at 5%+inflation for years on end? Then housing will come to dominate the CPI, and the "inflation" term will more and more closely track housing prices.)
  - rdtwo 7y ago
    This will still affect new units as it changes the forecasted rates over the lifetime of the loan (usually 10 year balloon) so instead of being able to forecast market rate increases the max value is now 7%. And maybe less if all units aren’t filled right away and you miss a year of increases. It’s not a huge impact but it does put a cap on the upside profits against potential huge losses
    - deleted 7y ago
      [deleted]
    - azernik 7y ago
      > sustained market-wide price increases of 5%+inflation are very rare. No sane investor forecasts an increase in rent of over 5% over a decade. > if all units aren’t filled right away and you miss a year of increases If a unit isn't filled, then you don't miss out; when it is filled you can immediately charge market rates.
macspoofing 7y ago
It is still rent control. The problems you see will not be fixed by the law. >I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restrictio Based on what data? And no, it's not a 'sane' argument: 1) if 5% + inflation is above market rates then this rent control is either a no-op or detrimental because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes. 2) if it is below market rates, then it's just rent control and it comes with all the same baggage and detrimental effects we always see. Rent control does not work. I don't understand the appeal to continue experimenting.
- eru 7y ago
  > [...] because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes. Relatively unlikely to have a big impact. Even without such a law they already have an incentive to raise rents as how as possible: profit. Mostly the law should be a no-op. I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily?
  - macspoofing 7y ago
    >Mostly the law should be a no-op. Mostly? Uh huh. Sorry - then why are we wasting time with this law in then? Because OP and supporters certainly don't think it's a no-op. California doesn't think it's a no-op. >Even without such a law they already have an incentive to raise rents as how as possible: profit. That is such a shallow, nonsensical argument. By your logic explain why Starbucks isn't charging $5000 for a coffee ... because after all: profit. I'm sure landlords would love to raise prices to astronomical levels. I'm sure tenants would love to live in the apartment for free. So tell me, why doesn't that happen? Why is it that prices in a market will tend to stable point? >I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily? They can. That's called a 'lease'. It's common.
    - 7y ago

rolltiide 7y ago

Why does someone have to be arguing anything? They wrote what happened and described it adequately with no disclaimers or partisan copy-pasta to assign favor to any mob.