7 ms·

> Why does rent control deter creation of new housing? If you have a lot of money and you want to build/buy a rental property, would you do it in a) a growing

by aianus 7y ago

> Why does rent control deter creation of new housing? If you have a lot of money and you want to build/buy a rental property, would you do it in a) a growing city with no rent control where your discounted future cash flows are unbounded or b) a city where there is a law placing a ceiling on your returns. All else being equal, you are going to choose the city without rent control to build your new housing units in (or invest in something other than real estate altogether), thus illustrating how rent control disincentives new investment in housing, and specifically low-income rental housing.

cryptoz 7y ago
I think your illustration has failed, though, because I would very much choose b). I consider a) as an evil in the world and would avoid participating in that if at all possible. b) sounds like a really good choice for long-term investment in in sustainable society. > All else being equal Okay but all else is not equal, and in the real world, it is never equal. These thought experiments do nothing to improve conditions in the real world, since they are based on flawed models of how people behave.
- aianus 7y ago
  > Okay but all else is not equal, and in the real world, it is never equal. These thought experiments do nothing to improve conditions in the real world, since they are based on flawed models of how people behave. By that logic, nothing affects anything else and we should all give up trying to think or plan.
  - cryptoz 7y ago
    I don't agree. We know that people are not 'rational actors' that maximize personal profit at every turn, and we should not base our economics around that known false idea. I think it is wise to produce better models with new information - not to ignore everything or to knowingly use false models. People do not - and should not - act according to those 'rational' ideas of maximum profit.
0xB31B1B 7y ago
The problem is that this is well a well studied problem and your first principles approach to it gives us the wrong results. Rent control policies like this one (only works on buildings 15 years old or older) do not impact new housing starts.

by aianus 7y ago

cryptoz 7y ago

I think your illustration has failed, though, because I would very much choose b). I consider a) as an evil in the world and would avoid participating in that if at all possible. b) sounds like a really good choice for long-term investment in in sustainable society. > All else being equal Okay but all else is not equal, and in the real world, it is never equal. These thought experiments do nothing to improve conditions in the real world, since they are based on flawed models of how people behave.

aianus 7y ago
> Okay but all else is not equal, and in the real world, it is never equal. These thought experiments do nothing to improve conditions in the real world, since they are based on flawed models of how people behave. By that logic, nothing affects anything else and we should all give up trying to think or plan.
- cryptoz 7y ago
  I don't agree. We know that people are not 'rational actors' that maximize personal profit at every turn, and we should not base our economics around that known false idea. I think it is wise to produce better models with new information - not to ignore everything or to knowingly use false models. People do not - and should not - act according to those 'rational' ideas of maximum profit.

0xB31B1B 7y ago

The problem is that this is well a well studied problem and your first principles approach to it gives us the wrong results. Rent control policies like this one (only works on buildings 15 years old or older) do not impact new housing starts.