3 ms·
> The big loss with rent control is the disincentive for developers to create new apartments Rent control does not prevent developers from building new constru
by speedplane 7y ago
> The big loss with rent control is the disincentive for developers to create new apartments
Rent control does not prevent developers from building new construction, in fact it may promote new developments. Rent control reduces the cost of housing for a select few people who haven't moved in a while, which artificially raises the prices for newer tenants that just moved into a neighborhood. Higher prices for new tenants make developing new housing more attractive, not less.
- imtringued 7y ago>Higher prices for new tenants make developing new housing more attractive, not less. I think you have switched cause and effect. Developers have to charge higher prices because they have to subsidize rent controlled units. Without rent control you may get away with charging $1000 per month to cover your costs and then slowly increasing prices as inflation picks up over the years. If you expect 3% inflation but rent control only allows a 1% increase then only charging $1000 will result in a net loss over time so you will have to adjust the rent upward. Assuming a tenant in a rent controlled unit stays for 20 years then the land lord has to charge the tenant $1400 from day one.
- speedplane 7y ago>> Higher prices for new tenants make developing new housing more attractive, not less. > Developers have to charge higher prices because they have to subsidize rent controlled units. I don't think these two points are contradictory. Yes, rent control increases housing prices on newer units. However, higher prices on newer units provides incentive for developers to build new construction rather than squeezing everything they can from existing ones.