13 ms·

> Landlords are very reluctant to lower rents, because with the statewide rent control that limits increases to 5% a year, we're incentivized to keep the rents

> Landlords are very reluctant to lower rents, because with the statewide rent control that limits increases to 5% a year, we're incentivized to keep the rents high and give months of free rent, just so our base rate doesn't drop. God what a short-sighted policy. Not that I expect rent control to go well but that's nuts.

rrrrrrrrrrrryan 6y ago
There's a reason rent-control is almost universally despised among economists. That said, of all the rent-control policies I've seen, I think the least-bad is what they've been using in Spain: no rent increases for 5 years after move-in, then increases are only allowed every 3 years after that. They've implemented a time-based stabilizing mechanism, instead of an arbitrary percentage-based cap. Moving is a huge cost for a tenant, so if a landlord raises rents every year, expecting people to be able to move every year to a fairly-priced place is insanity. But, I do think most people can handle a move every 5 years to a cheaper neighborhood if they need to.
jedberg 6y ago
Rent control has a lot of unintended consequences. It is supposed to be a short term band-aid for bad zoning policies, but the zoning policies actually have to be fixed if you want to remove the band-aid.
- sjg007 6y ago
  I imagine there will be lawsuits on effective rent vs published rent. Imagine paying an official rent of $2400 but you get an extra month free for every rent payment. Your effective rent is then $1200. These types of teasers aren't within the spirit of the law. In fact, maybe they are already prohibited in the statute.
  - jedberg 6y ago
    The law specifically excludes discounts in fact: " In determining the lowest gross rental amount pursuant to this section, any rent discounts, incentives, concessions, or credits offered by the owner of such unit of residential real property and accepted by the tenant shall be excluded. " Civil code section 1947.12.
    - sjg007 6y ago
      Seems like a loophole ripe for abuse.
      - 0xffff2 6y ago
        Just like everything else, it's a two way conversation. The discounts have to happen with the tenant's knowledge and agreement. If you don't like it don't rent from a landlord who plays those games. If every landlord is playing extreme games with discounts to game the rent control law, it only points to the deeper problems that we all know exist but refuse to fix.
        sjg007 6y ago
        I'll rent to you at $5000 a month with a $4k discount month to month. That discount is renewable solely at managements discretion after 12 months. Seems egregious.
        0xffff2 6y ago
        Yeah, and if someone made me that offer on my current ($2k/month) apartment, I would turn it down despite it being a 50% discount because I don't want the uncertainty of having to move in a year. This is not a problem if both parties know up front. The only way it becomes a problem is if I think I'm renting an apartment for $1k/month and then a year later my landlord says "Oh, actually your rent was $5000/month but you had the $4000/month move-in discount for the first year, your rent is now $5250/month".
        sjg007 6y ago
        Right but when the market becomes red hot again why would they not? I think this will only impact units that fall under rent control more generally though.
      - jedberg 6y ago
        It's almost as if the law was amended by real estate lobbyists...
- conanbatt 6y ago
  I'm willing to bet you more than a beer that a large share of people under rent-control are high earners.
  - chrischen 6y ago
    Rent control is trumpeted as some sort of protection for low-income people, but it actually has no such provisions that make it available to, or targets such people. The only beneficiaries of rent-control are people who happen to be incumbent residents.
    - hkt 6y ago
      Much if its value is in protecting existing communities who would be displaced by rising rents, so yeah, it favours incumbents.
      - chrischen 6y ago
        I think existing communities is interchangeable with incumbent residents. There are probably better ways to protect mass displacement of low-income residents since rent control only applies to certain really old buildings. Preserving the community in itself is not a bad thing to do but a lot of these policies have also been blocking the building of higher density housing, which could satisfy everyone (keep old residents AND let in new residents).
    - jonahbenton 6y ago
      ...who are low/fixed income at the time. "Affordable housing" is a completely separate issue.
    - imtringued 6y ago
      Also incumbent landlords who are sitting on paid off properties. A landlord with an old building has less vacancies if he doesn't have to compete with new construction.
      - 6y ago
- qqqwerty 6y ago
  In defense of rent control, it provides a stabilizing force during a downturn. How many folks who live in an apartment that has been under rent control for 10+ years are packing up and moving into their parents basement right now? My guess is very few. It certainly has its issues, but there are much worse market distorting policies that I would like to see be fixed before rent control gets put on the chopping block.
  - jonahbenton 6y ago
    Rent control in NYC also enormously important for elderly population, which has been systematically exploited by owners for centuries. It is absolutely not in owner interests. But cities by and large have been built in accordance with owner interests.
  - landryraccoon 6y ago
    I’m not sure this is a good argument. What landlords would try to raise rents or evict aggressively during a recession? Rent control prevents rents from aggressively dropping because landlords know the rents can’t be increased later. This is during a time when rents really need to go down.
    - Psyonic 6y ago
      Not the OP, but I think his point was people aren't ending their lease and moving home til covid is over, because if they did, they wouldn't be able to get that low of rent again.
  - nickik 6y ago
    It helps the people in the apparent and hurts everybody else. Doesn't really change in a recession.
julianeon 6y ago
It seems to work alright to me. We'll see where this takes us, but obviously if the population is dropping by 20% a year, keeping the theoretical option to charge a rent of 4k when the actual value is 2k won't matter. Also, I'd like to add that landlords are incentivized to charge high rents anyway. Even without rent control there's not going to be $800 rents in San Francisco anytime soon, sorry. This is just a holding pattern, right now. There's a slim chance that things could go back to normal, say with a quickly developed vaccine through decisive national leadership, and a lot of luck. In that case, those prices will look sensible again. I think the odds of that are extremely low... but they're not 0%. Probably, though, prices are going to crash. Some landlords will accept the inevitable and start charging less to rent out their rooms; if things are really caving in as people expect, landlords may be reluctant, but if it's that or lose money on empty rooms, they'll lower prices. And if things get that bad, then landlords will be lowering prices. Think of all the AirBnB hosts making 0$, all the landlords with mortgages depending on some kind of rent to meet their bills. They'll lead the way, and others will follow, just to keep up.
- claudeganon 6y ago
  I think we could go through weird waves of vacant, financialization before rents crash though. People parking cash in real estate that’s risky elsewhere.
  - paulcnichols 6y ago
    Very insightful. Parking money in Bay Area real estate still seems like a good idea.
    - godzillabrennus 6y ago
      Assets in general are a good idea when a currency is being devalued. Midwest real estate I’ve acquired offers cash flow you can’t find on the coasts but no hope of appreciation. To each their own.
triceratops 6y ago
"Rent control" has existed for nearly 50 years for property owners in California. It's called Prop 13. The current housing mess is a direct consequence of it
- dietr1ch 6y ago
  Oh, so if you implement rent control on some irrelevant city it'll have the same effect than on the Bay Area? Forgetting about all the high paying jobs around together with the restrictions for building sounds too convenient to blame it on rent control.
low_key 6y ago
I just negotiated an extension to a lease in Boston. The landlord eventually conceded 2 free months of rent on an extension of less than a year, but absolutely refused to budge at all on the monthly rent amount. Their adamant defense that the unit was already at "market price" was just such absolute bullshit that I nearly moved just on principle. Lucky for them, I hate moving even more than I hate the landlord. The average monthly price on my extension is about 11% below my average monthly price on the old lease.

rrrrrrrrrrrryan 6y ago

There's a reason rent-control is almost universally despised among economists. That said, of all the rent-control policies I've seen, I think the least-bad is what they've been using in Spain: no rent increases for 5 years after move-in, then increases are only allowed every 3 years after that. They've implemented a time-based stabilizing mechanism, instead of an arbitrary percentage-based cap. Moving is a huge cost for a tenant, so if a landlord raises rents every year, expecting people to be able to move every year to a fairly-priced place is insanity. But, I do think most people can handle a move every 5 years to a cheaper neighborhood if they need to.

jedberg 6y ago

Rent control has a lot of unintended consequences. It is supposed to be a short term band-aid for bad zoning policies, but the zoning policies actually have to be fixed if you want to remove the band-aid.

sjg007 6y ago
I imagine there will be lawsuits on effective rent vs published rent. Imagine paying an official rent of $2400 but you get an extra month free for every rent payment. Your effective rent is then $1200. These types of teasers aren't within the spirit of the law. In fact, maybe they are already prohibited in the statute.
- jedberg 6y ago
  The law specifically excludes discounts in fact: " In determining the lowest gross rental amount pursuant to this section, any rent discounts, incentives, concessions, or credits offered by the owner of such unit of residential real property and accepted by the tenant shall be excluded. " Civil code section 1947.12.
  - sjg007 6y ago
    Seems like a loophole ripe for abuse.
    - 0xffff2 6y ago
      Just like everything else, it's a two way conversation. The discounts have to happen with the tenant's knowledge and agreement. If you don't like it don't rent from a landlord who plays those games. If every landlord is playing extreme games with discounts to game the rent control law, it only points to the deeper problems that we all know exist but refuse to fix.
      - sjg007 6y ago
        I'll rent to you at $5000 a month with a $4k discount month to month. That discount is renewable solely at managements discretion after 12 months. Seems egregious.
        0xffff2 6y ago
        Yeah, and if someone made me that offer on my current ($2k/month) apartment, I would turn it down despite it being a 50% discount because I don't want the uncertainty of having to move in a year. This is not a problem if both parties know up front. The only way it becomes a problem is if I think I'm renting an apartment for $1k/month and then a year later my landlord says "Oh, actually your rent was $5000/month but you had the $4000/month move-in discount for the first year, your rent is now $5250/month".
        sjg007 6y ago
        Right but when the market becomes red hot again why would they not? I think this will only impact units that fall under rent control more generally though.
    - jedberg 6y ago
      It's almost as if the law was amended by real estate lobbyists...
conanbatt 6y ago
I'm willing to bet you more than a beer that a large share of people under rent-control are high earners.
- chrischen 6y ago
  Rent control is trumpeted as some sort of protection for low-income people, but it actually has no such provisions that make it available to, or targets such people. The only beneficiaries of rent-control are people who happen to be incumbent residents.
  - hkt 6y ago
    Much if its value is in protecting existing communities who would be displaced by rising rents, so yeah, it favours incumbents.
    - chrischen 6y ago
      I think existing communities is interchangeable with incumbent residents. There are probably better ways to protect mass displacement of low-income residents since rent control only applies to certain really old buildings. Preserving the community in itself is not a bad thing to do but a lot of these policies have also been blocking the building of higher density housing, which could satisfy everyone (keep old residents AND let in new residents).
  - jonahbenton 6y ago
    ...who are low/fixed income at the time. "Affordable housing" is a completely separate issue.
  - imtringued 6y ago
    Also incumbent landlords who are sitting on paid off properties. A landlord with an old building has less vacancies if he doesn't have to compete with new construction.
    - 6y ago
qqqwerty 6y ago
In defense of rent control, it provides a stabilizing force during a downturn. How many folks who live in an apartment that has been under rent control for 10+ years are packing up and moving into their parents basement right now? My guess is very few. It certainly has its issues, but there are much worse market distorting policies that I would like to see be fixed before rent control gets put on the chopping block.
- jonahbenton 6y ago
  Rent control in NYC also enormously important for elderly population, which has been systematically exploited by owners for centuries. It is absolutely not in owner interests. But cities by and large have been built in accordance with owner interests.
- landryraccoon 6y ago
  I’m not sure this is a good argument. What landlords would try to raise rents or evict aggressively during a recession? Rent control prevents rents from aggressively dropping because landlords know the rents can’t be increased later. This is during a time when rents really need to go down.
  - Psyonic 6y ago
    Not the OP, but I think his point was people aren't ending their lease and moving home til covid is over, because if they did, they wouldn't be able to get that low of rent again.
- nickik 6y ago
  It helps the people in the apparent and hurts everybody else. Doesn't really change in a recession.

julianeon 6y ago

It seems to work alright to me. We'll see where this takes us, but obviously if the population is dropping by 20% a year, keeping the theoretical option to charge a rent of 4k when the actual value is 2k won't matter. Also, I'd like to add that landlords are incentivized to charge high rents anyway. Even without rent control there's not going to be $800 rents in San Francisco anytime soon, sorry. This is just a holding pattern, right now. There's a slim chance that things could go back to normal, say with a quickly developed vaccine through decisive national leadership, and a lot of luck. In that case, those prices will look sensible again. I think the odds of that are extremely low... but they're not 0%. Probably, though, prices are going to crash. Some landlords will accept the inevitable and start charging less to rent out their rooms; if things are really caving in as people expect, landlords may be reluctant, but if it's that or lose money on empty rooms, they'll lower prices. And if things get that bad, then landlords will be lowering prices. Think of all the AirBnB hosts making 0$, all the landlords with mortgages depending on some kind of rent to meet their bills. They'll lead the way, and others will follow, just to keep up.

claudeganon 6y ago
I think we could go through weird waves of vacant, financialization before rents crash though. People parking cash in real estate that’s risky elsewhere.
- paulcnichols 6y ago
  Very insightful. Parking money in Bay Area real estate still seems like a good idea.
  - godzillabrennus 6y ago
    Assets in general are a good idea when a currency is being devalued. Midwest real estate I’ve acquired offers cash flow you can’t find on the coasts but no hope of appreciation. To each their own.

triceratops 6y ago

"Rent control" has existed for nearly 50 years for property owners in California. It's called Prop 13. The current housing mess is a direct consequence of it

dietr1ch 6y ago
Oh, so if you implement rent control on some irrelevant city it'll have the same effect than on the Bay Area? Forgetting about all the high paying jobs around together with the restrictions for building sounds too convenient to blame it on rent control.

low_key 6y ago

I just negotiated an extension to a lease in Boston. The landlord eventually conceded 2 free months of rent on an extension of less than a year, but absolutely refused to budge at all on the monthly rent amount. Their adamant defense that the unit was already at "market price" was just such absolute bullshit that I nearly moved just on principle. Lucky for them, I hate moving even more than I hate the landlord. The average monthly price on my extension is about 11% below my average monthly price on the old lease.