9 ms·

Rent control is keeping rents high in San Francisco

52 points by howlgarnish 6y ago

pmoriarty 6y ago
"A friend owns a three-unit building in San Francisco, occupying the top floor himself. The two tenants underneath have fled. One lost a job and the other kept the job, but decided to lose the California tax rates and mask/shutdown protocols. Both units are now vacant. "I asked how much rents have fallen and he responded with "30 percent." Why not rent the units out at the current market rate? "If you ever rent to someone in San Francisco," he replied, "you can never raise their rent more than about 2 percent per year after that. You're locked it at whatever rate you start with. So I am waiting until the shutdown ends, hoping that market rents will come back closer to what they were when I bought the building." Tax property more when it's vacant. Problem fixed.
- baron816 6y ago
  So if rents go down, even temporarily, you potentially get trapped underwater? Who would want to rent out apartments in that environment?
  - iandanforth 6y ago
    I'm not sure why there's an assumption that property owners should make money. If rents go up they make money and if they go down they lose money. That's the way the market is supposed to work.
    - SllX 6y ago
      Nah, it’s called the profit incentive and it is the bedrock of free enterprise. There are profits to be made even in a tough market, but at no time are people morally obligated to lose money just because losing money has become the norm, particularly with government restrictions that will make it more difficult to profit in the future. Fortunes don’t magically rise and fall with the “market”, the market is merely an abstraction that represents the multitude of transactional choices that anywhere from thousands to billions of people make on a day to day basis.
    - tylerhou 6y ago
      But if landlords make too little money, then there will be fewer landlords and more owner-occupied buildings. There will be less construction of rental properties. In the long term, economic theory predicts that such a supply shortage would increase rents, pricing out the poorest from being able to afford to live in that area. I am not arguing that we need landlords to make more money. But until leftists overthrow our current capitalist system, we do need to incentivize capital owners to invest in rental properties to increase the supply of rental properties (which should decrease the cost with all else equal). (That last sentence is positive and not normative.)
      - est31 6y ago
        Yes, shortages increase rents. Solution to that: allow people to develop. The fact that houses cost so much more than their construction cost is due to the fact that the government bans owners from building as many units as they want. Thus houses get artifically high prices in attractive areas because developers aren't allowed to meet the demand.
    - refurb 6y ago
      Sure, but if the gov’t caps the upside, the only fair thing is to cap the downside as well.
    - baron816 6y ago
      It’s not a problem if they lose money, but it is a problem if they have an expectation that they’ll lose money. Would you invest in anything that you’d expect to lose money on?
- TedShiller 6y ago
  Problem not fixed for the tenants. I know landlords of rent controlled units in SF, and believe me, those tenants are making a huge tradeoff. Yes the rent is low, but forget about ever really liking the place you spend your life in. There is zero incentive to upgrade anything ever. If your toilet is leaking it will be fixed. But get ready to live with 30 year old fixtures, cabinets, carpets, etc. So sure, rent is low and that’s great. But it doesn’t come free. It’s definitely a major sacrifice to be making as a tenant.
  - romwell 6y ago
    Yeah, not scared. Paying $3K/month for a matchbox is a major sacrifice, living with 30 year old cabinets is not.
    - rsj_hn 6y ago
      Rent control is why you have to pay 3K/month if you want to rent an apartment in San Francisco. Someone has to subsidize the cat lady living downstairs from you paying $800/month, and it's not the landlord - it's the new renter paying so much that's allowing her to pay so little.
      - jjoonathan 6y ago
        No, it's the enormous bargaining power of the landlord obtained through luck and lobbying. Nice try fobbing responsibility off on the cat lady, who is a comparatively minor cost of doing business.
        rsj_hn 6y ago
        Your argument doesn't even have internal logical consistency. You claim that landlords have "enormous bargaining power" and yet assume that they are too weak to charge higher rents based on the knowledge that their property is subject to rent control, so that they will be compensated for the risk of seeing a long term tenant. How can this be? Of course they will charge more in rent to adjust for the fact that a percentage of their tenants will be long term, and therefore short term tenants end up subsidizing long term tenants, exactly as I claimed. I get that you don't like landlords. But think this through and try to use reason rather than emotion.
- gdix 6y ago
  "If the old lady swallowed a fly. Just have her swallow a spider to catch the fly. Problem fixed."
- seibelj 6y ago
  “Just one more market-warping law! That will fix everything!”
- ww520 6y ago
  He'll just live in all 3 of them. Problem solved.
- SllX 6y ago
  The Board of Supervisors would love to impose some punitive tax increases to increase their slush fund and fritter it away on non-profits and unions. They just have to ask voters nicely first, and if tenants really are fleeing in numbers and new tenants can’t or won’t move in at these prices, that’s not looking more likely to happen. We could cut rent control, then landlords might want to rent out at a sane, well, saner, price again.
- tylerhou 6y ago
  > Tax property more when it's vacant. Problem fixed. Besides leaving properties vacant, rent control distorts the market in other ways. Because rent control also lowers the supply of rental unit, builders are more incentivized to sell to owner-occupants (since rent control depresses the value of rental units and thus a landlord's willingness to pay for a given unit). This increases the pool of housing available to richer people who can afford to buy a house, and decreases the pool of housing to people who can only afford the rent. Rent control also incentivizes renters to stay in their current housing, even when moving would be more efficient. (Consider someone living in an rent-controlled below-market rate apartment in San Francisco who gets a new job in the South Bay. They would like to move, but that would cost them extra in rent.) Even if you create policies that address these issues, there are likely more problems rent control creates. At what point do you give up and conclude that rent control is the issue?' If you want to control gentrification and enable people to stay in the neighborhoods that they grew up in, there ways to achieve that which don't have the negative side effects of market-wide rent control, like below-market-rate housing for people who make less than a certain amount or have lived in an area for a certain amount of time.
  - blackrock 6y ago
    This is a failure of the market. Since builders do not want to build, then the State needs to provide leadership, take control, establish eminent domain, and send in the army, to build government backed buildings. Then rent these out to people that need them, at affordable rates. The sacred market, is ultimately what is killing the quality of life in California.
    - anonuser123456 6y ago
      > Since builders do not want to build, Show me a builder that doesn’t want to build, and I’ll show you a city planning department that makes it impossible to do so. Builders are like any business. They want a margin. If they can’t make a margin, they don’t build. The only way government can build cheaper than a builder is to bypass its own regulatory morass. At which point one might ask, why not just let the builders operate on the same rule set.
- petre 6y ago
  Even better. Tax property based on yearly or quarterly mean rent price. This is what Switzerland does. The owner pays the same amount of tax if they keep the building vacant, rent it or live in it. So landlords are incentivized to rent vacant real estate and parking money into real estate and keeping it vacant might not be such a great idea.
- rsj_hn 6y ago
  That just means rents will go up even more to compensate landlords for the risk of having to pay higher taxes when the unit is vacant. Look, you are not going to cause rents to fall by adding more costs to landlords. To get rents to fall you will need to either build more units (increase supply) or make the city less desirable (decrease demand). For example, don't allow construction of office space in the city unless it's matched by construction of housing units.
  - pmoriarty 6y ago
    "That just means rents will go up even more to compensate landlords for the risk of having to pay higher taxes when the unit is vacant." Landlords will always charge the absolute highest rate that they can get away with, regardless of the taxes they have to pay. So raising taxes on vacant units will not raise rents even one single penny, as they'll already be as high as it's possible for landlords to charge and rent in that market (or, in the case of vacant units, even higher).
    - rsj_hn 6y ago
      That they can "get away" with means demand. By increasing demand for the unit, for example by putting it under rent control, then landlords will be able to charge more. You are assuming that demand for the unit with rent control is the same as demand for the unit without rent control. This is why you think the rent control is "free" -- that it doesn't raise prices for tenants even though they think it's very important and are willing to pay more for such units.
650REDHAIR 6y ago
Rent control is keeping renters safe in San Francisco.
- baron816 6y ago
  It’s also keeping a lot of homeless people out on the streets and forcing others to commute from Stockton. You’re either lucky on the inside, or completely shit out of luck.
  - lefrenchy 6y ago
    How Is rent control keeping them on the street? I don’t think that’s the case. Seems to me if they’re on the street it’s too late and we need social programs and safety nets to get them back on their feet.
    - temporalparts 6y ago
      > I don’t think that’s the case. What annoys me about this is that you can do the research instead of relying on your a priori thoughts, which are wrong. There are 5x more empty units than there are homeless people pre-pandemic [0] and it's the case for all cities with rent control because landlords don't want to be stuck with submarket rents for decades. [0] https://sf.curbed.com/2019/12/3/20993251/san-francisco-bay-area-vacant-homes-per-homeless-count https://sf.curbed.com/2019/12/3/20993251/san-francisco-bay-a...
      - freeone3000 6y ago
        Seems like Mao had some good ideas.
      - lefrenchy 6y ago
        It’s not that I haven’t researched it, i’m just not convinced rent control is the only problem. I think it’s also an amalgamation of other things like bad policy, urban centers with high demand for housing and tech companies changing the market, etc... I’m skeptical of anything arguing one thing is causing the problem.
jdkee 6y ago
“If you ever rent to someone in San Francisco,” he replied, “you can never raise their rent more than about 2 percent per year after that. You’re locked it at whatever rate you start with.” A perverse incentive system for landlords locked in by governmental rent stabilization strategy? Perhaps a during the great reset which could dramatically shift the out of whack supply-demand curves due to work from home, which allows Twitter or FB workers freedom from being tethered to the physical offices and certain neighborhoods would allow a freer market wherein lower income workers could contribute to a vibrant streetscale of shops and restaurants to serve customers all along the economic stratum. Behold better neighborhoods and communities by not locking out workers and families who contribute to the base resource needs of say the Tenderloin by allowing them a vested property interest in those communities. Sounds like a reasonable strategy to me and leads to Lee’s government interference and picking winners and losers based on solely economic factors such as maximizing rent.
ihm 6y ago
From reading the post, it sounds like the fact that housing is treated as a commodity rather than a necessity of life is what is keeping people on the street and units empty.
- howlgarnish 6y ago
  Renting in SF is tightly controlled and regulated, which sounds like the polar opposite of an easily substitutable commodity.
  - ihm 6y ago
    Clearly the fact that we treat housing as a commodity is causing an issue here. There are housing units owned (as investments, not for their use value) by OP's friend which could be used to house people, who are instead forced to live on the street.
    - chordalkeyboard 6y ago
      Alas, housing doesn't grow on trees. Someone needs to be paid for building and maintaining that living space.
    - anonuser123456 6y ago
      Those people could move?
- stale2002 6y ago
  Food is a commodity, even though we need it to live. Food works perfectly fine as a market, with out "food rent controls".
  - ulucs 6y ago
    Haven't you heard of food subsidies at all? Food is insanely price controlled.
    - deleted 6y ago
howlgarnish 6y ago
This also explains the popularity of giving rent-free months instead of just lowering the rate: this way the baseline is not affected.
- refurb 6y ago
  It’s not written in the rent control law in SF, but apparently the rent board regards the “effective base rent” as inclusive of all discounts. The one exception is if a tenant can’t afford the rent and the landlord decides to give a temporary hardship discount. There is a very strict procedure the landlord has to follow for that discounted rent to not become the new base rent. I assume that tenants, if they are willing to put in the work, could very well force their landlord to keep the discount offered during Covid.
ulucs 6y ago
Average tenancy length is two years (https://www.residentrated.com/blog/2019/6/10/average-us-renter-stays-in-a-building-275-months https://www.residentrated.com/blog/2019/6/10/average-us-rent...). So you'll have more money on your hands if you drop your rents by one third rather than leave it vacant for a year. Of course, the actual effect would be smaller than one third since tenancy length is endogenous. However, this serves to illustrate: keeping rents high is rather a combination of being bad at mathematics, tacit collusion among landlords and protesting rent control.
- fuzzybear3965 6y ago
  What's meant by "tenancy lengths are endogenous"? For me, "endogenous" refers to biological processes. I'm missing the connection to tenancy duration.
  - ulucs 6y ago
    We're modeling rent drops using tenancy length as an input. However, tenancy length is also affected by rents compared to market. Since the output also affects the input, we have endogeneity in an econometrics sense and blindly estimating the equation will give us wrong numbers.
    - fuzzybear3965 6y ago
      Ahhhh, it's a closed-loop feedback system, a function that depends on itself. Endogenous. Got it. Thanks!
  - thazework 6y ago
    They meant the statistical, not biological term. In this case, the possibility that reducing rents may effect tenancy lengths. https://www.investopedia.com/terms/e/endogenous-variable.asp https://www.investopedia.com/terms/e/endogenous-variable.asp
    - fuzzybear3965 6y ago
MAGZine 6y ago
It also keeps rents from being jacked up unfairly because you don't want to move your life every year or two. People like to point out that sf rental market does not have very high rental mobility. While it's not a good thing (people living in homes inappropriately sized because they can't afford to move), it's also not a bad thing (moving frequently sucks, and should be more at the behest of the tenant, rather than landlord).
- est31 6y ago
  This system of tenants having to look for a new place every 2 years is extremely weird to my German eyes where once you are tenant, you always pay your rent, and don't do bad things, the contract can't be easily terminated by the landlord.
  - refurb 6y ago
    You don’t have to move in SF after 2 years, but without rent control you may not have a choice.
    - Thorrez 6y ago
      I think there could be a middle ground: rent control that allows increases that average what the free market would follow (this can be determined by looking at how rent is changing in non-rent-controlled apartments), or even a few percent higher than that. This will stop landlords from doing vicious increases, but also will prevent renters from acquiring absurdly low rents.
      - refurb 6y ago
        That would certainly be an improvement. Right now SF allows 60% of CPI, so less than inflation. The state-wide rent control allows CPI + 5% or 10%, whichever is lower, which doesn’t seem like much of a limit. Just increasing it to CPI in SF seems like an improvement. Even pensioners get CPI adjustments.
- username90 6y ago
noobermin 6y ago
I like how the OP's story about his friend is good enough for an explanation that can be extended to all landlords.
scoot_718 6y ago
Sounds like they need a Land Value Tax on empty places, and to keep Rent Control. Making it more viable for him to sell the apartments outright would be a massive win. Why let this failed slumlord keep property he can't use productively?
didibus 6y ago
I hate when people do that, a concrete implementation of something in a very contextual instance is causing a non optimal result, and then make it sound like the category of solutions under that umbrella in a wide range of context is just bad and causing the issues. There could be many ways to enact rent control, every city is different, Covid is not always a thing, etc. Maybe all possible implementation of rent control are always bad in all real world scenarios, but having a single example of a particular concrete implementation in a particularly odd set of circumstances doesn't prove that.
azinman2 6y ago
Rent control is not universal for all rentals in SF. It depends on the building itself, and generally doesn’t apply to new buildings. So this post is very misleading.
ilyaeck 6y ago
Unless the rental market in SF bounces back soon, one would expect a sizable portion of landlords to opt for cashing out. Which, in theory, should increase the real estate supply and drive property prices down (AKA rents are a leading indicator of real estate prices). However, real estate seems to be unfazed by that prospect (still very much a bull market), as if it existed in a parallel universe. How to explain this paradox?
- username90 6y ago
  They expect rents to bounce back up in a few months, it is a reasonable assumption. The main risk is if most big software companies in SF allow workers to go full remote, then property prices would fall like a rock. But as of now it looks like most companies will just allow partial work from home if any at all.
jelliclesfarm 6y ago
Rent control, minimum wage etc that curtail free market rates for rent and wages are designed to keep people poor. They are insidious. From 1989: https://www.nytimes.com/1989/05/30/opinion/how-rent-control-hurts-the-poor.html https://www.nytimes.com/1989/05/30/opinion/how-rent-control-... makes for interesting reading (ETA: fuck downvotes ... I have an actual degree in economics. Bite Me. Because. Education. Knowledge is Power. Etc.) Apropos of nothing: if anyone is a yuppie FAANG employee living in rent control apartments, you ARE part of the problem.
- chordalkeyboard 6y ago
  downvotes sometimes mean you were correct and struck a nerve. Its best not to take it too seriously. Often when you're wrong or not 100% right, people will reply and discuss. When you make a good point and get downvoted its probably because people know you're right and don't like it.
  - yodon 6y ago
    Factually correct comments do sometimes initially get downvoted but when a factually correct comment gets downvoted into the gray it generally attracts enough attention by virtue of being gray to get voted back into the black. Comments that stay in the gray are not comments to be proud of. A very large community of intelligent people are saying they think you are wrong. That's generally a sign some introspection about one's comment is warranted.
    - chordalkeyboard 6y ago
      > generally I would say "sometimes" > Comments that stay in the gray are not comments to be proud of. A very large community of intelligent people are saying they think you are wrong. Its not correct to generalize over the entire community based on an unknown subset of people who happened to see the comment. And its true that this community is large and intelligent, and its also true that humans have their own individual and collective biases. If a large community of intelligent people think you're wrong and the comment in question is not obviously deficient (hostile, profane, or nonsensical), one might imagine that someone would take the time to post a reply correcting the parent. > That's generally a sign some introspection about one's comment is warranted. This is true.
6510 6y ago
Then just fix the rent between tenants. Say: If the last guy paid 2000 you get to ask 2200. If you don't find anyone within a week 2150. -50 for every next week.
effingwewt 6y ago
We need to abolish landlords. If you want a profit open a business. Im tired of seeing 'poor landlords arent making profits' comments. And 'Support local businesses' everywhere. Why? Are they taking care of their workers? Are they paying them better for taking risks during the pandemic? Probably not. Restaurant/fast food chains still open are making a killing with a leaner workforce and collecting far more money, but no workers got a raise ir even sick leave. Are they helping their communities? No. But at least they serve a purpose. Paying rent every month instead of to a mortgage to build someone else's wealth instead of your own. At what point in society did building wealth become married to screwing over fellow humans?

52 points by howlgarnish 6y ago

"A friend owns a three-unit building in San Francisco, occupying the top floor himself. The two tenants underneath have fled. One lost a job and the other kept the job, but decided to lose the California tax rates and mask/shutdown protocols. Both units are now vacant. "I asked how much rents have fallen and he responded with "30 percent." Why not rent the units out at the current market rate? "If you ever rent to someone in San Francisco," he replied, "you can never raise their rent more than about 2 percent per year after that. You're locked it at whatever rate you start with. So I am waiting until the shutdown ends, hoping that market rents will come back closer to what they were when I bought the building." Tax property more when it's vacant. Problem fixed.

baron816 6y ago
So if rents go down, even temporarily, you potentially get trapped underwater? Who would want to rent out apartments in that environment?
- iandanforth 6y ago
  I'm not sure why there's an assumption that property owners should make money. If rents go up they make money and if they go down they lose money. That's the way the market is supposed to work.
  - SllX 6y ago
    Nah, it’s called the profit incentive and it is the bedrock of free enterprise. There are profits to be made even in a tough market, but at no time are people morally obligated to lose money just because losing money has become the norm, particularly with government restrictions that will make it more difficult to profit in the future. Fortunes don’t magically rise and fall with the “market”, the market is merely an abstraction that represents the multitude of transactional choices that anywhere from thousands to billions of people make on a day to day basis.
  - tylerhou 6y ago
    But if landlords make too little money, then there will be fewer landlords and more owner-occupied buildings. There will be less construction of rental properties. In the long term, economic theory predicts that such a supply shortage would increase rents, pricing out the poorest from being able to afford to live in that area. I am not arguing that we need landlords to make more money. But until leftists overthrow our current capitalist system, we do need to incentivize capital owners to invest in rental properties to increase the supply of rental properties (which should decrease the cost with all else equal). (That last sentence is positive and not normative.)
    - est31 6y ago
      Yes, shortages increase rents. Solution to that: allow people to develop. The fact that houses cost so much more than their construction cost is due to the fact that the government bans owners from building as many units as they want. Thus houses get artifically high prices in attractive areas because developers aren't allowed to meet the demand.
  - refurb 6y ago
    Sure, but if the gov’t caps the upside, the only fair thing is to cap the downside as well.
  - baron816 6y ago
    It’s not a problem if they lose money, but it is a problem if they have an expectation that they’ll lose money. Would you invest in anything that you’d expect to lose money on?
TedShiller 6y ago
Problem not fixed for the tenants. I know landlords of rent controlled units in SF, and believe me, those tenants are making a huge tradeoff. Yes the rent is low, but forget about ever really liking the place you spend your life in. There is zero incentive to upgrade anything ever. If your toilet is leaking it will be fixed. But get ready to live with 30 year old fixtures, cabinets, carpets, etc. So sure, rent is low and that’s great. But it doesn’t come free. It’s definitely a major sacrifice to be making as a tenant.
- romwell 6y ago
  Yeah, not scared. Paying $3K/month for a matchbox is a major sacrifice, living with 30 year old cabinets is not.
  - rsj_hn 6y ago
    Rent control is why you have to pay 3K/month if you want to rent an apartment in San Francisco. Someone has to subsidize the cat lady living downstairs from you paying $800/month, and it's not the landlord - it's the new renter paying so much that's allowing her to pay so little.
    - jjoonathan 6y ago
      No, it's the enormous bargaining power of the landlord obtained through luck and lobbying. Nice try fobbing responsibility off on the cat lady, who is a comparatively minor cost of doing business.
      - rsj_hn 6y ago
        Your argument doesn't even have internal logical consistency. You claim that landlords have "enormous bargaining power" and yet assume that they are too weak to charge higher rents based on the knowledge that their property is subject to rent control, so that they will be compensated for the risk of seeing a long term tenant. How can this be? Of course they will charge more in rent to adjust for the fact that a percentage of their tenants will be long term, and therefore short term tenants end up subsidizing long term tenants, exactly as I claimed. I get that you don't like landlords. But think this through and try to use reason rather than emotion.
gdix 6y ago
"If the old lady swallowed a fly. Just have her swallow a spider to catch the fly. Problem fixed."
seibelj 6y ago
“Just one more market-warping law! That will fix everything!”
ww520 6y ago
He'll just live in all 3 of them. Problem solved.
SllX 6y ago
The Board of Supervisors would love to impose some punitive tax increases to increase their slush fund and fritter it away on non-profits and unions. They just have to ask voters nicely first, and if tenants really are fleeing in numbers and new tenants can’t or won’t move in at these prices, that’s not looking more likely to happen. We could cut rent control, then landlords might want to rent out at a sane, well, saner, price again.
tylerhou 6y ago
> Tax property more when it's vacant. Problem fixed. Besides leaving properties vacant, rent control distorts the market in other ways. Because rent control also lowers the supply of rental unit, builders are more incentivized to sell to owner-occupants (since rent control depresses the value of rental units and thus a landlord's willingness to pay for a given unit). This increases the pool of housing available to richer people who can afford to buy a house, and decreases the pool of housing to people who can only afford the rent. Rent control also incentivizes renters to stay in their current housing, even when moving would be more efficient. (Consider someone living in an rent-controlled below-market rate apartment in San Francisco who gets a new job in the South Bay. They would like to move, but that would cost them extra in rent.) Even if you create policies that address these issues, there are likely more problems rent control creates. At what point do you give up and conclude that rent control is the issue?' If you want to control gentrification and enable people to stay in the neighborhoods that they grew up in, there ways to achieve that which don't have the negative side effects of market-wide rent control, like below-market-rate housing for people who make less than a certain amount or have lived in an area for a certain amount of time.
- blackrock 6y ago
  This is a failure of the market. Since builders do not want to build, then the State needs to provide leadership, take control, establish eminent domain, and send in the army, to build government backed buildings. Then rent these out to people that need them, at affordable rates. The sacred market, is ultimately what is killing the quality of life in California.
  - anonuser123456 6y ago
    > Since builders do not want to build, Show me a builder that doesn’t want to build, and I’ll show you a city planning department that makes it impossible to do so. Builders are like any business. They want a margin. If they can’t make a margin, they don’t build. The only way government can build cheaper than a builder is to bypass its own regulatory morass. At which point one might ask, why not just let the builders operate on the same rule set.
petre 6y ago
Even better. Tax property based on yearly or quarterly mean rent price. This is what Switzerland does. The owner pays the same amount of tax if they keep the building vacant, rent it or live in it. So landlords are incentivized to rent vacant real estate and parking money into real estate and keeping it vacant might not be such a great idea.
rsj_hn 6y ago
That just means rents will go up even more to compensate landlords for the risk of having to pay higher taxes when the unit is vacant. Look, you are not going to cause rents to fall by adding more costs to landlords. To get rents to fall you will need to either build more units (increase supply) or make the city less desirable (decrease demand). For example, don't allow construction of office space in the city unless it's matched by construction of housing units.
- pmoriarty 6y ago
  "That just means rents will go up even more to compensate landlords for the risk of having to pay higher taxes when the unit is vacant." Landlords will always charge the absolute highest rate that they can get away with, regardless of the taxes they have to pay. So raising taxes on vacant units will not raise rents even one single penny, as they'll already be as high as it's possible for landlords to charge and rent in that market (or, in the case of vacant units, even higher).
  - rsj_hn 6y ago
    That they can "get away" with means demand. By increasing demand for the unit, for example by putting it under rent control, then landlords will be able to charge more. You are assuming that demand for the unit with rent control is the same as demand for the unit without rent control. This is why you think the rent control is "free" -- that it doesn't raise prices for tenants even though they think it's very important and are willing to pay more for such units.

650REDHAIR 6y ago

Rent control is keeping renters safe in San Francisco.

baron816 6y ago
It’s also keeping a lot of homeless people out on the streets and forcing others to commute from Stockton. You’re either lucky on the inside, or completely shit out of luck.
- lefrenchy 6y ago
  How Is rent control keeping them on the street? I don’t think that’s the case. Seems to me if they’re on the street it’s too late and we need social programs and safety nets to get them back on their feet.
  - temporalparts 6y ago
    > I don’t think that’s the case. What annoys me about this is that you can do the research instead of relying on your a priori thoughts, which are wrong. There are 5x more empty units than there are homeless people pre-pandemic [0] and it's the case for all cities with rent control because landlords don't want to be stuck with submarket rents for decades. [0] https://sf.curbed.com/2019/12/3/20993251/san-francisco-bay-area-vacant-homes-per-homeless-count https://sf.curbed.com/2019/12/3/20993251/san-francisco-bay-a...
    - freeone3000 6y ago
      Seems like Mao had some good ideas.
    - lefrenchy 6y ago
      It’s not that I haven’t researched it, i’m just not convinced rent control is the only problem. I think it’s also an amalgamation of other things like bad policy, urban centers with high demand for housing and tech companies changing the market, etc... I’m skeptical of anything arguing one thing is causing the problem.

jdkee 6y ago

“If you ever rent to someone in San Francisco,” he replied, “you can never raise their rent more than about 2 percent per year after that. You’re locked it at whatever rate you start with.” A perverse incentive system for landlords locked in by governmental rent stabilization strategy? Perhaps a during the great reset which could dramatically shift the out of whack supply-demand curves due to work from home, which allows Twitter or FB workers freedom from being tethered to the physical offices and certain neighborhoods would allow a freer market wherein lower income workers could contribute to a vibrant streetscale of shops and restaurants to serve customers all along the economic stratum. Behold better neighborhoods and communities by not locking out workers and families who contribute to the base resource needs of say the Tenderloin by allowing them a vested property interest in those communities. Sounds like a reasonable strategy to me and leads to Lee’s government interference and picking winners and losers based on solely economic factors such as maximizing rent.

ihm 6y ago

From reading the post, it sounds like the fact that housing is treated as a commodity rather than a necessity of life is what is keeping people on the street and units empty.

howlgarnish 6y ago
Renting in SF is tightly controlled and regulated, which sounds like the polar opposite of an easily substitutable commodity.
- ihm 6y ago
  Clearly the fact that we treat housing as a commodity is causing an issue here. There are housing units owned (as investments, not for their use value) by OP's friend which could be used to house people, who are instead forced to live on the street.
  - chordalkeyboard 6y ago
    Alas, housing doesn't grow on trees. Someone needs to be paid for building and maintaining that living space.
  - anonuser123456 6y ago
    Those people could move?
stale2002 6y ago
Food is a commodity, even though we need it to live. Food works perfectly fine as a market, with out "food rent controls".
- ulucs 6y ago
  Haven't you heard of food subsidies at all? Food is insanely price controlled.
  - deleted 6y ago

howlgarnish 6y ago

This also explains the popularity of giving rent-free months instead of just lowering the rate: this way the baseline is not affected.

refurb 6y ago
It’s not written in the rent control law in SF, but apparently the rent board regards the “effective base rent” as inclusive of all discounts. The one exception is if a tenant can’t afford the rent and the landlord decides to give a temporary hardship discount. There is a very strict procedure the landlord has to follow for that discounted rent to not become the new base rent. I assume that tenants, if they are willing to put in the work, could very well force their landlord to keep the discount offered during Covid.

ulucs 6y ago

Average tenancy length is two years (https://www.residentrated.com/blog/2019/6/10/average-us-renter-stays-in-a-building-275-months https://www.residentrated.com/blog/2019/6/10/average-us-rent...). So you'll have more money on your hands if you drop your rents by one third rather than leave it vacant for a year. Of course, the actual effect would be smaller than one third since tenancy length is endogenous. However, this serves to illustrate: keeping rents high is rather a combination of being bad at mathematics, tacit collusion among landlords and protesting rent control.

fuzzybear3965 6y ago
What's meant by "tenancy lengths are endogenous"? For me, "endogenous" refers to biological processes. I'm missing the connection to tenancy duration.
- ulucs 6y ago
  We're modeling rent drops using tenancy length as an input. However, tenancy length is also affected by rents compared to market. Since the output also affects the input, we have endogeneity in an econometrics sense and blindly estimating the equation will give us wrong numbers.
  - fuzzybear3965 6y ago
    Ahhhh, it's a closed-loop feedback system, a function that depends on itself. Endogenous. Got it. Thanks!
- thazework 6y ago
  They meant the statistical, not biological term. In this case, the possibility that reducing rents may effect tenancy lengths. https://www.investopedia.com/terms/e/endogenous-variable.asp https://www.investopedia.com/terms/e/endogenous-variable.asp
  - fuzzybear3965 6y ago

MAGZine 6y ago

It also keeps rents from being jacked up unfairly because you don't want to move your life every year or two. People like to point out that sf rental market does not have very high rental mobility. While it's not a good thing (people living in homes inappropriately sized because they can't afford to move), it's also not a bad thing (moving frequently sucks, and should be more at the behest of the tenant, rather than landlord).

est31 6y ago
This system of tenants having to look for a new place every 2 years is extremely weird to my German eyes where once you are tenant, you always pay your rent, and don't do bad things, the contract can't be easily terminated by the landlord.
- refurb 6y ago
  You don’t have to move in SF after 2 years, but without rent control you may not have a choice.
  - Thorrez 6y ago
    I think there could be a middle ground: rent control that allows increases that average what the free market would follow (this can be determined by looking at how rent is changing in non-rent-controlled apartments), or even a few percent higher than that. This will stop landlords from doing vicious increases, but also will prevent renters from acquiring absurdly low rents.
    - refurb 6y ago
      That would certainly be an improvement. Right now SF allows 60% of CPI, so less than inflation. The state-wide rent control allows CPI + 5% or 10%, whichever is lower, which doesn’t seem like much of a limit. Just increasing it to CPI in SF seems like an improvement. Even pensioners get CPI adjustments.
username90 6y ago

noobermin 6y ago

I like how the OP's story about his friend is good enough for an explanation that can be extended to all landlords.

scoot_718 6y ago

Sounds like they need a Land Value Tax on empty places, and to keep Rent Control. Making it more viable for him to sell the apartments outright would be a massive win. Why let this failed slumlord keep property he can't use productively?

didibus 6y ago

I hate when people do that, a concrete implementation of something in a very contextual instance is causing a non optimal result, and then make it sound like the category of solutions under that umbrella in a wide range of context is just bad and causing the issues. There could be many ways to enact rent control, every city is different, Covid is not always a thing, etc. Maybe all possible implementation of rent control are always bad in all real world scenarios, but having a single example of a particular concrete implementation in a particularly odd set of circumstances doesn't prove that.

azinman2 6y ago

Rent control is not universal for all rentals in SF. It depends on the building itself, and generally doesn’t apply to new buildings. So this post is very misleading.

ilyaeck 6y ago

Unless the rental market in SF bounces back soon, one would expect a sizable portion of landlords to opt for cashing out. Which, in theory, should increase the real estate supply and drive property prices down (AKA rents are a leading indicator of real estate prices). However, real estate seems to be unfazed by that prospect (still very much a bull market), as if it existed in a parallel universe. How to explain this paradox?

username90 6y ago
They expect rents to bounce back up in a few months, it is a reasonable assumption. The main risk is if most big software companies in SF allow workers to go full remote, then property prices would fall like a rock. But as of now it looks like most companies will just allow partial work from home if any at all.

jelliclesfarm 6y ago

Rent control, minimum wage etc that curtail free market rates for rent and wages are designed to keep people poor. They are insidious. From 1989: https://www.nytimes.com/1989/05/30/opinion/how-rent-control-hurts-the-poor.html https://www.nytimes.com/1989/05/30/opinion/how-rent-control-... makes for interesting reading (ETA: fuck downvotes ... I have an actual degree in economics. Bite Me. Because. Education. Knowledge is Power. Etc.) Apropos of nothing: if anyone is a yuppie FAANG employee living in rent control apartments, you ARE part of the problem.

chordalkeyboard 6y ago
downvotes sometimes mean you were correct and struck a nerve. Its best not to take it too seriously. Often when you're wrong or not 100% right, people will reply and discuss. When you make a good point and get downvoted its probably because people know you're right and don't like it.
- yodon 6y ago
  Factually correct comments do sometimes initially get downvoted but when a factually correct comment gets downvoted into the gray it generally attracts enough attention by virtue of being gray to get voted back into the black. Comments that stay in the gray are not comments to be proud of. A very large community of intelligent people are saying they think you are wrong. That's generally a sign some introspection about one's comment is warranted.
  - chordalkeyboard 6y ago
    > generally I would say "sometimes" > Comments that stay in the gray are not comments to be proud of. A very large community of intelligent people are saying they think you are wrong. Its not correct to generalize over the entire community based on an unknown subset of people who happened to see the comment. And its true that this community is large and intelligent, and its also true that humans have their own individual and collective biases. If a large community of intelligent people think you're wrong and the comment in question is not obviously deficient (hostile, profane, or nonsensical), one might imagine that someone would take the time to post a reply correcting the parent. > That's generally a sign some introspection about one's comment is warranted. This is true.

6510 6y ago

Then just fix the rent between tenants. Say: If the last guy paid 2000 you get to ask 2200. If you don't find anyone within a week 2150. -50 for every next week.

effingwewt 6y ago

We need to abolish landlords. If you want a profit open a business. Im tired of seeing 'poor landlords arent making profits' comments. And 'Support local businesses' everywhere. Why? Are they taking care of their workers? Are they paying them better for taking risks during the pandemic? Probably not. Restaurant/fast food chains still open are making a killing with a leaner workforce and collecting far more money, but no workers got a raise ir even sick leave. Are they helping their communities? No. But at least they serve a purpose. Paying rent every month instead of to a mortgage to build someone else's wealth instead of your own. At what point in society did building wealth become married to screwing over fellow humans?