4 ms·

Anecdotal, but San Francisco is mostly rent controlled and the economy and population haven't stagnated. It's not obvious to me why that has to be so. Is there

Anecdotal, but San Francisco is mostly rent controlled and the economy and population haven't stagnated. It's not obvious to me why that has to be so. Is there work that shows this is usually the case?

solveit 6y ago
> It's not obvious to me why that has to be so. Because ceteris is never paribus. The comparison is with the counterfactual world in which SF wasn't rent-controlled. Now, we can never know what would have happened, but I think there's a very strong case to be made that such an SF would be even more of a roaring powerhouse than it is now.
- mattnewton 6y ago
  Sure, but it's not obvious to me what allowing rents to move more freely for more of the city does for the local economy. It could be the stability rent control provides allows for long term growth and prevents shocks of large population loss or gain, for another example model. I was wondering if you or gp had reasources that make the case for an unregulated rent market.
  - solveit 6y ago
    I mean, econ 101 says rent control (along with blocking new construction) will hinder people who can produce more (economic) value from moving in and replacing their less productive counterparts. Econ 101 is often naive and wrong, but it should be the default prior you work from unless you have a compelling case to the contrary. That is, you shouldn't be looking for resources that make the case for an unregulated rent market, the burden of proof should be on the people who want to regulate rent, and I have never seen a compelling refutation of the naive econ 101 view for rent control (in the case of SF and other tech hubs that I presume HN is most interested in).
    - mattnewton 6y ago
      I don't think the "econ 101" model here actually has much to say about how market rates increase the productivity of renters. It's true that they will probably have to pay more rent, but it's not clear to me they will do so by being more productive. It could be they do so by just buying less from their local corner store, going out to drink less at the local bar, and skipping out on fancy dinners.The only thing the econ 101 model is says is that the landlords will keep commanding higher prices as long as demand outrstrips supply. And the price of housing near your job and friends is very inelastic, building up in a limited landmass is expensive to do right, so supply is going to have a hard time keeping up. I guess the case in the negative is my experience, where every largest metro area I have been in has implemented rent control, often after large rent shocks.
epistasis 6y ago
I think the effects analysis is wrong; SF's policy does squeeze out all poorer newcomers and anybody who falls on temporary hard times, while letting the wealthiest in at any time. There's a reason that studios were going for $4k/month until the pandemic, and it's because the price was getting set by a tiny tiny fraction of the highest incomes, since those were the only people left. So populations that had a lower home ownership base and less access to high income jobs, such as African Americans, have seen their populations completely destroyed in SF, starting exactly when SF decided to downzone. Rent control is just fine for newcomers, as long as tenants don't ally with homeowners to keep our newcomers. The tenants lose in that battle when it comes time for the next generation to find housing.
astrange 6y ago
San Francisco is mostly single family houses, so I think that influences the local economy more than rent-controlled apartments. That said, California essentially has rent control for homeowners through Prop 13, and California's population is stagnant.
imtringued 6y ago
San Francisco mostly builds commercial real estate. It's not stagnating but it is definitively slowly replacing existing residents with new ones instead of just adding the new comers on top of the existing population.

solveit 6y ago

> It's not obvious to me why that has to be so. Because ceteris is never paribus. The comparison is with the counterfactual world in which SF wasn't rent-controlled. Now, we can never know what would have happened, but I think there's a very strong case to be made that such an SF would be even more of a roaring powerhouse than it is now.

mattnewton 6y ago
Sure, but it's not obvious to me what allowing rents to move more freely for more of the city does for the local economy. It could be the stability rent control provides allows for long term growth and prevents shocks of large population loss or gain, for another example model. I was wondering if you or gp had reasources that make the case for an unregulated rent market.
- solveit 6y ago
  I mean, econ 101 says rent control (along with blocking new construction) will hinder people who can produce more (economic) value from moving in and replacing their less productive counterparts. Econ 101 is often naive and wrong, but it should be the default prior you work from unless you have a compelling case to the contrary. That is, you shouldn't be looking for resources that make the case for an unregulated rent market, the burden of proof should be on the people who want to regulate rent, and I have never seen a compelling refutation of the naive econ 101 view for rent control (in the case of SF and other tech hubs that I presume HN is most interested in).
  - mattnewton 6y ago
    I don't think the "econ 101" model here actually has much to say about how market rates increase the productivity of renters. It's true that they will probably have to pay more rent, but it's not clear to me they will do so by being more productive. It could be they do so by just buying less from their local corner store, going out to drink less at the local bar, and skipping out on fancy dinners.The only thing the econ 101 model is says is that the landlords will keep commanding higher prices as long as demand outrstrips supply. And the price of housing near your job and friends is very inelastic, building up in a limited landmass is expensive to do right, so supply is going to have a hard time keeping up. I guess the case in the negative is my experience, where every largest metro area I have been in has implemented rent control, often after large rent shocks.

epistasis 6y ago

I think the effects analysis is wrong; SF's policy does squeeze out all poorer newcomers and anybody who falls on temporary hard times, while letting the wealthiest in at any time. There's a reason that studios were going for $4k/month until the pandemic, and it's because the price was getting set by a tiny tiny fraction of the highest incomes, since those were the only people left. So populations that had a lower home ownership base and less access to high income jobs, such as African Americans, have seen their populations completely destroyed in SF, starting exactly when SF decided to downzone. Rent control is just fine for newcomers, as long as tenants don't ally with homeowners to keep our newcomers. The tenants lose in that battle when it comes time for the next generation to find housing.

astrange 6y ago

San Francisco is mostly single family houses, so I think that influences the local economy more than rent-controlled apartments. That said, California essentially has rent control for homeowners through Prop 13, and California's population is stagnant.

imtringued 6y ago

San Francisco mostly builds commercial real estate. It's not stagnating but it is definitively slowly replacing existing residents with new ones instead of just adding the new comers on top of the existing population.