6 ms·

I expected to agree with that article, but honestly the tradeoff seems reasonable. Given just the data presented there, is it actually worse if rent controlled

I expected to agree with that article, but honestly the tradeoff seems reasonable. Given just the data presented there, is it actually worse if rent controlled apartments are hard to get if lots of people are also paying much less rent? I'd really want to see some data about lots of people wanting to move to or within Berlin who are not able to due to lack of supply. That data may well exist but isn't presented here.

fallingknife 6y ago
Is it worse if now there is a special class of people who happened to be in the right buildings at the right time when this law passed who will now forever get discounted rent, leaving everybody else to pay full price?
- rbranson 6y ago
  This sounds a lot like land ownership.
  - DamnYuppie 6y ago
    Well in most of US you can pay off the land but you still have property taxes which can go up. Also the tax basis can be adjusted based on the market value of similar properties in your area.
    - rbranson 6y ago
      Not in California.
  - BurningFrog 6y ago
    It turns renters into a kind of owners, yes.
    - foolinaround 6y ago
      a kind, that enjoys the upsides, but can run away when there are downsides without any consequences?
      - sudosysgen 6y ago
        Which downsides can they run away from? They pay for maintenance, property taxes, and so on. And still pay a premium over that.
        compiler-guy 6y ago
        They don't pay for these things if their rent is fixed.
        sudosysgen 6y ago
        The vast majority of rent controlled cities have rent control boards where landlords can request and increase in rent in case of exceptional circumstances. In those cases, the landlord must show that the rent is not enough to cover maintenance, and the increase is granted. In general though, maintenance on average only costs ~150-300$ a month, so it's not necessary.
      - La1n 6y ago
        >enjoys the upsides, but can run away when there are downsides without any consequences? Isn't that why landlords argue they should make profit, because they carry the risk?
      - rbranson 6y ago
        I don’t know why I have to explain this, but I’m not aware of any situation in which a renter builds equity in the underlying asset either. Under rent control the situation goes from being extremely advantageous to the landlord to just being regular advantageous.
- sudosysgen 6y ago
  You mean, exactly like people who have enough money to buy instead of rent as real estate values keep climbing? In Berlin, people that already have social relations and support structures are the one that get discounted rent, which is what we want! This is better than if wealthy people get to pay less for housing. It's not as if the alternative made it cheaper.
- crote 6y ago
  Exactly, it should be extended to all rental units. An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move.
  - ggreer 6y ago
    > An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move. Mumbai did this and it was a disaster: https://marginalrevolution.com/marginalrevolution/2017/04/twisted-tale-rent-control-maximum-city.html https://marginalrevolution.com/marginalrevolution/2017/04/tw...
  - PeterisP 6y ago
    The consequence of that, as claimed in the article, is that when the old tenant leaves, it often ceases to be a rental property - it's not offered for rent but put on sale for someone who'll live there as an owner. Already there are half as many spaces available for rent as it was a few years ago, and the number is still shrinking. If this goes on, most of the rental stock will get converted to non-rental and you'll be able to move only if you can get sufficient credit to buy the dwelling.
robertlagrant 6y ago
Think about how much money a landlord has to invest with in keeping a property attractive to renters. What's the point?
- axihack 6y ago
  Exactly, what is the point?
- cassepipe 6y ago
  Time to sell for a reasonable price then.
  - robertlagrant 6y ago
    Phrases like "reasonable price" are meaningless. There is only "what someone's willing to pay". Property is the one place where people tend to actually get that.
Mediterraneo10 6y ago
> I'd really want to see some data about lots of people wanting to move to ... Berlin who are not able to due to lack of supply. Even if there were those lots of people unable to move, would that actually be a problem in various cases? Unlike many other European countries, where the countryside has emptied out and brain-drained as its young people move to the big city, Germany has managed to keep many of its small towns viable places to live and work.
steviedotboston 6y ago
You also need to look at how many formerly rent controlled apartments have been sold and taken off the market. The charts don't really show that, but the articles suggests that is happening
- sudosysgen 6y ago
  If they are finding homeowners which are not renting them, is that not a good thing?
  - candiodari 6y ago
    The purpose of this regulation is to provide cheap rent for the poor. Not to enable "the rich" to acquire new real estate which they then proceed to not rent out at all ... Increasing the number of homeless. Now of course this legislation "prevented that", by refusing owners do this while tenants are in the apartments. Except the net result seems to be when tenants do leave, the apartments are taken out of the housing market altogether, exacerbating the already pretty critical problems. And in the German press you will find accounts of pressure tactics (such as schemes to force tenants into default, "using" things like a divorce to kick people out (man signed contract, woman stays in apartment, gets kicked out when man refuses to pay but woman is not allowed to sign contract in her own name), creating critical maintenance problems ...) to create that situation. So no, that is a very, very bad thing.
    - foolinaround 6y ago
      > the apartments are taken out of the housing market altogether are the apartments just kept locked up?
      - DetroitThrow 6y ago
        Not that I know Berlin's situation, but hypothetically they could be converted into Airbnbs which end up competing with local hotels instead of rentals. I know rental stock immediately opened up in Dublin when the pandemic started, for example, before such a large increase would have arisen from renters leaving the city for suburbs.
tjansen 6y ago
It remains to be seen whether they are just paying less rent, or there are other disadvantages. Beside the obvious maintenance issue (will landlords invest more than legally mandated?), a german-specific issue is that it is quite common in Germany that renters who want to end their lease search for their own successors. The reason is that apartments often come without kitchens, low-end apartments even without flooring. The renter needs to take care of that, and if you end your lease, your investment is lost. Unless you find a successor who is willing to pay for it, which is quite easy if you live in a desired, low-rent apartment. Where I live (outside Berlin), people pay several thousand euros "for kitchen and floors" to the previous tenant to get a city-owned, low-rent apartment. Often they pay more than the kitchen and floors are actually worth, even though legally they are not even required to pay for this. But it's the price to be chosen as successor among many applicants. Landlords usually play along, as it's less work for them and this process will ensure that they get only the most affluent renters. I expect that renters in Berlin will be willing to pay even more to get one of the regulated apartments, as they are even cheaper.

fallingknife 6y ago

Is it worse if now there is a special class of people who happened to be in the right buildings at the right time when this law passed who will now forever get discounted rent, leaving everybody else to pay full price?

rbranson 6y ago
This sounds a lot like land ownership.
- DamnYuppie 6y ago
  Well in most of US you can pay off the land but you still have property taxes which can go up. Also the tax basis can be adjusted based on the market value of similar properties in your area.
  - rbranson 6y ago
    Not in California.
- BurningFrog 6y ago
  It turns renters into a kind of owners, yes.
  - foolinaround 6y ago
    a kind, that enjoys the upsides, but can run away when there are downsides without any consequences?
    - sudosysgen 6y ago
      Which downsides can they run away from? They pay for maintenance, property taxes, and so on. And still pay a premium over that.
      - compiler-guy 6y ago
        They don't pay for these things if their rent is fixed.
        sudosysgen 6y ago
        The vast majority of rent controlled cities have rent control boards where landlords can request and increase in rent in case of exceptional circumstances. In those cases, the landlord must show that the rent is not enough to cover maintenance, and the increase is granted. In general though, maintenance on average only costs ~150-300$ a month, so it's not necessary.
    - La1n 6y ago
      >enjoys the upsides, but can run away when there are downsides without any consequences? Isn't that why landlords argue they should make profit, because they carry the risk?
    - rbranson 6y ago
      I don’t know why I have to explain this, but I’m not aware of any situation in which a renter builds equity in the underlying asset either. Under rent control the situation goes from being extremely advantageous to the landlord to just being regular advantageous.
sudosysgen 6y ago
You mean, exactly like people who have enough money to buy instead of rent as real estate values keep climbing? In Berlin, people that already have social relations and support structures are the one that get discounted rent, which is what we want! This is better than if wealthy people get to pay less for housing. It's not as if the alternative made it cheaper.
crote 6y ago
Exactly, it should be extended to all rental units. An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move.
- ggreer 6y ago
  > An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move. Mumbai did this and it was a disaster: https://marginalrevolution.com/marginalrevolution/2017/04/twisted-tale-rent-control-maximum-city.html https://marginalrevolution.com/marginalrevolution/2017/04/tw...
- PeterisP 6y ago
  The consequence of that, as claimed in the article, is that when the old tenant leaves, it often ceases to be a rental property - it's not offered for rent but put on sale for someone who'll live there as an owner. Already there are half as many spaces available for rent as it was a few years ago, and the number is still shrinking. If this goes on, most of the rental stock will get converted to non-rental and you'll be able to move only if you can get sufficient credit to buy the dwelling.

robertlagrant 6y ago

Think about how much money a landlord has to invest with in keeping a property attractive to renters. What's the point?

axihack 6y ago
Exactly, what is the point?
cassepipe 6y ago
Time to sell for a reasonable price then.
- robertlagrant 6y ago
  Phrases like "reasonable price" are meaningless. There is only "what someone's willing to pay". Property is the one place where people tend to actually get that.

Mediterraneo10 6y ago

> I'd really want to see some data about lots of people wanting to move to ... Berlin who are not able to due to lack of supply. Even if there were those lots of people unable to move, would that actually be a problem in various cases? Unlike many other European countries, where the countryside has emptied out and brain-drained as its young people move to the big city, Germany has managed to keep many of its small towns viable places to live and work.

steviedotboston 6y ago

You also need to look at how many formerly rent controlled apartments have been sold and taken off the market. The charts don't really show that, but the articles suggests that is happening

sudosysgen 6y ago
If they are finding homeowners which are not renting them, is that not a good thing?
- candiodari 6y ago
  The purpose of this regulation is to provide cheap rent for the poor. Not to enable "the rich" to acquire new real estate which they then proceed to not rent out at all ... Increasing the number of homeless. Now of course this legislation "prevented that", by refusing owners do this while tenants are in the apartments. Except the net result seems to be when tenants do leave, the apartments are taken out of the housing market altogether, exacerbating the already pretty critical problems. And in the German press you will find accounts of pressure tactics (such as schemes to force tenants into default, "using" things like a divorce to kick people out (man signed contract, woman stays in apartment, gets kicked out when man refuses to pay but woman is not allowed to sign contract in her own name), creating critical maintenance problems ...) to create that situation. So no, that is a very, very bad thing.
  - foolinaround 6y ago
    > the apartments are taken out of the housing market altogether are the apartments just kept locked up?
    - DetroitThrow 6y ago
      Not that I know Berlin's situation, but hypothetically they could be converted into Airbnbs which end up competing with local hotels instead of rentals. I know rental stock immediately opened up in Dublin when the pandemic started, for example, before such a large increase would have arisen from renters leaving the city for suburbs.

tjansen 6y ago

It remains to be seen whether they are just paying less rent, or there are other disadvantages. Beside the obvious maintenance issue (will landlords invest more than legally mandated?), a german-specific issue is that it is quite common in Germany that renters who want to end their lease search for their own successors. The reason is that apartments often come without kitchens, low-end apartments even without flooring. The renter needs to take care of that, and if you end your lease, your investment is lost. Unless you find a successor who is willing to pay for it, which is quite easy if you live in a desired, low-rent apartment. Where I live (outside Berlin), people pay several thousand euros "for kitchen and floors" to the previous tenant to get a city-owned, low-rent apartment. Often they pay more than the kitchen and floors are actually worth, even though legally they are not even required to pay for this. But it's the price to be chosen as successor among many applicants. Landlords usually play along, as it's less work for them and this process will ensure that they get only the most affluent renters. I expect that renters in Berlin will be willing to pay even more to get one of the regulated apartments, as they are even cheaper.