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A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents and still a stable supply of f

A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents and still a stable supply of flats. One tweak they apply is that rent-control does not apply to new developments, so creating new flats is more lucrative than turning old buildings into luxury developments. The city also acts as a competitor, driving prices down by offering cheap flats. There are definitively problems with rent-control if applied bluntly, but the it's a tool that can be useful. [1] https://www.immobilienwirtschaft.tu-berlin.de/fileadmin/fg287/ERES/Presentations/Funk-Rent-control-in-Austria.pdf https://www.immobilienwirtschaft.tu-berlin.de/fileadmin/fg28...

DetroitThrow 6y ago
Very interesting approach, it's almost as if developers get a "patent" on creating useful housing stock.
dionidium 6y ago
> One tweak they apply is that rent-control does not apply to new developments, so creating new flats is more lucrative than turning old buildings into luxury developments. Typical YIMBY broken record here, but in the U.S. it's more or less illegal to build new housing on almost every inch of land (especially in the most expensive cities). We don't need to develop baroque incentives for developers to create housing; we need to stop making it illegal.
- lotsofpulp 6y ago
  It is most certainly not illegal to build new housing in the US. https://www.census.gov/construction/nrc/pdf/newresconst.pdf https://www.census.gov/construction/nrc/pdf/newresconst.pdf
  - dionidium 6y ago
    It's illegal to build at all on some plots of land. It's illegal to build apartments on most plots of land in most cities (this is called "single-family zoning" and it dominates most U.S. cities). It's illegal to build large apartment buildings on still more plots of land. And then, yes, of course, there are some plots of land where it's legal to build one or more of the categories listed above. The places where housing is scarce are in the former groups, by and large, not the latter, which is to say the problem where housing is scarce is indeed that it's illegal to build enough housing there. Those places don't need to incentivize development. They need to make it legal.
imtringued 6y ago
Rent control only exists for one reason: to keep tenants in their apartments. It's not a tool that is solving a shortage of housing but lots of politicians will insist that new housing isn't needed. You just need to manipulate the useful fiction that is the market and fake everything. At least that's what the politicians think. Even if it means that the market is no longer useful.
- foota 6y ago
  Rent control, when coupled with other means of ensuring housing is built for those that can afford it, is a reasonable way of ensuring housing for those that can't afford it at the market price. That is, globally applying a cap on rents would be a bad idea, since there would be no incentive to build new housing. However, when coupled with restrictions such as requiring only some fraction of new housing construction to be below market rate it can produce better results. Imo we should just solve this issue once and for all by supplying government housing to anyone at a low price, but there seems to be little political will for that. It seems to me if you can reach the right people to pay for it they would gladly pay to solve homelessness (which, is admittedly more than just having available housing), but it's difficult to get that to happen.
  - mandelbrotwurst 6y ago
    This may depend on where you are, but around here I’d have very low confidence that the government would be capable of efficiently delivering quality housing at a low price. Edit: Ah, I’m realizing now that you may have meant delivering it to the occupants at a low price out of their pocket, and not necessarily at a low cost overall.
  - dheera 6y ago
    > supplying government housing to anyone at a low price Singapore does exactly this with the HDB flats.
    - refurb 6y ago
      Not quite a “low price”. A 2 bed HDB costs around $500k SGD. And the median salary is ~10-15% lower than the US. Way cheaper than a private condo ($1M), but still a significant barrier to many people in Singapore especially since you can’t buy one if you’re single until you’re over 35.
ForHackernews 6y ago
According to the article, this is the same system enacted in Berlin. The supply of new-build developments in Berlin has increased at a greater rate than in other German cities, just not fast enough for this Bloomberg writer's tastes.
FDSGSG 6y ago
This also means that there are almost no nice flats in Vienna, so you probably wouldn't want to live there unless you are poor.
freyir 6y ago
San Francisco also applies rent control only to older buildings. The effect is that developers only build top-of-market “luxury” housing (often cheaply constructed it rented at luxury rates). This helps them recover their development costs, which they couldn’t recoup on affordable housing.
- austhrow743 6y ago
  I don’t understand how those things impacts each other. Are you saying that if old buildings didn’t have rent control then developers would build less profit maximising buildings?
  - refurb 6y ago
    If you only have 15 years of free pricing, then build the housing with the highest short term margins possible. If you have free pricing in perpetuity, then you can build housing that might have a lower margin near term but an overall high NPV over its lifetime.
    - shuckles 6y ago
      I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.
      - TylerE 6y ago
        Aren't doormen pretty much only an NYC thing, anyway?
        illirik 6y ago
        Chicago as well, at least buildings on Lake Shore Drive.
        shuckles 6y ago
        NYC is one of the few places in the United States building truly luxurious condos. The per unit construction cost of new construction in San Francisco is probably within 20% of 100% affordable non-profit developer built subsidized housing (which runs at around $850k/unit).
elihu 6y ago
Are new buildings exempted from rent control permanently, or just for a limited time? The latter seems like it would be a workable system: incentivize new buildings by allowing the owners to charge whatever rents the market will bear for the first 10 or 20 years or so, then eventually they revert to rent control (presumably after the original construction costs have been repaid and then some).
- kelnos 6y ago
  Permanently. There was a 2020 ballot measure that aimed to change that so buildings could become subject to rent control on a rolling basis after they'd been around for 15 years or more, but it did not pass.
TedShiller 6y ago
FYI, rents in Vienna are not "incredibly low". From someone who has rented there.
- iamthemalto 6y ago
  I think if you compare rents to a place like Munich, then Vienna is indeed quite low
  - ChuckNorris89 6y ago
    If we keep moving the goal posts, workers in Munich also earn more.
  - TedShiller 6y ago
    Sure, it's not Munich, but given how insane Munich is that doesn't mean much. That's like saying it's not San Francisco.
jboog 6y ago
This is interesting and we can definitely learn something from the Vienna model but it isn't a super dense city so what works there might not translate as well to other cities. Manhattan for example is about 7x as dense as Vienna. There just isn't the space for the government to be churning out cheap flats for the amount of people that want to live there. SF is not nearly as dense and there is absolutely a lot of space to build there but unfortunately the zoning there is an absolute nightmare that doesn't seem to be getting better any time soon.
Gimpei 6y ago
This is interesting but doesn't appear to be evidence. Any studies with a plausible identifying strategy? It could be, for example, that rents wouldn't have gone up much regardless.
ChuckNorris89 6y ago
>A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents I beg your pardon? You can't possibly call rent prices in Vienna incredibly low and still keep a straight face. Maybe for the lucky Viennese that got grandfathered in some rent controlled flats, but last time I looked (pre-covid), rents there for new comers were insane compared to the next "biggest" cities like Graz or Linz, while Viennese working class wages were not much higher than those other two cities, if you exclude fancy lawyers, bankers, UN, IAEA and other diplomats. Maybe rent prices have come down a bit recently due to covid disrupting AirBnBs but even telling Austrians that rents in Vienna are incredibly low is a guaranteed way of getting a few laughs out of them.
- carlmr 6y ago
  Sorry, but judging from neighboring Germany the rents in Vienna ARE incredibly low. The measure I would apply is whether middle class people can live in the city, and that's definitely the case, in contrast to e.g. Munich.
  - ChuckNorris89 6y ago
    Except not all Germans live in Munich, Europe's biggest property bubble. There are affordable cities in Germany that are cheaper than Vienna, if we keep moving the goal posts.
    - carlmr 6y ago
      Not all Austrians live in Vienna. There are afordable cities in Austria that are cheaper than Vienna. Munich is the only city in Germany that I can think of that's comparable to Vienna in terms of wealth, demand and size though. So I don't see how this is moving the goalposts.
      - ChuckNorris89 6y ago
        >There are afordable cities in Austria that are cheaper than Vienna. That's exactly what I said. What's your point in the end? >Munich is the only city in Germany that I can think of that's comparable to Vienna in terms of wealth, demand and size though. "$EXPENSIVE_CITY in the country I live in, is less expensive than $EXPENSIVE_CITY with higher wages in another country I don't live in." Great, how does that help me? I'm sure rent is even more expensive in SF or NY but I don't compete on the jobs or rental market with those over there. Whataboutism doesn't pay my rent or feed my kids.
ivan1783 6y ago
Really? I just looked on immowelt and the prices are higher than here where I live (Stuttgart, DE) which is already incredibly high.
aserafini 6y ago
That is not a tweak: Berlin did exactly the same thing, the rent controls did not apply to new apartments.
bobthepanda 6y ago
Vienna has experienced total population decline from 1910 to 1990 and is still well below peak population. This strategy wouldn’t work out for a much faster growing city.

DetroitThrow 6y ago

Very interesting approach, it's almost as if developers get a "patent" on creating useful housing stock.

dionidium 6y ago

> One tweak they apply is that rent-control does not apply to new developments, so creating new flats is more lucrative than turning old buildings into luxury developments. Typical YIMBY broken record here, but in the U.S. it's more or less illegal to build new housing on almost every inch of land (especially in the most expensive cities). We don't need to develop baroque incentives for developers to create housing; we need to stop making it illegal.

lotsofpulp 6y ago
It is most certainly not illegal to build new housing in the US. https://www.census.gov/construction/nrc/pdf/newresconst.pdf https://www.census.gov/construction/nrc/pdf/newresconst.pdf
- dionidium 6y ago
  It's illegal to build at all on some plots of land. It's illegal to build apartments on most plots of land in most cities (this is called "single-family zoning" and it dominates most U.S. cities). It's illegal to build large apartment buildings on still more plots of land. And then, yes, of course, there are some plots of land where it's legal to build one or more of the categories listed above. The places where housing is scarce are in the former groups, by and large, not the latter, which is to say the problem where housing is scarce is indeed that it's illegal to build enough housing there. Those places don't need to incentivize development. They need to make it legal.

imtringued 6y ago

Rent control only exists for one reason: to keep tenants in their apartments. It's not a tool that is solving a shortage of housing but lots of politicians will insist that new housing isn't needed. You just need to manipulate the useful fiction that is the market and fake everything. At least that's what the politicians think. Even if it means that the market is no longer useful.

foota 6y ago
Rent control, when coupled with other means of ensuring housing is built for those that can afford it, is a reasonable way of ensuring housing for those that can't afford it at the market price. That is, globally applying a cap on rents would be a bad idea, since there would be no incentive to build new housing. However, when coupled with restrictions such as requiring only some fraction of new housing construction to be below market rate it can produce better results. Imo we should just solve this issue once and for all by supplying government housing to anyone at a low price, but there seems to be little political will for that. It seems to me if you can reach the right people to pay for it they would gladly pay to solve homelessness (which, is admittedly more than just having available housing), but it's difficult to get that to happen.
- mandelbrotwurst 6y ago
  This may depend on where you are, but around here I’d have very low confidence that the government would be capable of efficiently delivering quality housing at a low price. Edit: Ah, I’m realizing now that you may have meant delivering it to the occupants at a low price out of their pocket, and not necessarily at a low cost overall.
- dheera 6y ago
  > supplying government housing to anyone at a low price Singapore does exactly this with the HDB flats.
  - refurb 6y ago
    Not quite a “low price”. A 2 bed HDB costs around $500k SGD. And the median salary is ~10-15% lower than the US. Way cheaper than a private condo ($1M), but still a significant barrier to many people in Singapore especially since you can’t buy one if you’re single until you’re over 35.

ForHackernews 6y ago

According to the article, this is the same system enacted in Berlin. The supply of new-build developments in Berlin has increased at a greater rate than in other German cities, just not fast enough for this Bloomberg writer's tastes.

FDSGSG 6y ago

This also means that there are almost no nice flats in Vienna, so you probably wouldn't want to live there unless you are poor.

freyir 6y ago

San Francisco also applies rent control only to older buildings. The effect is that developers only build top-of-market “luxury” housing (often cheaply constructed it rented at luxury rates). This helps them recover their development costs, which they couldn’t recoup on affordable housing.

austhrow743 6y ago
I don’t understand how those things impacts each other. Are you saying that if old buildings didn’t have rent control then developers would build less profit maximising buildings?
- refurb 6y ago
  If you only have 15 years of free pricing, then build the housing with the highest short term margins possible. If you have free pricing in perpetuity, then you can build housing that might have a lower margin near term but an overall high NPV over its lifetime.
  - shuckles 6y ago
    I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.
    - TylerE 6y ago
      Aren't doormen pretty much only an NYC thing, anyway?
      - illirik 6y ago
        Chicago as well, at least buildings on Lake Shore Drive.
      - shuckles 6y ago
        NYC is one of the few places in the United States building truly luxurious condos. The per unit construction cost of new construction in San Francisco is probably within 20% of 100% affordable non-profit developer built subsidized housing (which runs at around $850k/unit).

elihu 6y ago

Are new buildings exempted from rent control permanently, or just for a limited time? The latter seems like it would be a workable system: incentivize new buildings by allowing the owners to charge whatever rents the market will bear for the first 10 or 20 years or so, then eventually they revert to rent control (presumably after the original construction costs have been repaid and then some).

kelnos 6y ago
Permanently. There was a 2020 ballot measure that aimed to change that so buildings could become subject to rent control on a rolling basis after they'd been around for 15 years or more, but it did not pass.

TedShiller 6y ago

FYI, rents in Vienna are not "incredibly low". From someone who has rented there.

iamthemalto 6y ago
I think if you compare rents to a place like Munich, then Vienna is indeed quite low
- ChuckNorris89 6y ago
  If we keep moving the goal posts, workers in Munich also earn more.
- TedShiller 6y ago
  Sure, it's not Munich, but given how insane Munich is that doesn't mean much. That's like saying it's not San Francisco.

jboog 6y ago

This is interesting and we can definitely learn something from the Vienna model but it isn't a super dense city so what works there might not translate as well to other cities. Manhattan for example is about 7x as dense as Vienna. There just isn't the space for the government to be churning out cheap flats for the amount of people that want to live there. SF is not nearly as dense and there is absolutely a lot of space to build there but unfortunately the zoning there is an absolute nightmare that doesn't seem to be getting better any time soon.

Gimpei 6y ago

This is interesting but doesn't appear to be evidence. Any studies with a plausible identifying strategy? It could be, for example, that rents wouldn't have gone up much regardless.

ChuckNorris89 6y ago

>A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents I beg your pardon? You can't possibly call rent prices in Vienna incredibly low and still keep a straight face. Maybe for the lucky Viennese that got grandfathered in some rent controlled flats, but last time I looked (pre-covid), rents there for new comers were insane compared to the next "biggest" cities like Graz or Linz, while Viennese working class wages were not much higher than those other two cities, if you exclude fancy lawyers, bankers, UN, IAEA and other diplomats. Maybe rent prices have come down a bit recently due to covid disrupting AirBnBs but even telling Austrians that rents in Vienna are incredibly low is a guaranteed way of getting a few laughs out of them.

carlmr 6y ago
Sorry, but judging from neighboring Germany the rents in Vienna ARE incredibly low. The measure I would apply is whether middle class people can live in the city, and that's definitely the case, in contrast to e.g. Munich.
- ChuckNorris89 6y ago
  Except not all Germans live in Munich, Europe's biggest property bubble. There are affordable cities in Germany that are cheaper than Vienna, if we keep moving the goal posts.
  - carlmr 6y ago
    Not all Austrians live in Vienna. There are afordable cities in Austria that are cheaper than Vienna. Munich is the only city in Germany that I can think of that's comparable to Vienna in terms of wealth, demand and size though. So I don't see how this is moving the goalposts.
    - ChuckNorris89 6y ago
      >There are afordable cities in Austria that are cheaper than Vienna. That's exactly what I said. What's your point in the end? >Munich is the only city in Germany that I can think of that's comparable to Vienna in terms of wealth, demand and size though. "$EXPENSIVE_CITY in the country I live in, is less expensive than $EXPENSIVE_CITY with higher wages in another country I don't live in." Great, how does that help me? I'm sure rent is even more expensive in SF or NY but I don't compete on the jobs or rental market with those over there. Whataboutism doesn't pay my rent or feed my kids.

ivan1783 6y ago

Really? I just looked on immowelt and the prices are higher than here where I live (Stuttgart, DE) which is already incredibly high.

aserafini 6y ago

That is not a tweak: Berlin did exactly the same thing, the rent controls did not apply to new apartments.

bobthepanda 6y ago

Vienna has experienced total population decline from 1910 to 1990 and is still well below peak population. This strategy wouldn’t work out for a much faster growing city.