4 ms·

I think it's the opposite. The rent cap (at least in the way it was implemented) achieved nothing to solve the problems that exist in the Berlin rental market.

I think it's the opposite. The rent cap (at least in the way it was implemented) achieved nothing to solve the problems that exist in the Berlin rental market. It led to a huge decrease in rental supply. Yes, rent may have been cheap for the few people who managed to get a place, but it was a lottery with dozens of applicants for each flat. This mismatch of supply and demand is exactly the kind of thing that would be solved through pricing in normal markets. And rents rising as a city becomes a more desirable place to live just makes perfect sense. If you are convinced that this will happen in your city maybe now would be a great time to buy a place?

yladiz 5y ago
> It led to a huge decrease in rental supply. This was artificial though, as landlords were waiting to know the outcome of this ruling. It's not like the apartments just vanished from existence.
- DangerousPie 5y ago
  Sure, but I don't think it would have gone back to 100% if this law hadn't been overturned, since the law made it much more attractive to keep a property empty in order to sell it at some point.
  - llampx 5y ago
    Empty apartments are more attractive for buyers but if your intention is to rent it anyway, it wouldn't have made a difference, as the Mietendeckel ensured you couldn't rent it for more than what the previous tenant was paying.
goodpoint 5y ago
> This mismatch of supply and demand is exactly the kind of thing that would be solved through pricing in normal markets. The very opposite. The market optimizes for maximum profitability, not for maximum savings for renters or best quality of life. There's a reason why governments have been building cheap housing across the last 100 years in most developed countries.
- DangerousPie 5y ago
  The market is how we find a compromise between tenants' desire for low rents and landlords' desire for high rents. I don't think you can say it optimizes for landlord profitability but it obviously also doesn't optimize for savings of renters. I agree that this is not perfect, but I think it's the fairest proxy we got. Attempts at regulating rents directly usually end up causing all sorts of unwanted side effects and make things worse for both tenants and landlords. That said, I'm not opposed to the government building cheap housing. I think that's actually the best solution to an undersupply of housing.
  - goodpoint 5y ago
    > I think it's the fairest proxy we got You are simply rehashing the idea that free market is holy and magic. Instead, housing is inelastic. Also, apartments are non-fungible goods. Furthermore, they have a ton of externalities. (e.g. access to transportation, shops, workplaces, schools) All of this breaks every assumption around free market theory. Unsurprisingly, governments intervene heavily in the housing market almost in every developed country. The only exceptions lead to a combination of slumslords exploiting the poorest people and gated communities for the wealthy.
    - CryptoPunk 5y ago
      >>You are simply rehashing the idea that free market is holy and magic. Instead, housing is inelastic. Housing is not inelastic at all. Economists have studied the effects of laws reducing land-use rights, and have found they impose massive social costs, in the form of less housing construction, that leads to less affordable housing. https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388
      - goodpoint 5y ago
        > less housing construction, that leads to less affordable housing You mean that decreasing housing supply correlates with increasing price? Because that's exactly what inelastic demand is: https://www.investopedia.com/terms/e/inelastic.asp https://www.investopedia.com/terms/e/inelastic.asp
qayxc 5y ago
> If you are convinced that this will happen in your city maybe now would be a great time to buy a place? Did you miss the part were they explained they can't do it because they only have a temporary assignment? This sounds a lot like "just be rich". The reality is that a lot of people simply cannot afford to just "buy a place". According to some statistics [0], 40% of Americans (i.e. a "rich" country), are just one missed paycheck (or unexpected expenditure) away from homelessness. If you belong to the 60% that aren't and never experienced the situation, I understand how foreign the concept might seem to you. [0] https://www.cbsnews.com/news/40-of-americans-one-step-from-poverty-if-they-miss-a-paycheck/ https://www.cbsnews.com/news/40-of-americans-one-step-from-p...
- DangerousPie 5y ago
  Yeah, that comment was admittedly a bit flippant. But I would say that OP can't expect to have the flexibility and low capital requirements of renting but get the benefits of stability and profiting from price increases that a property owner would have. There are sacrifices in terms of work and flexibility (and location) that people make because they want to buy their property.
hawos 5y ago
There are dozens of appicants for each flat anyway, with or without the cap. Not everyone can just buy a place, if rents keep increasing only rich people will be able to afford living in the city, you need a lot of non-rich people to actually run the city though: cashiers, nurses, teachers, firefighters etc. It's not that easy.
- DangerousPie 5y ago
  I know the market isn't perfect, but in theory if lowly paid workers can't afford to live in the city anymore they'll start looking for jobs elsewhere, which will force their employers to raise wages.
  - jonathanstrange 5y ago
    Sorry to be so blunt but that theory is really just false. There are no jobs elsewhere, the jobs are in the city. I'm also not a "lowly paid worker", I'm in the highest quartile of income in my country and work as a full-time researcher at university. Nevertheless, there is no cap on the rents in my area and they continuously increase even for my existing contract. They have increased sometimes by several hundred percent for new contracts in my area, so if we ever had to leave our current apartment, we'd be forced to spend more than 3/2 of our salaries on rent alone. Even relatively well-off families will have troubles getting affordable living space in the foreseeable future, thanks to AirBnB, hostels, and long-term investments into (right now mostly empty) luxury apartments. How the average family can do it in my country is mysterious to me, but I'd wager most of them only can because they have very old rent contracts which do not have in-built rent progression. The market forces you refer to are fictitious. What happens in reality is that the middle class is dwindling, there is an ever increasing divide between land and house owners and mere renters, and at some point in the more distant future the whole system will break down.
wrthfl 5y ago
You actually made me create a HN-Account to reply to this. This is not true. The cap didn't apply to new flats. Which means that nobody wanted to invest and build new housing, but instead created artificial scarcity, there are a lot of empty buildings now because very few people can afford some of the abhorrent prices. So yeah supply and demand totally worked. /s

yladiz 5y ago

> It led to a huge decrease in rental supply. This was artificial though, as landlords were waiting to know the outcome of this ruling. It's not like the apartments just vanished from existence.

DangerousPie 5y ago
Sure, but I don't think it would have gone back to 100% if this law hadn't been overturned, since the law made it much more attractive to keep a property empty in order to sell it at some point.
- llampx 5y ago
  Empty apartments are more attractive for buyers but if your intention is to rent it anyway, it wouldn't have made a difference, as the Mietendeckel ensured you couldn't rent it for more than what the previous tenant was paying.

goodpoint 5y ago

> This mismatch of supply and demand is exactly the kind of thing that would be solved through pricing in normal markets. The very opposite. The market optimizes for maximum profitability, not for maximum savings for renters or best quality of life. There's a reason why governments have been building cheap housing across the last 100 years in most developed countries.

DangerousPie 5y ago
The market is how we find a compromise between tenants' desire for low rents and landlords' desire for high rents. I don't think you can say it optimizes for landlord profitability but it obviously also doesn't optimize for savings of renters. I agree that this is not perfect, but I think it's the fairest proxy we got. Attempts at regulating rents directly usually end up causing all sorts of unwanted side effects and make things worse for both tenants and landlords. That said, I'm not opposed to the government building cheap housing. I think that's actually the best solution to an undersupply of housing.
- goodpoint 5y ago
  > I think it's the fairest proxy we got You are simply rehashing the idea that free market is holy and magic. Instead, housing is inelastic. Also, apartments are non-fungible goods. Furthermore, they have a ton of externalities. (e.g. access to transportation, shops, workplaces, schools) All of this breaks every assumption around free market theory. Unsurprisingly, governments intervene heavily in the housing market almost in every developed country. The only exceptions lead to a combination of slumslords exploiting the poorest people and gated communities for the wealthy.
  - CryptoPunk 5y ago
    >>You are simply rehashing the idea that free market is holy and magic. Instead, housing is inelastic. Housing is not inelastic at all. Economists have studied the effects of laws reducing land-use rights, and have found they impose massive social costs, in the form of less housing construction, that leads to less affordable housing. https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388
    - goodpoint 5y ago
      > less housing construction, that leads to less affordable housing You mean that decreasing housing supply correlates with increasing price? Because that's exactly what inelastic demand is: https://www.investopedia.com/terms/e/inelastic.asp https://www.investopedia.com/terms/e/inelastic.asp

qayxc 5y ago

> If you are convinced that this will happen in your city maybe now would be a great time to buy a place? Did you miss the part were they explained they can't do it because they only have a temporary assignment? This sounds a lot like "just be rich". The reality is that a lot of people simply cannot afford to just "buy a place". According to some statistics [0], 40% of Americans (i.e. a "rich" country), are just one missed paycheck (or unexpected expenditure) away from homelessness. If you belong to the 60% that aren't and never experienced the situation, I understand how foreign the concept might seem to you. [0] https://www.cbsnews.com/news/40-of-americans-one-step-from-poverty-if-they-miss-a-paycheck/ https://www.cbsnews.com/news/40-of-americans-one-step-from-p...

DangerousPie 5y ago
Yeah, that comment was admittedly a bit flippant. But I would say that OP can't expect to have the flexibility and low capital requirements of renting but get the benefits of stability and profiting from price increases that a property owner would have. There are sacrifices in terms of work and flexibility (and location) that people make because they want to buy their property.

hawos 5y ago

There are dozens of appicants for each flat anyway, with or without the cap. Not everyone can just buy a place, if rents keep increasing only rich people will be able to afford living in the city, you need a lot of non-rich people to actually run the city though: cashiers, nurses, teachers, firefighters etc. It's not that easy.

DangerousPie 5y ago
I know the market isn't perfect, but in theory if lowly paid workers can't afford to live in the city anymore they'll start looking for jobs elsewhere, which will force their employers to raise wages.
- jonathanstrange 5y ago
  Sorry to be so blunt but that theory is really just false. There are no jobs elsewhere, the jobs are in the city. I'm also not a "lowly paid worker", I'm in the highest quartile of income in my country and work as a full-time researcher at university. Nevertheless, there is no cap on the rents in my area and they continuously increase even for my existing contract. They have increased sometimes by several hundred percent for new contracts in my area, so if we ever had to leave our current apartment, we'd be forced to spend more than 3/2 of our salaries on rent alone. Even relatively well-off families will have troubles getting affordable living space in the foreseeable future, thanks to AirBnB, hostels, and long-term investments into (right now mostly empty) luxury apartments. How the average family can do it in my country is mysterious to me, but I'd wager most of them only can because they have very old rent contracts which do not have in-built rent progression. The market forces you refer to are fictitious. What happens in reality is that the middle class is dwindling, there is an ever increasing divide between land and house owners and mere renters, and at some point in the more distant future the whole system will break down.

wrthfl 5y ago

You actually made me create a HN-Account to reply to this. This is not true. The cap didn't apply to new flats. Which means that nobody wanted to invest and build new housing, but instead created artificial scarcity, there are a lot of empty buildings now because very few people can afford some of the abhorrent prices. So yeah supply and demand totally worked. /s