8 ms·

Isn’t rent control, as a means of addressing housing affordability, one of the things that nearly every economist agrees doesn’t work? If you want to use rent

• RandomNick 5y ago
  It's basic economic principle: Price ceiilngs, like rent control, cause a shortage of supply. Price floors, cause surpluses in supply. Everything else is just nonsensical hand-waving people use in an attempt to justify why various schemes they favor are not working yet again.
  • Finnucane 5y ago
    Or not. I mean, we used to have rent control in Boston and Cambridge, and when it was eliminated (by statewide referendum) rents just went up. And they went up in surrounding areas, as people went looking for cheaper rent elsewhere.
    • seoaeu 5y ago
      A trend which surely had nothing to do with the tech/biotech boom in the area. When a region gains hundreds of thousands of new jobs and doesn't build housing to compensate, then rents are going to increase
      • Finnucane 5y ago
        There's actually been a fair bit of construction. In fact, a 2400 unit development is under construction here right now.
        • seoaeu 5y ago
          There have literally been hundreds of thousands of new jobs created in the region in recent decades. Cambridge alone added nearly 50,000 new jobs since 1980! So yes 2400 units is a start, but we need dozens more like it before we start to even come close to solving the shortage.
          • Finnucane 5y ago
            >Cambridge alone added nearly 50,000 new jobs But not 50,000 new residents. Adding jobs doesn't necessarily mean more people, just more employed people.
            • seoaeu 5y ago
              Of course Cambridge didn't add significantly more people than it added housing units. People aren't going to move to the city for a job only to live in a tent down by the railroad tracks! Instead what happened is that new residents came to the city for high paying jobs and bid up the prices for local apartments. Basically a cruel game of musical chairs where low-income households were forced from their homes and into cheaper neighborhoods in the surrounding cities. (Those poor neighborhoods actually did grow in population faster than housing: people were forced to pack into overcrowded living conditions) If you're curious about the numbers, over the last 40 years Cambridge added about one housing unit for every four new jobs
              • tacker2000 5y ago
                The thing with boston/Cambridge is that in addition to “great” companies there are also several top notch universities there so the competition for apartments is even greater.
              • Finnucane 5y ago
                You know that people don’t all live in the place they work in, right? A lot of them don’t even want to.
    • zip1234 5y ago
      This is why supply is constrained in Boston and most places: http://www.bostonplans.org/zoning http://www.bostonplans.org/zoning
    • qnsi 5y ago
      what you are saying is not contradictory to the commentor you reply to. Rents go up, because price ceiling is removed. Idea is that in the future supply increases and you don't have to wear a suit when looking for a flat
    • colinmhayes 5y ago
      Because people were previously unable to find units where they wanted, so they were forced to live further away. Now everyone can compete for the good location units so price goes up.
  • pasabagi 5y ago
    It's obviously a bit more complex than that, though. Most countries in europe have some form of rent caps, and some have fairly low average rents, while others have high rents. The economic idea simply doesn't fit with reality that well.
  • maxsilver 5y ago
    > Price ceilings, like rent control, cause a shortage of supply They don't have to. We've had price ceilings in the US in many places for over 60+ years without ever experiencing a shortage. (In my hometown, for example, education is price-capped, electricity is price-capped, water + sewer are price-capped, natural gas is price-capped. No shortages since the 1950s). You just have to require reasonable regulations on the industry, and strictly enforce those regulations. Heavy Regulations + Price Ceilings is the magic combo for success, more or less.
    • flavius29663 5y ago
      Everything you mentioned "has" to work, day in and out. If gas or water would go out, the local government would be out with the first elections. So they have a very strong incentive to make it work with public subsidies. Whereas the politicians won't care that a large percentage of would-be new residents for their city can't get in and have to commute. In fact, it's a perverse incentive: the locals love the lower rent, and there is no one to vote out the politicians that like rent controls.
      • maxsilver 5y ago
        > Everything you mentioned "has" to work, day in and out. Agreed, but this is true of housing as well. Housing "has to" work, or you end up with a huge commuting and homeless population (and the state of being homeless is effectively a crime in the US). > In fact, it's a perverse incentive: the locals love the lower rent, and there is no one to vote out the politicians that like rent controls. It's not perverse, it's a good incentive. Locals love lower rent from rent control, so the commuters who don't have it should be incentivized to also vote for rent control, and it's a great idea that should continue to spread. In a ideal world, every rental unit in the nation would be under a strict rent control (just like how power/water/sewer/natgas often is).
        • seoaeu 5y ago
          Why should newcomers to a city be forced to endure long commutes just because they happened to be born in a different part of the country? We have the capability to let everyone who wants to live in those areas do so. I see no reason that the privileged minority that already lives there should get to dictate that for everyone else in the region Not to mention, designing metro areas to require long commutes basically amounts to climate arson
  • epistasis 5y ago
    This applies with spherical cow-like assumptions for commodities. Housing and land require further analysis due to inelastic supply of land, and huge restrictions on construction, both for political and safety reasons. The biggest determinant of supply of housing is not the ability to charge more for it, but all the other challenges around building.
    • thinkharderdev 5y ago
      The supply of land is (mostly) fixed but the relationship between land and housing units is not. You can build row houses or multi-story apartment buildings instead of single-family homes, so the supply of land is almost never the binding constraint. What is a major constraint is various restrictions on building additional housing stock (and particularly building higher density housing stock) but that is a malleable constraint. Given that constraint maybe price controls on housing aren't so bad but still having an equilibrium where there is dramatically more demand for housing than supply is bad. Either you get sky-high prices or you get rationing through other means (you can only get a rent controlled apartment if you have connections or just get lucky).
      • epistasis 5y ago
        Yes, I agree on all this. But rent control is about price changes on existing houses, not on new construction, at least in the US. So it's not a "price control" as much as it is a control on rentierism, on existing rentiers taking unearned profits without working.
      • imtringued 5y ago
        That's an argument for (land) taxation, not direct control of prices. Here is an idea: Measure average rent per sqft. Put a 20% tax on rent above the average and use it to subsidize low income households. That way you tax wealthy tenants and subsidize poor tenants.
    • kwhitefoot 5y ago
      There really isn't a lack of land in Sweden. The population is only 10 million in a country considerably larger than the UK. Mean population density is 25 per km2, UK is 270 per km2. What there is is a lack of accommodation where people want to live. Ultimately people need to be persuaded or given a good reason to live elsewhere.
  • fulafel 5y ago
    Many basic economic principles work only in imaginary simplified scenarios.
  • oolang 5y ago
    No, what basic economics says it that a price ceiling causes a shortage of supply _if_ no other variables change. Which they do in general but especially in the housing market. That is the principle called "ceteris paribus". And that is in addition to having the right supply curve in the first place. The potential shortage of supply created by a price ceiling may very well be irrelevant when supply decreases from other factors.
  • asdff 5y ago
    it just doesn't make sense to allow rent increases past 5% in a world where wages remain nearly constant for the working class
    • rguillebert 5y ago
      That's not how the market sets prices.
      • asdff 5y ago
        The market sets prices by charging as much as possible and since housing is indispensable rather than an optional commodity. People pay as much as they absolutely can for it, which can be like 90% of their wages in some extreme cases in high cost of living American cities. It's a race to the bottom until there is simply no money left for the landlord and you are on the street, while working a job in some cases.
  • thehappypm 5y ago
    This is so baffling but you're right, a price floor (that is, setting a minimum rent) would create a feeding frenzy for new housing units to come online, since they would backstop risk. Clearly terrible for tenants -- no deals to be had for anyone -- but might actually be better for society!
    • imtringued 5y ago
      The government would rent the apartments and then sublet them to tenants it wants to subsidize.
• maxsilver 5y ago
  > every economist agrees doesn’t work? Yes, but "doesn't work" is a bit of a loaded term. Economists agree that rent control is not the most profitable way to price housing, but since the whole point of rent control is to prevent aggressive profit-seeking in housing, economists "agreeing it doesn't work" is intentionally the goal. Rent controls job is not to make more housing (it has no control over that). Rent control's job is not to make housing cheaper (it has no control over that). Rent controls only job is to provide housing security for existing renters, and the vast majority of the time, it's successful at doing that. If you also want cheaper housing overall, your supposed to pair rent control with a matching set of changes for non-rent-protected residents (like say, pair it with new construction of additional public-owned public-operated housing).
  • jdasdf 5y ago
    >Rent controls only job is to provide housing security for existing renters, and the vast majority of the time, it's successful at doing that.´ At a cost to everyone else.
    • maxsilver 5y ago
      > At a cost to everyone else. It doesn't. There is no cost to anyone else, unless you believe all purchases of all products automatically hurt someone else (since every purchase you make technically reduces overall supply by the amount you purchased)
      • antasvara 5y ago
        The use of rent control isn't the issue. If a policy is in place, actually using the options it affords isn't the issue. It's the policy itself that causes the cost to others. I don't think it's crazy to say that rent control helps those in it and hurts those that aren't in it. That's not the tenant's fault, but we can't pretend that rent control doesn't have an effect on the supply of rentable apartments.
        • maxsilver 5y ago
• throwawaymanbot 5y ago
  In fairness, there's a lot of things economists say does not work, if it conflicts with their chosen life outlook. But can it be said that an absence of rent controls works either? Look at the mess currently in cities all over the world. No Rent Control/Rent Control, makes no difference. Somethnig else is at play.
• sumtechguy 5y ago
  I like to use the book 'economics in one lesson' by Henry Hazlitt to show why. The book has some flaws, and missing about 30 years of new ways to do it, but it shows the secondary effects many policies have. The basic premise of the book is 'broken window'. Which is 'take something from someone else and it will cause economic velocity'. But in the end effect is you are still overall worse off then you were when you started. An easy example is take something simple like 'give food to the hungry who can not afford it'. Sounds nice. Easy to do. Does not really seem to hurt anything. But that can have a inflationary effect on food prices if done too much and too rapidly. Thus creating more 'hungry' people who can not buy food, as maybe their wages are not keeping up. Then causing more money to be injected in to 'fix the issue' again causing inflation. Creating a cycle that can only be broken by hurting a lot of people. That is just one side effect. There are several others. Rent control is similar. The trick is how do you 'fix' things without creating bad cycles? It is not as easy or handwavy as many make it.
• nepeckman 5y ago
  There's a fantastic video essay from an economist that breaks down the issues that are frequently hand waved by saying "X doesnt work, that's just basic economics" https://youtu.be/4epQSbu2gYQ https://youtu.be/4epQSbu2gYQ
• rdedev 5y ago
  https://youtu.be/4epQSbu2gYQ https://youtu.be/4epQSbu2gYQ A deep dive into rent control by a left leaning economist. Start from 21 min mark.
• jlokier 5y ago
  I think it's fair to say that right now, mainstream economists don't appear to have anything they agree does work either. It's useful to know something doesn't work like a proponent would hope, but I don't think it's all that helpful if everything else the economists propose as an alternative, including the status quo, doesn't work either. If the economists can't find a solution, perhaps it has to fall back to moral imperatives and which values to prioritise. Specifically, which is more important, letting people who have lived somewhere much of their lives stay there, or forcing them out into unfamiliar places with no connections so that new, wealthier people can take their place.
  • kyleee 5y ago
    It's hard to expect economists (or anyone really) to be able to fix what is essentially political gridlock and innefective governance. The answer is to build more to outpace demand but that's very difficult for so many reasons including zoning, factions opposed to growth, difficulty scaling supporting infrastructure and services, etc and we're left discussing bandaids to be applied on top of the crusty remains of hundreds of old bandaids covering up the festering wound, so to speak
  • tootahe45 5y ago
    We know what works - building more. To my knowledge, this has only been politically acceptable after a natural disaster like an earthquake which makes a lot of homes unlivable.
• imtringued 5y ago
  Sure, I'll go out of a limb and say that most serious economics do not think austerity works either. For example, the Greek government cut welfare benefits only for the government to lose the next election and the new government to reinstate welfare. This is the "cut the wasteful spending" type of austerity, meaning it's the least bad form of austerity. If you were to cut healthcare, infrastructure or core industries you could easily end up worse off than without austerity. Guess what the Greeks did? They sold their most important assets (ports and ships) to China. Really, the problem with debt is that the person holding onto the money that the debt created decided they want to wait it out and spend their money later. In essence, the problem is that the interest rate on the debt is too high. If that person were to spend all his money, the debt would be gone assuming effective taxation. Meanwhile the IMF will tell literally every country in trouble to do austerity to qualify for support.
• gnopgnip 5y ago
  As you mentioned there is more to it than just addressing affordability. And there is a lot of research showing that it doesn't hurt affordability. https://www.sciencedirect.com/science/article/abs/pii/S0264275115001122 https://www.sciencedirect.com/science/article/abs/pii/S02642...