3 ms·
Rent control decreases the incentive to build
by throwaway6734 5y ago
Rent control decreases the incentive to build
- nivenkos 5y agoI'm not a property developer, so I don't know how many flats they are forced to rent out as first-hand contracts when building new blocks. You can definitely buy apartments from new blocks though, and then you're just paying the normal market price. Second-hand contracts and commercial rentals also aren't covered by the rent controls, but I imagine the property developers can't rent them like that directly (only by selling them).
- epistasis 5y agoHow does it do that? Are the builders typically the same as the owners in Sweden? If so, I could see that being true. But if housing builders are different than the eventual owners, the have different economic interests, and rent control shouldn't limit housing production.
- stonemetal12 5y agoDoesn't really matter who the owner is. If it costs 1 million to build a new apartment complex, and rent control means it will only return 500K in a reasonable time frame it doesn't get built. If it returns 1.5 million in a reasonable time frame it does. A builder isn't going to build it if no one will buy it, and no one will buy it if they lose money on the rent.
- epistasis 5y agoRent control doesn't apply to the price of new housing, at least for any the many many versions of rent control I've seen. Rent control only limits the increases on existing housing. The new building can charge whatever they want, they just can't depend on large increases in rent later on after their initial pricing. This same assumption, no huge rise in rents later, is also applied by financiers.
- sokoloff 5y agoHousing is produced because there are buyers are willing to pay an amount $X that makes it attractive to build. Anything that reduces that value $X likely has a negative influence on marginal housing construction.