4 ms·

There is lots of research on this. Here's one heavily cited paper that finds what the previous poster was suggesting. Fine to disagree, but it would be nice to

by Gimpei 5y ago

There is lots of research on this. Here's one heavily cited paper that finds what the previous poster was suggesting. Fine to disagree, but it would be nice to see some counter evidence. https://web.stanford.edu/~diamondr/DMQ.pdf https://web.stanford.edu/~diamondr/DMQ.pdf In terms of London, there is also the problem of building restrictions. I don't think we're going to see tall residential towers popping up in say, Mayfair, anytime soon. I understand that this kind of change would completely transform the character of London. But the price of not wanting change is sky high rents.

blitzar 5y ago
Not in Mayfair, but all around the fringes of the city they are. If you want a £500,000 studio flat 30 minutes away from central london by tube there is a massive amount of supply. If however, you can afford said property, you probably dont want to jam your wife and 2 kids into it.
- philjohn 5y ago
  And with high speed trains on the west coast mainline you can get a 5 bed detached with garden for around that - with Euston reachable in 45-50 minutes in places like Rugby.
wahern 5y ago
I'm generally favorable to rent control (it's a socio-political tradeoff, like all public policies), but rent control on single-family homes or single units (as with renting an in-law), which is what that paper examines, is a horrible policy. The consequences for landlords are far more extreme than rent control on large, multi-unit buildings. This makes it's difficult to infer similar supply effects between rent control on single-family homes and on multi-unit buildings. Turnover in SF is actually quite robust. The vast majority of tenants don't stay in the same apartment for decades. This is especially true during boom periods. IOW, ebbs & flows in turnover actually tend to benefit landlords. But a small number do. The average turnover rate is ~20%, which means the average occupancy is ~5 years. For large buildings what matters is the average. The fewer the number of units (either in a building, or in your portfolio), the riskier things become. The riskiest of all is a single-family home, whether you rent out an in-law or the whole house. In the face of rent control you're not only risking being stuck with the same person indefinitely, paying an increasingly below market rent, but you're locking up for an indefinite period what is probably your largest and most important asset. It's a potential financial nightmare, and one with realistic odds (e.g. maybe 1 in 10 instead 1 in 10000) of befalling you. As the building grows larger, the more the risk is spread and you can rely on the average occupancy term. Moreover, the larger the building, the less likely one would want to tear it down to build something larger. IOW, the larger the building, the more closely your expected future investment returns approach non-rent control levels. Rent control policies should be accompanied by policies that promote densification. All forms of rent control will tend to reduce supply to some extent (at least, that should be the a priori expectation), but rent control also provides important social benefits. IMO, those lines cross, but I would never expect the benefits to be greater than the costs in the context of single-family homes.
- gnopgnip 5y ago
  Rent control in San Francisco doesn't apply to single family homes or condos. As the owner you can raise the rent to market rate.
  - wahern 5y ago
    You're right. I was confused. It doesn't cover the main residence of single-family homes. But AFAIU the 1994 rent control extension did encompass pre-1980 in-laws in single-family homes, which are quite common in the vast areas of San Francisco containing single-family homes. (Most homes built after 1930 put the primary living space on the 2nd floor. The first floor was a garage, and it was extremely common to build an in-law at the back of the garage.) They would be more common but for the fear people have renting them out. The 1994 law encompassed multi-unit buildings of 4 or less, which were previously excluded from rent control. An elderly neighbor of mine owns a classic 1960s-era 3-story, 2-unit apartment building. He lives in one unit and keeps the other vacant so that his children won't have any trouble refurbishing or selling the asset when he dies. This is a nearly identical scenario to someone living in a single-family home with an ADU. There are several such homes on my block, though I don't know the owners so don't know how many are kept unnecessarily vacant.
gnopgnip 5y ago
There is lots of research going the other way too. https://www.sciencedirect.com/science/article/abs/pii/S0264275115001122 https://www.sciencedirect.com/science/article/abs/pii/S02642... Forty years of rent control: Reexamining New Jersey’s moderate local policies after the great recession. The short of it is moderate rent control doesn't positively or negatively impact aggregate prices, but it prevents displacement in the short term.

by Gimpei 5y ago

blitzar 5y ago

Not in Mayfair, but all around the fringes of the city they are. If you want a £500,000 studio flat 30 minutes away from central london by tube there is a massive amount of supply. If however, you can afford said property, you probably dont want to jam your wife and 2 kids into it.

philjohn 5y ago
And with high speed trains on the west coast mainline you can get a 5 bed detached with garden for around that - with Euston reachable in 45-50 minutes in places like Rugby.

wahern 5y ago

I'm generally favorable to rent control (it's a socio-political tradeoff, like all public policies), but rent control on single-family homes or single units (as with renting an in-law), which is what that paper examines, is a horrible policy. The consequences for landlords are far more extreme than rent control on large, multi-unit buildings. This makes it's difficult to infer similar supply effects between rent control on single-family homes and on multi-unit buildings. Turnover in SF is actually quite robust. The vast majority of tenants don't stay in the same apartment for decades. This is especially true during boom periods. IOW, ebbs & flows in turnover actually tend to benefit landlords. But a small number do. The average turnover rate is ~20%, which means the average occupancy is ~5 years. For large buildings what matters is the average. The fewer the number of units (either in a building, or in your portfolio), the riskier things become. The riskiest of all is a single-family home, whether you rent out an in-law or the whole house. In the face of rent control you're not only risking being stuck with the same person indefinitely, paying an increasingly below market rent, but you're locking up for an indefinite period what is probably your largest and most important asset. It's a potential financial nightmare, and one with realistic odds (e.g. maybe 1 in 10 instead 1 in 10000) of befalling you. As the building grows larger, the more the risk is spread and you can rely on the average occupancy term. Moreover, the larger the building, the less likely one would want to tear it down to build something larger. IOW, the larger the building, the more closely your expected future investment returns approach non-rent control levels. Rent control policies should be accompanied by policies that promote densification. All forms of rent control will tend to reduce supply to some extent (at least, that should be the a priori expectation), but rent control also provides important social benefits. IMO, those lines cross, but I would never expect the benefits to be greater than the costs in the context of single-family homes.

gnopgnip 5y ago
Rent control in San Francisco doesn't apply to single family homes or condos. As the owner you can raise the rent to market rate.
- wahern 5y ago
  You're right. I was confused. It doesn't cover the main residence of single-family homes. But AFAIU the 1994 rent control extension did encompass pre-1980 in-laws in single-family homes, which are quite common in the vast areas of San Francisco containing single-family homes. (Most homes built after 1930 put the primary living space on the 2nd floor. The first floor was a garage, and it was extremely common to build an in-law at the back of the garage.) They would be more common but for the fear people have renting them out. The 1994 law encompassed multi-unit buildings of 4 or less, which were previously excluded from rent control. An elderly neighbor of mine owns a classic 1960s-era 3-story, 2-unit apartment building. He lives in one unit and keeps the other vacant so that his children won't have any trouble refurbishing or selling the asset when he dies. This is a nearly identical scenario to someone living in a single-family home with an ADU. There are several such homes on my block, though I don't know the owners so don't know how many are kept unnecessarily vacant.

gnopgnip 5y ago

There is lots of research going the other way too. https://www.sciencedirect.com/science/article/abs/pii/S0264275115001122 https://www.sciencedirect.com/science/article/abs/pii/S02642... Forty years of rent control: Reexamining New Jersey’s moderate local policies after the great recession. The short of it is moderate rent control doesn't positively or negatively impact aggregate prices, but it prevents displacement in the short term.