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There are few mechanisms through which rent control can hurt. Rent control discourages building more units. The more you can make from rental, the more compani

• pydry 5y ago
  >Rent control discourages building more units. Yet the strictest rent controls went hand in hand with the fastest homebuilding spree in 1950s NYC. It clearly didnt discourage that much. Maybe it didnt discourage it at all? Or maybe it does a bit but is eclipsed by the effect of, say, NIMBY landlords inhibiting development, hellbent on staying above water on their eyewatering SF mortgage. >Rent control can decrease efficiency of living situations. You can imagine an old woman living alone in a 3 bedroom unit with rent control because it would be more expensive for her to move to a smaller unit. I can imagine. She could get priced out of the city entirely I suppose. It seems to me that if the market rate is intent on 10x'ing her rent maybe it's the market that should be forced to adjust first, not her. More home building. Higher property taxes. Rent control while the effects kick in.
  • Manuel_D 5y ago
    Seattle (which is for forbidden by the state from implementing rent control) added 2-3x the housing units as San Francisco from 2010-2020 despite similar population growth in both cities. The impact of price controls on supply is a well studied phenomenon. Lower price for something -> less incentive to produce it.
    • pydry 5y ago
      If you look at the data above it shows home building peaking in the early 1960s in NYC. Rent control laws were strong until the 1970s. That's the point when homebuilding plunged and didn't perk up for decades. Weakening them in 1974 if anything seemed to restrict supply. SF has comically low density housing that is driven by homeowners lobbying to restrict development. The difference between SF and Seattle is probably property taxes (higher in Seattle). It discourages land from being hoarded and used unproductively.
    • Avshalom 5y ago
      Units built after 1980 in SF units aren't subject to rent control. On a purely econ 101 level "old units are unprofitable/new units are profitable" should spur more new construction to minimize the effects of old units on your portfolio.
      • fiter 5y ago
        I agree with this, but the misunderstanding because no one is explicitly talking about how there is a desire to preserve rent controlled units. This means it's very hard for the econ 101 to play out.
    • plorkyeran 5y ago
      You're blaming rent control for SF not building housing even though SF rent control doesn't apply to new buildings built (and hasn't for 40 years)?
      • Manuel_D 5y ago
        70% of housing units in SF are still rent controlled. The negative influence of price controls are still felt. Not to mention, repeated attempts to repeal Costa-Hawkins means the threat of rent control is still hanging over developers heads.
      • fiter 5y ago
        Because of the laws around new buildings, rent control advocates have an incentive to prevent old buildings from being redeveloped: if they are redeveloped then there will be fewer rent controlled units! This does regularly play out in the politics of development in the area[0]. Then when rent controlled unit can be redeveloped, there's a desire to allocate various percentages to different income levels. This means that some units have less income for the same cost so it's hard to balance meaning fewer projects get off the ground. Now there's even further issues about development as a right vs requiring a use permit... So, there's a lot of contributors, but the political impact of the politics of rent control is significant. [0] https://www.berkeleyside.org/2021/07/28/uc-berkeley-settlement-housing-enrollment https://www.berkeleyside.org/2021/07/28/uc-berkeley-settleme...
      • refurb 5y ago
        It’s doesn’t take a genius to see see that being a landlord in SF is an ugly prospect.
    • com2kid 5y ago
      > Seattle (which is for forbidden by the state from implementing rent control) added 2-3x the housing units as San Francisco from 2010-2020 and yet to keep up with demand we would've needed to more than 3x what we did, though from what I understand, the infrastructure to build more high density housing even faster just doesn't exist. Seattle was literally building housing as fast as it is possible for a US city to build housing. If true that, in my opinion, points to a more significant problem in America.
  • davrosthedalek 5y ago
    How exactly do higher property taxes encourage more homes being built? Edit: I guess you mean taxes on land, not the houses. But even then, would this not encourage to build high-yield luxury condos instead of high-density cheap space?
  • nearbuy 5y ago
    > It seems to me that if the market rate is intent on 10x'ing her rent maybe it's the market that should be forced to adjust first, not her. Assuming a family of 4 would live there instead, she's effectively removing 3 people from the city. That can force other old women to move out of nearby homes that aren't rent controlled (since prices become higher than they'd be if more people could fit in existing housing), or it could prevent people from moving in. But either way, less people can live there. The policy isn't without harm. > I can imagine. She could get priced out of the city entirely I suppose. kind of an unlikely worst case. There's a gradient of prices as you move further from the city center, and this particular hypothetical woman is moving to a much smaller unit. I haven't heard of a city where the average market price unit was 10x the rent controlled price. It's probably 2x-3x at worst for an equivalent unit.
    • oolang 5y ago
      > Assuming a family of 4 would live there instead, she's effectively removing 3 people from the city. I think is overrated concern in general. Most popular cities aren't underdeveloped. Rather the problem is concentration of resource. Having less optimized areas are actually a good things as that means more areas are equivalent. Which is really what supply is in housing markets. It's when every one too young, old or poor have to move you get problems because now all the attractive things are in the same area. Which means the demand will be very high. Also this is happening in the housing market in general but apparently it isn't a problem when it's wealthy people retiring in their forties because of the housing market itself. > There's a gradient of prices as you move further from the city center, and this particular hypothetical woman is moving to a much smaller unit. That is mostly true if you are moving voluntarily. Because if you couldn't find something beneficial you wouldn't move in the first place. It isn't as true when you are being forced to move. Often it isn't even about what you are moving to but what you are moving from. Once you can't live close to your family, acquaintances or familiar establishment it doesn't matter as much. It's sort of curious how so many seem to agree that we are "losing our values" in society (or whatever) but then base everything on assets. If we want people to be able to live close to their grandchildren, know their friends from growing up, involve themselves in organization or otherwise make social connections it isn't going to be free.
  • IkmoIkmo 5y ago
    There's a shortage of bread. What's the solution? > More bread baking. Higher bread taxes. Limit bread prices while the effects of all these magical new baking companies flocking to lower prices and higher taxes kick in. Also, some will get cheap subsidised bread allotments, others won't get anything. And if you get an allotment of bread to feed 3 people but it's only you, there's no mechanism that redistributes the excess to those who need it most, despite massive scarcity. And if you get a certain type of bread you like at a certain age, but your preferences change and it becomes bland, there's no mechanism for others who love your type of bread, to be incentivised to exchange your types. e.g. my dad, who is in a rent-controlled apartment with 3 bedrooms in the capital city and has no mechanism or incentive to move out, despite not using the space, not wanting the space, and not wanting to live in such an in-demand area necessarily. Oh wait, I meant bread. Rent control has 2nd order effects that can do a lot of harm. If rent-control was mixed with market based incentives and a limited time to the right to an apartment, it wouldn't be as bad. I'm not against rent-control per se, but as with all things, it must be balanced. Just adding more of it isn't a solution. And balancing existing rent-control rules with reasonable additional (market) incentives, would help. For example, if cities allow an individual to live in a rent-controlled unit for 8 years, after which they must leave, that's better. The unit can then go to someone else, also rent-controlled. Instead, some people get a lifetime right, and others a lifetime waiting list. That's a fundamentally unfair use of public funds. It's not perfect (leaving a home has a chance of making it harder to stay connected to a local labour/social circle), but two people having each 8 years is clearly preferable to one having 16 and the other nothing. Another example is if (such as in Germany I believe, if anyone can link an English source that'd be great) you have a system where your rent is controlled based on usage. e.g. suppose market rent is 1500 for a 3 bedroom, rent controlled it's 750 for a family of 3. The moment you live there alone it's no longer 750, but instead say 1000. That creates natural incentives to only renting a place that is necessary to fit your lifestyle. My dad for example would exchange his place with someone who lives with a family of 3 in a 1 or 2 bedroom home, because of this.
  • georgeecollins 5y ago
    I don't know if this mattered, but there was still a lot of public housing being built in New York in the 1950s. https://www.guernicamag.com/the-rise-and-fall-of-public-housing-in-nyc/ https://www.guernicamag.com/the-rise-and-fall-of-public-hous...
• igammarays 5y ago
  > Rent control discourages building more units. The more you can make from rental, the more companies will invest in new construction projects. Actually, I would think the opposite. If capital-laden landlords aren't getting increased returns from their existing holdings, they would be incentivized to create more supply by funding new developments.
  • ralusek 5y ago
    Then you don't understand opportunity cost. If the ROI isn't there, they're not gonna invest in real estate at all.
    • igammarays 5y ago
      Rent control doesn't typically restrict the prices they can set on new housing, only on existing units. Therefore the ROI is there to be had, just not in forcing people out of their homes.
      • KptMarchewa 5y ago
        You need to build higher, and the way to do it is to force people out of their small homes and build large ones.
        • michaelmrose 5y ago
          Actually nimby zoning is more so what prevents this in Seattle. Without such small groups of home owners could potentially drastically increase their profit on their homes by selling together to a developer building an apartment building.
  • nearbuy 5y ago
    Rent control can mean many different things. Different rent control schemes are implemented in different cities. But generally, any rent control scheme that reduces rental prices across the board is going to reduce new construction. I think this is pretty uncontroversial among economists. I think your logic is flawed here. 1. There's no reason why making landlords earn less money would make them want to invest in real estate more. If you have $1 million to invest, you'll try to choose the best investment available to you. It doesn't make a difference if your current property is doing well or badly. 2. If landlords make less money, they should have less capital. 3. Even assuming your premise was correct and landlords who make more money from their property want to invest in new properties less, it wouldn't matter. As long as building new units is a good investment, someone else would do it.
• marcus_holmes 5y ago
  Berlin is rent-controlled (though probably not to the same extent as Stockholm), and covered in new apartment building sites. Though Berlin is going through interesting times with rent control at the moment.
  • KingMachiavelli 5y ago
    New development is occurring in Berlin because the rent control does not apply to new units and it's on purpose. (Although didn't the rent control policy get voided by some court?).
    • marcus_holmes 5y ago
      As I understand it, and I'm not sure I do, the "you can't increase rent by that much" law got knocked down, and the govt response was to buy a bunch of properties and offer them for rent at rent-controlled prices. Interesting times. It'll be fascinating to see this play out. Like a social experiment on rent control.
  • colinmhayes 5y ago
    And it's next to impossible to move to the rent controlled side of Berlin. The reality of rent control is it's a handout for the people who already live there at the expense of those that wish to move there.
    • oolang 5y ago
      I don't see how that is particularly legitimate argument against rent control as that is how the housing market works in general. The difference is that if you buy an apartment you also get appreciation.
      • deleted 5y ago
        [deleted]
• raffraffraff 5y ago
  If rent control discourages building more units, then the market has failed and the government or local authorities should build "more units"