7 ms·

Why do you consider the 2 examples you gave “draconian”?

by ido 5y ago

standardUser 5y ago
Draconian is a strong word (but cool-sounding) and what I really mean is "antiquated". But they are also somewhat blunt instruments and have historically lead to unwanted consequence. We already have more modern, market-oriented solutions, like vouchers and tax-credit housing, but those have problems too. My bigger point was, Millennials tend to react big when specific issues rise to the forefront, and if there aren't better solution than what is already on the table, we risk people clinging to whatever ideas do exist, which in the realm of housing, are mostly shit ideas.
- beepbooptheory 5y ago
  Its interesting how often on HN the main problem always ends up being how people will "feel" about the next crisis, and the danger of that feeling itself. It's a weird kind of proxy self-consciousness older generations have on behalf of the economy. Always and forever: "no no, it's not that bad, really!" meanwhile people are very much homeless, whether they are millenials or not, whether they react strongly or not.
mrfusion 5y ago
Rent control really doesn’t make sense. If we could make things cheaper by passing a law we’d do it for everything. Rent control won’t work for the same reason a price control for food or cars won’t work. https://freakonomics.com/podcast/rent-control/ https://freakonomics.com/podcast/rent-control/
- standardUser 5y ago
  Some forms of rent stabilization make perfect sense. But most of the policies implemented in big cities are far too restrictive. There is a lot of policy to be explored between "your rent never goes up forever" and "you can't be immediately evicted for no reason". No one wants the latter, but there are better ways to address that, like much longer notices for rent increases, or requiring multi-year lease options.
  - mrfusion 5y ago
    Sounds feasible. I don’t normally think of that as rent control.
  - nradov 5y ago
    San Jose limits annual rent increases to 5%. That seems reasonable (unless inflation gets out of control). Tenants aren't immediately forced out of their homes if the market rate jumps 20% in one year. But landlords can still eventually raise rents to market rates spread out over several years. There's no absolute limit on maximum rent.
    - laverya 5y ago
      If it was inflation + 5%, I'd be fine with that - but a flat 5% limit only works so long as inflation stays low.
      - dragonwriter 5y ago
        Technically, it only works if the (notional, I’m not sure this is an actual tracked category) PPI for rental housing is low, general (CPI) inflation may loosely correlate with that, but its not directly relevant.
    - ralph84 5y ago
      Inflation may not be out of control yet, but certainly things like insurance, parts and labor for repairs and maintenance, and HOA dues are already increasing more than 5%/year. And property taxes alone are guaranteed to increase 2%/year in California. Not saying we should feel sorry for landlords, but when some parts of a market have price controls and other parts don't, distortions are inevitable.
      - dragonwriter 5y ago
        > And property taxes alone are guaranteed to increase 2%/year in California No, they aren't. Assuming no increase in property tax rate (which is a good assumption, since your local taxing jurisdiction almost certainly already charges the maximum nominal rate of 1% allowed under Prop. 13), your property taxes will increase only by the amount your assessed value for taxation increases, which is capped to the lower of 2% or the actual annual (trailing) rate of inflation. For 2021/2022 the actual cap is 1.036%, based on the actual California CPI for October 2019 through October 2020.
- antisthenes 5y ago
  > If we could make things cheaper by passing a law we’d do it for everything. Price controls for medicine are proven to work, based on single payer European systems. They cost cheaper and provide better outcomes than the US system. Yet here we are.
  - mrfusion 5y ago
    That’s a little different because we’re dealing with a monopoly which can raise prices above the market rate. But you are correct that in those cases it can work well. Same with other monopolies like utilities.
  - FredPret 5y ago
    That’s different. The drugs are invented and produced all over the world and can be imported to Europe. So low European drug prices will harm overall pharma innovation a bit without killing the entire market. Housing, OTOH, is always local. Low rents will discourage development which will make the real, underlying problem worse.
  - nradov 5y ago
    That is an example of what economists call the free rider problem. European countries get cheap drugs only because they are effectively being subsidized by Americans. https://www.investopedia.com/terms/f/free_rider_problem.asp https://www.investopedia.com/terms/f/free_rider_problem.asp Outcome differences are due more to public health and social factors like obesity. Expensive drugs or lack thereof have only a tiny impact at the population level.
    - toomuchtodo 5y ago
      US pharma spends an outsized amount on sales and marketing, expenses that could be eliminated if public funding was spent directly on R&D. Europeans aren’t free riding; they’re paying a reasonable rate for these goods while Americans are shouldered with extraction of revenue for pharma profits and those inefficient (and arguably unnecessary) sales and marketing expenses. Only two countries in the world permit marketing directly to consumers to promote pharmaceuticals: the United States and New Zealand.
- lordnacho 5y ago
  As described by Freakonomics and general economic education, this is more or less right. However keep in mind there's two kinds of rent. You can rent a house, or you can rent money and buy a house. Historically and across countries there's been some willingness to restrict mortgage LTVs and interest-to-income ratios. At least in some European countries the interest ratio depends on a fixed interest rate (eg 5%) rather than the current interest rate. We can create and destroy money more easily than we can create and destroy homes, maybe that's a worthwhile lever to try.
zbrozek 5y ago
Not the OP, but I'll guess that it's because both of them strongly erode property rights. Another, more freedom-preserving, approach is to make it easier to build build build. Planet Money had a decent introduction a couple years ago.[0] In the current NIMBY climate, my neighbor is struggling with the red tape to repave her driveway. Building a new home around here seems about as improbable as a hobbyist making the first human Mars landing. [0] https://www.npr.org/sections/money/2019/03/05/700432258/the-return-of-rent-control https://www.npr.org/sections/money/2019/03/05/700432258/the-...
- bakuninsbart 5y ago
  Are property rights freedom-preserving? One of the most infuriating bits of my visit to the US West coast was driving up from LA to SF and a lot of the really nice bits of coast not being accessible to the public. There's compromises like germanic Jedermansrecht [0], but overall I think limiting property rights is often a net gain of freedom. I do agree on the problem of NYMBYism though. There's a funny-if-not-so-sad dispute here in Berlin at the moment, where the leftist state government is desperately trying to build public housing while the leftist local government in the district of Lichtenberg is blocking a major developing due to local concern. Sadly I can't find an article in English, but I am sure there are dozens if not hundreds of examples for that. [0]https://en.wikipedia.org/wiki/Freedom_to_roam https://en.wikipedia.org/wiki/Freedom_to_roam
  - reducesuffering 5y ago
    All of the California coastline is public.
    - jcrawfordor 5y ago
      California coast is public up to mean high tide. This is appreciably different from, for example, Oregon where it is public further in (typically to the vegetation line, details are slightly complex). It makes it significantly easier for California property owners to de facto remove public access to beaches, which is very common in some areas. On top of this, CA courts have often been reluctant to enforce public rights to beaches.
JTbane 5y ago
Econ 101 says that rent control (in effect a price ceiling) just results in scarcity (people are unable to get ANY housing), rather than actually reducing the cost of housing.
- Enginerrrd 5y ago
  I'm not sure why you're being downvoted. This is the theoretical prediction based on simple microeconomics. By example, I believe NY rent controls were ineffective to the point where rents outside of controlled areas went higher than they otherwise would have and within rent control areas there was (and is) scarcity of housing.
- Rebelgecko 5y ago
  It also exacerbates other problems that go hand in hand with urban areas, such as traffic. Most people would rather stay in their rent controlled apartment and drive an hour to work instead of having to move and pay the current market value

Why do you consider the 2 examples you gave “draconian”?

by ido 5y ago

Why do you consider the 2 examples you gave “draconian”?

Draconian is a strong word (but cool-sounding) and what I really mean is "antiquated". But they are also somewhat blunt instruments and have historically lead to unwanted consequence. We already have more modern, market-oriented solutions, like vouchers and tax-credit housing, but those have problems too. My bigger point was, Millennials tend to react big when specific issues rise to the forefront, and if there aren't better solution than what is already on the table, we risk people clinging to whatever ideas do exist, which in the realm of housing, are mostly shit ideas.

beepbooptheory 5y ago
Its interesting how often on HN the main problem always ends up being how people will "feel" about the next crisis, and the danger of that feeling itself. It's a weird kind of proxy self-consciousness older generations have on behalf of the economy. Always and forever: "no no, it's not that bad, really!" meanwhile people are very much homeless, whether they are millenials or not, whether they react strongly or not.

mrfusion 5y ago

Rent control really doesn’t make sense. If we could make things cheaper by passing a law we’d do it for everything. Rent control won’t work for the same reason a price control for food or cars won’t work. https://freakonomics.com/podcast/rent-control/ https://freakonomics.com/podcast/rent-control/

standardUser 5y ago
Some forms of rent stabilization make perfect sense. But most of the policies implemented in big cities are far too restrictive. There is a lot of policy to be explored between "your rent never goes up forever" and "you can't be immediately evicted for no reason". No one wants the latter, but there are better ways to address that, like much longer notices for rent increases, or requiring multi-year lease options.
- mrfusion 5y ago
  Sounds feasible. I don’t normally think of that as rent control.
- nradov 5y ago
  San Jose limits annual rent increases to 5%. That seems reasonable (unless inflation gets out of control). Tenants aren't immediately forced out of their homes if the market rate jumps 20% in one year. But landlords can still eventually raise rents to market rates spread out over several years. There's no absolute limit on maximum rent.
  - laverya 5y ago
    If it was inflation + 5%, I'd be fine with that - but a flat 5% limit only works so long as inflation stays low.
    - dragonwriter 5y ago
      Technically, it only works if the (notional, I’m not sure this is an actual tracked category) PPI for rental housing is low, general (CPI) inflation may loosely correlate with that, but its not directly relevant.
  - ralph84 5y ago
    Inflation may not be out of control yet, but certainly things like insurance, parts and labor for repairs and maintenance, and HOA dues are already increasing more than 5%/year. And property taxes alone are guaranteed to increase 2%/year in California. Not saying we should feel sorry for landlords, but when some parts of a market have price controls and other parts don't, distortions are inevitable.
    - dragonwriter 5y ago
      > And property taxes alone are guaranteed to increase 2%/year in California No, they aren't. Assuming no increase in property tax rate (which is a good assumption, since your local taxing jurisdiction almost certainly already charges the maximum nominal rate of 1% allowed under Prop. 13), your property taxes will increase only by the amount your assessed value for taxation increases, which is capped to the lower of 2% or the actual annual (trailing) rate of inflation. For 2021/2022 the actual cap is 1.036%, based on the actual California CPI for October 2019 through October 2020.
antisthenes 5y ago
> If we could make things cheaper by passing a law we’d do it for everything. Price controls for medicine are proven to work, based on single payer European systems. They cost cheaper and provide better outcomes than the US system. Yet here we are.
- mrfusion 5y ago
  That’s a little different because we’re dealing with a monopoly which can raise prices above the market rate. But you are correct that in those cases it can work well. Same with other monopolies like utilities.
- FredPret 5y ago
  That’s different. The drugs are invented and produced all over the world and can be imported to Europe. So low European drug prices will harm overall pharma innovation a bit without killing the entire market. Housing, OTOH, is always local. Low rents will discourage development which will make the real, underlying problem worse.
- nradov 5y ago
  That is an example of what economists call the free rider problem. European countries get cheap drugs only because they are effectively being subsidized by Americans. https://www.investopedia.com/terms/f/free_rider_problem.asp https://www.investopedia.com/terms/f/free_rider_problem.asp Outcome differences are due more to public health and social factors like obesity. Expensive drugs or lack thereof have only a tiny impact at the population level.
  - toomuchtodo 5y ago
    US pharma spends an outsized amount on sales and marketing, expenses that could be eliminated if public funding was spent directly on R&D. Europeans aren’t free riding; they’re paying a reasonable rate for these goods while Americans are shouldered with extraction of revenue for pharma profits and those inefficient (and arguably unnecessary) sales and marketing expenses. Only two countries in the world permit marketing directly to consumers to promote pharmaceuticals: the United States and New Zealand.
lordnacho 5y ago
As described by Freakonomics and general economic education, this is more or less right. However keep in mind there's two kinds of rent. You can rent a house, or you can rent money and buy a house. Historically and across countries there's been some willingness to restrict mortgage LTVs and interest-to-income ratios. At least in some European countries the interest ratio depends on a fixed interest rate (eg 5%) rather than the current interest rate. We can create and destroy money more easily than we can create and destroy homes, maybe that's a worthwhile lever to try.

zbrozek 5y ago

Not the OP, but I'll guess that it's because both of them strongly erode property rights. Another, more freedom-preserving, approach is to make it easier to build build build. Planet Money had a decent introduction a couple years ago.[0] In the current NIMBY climate, my neighbor is struggling with the red tape to repave her driveway. Building a new home around here seems about as improbable as a hobbyist making the first human Mars landing. [0] https://www.npr.org/sections/money/2019/03/05/700432258/the-return-of-rent-control https://www.npr.org/sections/money/2019/03/05/700432258/the-...

bakuninsbart 5y ago
Are property rights freedom-preserving? One of the most infuriating bits of my visit to the US West coast was driving up from LA to SF and a lot of the really nice bits of coast not being accessible to the public. There's compromises like germanic Jedermansrecht [0], but overall I think limiting property rights is often a net gain of freedom. I do agree on the problem of NYMBYism though. There's a funny-if-not-so-sad dispute here in Berlin at the moment, where the leftist state government is desperately trying to build public housing while the leftist local government in the district of Lichtenberg is blocking a major developing due to local concern. Sadly I can't find an article in English, but I am sure there are dozens if not hundreds of examples for that. [0]https://en.wikipedia.org/wiki/Freedom_to_roam https://en.wikipedia.org/wiki/Freedom_to_roam
- reducesuffering 5y ago
  All of the California coastline is public.
  - jcrawfordor 5y ago
    California coast is public up to mean high tide. This is appreciably different from, for example, Oregon where it is public further in (typically to the vegetation line, details are slightly complex). It makes it significantly easier for California property owners to de facto remove public access to beaches, which is very common in some areas. On top of this, CA courts have often been reluctant to enforce public rights to beaches.

JTbane 5y ago

Econ 101 says that rent control (in effect a price ceiling) just results in scarcity (people are unable to get ANY housing), rather than actually reducing the cost of housing.

Enginerrrd 5y ago
I'm not sure why you're being downvoted. This is the theoretical prediction based on simple microeconomics. By example, I believe NY rent controls were ineffective to the point where rents outside of controlled areas went higher than they otherwise would have and within rent control areas there was (and is) scarcity of housing.
Rebelgecko 5y ago
It also exacerbates other problems that go hand in hand with urban areas, such as traffic. Most people would rather stay in their rent controlled apartment and drive an hour to work instead of having to move and pay the current market value