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The Great Forgetting, yet again. Few things have been proven as resoundingly as "price controls don't work", or more accurately "are very net negative". This
by Wolfenstein98k 4y ago
The Great Forgetting, yet again.
Few things have been proven as resoundingly as "price controls don't work", or more accurately "are very net negative".
This gets forgotten every time someone really wants them to work.
This applies to rent control as much as any other price.
When you want the price of something to be lower, subsidising demand increases prices rather than lowering them.
Suppliers and owners will not simply accept lower prices, even if you really wish they did.
The Great Forgetting - price controls don't work.
- dangerwill 4y agoI agree, time to strip them of the assets then with 0 compensation.
- baggy_trough 4y agoWhat a terrible thing to advocate.
- dangerwill 4y agoAnd landlording is a terrible thing to do
- californical 4y agoAs someone who is renting right now and doesn’t want to own a home currently, where would I live if not for a landlord? Government housing? What in the heck is wrong with someone renting out something that they own?
- yazzku 4y agoSome find it immoral, especially when the landlord has multiple properties, or when, like in the article, they hold up the apartments vacant until their conditions are satisfied. There are also people who are basically social parasites, living off of rent and the work of those who actually contribute to society.
- prepend 4y agoSome find any profit immoral. That doesn’t make them right.
- yazzku 4y ago
- bilvar 4y agoGrown-ups don’t throw tantrums like you do.
- dang 4y agoPlease don't respond to a bad comment by breaking the site guidelines yourself. That only makes everything worse. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html Edit: it looks like you've been posting unsubstantive and/or flamewar comments repeatedly. Would you please stop? We ban that sort of account. It's not what this site is for, and it destroys what it is for.
- dang 4y agoYou can't break the site guidelines like this, regardless of how wrong someone is or you feel they are. We ban accounts that post this way, so please don't do it again. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- Gigachad 4y agoIsn’t holding a unit empty somewhat similar to workers striking until unjust conditions are resolved? If the government is forcing rents to remain under inflation, eventually something will break.
- dangerwill 4y agoYes, government owned and managed housing. Across the more-left leaning parts of Europe this is not controversial at all. It's mostly a US/UK/Canada thing that "government housing" = "scary and full of drugs" because these governments only ever adopted policies for the very bottom of society, and then left these projects to rot over time.
- tomcam 4y agoWhere is this happening in Europe?
- bilvar 4y ago[flagged]
- tempestn 4y agoOK, but that option doesn't exist here currently. So in the actual situation we're living in, are you actually saying that you think it's wrong/evil for a person to choose to invest in a rental property? IE buying a house for the purpose of renting it out? Because I know a lot of people renting and looking to rent who wish more people would do that.
- pxmpxm 4y agoThat's a bit of an inane, edgelord take, no?
- dangerwill 4y agoIt's my honestly held belief that private landlords (both private individuals and even more so corporate) are systemically pushed to provide the least amount of maintenance, repair, and amenities for the most amount of money. Having a market based system for a necessity, especially when the market is allowed to get as incredibly distorted as it has (in the US and Western Europe), is a moral travesty. I have just given up trying to be nice about this, despite HN's capitalist slant
- prepend 4y ago> Having a market based system for a necessity, especially when the market is allowed to get as incredibly distorted as it has (in the US and Western Europe), is a moral travesty Markets for food work pretty well. And for loans. Markets are pretty efficient. That doesn’t mean you don’t regulate them.
- polygamous_bat 4y ago> Markets for food work pretty well. Please look up how much subsidy is given to the American farmers. It's probably more than you think it is. > And for loans. Might have agreed more with you, but then 2008 happened.
- pxmpxm 4y ago> systemically pushed to provide the least amount of maintenance, repair, and amenities for the most amount of money That argument can literally be applied to any product or service, yet here we are. There is a peculiar correlation I have noticed with these views - it tends to be (white) upper middle class suburban upbringing Americans that profess them. Principal agent problem of sorts, I guess.
- tomcam 4y agoHow much property are you renting at a loss to assist others?
- sokoloff 4y agoHow dare some people put up the money long-term to provide housing on a short-term basis to others who need it; what assholes!
- amrocha 4y agoLandlords don't provide shit, the housing is already there they just charge a tenant money to use it
- sokoloff 4y agoThink through the money flows. Developer buys land. Spends all their money on land and building a house. Investor comes along and buys the house to rent it out. Developer now has money to buy another lot and build another house (and other developers notice that they can build houses and get paid to do so). Without the investor money in step 2, developers build a lot fewer houses in steps 1 and 3.
- amrocha 4y agoYou literally admitted it, landlords provide nothing, all they do is finance private spending. Once the property is paid for the landlord gets to keep an appreciating asset and generate cash flow from it by stealing from the tenant's paycheck. Literally leeches on society.
- tempestn 4y agoIf the landlord isn't there to buy the house, it won't get built in the first place. Not everyone can afford to buy a house, so someone needs to provide that capital in order for the housing to exist. No one is stealing anything; the tenant is paying the landlord for the service of lending them the house to live in. The landlord is being compensated for the funds they have tied up in the house, that they can't use to invest in (buy) other things. Like, literally, if there were no landlords, by definition there would be no rental properties. So people who couldn't afford to buy a house outright would have nowhere to live. That can't be what you're advocating?
- technion 4y agoI bought my apartment a decade ago. I needed to move to another area so I rented it out. I regularly see these takes hn and I don't get what's so assholeish about my situation. I know that my tenant is on a temporary visa. Are we arguing that ethically he should have bought my property?
- Ekaros 4y agoCapitalism is general is. Extracting money from others with zero labour put in. We really should socialise everything and ban private ownership.
- bilvar 4y ago[flagged]
- refurb 4y agoThe decades of absolute failure of that model and the need to enforce it through state violence don’t concern you?
- bombcar 4y agoThis time it’ll work! The sad thing is that people don’t bother digging much into it and take simple answers like “greed” instead of figuring out exactly where the monies are going.
- 8note 4y agoits an effective way to remove the high value of housing and landlording, but the government also then has to take over the creation and management of housing
- dixie_land 4y agoMaybe you should move to North Korea where the government does exactly that
- dangerwill 4y agoOr ya know, Austria for example, a country with a better standard of living, overall happiness, and life expectancy than the US
- woodruffw 4y agoThere are many modern, developed, market economy countries where the government enacts controls to ensure access to affordable housing. The US is somewhat of an outlier in that regard.
- 8note 4y agoIt's the backbone of American society too, for land and housing. The colonists certainly didn't pay the natives for their land, and the revolutionaries sure didn't pay Britain to take ownership When land isn't being used effectively, it's moved to another owner with limited to no compensation
- smeagull 4y agoIn the past, civilisation has been held together by the threat of violence on the landed classes. Now that is essentially no longer possible, corruption and inequality have grown unchecked. It is a solution - "Those who make peaceful revolution impossible will make violent revolution inevitable."
- tomcam 4y agoI think it’s unfair you have so many assets compared to the average citizen of Cameroon. Care to redress this grave injustice?
- matsemann 4y agoWhat a stupid comparison. Own 10 houses, all vacant, then you can either sell or rent out. Having people hoard these properties does no good for society.
- tomcam 4y agoSo you’re hoarding resources that could help Cameroon citizens and don’t care. Got it.
- matsemann 4y agoYou think that's such a good "gotcha", but it's just pathetic, really. Like you do so much better. It's perfectly fine to complain about a system, without being a perfect citizen yourself. I can complain about oil companies, and still be dependent on a car.
- MichaelZuo 4y agoI think the parent was saying that your claims would simply not be credible. Not that your claims are somehow physically blocked from being uttered.
- tomcam 4y ago> I agree, time to strip them of the assets then with 0 compensation That’s not a complaint. It is a naked authoritarian call to steal from people who legally do things you disapprove of. Do you give permission to people who dislike your policy positions to take away your livelihood?
- Ekaros 4y agoCompanies like Apple and Google make huge profits. That means they are clearly profiteering of the customers. We should strip the stock from their owners and set them to sell at much much lower prices. Even below cost for good of the world.
- pxmpxm 4y ago[flagged]
- WalterBright 4y agoWage & price controls have been tried for 4,000 years. They have never worked yet. But this never discourages people from trying them again. https://www.amazon.com/Forty-Centuries-Wage-Price-Controls/dp/1610161408 https://www.amazon.com/Forty-Centuries-Wage-Price-Controls/d...
- warning26 4y agoRemember, high rents are always one of the following: A. Evil landlords meet at their secret underground fortress and collectively agree to charge too much for rent B. Evil rich people / foreigners (pick whichever you find more objectionable) have bought up all the housing and are keeping the units vacant to spite everyone Supply and demand doesn't apply to housing, of course. If we build more housing that will just drive prices up! Somehow!
- rootusrootus 4y ago> If we build more housing that will just drive prices up! Somehow! Well, induced demand is a popular theory in other areas, so... maybe?
- commoner 4y ago> In economics, induced demand – related to latent demand and generated demand – is the phenomenon whereby an increase in supply results in a decline in price and an increase in consumption. In other words, as a good or service becomes more readily available and mass produced, its price goes down and consumers are more likely to buy it, meaning that demand subsequently increases. This is consistent with the economic theory of supply and demand. https://en.wikipedia.org/wiki/Induced_demand https://en.wikipedia.org/wiki/Induced_demand
- seunosewa 4y agoHas it been observed in housing?
- zaroth 4y agoThe concept fundamentally does not really apply. Building lots and lots of housing will never induce more per capita housing use in the same way that better roads induce longer per capital commutes. Because the fundamental concept of induced demand doesn’t really track with the concept of having a place to live. You need a place to live, you don’t start using more “place to live” because there are more of them. It can only happen at the fringes — fewer shared leases, more people with 2nd homes. The vast majority will still have one place to live for their family. Population mobility to desirable neighborhoods is also not “induced demand”.
- lostlogin 4y ago> When you want the price of something to be lower, subsidising demand increases prices rather than lowering them. Applying this to healthcare, does it hold? Socialised healthcare appears to be less expensive. I might be missing your point though… > Suppliers and owners will not simply accept lower prices, even if you really wish they did. This isn’t always true. It probably devolves into a discussion on monopsony behaviour which become relevant at a certain point.
- mattnewton 4y agoMy understanding is that socialized healthcare isn't cheaper because it's subsidized, it's cheaper because it has a monopsony buying power when negotiating. And to a lesser extent, I bet it can be marginally cheaper because of a reduction in redundant administration costs across multiple providers. But that, and all other of those facets are dwarfed by the single payer negotiating.
- dantheman 4y agoThe expense of healthcare is also from regulation making competition impossible - patents, fda approval, certificate of need, etc
- lostlogin 4y agoRegulating healthcare seems reasonable to me. A surgery enthusiast startup for cardiac surgery or a garage side hustle pharmaceutical dispensary do not sound like a good idea. Yes, regulation costs, and a lot of that is reasonable.
- deleted 4y ago[deleted]
- Findeton 4y agoIt does hold, just remove healthcare regulation and remove all patents altogether.
- 8note 4y agoRent control works fine for its purpose - keeping people in their houses. If landlords are being abusive, we should update regulations to suitably punish them for that abuse. If landlords are keeping rentals empty, we should add an onerous tax on empty housing
- ReactiveJelly 4y agoWe can't just give people money?
- smeagull 4y agoThe problem here appears to be the landlords are being assholes. When that happens, you don't give up trying to regulate - you regulate them further. Clearly they need a LVT or tax on empty living space to make them play ball. Rent controls are essentially the only thing that has ever worked for cheaper rent.
- macinjosh 4y ago> Clearly they need a LVT or tax on empty living space to make them play ball. Yeah we need to send Vinny and Sal over there to get those assholes to play ball. Whose city do they think this is! /s The mafia and the government operate on the same concepts. Coercion and violence to take your property.
- pretendscholar 4y agoI never understood this. Don't property rights operate on a similar principle? Lets say you own a home, live in it for many years, go on vacation for a week, come back and other people are living in it. Lets also say you live in libertarianstan and there is no state. What do you do? If you try to remove them from some place you believe to be rightfully yours you are using coercion and violence to remove them. Unless you are a pacifist you believe in the use of violence and coercion for some purposes. So saying that a state is illegitimate because it uses such tactics seems silly.
- commoner 4y agoIn libertarianism, the non-aggression principle is not a commitment to pacifism. When someone trespasses on someone else's property, the trespasser is considered the initial aggressor, and the property owner is within their right to remove the trespasser from the property. > Consider the following hypothetical example: >> Trespass: George is walking across a field when David jumps out from behind a bush, grabs him, and gently but forcefully removes him from the area. > In this example, it certainly looks as though David is the one committing an act of aggression against George. After all, George is simply walking along, minding his own business, when David comes from out of nowhere, physically lays hands on him, and drags him off the field. > But suppose that the field in this example is David’s property, and that George is knowingly trespassing across it. In that case it is clear that most libertarians would say that it is actually George who has committed aggression. David’s violence, they would say, is simply an appropriate response to George’s impermissible intrusion upon his land. https://www.cambridge.org/core/journals/social-philosophy-and-policy/article/abs/libertarian-nonaggression-principle/E8CF5446CB1D9601EFA043F7903F1CB1 https://www.cambridge.org/core/journals/social-philosophy-an... Libertarians oppose expropriation and eminent domain because the government is the one initiating the aggression against the property owner by forcible seizure. (Although libertarians support limiting the power of the state, it is not the same thing as eliminating the state entirely. That would be anarchism, not libertarianism.)
- mattzito 4y agoFrom the article, the primary reason landlords are holding inventory back is because some of the predatory practices they were incentivized to use to deregulate their apartments got revoked and they are hoping court cases work in their favor. It’s also important to remember that rent stabilization is not rent control - landlords are free to raise the rent by an amount set annually by a board of landlord and tenant representatives. As a practical matter, that means that the rent increases track closely to inflation and consumer prices. What it protects isn’t rising rent, it protects tenants from landlords jacking up the rent to kick them out, and then lowering it back again to get tenants of a different age or ethnicity, or saddling tenants with the risk that if they advocate for their rights as tenants that their lease may not be renewed next year. It’s easy to say “price controls don’t work” while ignoring that the landlord / tenant relationship is so skewed from a power dynamic that there needs to be some sort of protection from abuse.
- faeriechangling 4y agoIt is absolutely a rent control and price control policy. You are literally preventing rents from rising. Landlords abusing tenants is totally irrelevant because rent control doesn't address that problem at all, it just shifts that abuse to new tenants for the benefit of long term residents, since the entire policy is a wealth transfer to people who never move from where they live.
- ysavir 4y ago> It is absolutely a rent control and price control policy. You are literally preventing rents from rising. As both the article and the GP pointed out, rent stabilization does allow for rents to increase. Are you trying to say they aren't allowed to increase enough, or are you under the impression they don't rise at all?
- faeriechangling 4y agoWow, so the rate at which the price of RENT is increasing is being subject to CONTROLS? In any case, the exact same economic phenomena has been observed regardless of if you fix rent increases to inflation or never allow for rents to increase, because the two approaches are just incredibly similar variants of price controls.
- mushbino 4y agoEasy solution. Rent the units or the city takes them.
- Findeton 4y agoExpropriation, it always works /sarcasm
- Gigachad 4y agoLonger term result: no one builds anymore units in the area ever again. And all existing units are never renovated or maintained.
- EricDeb 4y agoOr do a bit of both. Add a vacancy tax and also incentivize building
- chii 4y agohow do you incentivize building, and yet have a vacancy tax? If you invest in building, but couldn't lent it out (as it's been incentivized so lots of new competition), it would get hit with a vacancy tax! So the risk of building becomes high under a vacancy tax - therefore, it would cost more to incentivize.
- EricDeb 4y agoA vacancy tax would make it less attractive to investors but people purchasing it to live there as their primary residence wouldn't mind. I dont see how forcing a landlord to rent a property out at market rates or pay a tax is a massive burden. It doesn't have to be a real tax, but it would help stop landlords withholding units for no reason except they aren't making enough profit.
- faeriechangling 4y agoPrice controls are useful if you want to ensure a supply or demand surplus, not if you're interested in absolute efficiency. Artificially lowering prices is a good way to lower supply of housing, if that's what you're going for. Since people generally aren't interesting in lowering supply of housing and making the market less efficient, it's not a good approach. The other thing rent control specifically does is give you are larger incentive to live where you've already been living, so if everybody did it, everybody would figure out it was irrational to ever move from the first home they ever rented. This doesn't actually stop "gentrification", it merely slows it, by simply making it hard to move to a new home in general. It also makes the existing residents more wealthy than newcomers, and the existing residents don't consider themselves the "Gentry" no matter how valuable the NY real estate they sit on is. I feel there is a huge mismatch between what rent control actually does and what people are trying to accomplish by implementing it.
- contravariant 4y agoI'm not sure if increasing supply by pricing people out of their homes is the better alternative. Real world free markets consistently fail to reflect the cost of externalities such as the effect of only rich people being able to afford housing in a wide area.
- faeriechangling 4y agoIf you want to ensure people are never priced out of housing, it's possible to guarantee this. You just build a home for every person, and beggars can't be choosers in terms of location, quality of accommodations, roommates, or size. Homelessness will still exist if you do this, as people will simply refuse to live in such places, even if you force them to USSR style, but it's about the only workable approach I'm aware of. Mass scale social housing. If housing isn't connected to price to begin with, you can hardly be priced out of it now can you? Rent controlling privately owned real estate does not work and has never worked. It literally just doesn't do what is claimed. It mostly repeatedly crops up generally because of how politics is structured means long term residents have a lot of clout to propose policies that benefit themselves while spinning BS about how rent control ends homelessness. If you want the right to live in a specific area with specific amenities, well you can't always get what you want. The reality of resource scarcity and power differentials always crops up somewhere.
- woodruffw 4y agoI don’t think this is as much of a slam dunk as you think it is: keeping properties empty is a timeless tradition among NY realtors, and applies equally to commercial and uncontrolled residential properties as well. You just don’t hear about it because they aren’t tracked. Real estate, as far as markets go, is exceptionally prone to profiteering via reduced supply. It’s unlikely that these 60k units would be unprofitable for their owners; the owners have simply determined that they’re not profitable enough.
- stainforth 4y agoDoes economic theory even account for this concept of holding out? It's like those supply and demand graphs assume a good or service is automatically living and moving in a market
- lapcat 4y ago> The Great Forgetting, yet again. > Few things have been proven as resoundingly as "price controls don't work", or more accurately "are very net negative". I don't see how this follows. NYC has had rent stabilization for over 50 years, and the story here is: "the number of rent-stabilized homes reported vacant on annual apartment registrations rose to over 61,000 in 2021 — nearly doubling from less than 34,000 in just a year as the city emerged from COVID lockdown." In other words, a very recent problem. If price controls don't work, then wouldn't they have failed in the year 1971 rather than the year 2021?
- hindsightbias 4y agoI think we need a new term for rationalist economics, something like covidfreakonomics. Only Black Swan data applies.
- throwaway292939 4y agoFrom the article > Altogether, the state numbers show a loss of over 95,000 stabilized apartments for rent after 2019 — the year a major overhaul in Albany of the state’s rent laws blocked landlords from significantly jacking up rents on vacant units when letting them to new tenants.
- hackerlight 4y agoFailure doesn't just manifest as vacancies. Also the change in vacancies over a two year period doesn't say much about 10 years ago. Show me a time series over the last few years.
- cam_l 4y agoThere is a maxim I apply to all these sorts of stories - the best explanation of a rule, political or otherwise, is not its purported reason for existence, it is the results. If a rule performs so badly, and everyone wants it changed, it just gets changed. If it doesn't get changed, it is usually because it is performing exactly as desired (if not always as intended). I think it is based on a mathematical theorem or something, but i have long since forgotten.
- throwaway292939 4y agoWith price controls, seeing this firsthand, landlords are less incentivized to renovate existing apartments and keep them competitive. With price controls, there is a limit to how much you can invest in a property to fix it up to attract new tenants.
- joak 4y agoRental market is not a free market. Is not like if you let the prices go up, you'll have more supply. There are building permits with harsh rules. The reasons of these permits and rules is to keep the city livable, beautiful and functional. Since you cannot build freely if left unchecked the prices would go to the sky. And you don't want that because functional city needs working class people, you need nurses, shop attendants, janitors, etc... Maybe you think city planning and urbanism are bad ideas and that we should let the free market magically solve all the problems.
- ricardobayes 4y agoPrice caps generally don't work, however EU examples show that some balanced 'price control' can work. There are rent moderation schemes in place in France, Germany, Ireland and parts of Spain. It's working well so far.
- djbebs 4y agoIt's working so well that those countries household incomes are comparable to Louisiana.
- EricDeb 4y agoHow about a vacancy tax so landlords can't just keep properties off the market?