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An argument could be made for rent controlled apartments being a net positive. Not just for the people renting them but also for the businesses hiring those peo

by wilfra 14y ago

An argument could be made for rent controlled apartments being a net positive. Not just for the people renting them but also for the businesses hiring those people and by extension their customers.

davidandgoliath 14y ago
That may have been more of an argument prior to the internet -- e.g. now someone can find an alternative place to stay in fifteen minutes on craigslist at a cheaper rate. That is unless all of the landlords get together and price-fix, though I suspect that would correct itself rather quickly.
anamax 14y ago
> An argument could be made for rent controlled apartments being a net positive. Only if you overvalue the benefits and ignore lots of costs. Rent-control discourages turnover and maintenance. It also discourages building new capacity. The various tweaks to try to get around these things have other problems. > the businesses hiring those people and by extension their customers. How many biz want fewer potential customers and employees? Whenever you hear a politician say "I remembered {group}", he's telling you that other people were "forgotten". (Actually, they weren't forgotten, they're paying the bills, and then some.)
- leot 14y ago
  Are you referring to "rent control" or "rent stabilization" or both? It's not clear to me how/why rent stabilization (which merely limits how much rents can increase each year) would lead to less "building new capacity" -- an argument could be made that it forces new capacity to be created, because landlords can't make much more money off their existing units.
  - rdl 14y ago
    It reduces the lifetime rental income from building a new unit. If I have to pay $600/ft2 to build a new unit, and can only price it at $2/ft2/mo it makes a big difference whether my annual income goes up by 6% vs. 2%, especially given other fixed costs. Rents are supposed to be set at fair market for new construction, but if you finish the unit in a downturn, or if there is oversupply, and you ever rent for less than you'd like, you'll never get out of the hole (without a tenant moving out) under rent stabilization. There's also the risk of additional regulation -- part of why I won't buy in EPA is that it has rent control now (the only place on the peninsula), which is sort of tolerable as it exists now but which could easily get worse. Unincorporated San Mateo County is effectively never going to have rent control, so even for 5% more (on top of the "not being in the ghetto" premium), it's a better deal.
  - anamax 14y ago
    > an argument could be made that it forces new capacity to be created, because landlords can't make much more money off their existing units. If they're not making "enough" off of a unit, why would they build more units? Demand isn't the whole story. Demand that can be satisfied profitably will be satisfied. Demand that can't be satisfied profitably won't be satisfied. For example, there's a huge demand for $1000 "supercars". Yet, the only supercars made cost far more.
gareim 14y ago
That's interesting, because the very first economics study material I read specifically used rent control of an example where government interference leads to a less efficient market. I'd love to hear the argument for rent control, though.
- deleted 14y ago
  [deleted]
- wilfra 14y ago
  You read a study that said that artificially reducing prices leads to an inefficient market? What was the next paper written by that economist, that the sun coming out decreases the amount of clothes per inch people use to cover their bodies? I didn't say it made the market efficient, I said an argument could be made that it was a net positive. That's not the same thing. Example: efficient markets sometimes produce monopolies, who then abuse their monopoly power. That's a net negative - but it isn't an example of an inefficient market.
  - smokeyj 14y ago
    > an argument could be made that it was a net positive Net positive? Sounds like some kind of value theory. Which "net positive" are you talking about? Can't argue something you don't understand..
    - wilfra 14y ago
      I made $500 playing craps. I spent $200 on my hotel and another $200 on food and drinks. The trip to Vegas was a net positive. I made $100. In this instance it would mean that the sum total of the economic benefits to NYC that come from rent-controlled apartments outweigh the sum total of the negatives.
      - smokeyj 14y ago
        There's a word for profitability already. You're arguing price-control can be a profitable endeavor, but to who? Consumers? The cartels?

by wilfra 14y ago

An argument could be made for rent controlled apartments being a net positive. Not just for the people renting them but also for the businesses hiring those people and by extension their customers.

davidandgoliath 14y ago

That may have been more of an argument prior to the internet -- e.g. now someone can find an alternative place to stay in fifteen minutes on craigslist at a cheaper rate. That is unless all of the landlords get together and price-fix, though I suspect that would correct itself rather quickly.

anamax 14y ago

> An argument could be made for rent controlled apartments being a net positive. Only if you overvalue the benefits and ignore lots of costs. Rent-control discourages turnover and maintenance. It also discourages building new capacity. The various tweaks to try to get around these things have other problems. > the businesses hiring those people and by extension their customers. How many biz want fewer potential customers and employees? Whenever you hear a politician say "I remembered {group}", he's telling you that other people were "forgotten". (Actually, they weren't forgotten, they're paying the bills, and then some.)

leot 14y ago
Are you referring to "rent control" or "rent stabilization" or both? It's not clear to me how/why rent stabilization (which merely limits how much rents can increase each year) would lead to less "building new capacity" -- an argument could be made that it forces new capacity to be created, because landlords can't make much more money off their existing units.
- rdl 14y ago
  It reduces the lifetime rental income from building a new unit. If I have to pay $600/ft2 to build a new unit, and can only price it at $2/ft2/mo it makes a big difference whether my annual income goes up by 6% vs. 2%, especially given other fixed costs. Rents are supposed to be set at fair market for new construction, but if you finish the unit in a downturn, or if there is oversupply, and you ever rent for less than you'd like, you'll never get out of the hole (without a tenant moving out) under rent stabilization. There's also the risk of additional regulation -- part of why I won't buy in EPA is that it has rent control now (the only place on the peninsula), which is sort of tolerable as it exists now but which could easily get worse. Unincorporated San Mateo County is effectively never going to have rent control, so even for 5% more (on top of the "not being in the ghetto" premium), it's a better deal.
- anamax 14y ago
  > an argument could be made that it forces new capacity to be created, because landlords can't make much more money off their existing units. If they're not making "enough" off of a unit, why would they build more units? Demand isn't the whole story. Demand that can be satisfied profitably will be satisfied. Demand that can't be satisfied profitably won't be satisfied. For example, there's a huge demand for $1000 "supercars". Yet, the only supercars made cost far more.

gareim 14y ago

That's interesting, because the very first economics study material I read specifically used rent control of an example where government interference leads to a less efficient market. I'd love to hear the argument for rent control, though.

deleted 14y ago
[deleted]
wilfra 14y ago
You read a study that said that artificially reducing prices leads to an inefficient market? What was the next paper written by that economist, that the sun coming out decreases the amount of clothes per inch people use to cover their bodies? I didn't say it made the market efficient, I said an argument could be made that it was a net positive. That's not the same thing. Example: efficient markets sometimes produce monopolies, who then abuse their monopoly power. That's a net negative - but it isn't an example of an inefficient market.
- smokeyj 14y ago
  > an argument could be made that it was a net positive Net positive? Sounds like some kind of value theory. Which "net positive" are you talking about? Can't argue something you don't understand..
  - wilfra 14y ago
    I made $500 playing craps. I spent $200 on my hotel and another $200 on food and drinks. The trip to Vegas was a net positive. I made $100. In this instance it would mean that the sum total of the economic benefits to NYC that come from rent-controlled apartments outweigh the sum total of the negatives.
    - smokeyj 14y ago
      There's a word for profitability already. You're arguing price-control can be a profitable endeavor, but to who? Consumers? The cartels?