4 ms·

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 in

by 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.

4 ms·

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 in

by leot 14y ago

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.