9 ms·

> This paper studies the effects of rent control on the housing wealth of renters, landlords, and homeowners. Over the nine months following the passage of rent

• heylook 4mo ago
  > But I doubt the impacts of rent control would appear in the market this quickly, it'd take years for the market signals to be measurable. Hard disagree. Rational investors have no problem whatsoever projecting the impact to future cash flows and adjusting the amount they're willing to pay now. That's like saying the stock market wouldn't respond quickly to changes in next year's tax law.
  • tverbeure 4mo ago
    I think you're wildly overestimating the rationality of investors.
    • WalterBright 4mo ago
      If you're smarter than other investors, you can make a lot of money doing the opposite of what they do.
      • WalterBright 4mo ago
        The failures and dislocations and "unanticipated" side effects of rent control are always a consequence of the Law of Supply and Demand. You cannot repeal that law, though they try again and again and again.
      • stymaar 4mo ago
        In a beauty contest, being right alone against everyone else just makes you lose. Markets can remain irrational much longer than you can remain solvent.
    • jjav 4mo ago
      If other investors are irrational that's a wonderful arbitrage opportunity. But good arbitrage opportunities are rare and don't last very long, so maybe they are rational.
      • rcxdude 4mo ago
        That does depend on the underlying market. Often you can make money (especially as a small participant) only if you can predict when the other participants in the market will snap back to reality. This can be pretty difficult when the market is more detached from the underlying activity it's supposed to represent (and property markets are often not very transparent or fast-moving).
      • tverbeure 4mo ago
        You’re really asking for a Keynes comment here. :-) He flirted with bankruptcy multiple times.
  • ameon 4mo ago
    both can be true if we separate short-term from a long-term effect. Panic or other emotional reactions are quick, that's for sure.
  • avs733 4mo ago
    Except the housing market, especially the rental market, is still significantly driven by small rental property owners and is a significant source of generational wealth transfer. Starting with the assumption that all or even most investors / actors are rational is a continuing pox on both economic scholarship and societal thinking
    • joshribakoff 4mo ago
      It doesn’t require all or most investors to act rational. A small percentage of rational actors still moves prices.
      • dwallin 4mo ago
        Moving prices is not the same as moving the market, and famously the market might cause them to go insolvent faster then the market goes rational. Which would mean that they weren’t actually rational and this is all circular reasoning?
    • datadrivenangel 4mo ago
      actors are in aggregate rational and self interested, but emotions are important.
  • roenxi 4mo ago
    In a highly liquid commodity market full of professional traders, I'd agree. But the housing market isn't that liquid over 9 months and there are a lot of small timers. It seems more likely there'd be some sort of initial wobble as sophisticated participants reposition, then a period of calm, then the actual impacts set in over a few years. It might not happen that way - someone does need to check - but at 9 months I wouldn't read much in to this study. The physical market would still be reorganising and it seems entirely possible that the eventual impacts are just different than what this study suggests. I'd want a period of more like 5 years to be confident that the data had given everyone in the market enough time to feel the impacts of artificially low rents and reposition appropriately.
    • heylook 4mo ago
      "It seems more likely..." "It might not happen that way..." "someone does need to check..." "seems entirely possible..." "I'd want more like 5 years to be confident..." Lot of different ways to say you don't know anything at all. This isn't a new market. This isn't the first time laws have changed in this way. This isn't the first time they've had this effect. We already know all of this. You're just waffling and enjoying the sound of your own voice.
  • pushcx 4mo ago
    The stock market has liquidity, fungibility, low transaction costs, etc etc. https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terri...
  • servo_sausage 4mo ago
    You probably won't see new commencement of building projects, but it probably doesn't mean ongoing projects would be scrapped... And these things have a lead time of years
    • Schiendelman 4mo ago
      You don't have to build for the market to change - the projection of future rents changes behavior in more efficiently operationalized landlords.
  • AnthonyMouse 4mo ago
    > Rational investors have no problem whatsoever projecting the impact to future cash flows and adjusting the amount they're willing to pay now. That's not accounting for the time value of money. Suppose you have a rental unit and before rent control you were planning to rent it out. That now has far less attractive returns and it suddenly makes more sense to sell it as a condo to an occupant rather than keeping it to rent it out. Likewise, other prospective landlords no longer want to buy it at the previous market price (returns went down and they can invest in stocks or housing in some other city instead), so the short-term effect is to increase the number of property sellers and decrease the number of buyers. Short-term, property values going down is the expected thing. But construction going down is also the expected thing, for the same reason. If property values are lower then the number of viable construction projects is lower and less construction happens. The lack of construction then continues until rents, even after rent control, are high enough to justify more construction, i.e. are even higher than they were originally, because now to justify the same investment as before you need the current rent to be high enough to account for the inability to increase it later. And with less construction happening, that's the natural result in a growing area. More people have to bid on the same number of units, rents go up. So the short-term effect is lower real estate prices, the long-term effect is higher. Now you say, if we expect real estate costs to be higher later, why don't investors take advantage? Which is the "time value of money" issue. If you invest there now because the prices will be high later, what do you do with the property in the meantime? If you don't rent it out, paying $1 today to get $1 in ten or twenty years is dumb, so you only buy if the current price is at a discount. If you do rent it out, then you'd be stuck trying to sell a building with a rent-controlled tenant, which isn't worth as much as the same building as empty as you bought it which you could sell as condos or rent out at current rents instead of price controlled ones, and then you still need a discount. And so the current seller has to provide a discount even if the real estate costs will be higher in a few years.
    • linkregister 4mo ago
      This argument presupposes multiple levels of assumption. By the point where the assertion is made that construction costs would drop, the prediction's error bars equal the entire range. There's no reason to believe that construction companies would accept jobs at prices below the cost of materials and labor. Construction companies frequently let workers go rather than accept large negative cash flows.
• vannevar 4mo ago
  The plot on page 39 certainly looks like the St Paul market turned somewhere around July of 2020, over a year before the rent control, and the downward trend accelerated over the next couple of years. I'm skeptical of the authors' ability to tease out the contribution of rent control to a process that had already begun well before the alleged causal event.
  • colechristensen 4mo ago
    It's terribly hard to isolate rent because of the supply/demand shock (in geographically dependent directions) that COVID had on the market. It made people move, a lot of people got a lot of free money and were out of work, among many other changes.
  • ryukoposting 4mo ago
    I lived there at the time. The George Floyd riots were in late May/early June 2020. I went to the protests by the police station in the Powderhorn neighborhood, that's the police station that got burned down. I got the hell out before that, though. Most of the damage was concentrated in Minneapolis, a little south of the river. But what happens in Minneapolis affects St. Paul, and vice versa. St. Paul wasn't unscathed, either. Property values dipped as a result of the riots, and I'd go find more evidence of that if it wasn't just taken as a fact by the people who live there. There was also an arson on a construction site in downtown St. Paul later that summer that spooked a lot of folks too. There's also George Floyd Square, an ad-hoc memorial at the intersection where he was murdered. For reasons beyond me, this was a source of controversy for well over a year, and I know a lot of MN righties who took the city's willingness to leave the memorial there as "capitulating to crime" or something. In short, don't use Twin Cities property values in the early 2020s to make generalizations about economics or policy. It took years for those scars to heal. Things didn't really go back to normal until 2023 at the absolute earliest, and some things haven't ever gone back to the way they were.
    • MAustriaGA 4mo ago
      [flagged]
• WalterBright 4mo ago
  The key to understanding the effects of rent control is understanding the Law of Supply and Demand. Artificially holding down rents will result in housing shortages. The lower the rent controlled price, the worse the shortage. If the rent goes too low, the building owner will stop doing maintenance. Eventually, the building gets abandoned.
  • uoaei 4mo ago
    Supply and demand is and always has been a useful first-order approximation. Reality is a lot more complicated. Dear reader, never believe anyone who says a serious societal problem is "just" anything. Especially on the internet when they use merely a pesudonym to assert their authority. Especially when the person behind the pseudonym is a one-time washed-out author desperately clinging to their housing stock in Atherton.
    • WalterBright 4mo ago
      [flagged]
      • uoaei 4mo ago
        No, it's not a law in the same way as physical laws. Most of the failures in economics of the past 50 years can be mostly directly attributed to a fatal overcommitment to the belief that these attributed relations are incontrivertible. What really exists, closest to the limit we will call "hard science" or "physics", is the microcosmic focus on individuals interacting in a market. Everything else -- supply and demand as a theory definitely included -- is a statistical extrapolation from micro-scale interactions. Hence the label of "dismal science". It's dismal because every hardline assumption is inevitably contravened by real life physics.
        • danaris 4mo ago
          No, no, see, of course it's a law! Now, I'll explain it to you: First, assume a spherical economy in a frictionless vacuum... (/s)
• rcxdude 4mo ago
  I think this argument depends on what exactly is constraining supply: if prices are at a level where there is still a profit to be made building new housing, it will be built anyhow. If developers and landlords truly are capturing an outsize fraction of the value in building and renting new property, then it might redistribute that value without affecting supply. But in that case the supply is being constrained by something else and it might be better overall to focus on relieving that constraint instead (property development and rental is an area with lots of room for creative accounting, and it seems to vary a lot who is making money and how, I would love to see some detailed breakdown on this).
• xtiansimon 4mo ago
  > “…average property values fell by 4.4% to 5.8%” I’m not clever enough to follow these arguments, but I’m struck by the idea of home prices going down in the face of so much demand. And I think it’s a miracle to have discovered such a lever.
• inigyou 4mo ago
  easy work around for that btw: don't control new construction (unless it replaced controlled old construction. no demolishing and rebuilding just to avoid control)
• port11 4mo ago
  I propose the Invisible Hand… ahm, Grenade: it is likely impossible that a thread about rent control can exist without it being quickly dismissed because of the Free Market. Housing policy debate is not allowed nuance, as unregulated capitalism is the ultimate goal of Humanity.