4 ms·

What would happen if one of these cities passed a law that apartment rents would have to be adjust for income level? So lower income people would get a break,

by derekp7 13y ago

What would happen if one of these cities passed a law that apartment rents would have to be adjust for income level? So lower income people would get a break, and higher income would have to pay more? Would that be effective, and would it be legal? Or, the city could have a housing subsidy tax that is progressive based on income.

bandushrew 13y ago
It would be effective, but maybe not have the effect you are hoping for. People investing in rental homes would invest more into homes targeted at higher incomes, and the quantity of homes available to lower income people would decrease, driving up rentals on them.
fennecfoxen 13y ago
So you're saying that landlords subsidize their low-income tenants' rent? That's totally going to be an awesome way to encourage people to build new housing and go into the landlording business! ... except not. The destructive legacy of the War Emergency Tenant Protection Act (NYC's rent control law - the 'war' in question is WWII) is well-known and well-documented (and equally well ignored by people who think that it should work because they want the world to work that way). It's half the reason why the rent is too damn high - because no one builds apartments anymore except crazy luxury apartments. There's no money in it. Heck, landlords have abandoned hundreds of thousands of apartments over the decades because of rent control. The city took them over, and, at one point, realized it owned 70% of Harlem. Clearly more of the same is the only answer. :P ---- Postscript. When people ignore a consensus among climate scientists about global warming, we mock them. When people ignore a consensus among economists about the destructiveness of rent control (cf. the Whaples "where is there consensus?" surveys of economists), we elect them instead. Meh.
- derekp7 13y ago
  Well the way I was thinking was that the higher-income tenants would subsidise the lower-income ones -- but within a certain range (i.e., no more than 10% higher for the high-income ones, and 10% lower for the low income ones -- adjust as necessary). This could be implemented via something like a sales tax, but would apply to the monthly rent, and would be progressive based on the tenant's income (above a certain income level, tenants would pay more, and below a certain level tenants would receive a subsidy). The apartment owners would still get the same overall income though. This should only have the effect of driving higher earners out of the city, which would then cause the desired effect of lowering property values, and therefore lowering rent overall.
  - thaumasiotes 13y ago
    People generally don't want lower property values. What they want is higher property values and lower rent. Personally, I agree that lower property values other things equal are a good thing, but getting them by driving high earners out is a loss; it makes everyone poorer.
  - nimble 13y ago
    This idea reminds me of the ones I used to get from my boss for how we should change the software system I was building for him when it wasn't working the way he expected. His solutions would (usually) fix the immediate problem he was seeing, but in a completely ad hoc way that would usually introduce numerous other problems.
- gaadd33 13y ago
  Thinking about the math for a bit, aside from places like One57, it doesn't make sense to build cheap apartments. The majority cost is in the structure and land, finishings are a pretty small amount of the total cost so why not spend slightly more and get "premium" finishings, so you can charge luxury prices? When would it make sense to not build luxury buildings? The only time I can think is if you are trying to build in places like East New York or similar but I don't think that market can support new construction in the first place, regardless of the level of finish. Also I believe the failure of rent control is well known, rent stabilization on the other hand is contentious (by people, not sure by economists) and started in 1974. Less than 2% of units in the city are rent controlled.
hudibras 13y ago
Cities do this already with mixed-income housing. http://en.wikipedia.org/wiki/Mixed-income_housing http://en.wikipedia.org/wiki/Mixed-income_housing It's usually implemented as part of the permitting process rather than as a law, though. Essentially the city says "We'll give you a permit to build luxury apartments, so long as you also build X number of low- and middle-income units."
- tsotha 13y ago
  Yes, and what you end up with is San Francisco, where housing supply has been far outpaced by demand because developers can't make the numbers work.
  - hudibras 13y ago
    Maybe you're right, we'll see in a few years. Currently, there's literally more than 10 times the number of new housing starts in San Francisco than there was 3 years ago, so there must be some profitable opportunities out there.
    - tsotha 13y ago
      Three years ago was just after the housing bubble popped. What is it compared to, say, ten years ago?

by derekp7 13y ago

bandushrew 13y ago

It would be effective, but maybe not have the effect you are hoping for. People investing in rental homes would invest more into homes targeted at higher incomes, and the quantity of homes available to lower income people would decrease, driving up rentals on them.

fennecfoxen 13y ago

So you're saying that landlords subsidize their low-income tenants' rent? That's totally going to be an awesome way to encourage people to build new housing and go into the landlording business! ... except not. The destructive legacy of the War Emergency Tenant Protection Act (NYC's rent control law - the 'war' in question is WWII) is well-known and well-documented (and equally well ignored by people who think that it should work because they want the world to work that way). It's half the reason why the rent is too damn high - because no one builds apartments anymore except crazy luxury apartments. There's no money in it. Heck, landlords have abandoned hundreds of thousands of apartments over the decades because of rent control. The city took them over, and, at one point, realized it owned 70% of Harlem. Clearly more of the same is the only answer. :P ---- Postscript. When people ignore a consensus among climate scientists about global warming, we mock them. When people ignore a consensus among economists about the destructiveness of rent control (cf. the Whaples "where is there consensus?" surveys of economists), we elect them instead. Meh.

derekp7 13y ago
Well the way I was thinking was that the higher-income tenants would subsidise the lower-income ones -- but within a certain range (i.e., no more than 10% higher for the high-income ones, and 10% lower for the low income ones -- adjust as necessary). This could be implemented via something like a sales tax, but would apply to the monthly rent, and would be progressive based on the tenant's income (above a certain income level, tenants would pay more, and below a certain level tenants would receive a subsidy). The apartment owners would still get the same overall income though. This should only have the effect of driving higher earners out of the city, which would then cause the desired effect of lowering property values, and therefore lowering rent overall.
- thaumasiotes 13y ago
  People generally don't want lower property values. What they want is higher property values and lower rent. Personally, I agree that lower property values other things equal are a good thing, but getting them by driving high earners out is a loss; it makes everyone poorer.
- nimble 13y ago
  This idea reminds me of the ones I used to get from my boss for how we should change the software system I was building for him when it wasn't working the way he expected. His solutions would (usually) fix the immediate problem he was seeing, but in a completely ad hoc way that would usually introduce numerous other problems.
gaadd33 13y ago
Thinking about the math for a bit, aside from places like One57, it doesn't make sense to build cheap apartments. The majority cost is in the structure and land, finishings are a pretty small amount of the total cost so why not spend slightly more and get "premium" finishings, so you can charge luxury prices? When would it make sense to not build luxury buildings? The only time I can think is if you are trying to build in places like East New York or similar but I don't think that market can support new construction in the first place, regardless of the level of finish. Also I believe the failure of rent control is well known, rent stabilization on the other hand is contentious (by people, not sure by economists) and started in 1974. Less than 2% of units in the city are rent controlled.

hudibras 13y ago

Cities do this already with mixed-income housing. http://en.wikipedia.org/wiki/Mixed-income_housing http://en.wikipedia.org/wiki/Mixed-income_housing It's usually implemented as part of the permitting process rather than as a law, though. Essentially the city says "We'll give you a permit to build luxury apartments, so long as you also build X number of low- and middle-income units."

tsotha 13y ago
Yes, and what you end up with is San Francisco, where housing supply has been far outpaced by demand because developers can't make the numbers work.
- hudibras 13y ago
  Maybe you're right, we'll see in a few years. Currently, there's literally more than 10 times the number of new housing starts in San Francisco than there was 3 years ago, so there must be some profitable opportunities out there.
  - tsotha 13y ago
    Three years ago was just after the housing bubble popped. What is it compared to, say, ten years ago?