6 ms·

London needs rent control.

fennecfoxen 13y ago
Rent control? Geez. If it's the destruction of the city you're after, you could just bomb it, you know. :P (Oh! Or are you one of those denialists who thinks rent control isn't actually destructive, and prefers your own vision of reality to what the consensus among economists has to say about the matter? because if so I've got some people you should meet who don't believe climate scientists on global warming, or the medical establishment about things like homeopathy, and i think you can all be friends)
- hindsightbias 13y ago
  Rent control has so destroyed San Francisco.
  - kansface 13y ago
    Is this sarcasm?
  - fennecfoxen 13y ago
    I know!! Have you tried to get an apartment there recently? I swear, there'll be something like 50 couples standing in line to view a rickety, old, drafty, minuscule 1-bedroom, at a price that they can barely afford even if they are working for Google. It's INSANE.
    - cmccabe 13y ago
      Yeah! We should artificially push the price of rentals down, so that there will be no incentive to increase supply, ever. I can't see any problems with this plan.
      - spiek 13y ago
        Well yeah, but in places like SF and NYC, supply is limited by available space. We could house people in 6x6 cubes in giant rectangular buildings to be really efficient, but nobody wants that. So what do you do when your supply is limited, and the poor and middle class are being pushed out of your city?
        deleted 13y ago
        [deleted]
        hindsightbias 13y ago
        I'm all for bulldozing the Mission right after bulldozing Cupertino for high-density cubes.
        cmccabe 13y ago
        Cupertino already is fairly high-density, at least downtown. And I don't think anyone suggested bulldozing anything, just allowing people to build what they want, which they currently have a very hard time doing.
      - nerfhammer 13y ago
        Supply isn't held back by lack of pricing incentive, it's denialist zoning restrictions
      - UK-AL 13y ago
        There's massive incentives to build in and around london. Its just getting the land thats the problem.
    - _delirium 13y ago
      Yeah, rent control is bad for Googlers trying to move in to SF, especially on short notice. But it's good for locals who already live there, who are not standing in line for flats, because they already live in them. How you weigh ease of moving in vs. stability for long-time tenants is more of a public-policy than economics question initially, and depends on how you assign utility (though economic analysis can help you maximize utility, once you've assigned it). A pure unrestricted market is already making an ideological decision that stability of people's current living situations should be valued as having zero utility, which not everyone agrees with. If you assign some kind of non-zero-but-not-infinite utility to that, then it's likely neither an unrestricted market nor a classic rigid rent control system will be utility-maximizing, and instead various hybrid schemes may be preferable. One scheme used in some European cities is to let the prices float freely, but kick in a subsidy for existing residents when rent in an area increases by more than a certain % of their salary, softening the impact of market shifts on neighborhood turnover. This of course has the impact of increasing prices for newcomers relative to a situation where such a subsidy didn't exist, because fewer existing residents will be forced out due to rent increases, thereby freeing up fewer empty apartments for newcomers to rent. But that's the goal of the program, to reduce the number of existing residents unwillingly forced out of their neighborhood by rent increases, by shifting the margins a bit. With some kind of actual quantitative assignment of utilities it'd be possible to rationally design a subsidy program that buffers the impact of large changes without neutralizing them or setting up a long-term two-tier market (for example, subsidies can cover less than 100% of increases, and phase out over time).
  - hackerboos 13y ago
    But worked surprisingly well in Germany.
archangel_one 13y ago
Why? I mean, the point of the article is a little shocking, but it carefully doesn't mention the commute time, which appears to be the thick end of 7-8 hours per day (2h 30 flight each way, and Stansted is not exactly in the heart of London). As a result, there's no shortage of people paying London's high rent prices. I'm one of them, and I wouldn't trade cheaper rents for that kind of commute (or, honestly, even commuting for 1-1.5 hours from the many towns outside London where such a thing is practical). So why does London need rent control?
xxpor 13y ago
http://seattletransitblog.com/2013/10/24/rent-control-is-bad-for-affordability/ http://seattletransitblog.com/2013/10/24/rent-control-is-bad...
JeffL 13y ago
See the chapter in Economics in One Lesson about how rent control makes everything worse. http://steshaw.org/economics-in-one-lesson/chap18p1.html http://steshaw.org/economics-in-one-lesson/chap18p1.html
- e12e 13y ago
  Do they have examples from Sweden? Because my impression is that it works pretty well there (especially if you compare with Norway).
  - klipt 13y ago
    How does Swedish rent control work? Because in San Francisco it only applies while the same person is living there. So old tenants keep their "original rent" with small inflation linked increases, while new tenants pay the much higher "market price". So in the same apartment building you have a new tenant paying $3000 and an old tenant paying $400 for same size apartments. I.e. the new tenant is overpaying to subsidize the old tenant who is underpaying.
    - e12e 13y ago
      I'm not sure, but I think it is more of a "regulated market/fixed price w/index adjustments based on inflation". So a price will have been set at some point in the past, and is adjusted up a few percent every year, depending on inflation (typically less than 2% I think for Sweden). To be clear, there is a "black market" of sorts wrt apartments in Sweden -- not sure how that works, but I think it is people illegally sub-letting at a higher price and/or owners taking a "bribe" on top of the regulated rent -- and it can be hard to get apartments in certain areas (high demand, too few new buildings) -- but my impression is that on the whole, it works much better than an unregulated marked, like the one we have in Norway. Perhaps someone from Sweden can comment further.

Rent control? Geez. If it's the destruction of the city you're after, you could just bomb it, you know. :P (Oh! Or are you one of those denialists who thinks rent control isn't actually destructive, and prefers your own vision of reality to what the consensus among economists has to say about the matter? because if so I've got some people you should meet who don't believe climate scientists on global warming, or the medical establishment about things like homeopathy, and i think you can all be friends)

hindsightbias 13y ago
Rent control has so destroyed San Francisco.
- kansface 13y ago
  Is this sarcasm?
- fennecfoxen 13y ago
  I know!! Have you tried to get an apartment there recently? I swear, there'll be something like 50 couples standing in line to view a rickety, old, drafty, minuscule 1-bedroom, at a price that they can barely afford even if they are working for Google. It's INSANE.
  - cmccabe 13y ago
    Yeah! We should artificially push the price of rentals down, so that there will be no incentive to increase supply, ever. I can't see any problems with this plan.
    - spiek 13y ago
      Well yeah, but in places like SF and NYC, supply is limited by available space. We could house people in 6x6 cubes in giant rectangular buildings to be really efficient, but nobody wants that. So what do you do when your supply is limited, and the poor and middle class are being pushed out of your city?
      - deleted 13y ago
        [deleted]
      - hindsightbias 13y ago
        I'm all for bulldozing the Mission right after bulldozing Cupertino for high-density cubes.
        cmccabe 13y ago
        Cupertino already is fairly high-density, at least downtown. And I don't think anyone suggested bulldozing anything, just allowing people to build what they want, which they currently have a very hard time doing.
    - nerfhammer 13y ago
      Supply isn't held back by lack of pricing incentive, it's denialist zoning restrictions
    - UK-AL 13y ago
      There's massive incentives to build in and around london. Its just getting the land thats the problem.
  - _delirium 13y ago
    Yeah, rent control is bad for Googlers trying to move in to SF, especially on short notice. But it's good for locals who already live there, who are not standing in line for flats, because they already live in them. How you weigh ease of moving in vs. stability for long-time tenants is more of a public-policy than economics question initially, and depends on how you assign utility (though economic analysis can help you maximize utility, once you've assigned it). A pure unrestricted market is already making an ideological decision that stability of people's current living situations should be valued as having zero utility, which not everyone agrees with. If you assign some kind of non-zero-but-not-infinite utility to that, then it's likely neither an unrestricted market nor a classic rigid rent control system will be utility-maximizing, and instead various hybrid schemes may be preferable. One scheme used in some European cities is to let the prices float freely, but kick in a subsidy for existing residents when rent in an area increases by more than a certain % of their salary, softening the impact of market shifts on neighborhood turnover. This of course has the impact of increasing prices for newcomers relative to a situation where such a subsidy didn't exist, because fewer existing residents will be forced out due to rent increases, thereby freeing up fewer empty apartments for newcomers to rent. But that's the goal of the program, to reduce the number of existing residents unwillingly forced out of their neighborhood by rent increases, by shifting the margins a bit. With some kind of actual quantitative assignment of utilities it'd be possible to rationally design a subsidy program that buffers the impact of large changes without neutralizing them or setting up a long-term two-tier market (for example, subsidies can cover less than 100% of increases, and phase out over time).
- hackerboos 13y ago
  But worked surprisingly well in Germany.

archangel_one 13y ago

Why? I mean, the point of the article is a little shocking, but it carefully doesn't mention the commute time, which appears to be the thick end of 7-8 hours per day (2h 30 flight each way, and Stansted is not exactly in the heart of London). As a result, there's no shortage of people paying London's high rent prices. I'm one of them, and I wouldn't trade cheaper rents for that kind of commute (or, honestly, even commuting for 1-1.5 hours from the many towns outside London where such a thing is practical). So why does London need rent control?

xxpor 13y ago

http://seattletransitblog.com/2013/10/24/rent-control-is-bad-for-affordability/ http://seattletransitblog.com/2013/10/24/rent-control-is-bad...

JeffL 13y ago

See the chapter in Economics in One Lesson about how rent control makes everything worse. http://steshaw.org/economics-in-one-lesson/chap18p1.html http://steshaw.org/economics-in-one-lesson/chap18p1.html

e12e 13y ago
Do they have examples from Sweden? Because my impression is that it works pretty well there (especially if you compare with Norway).
- klipt 13y ago
  How does Swedish rent control work? Because in San Francisco it only applies while the same person is living there. So old tenants keep their "original rent" with small inflation linked increases, while new tenants pay the much higher "market price". So in the same apartment building you have a new tenant paying $3000 and an old tenant paying $400 for same size apartments. I.e. the new tenant is overpaying to subsidize the old tenant who is underpaying.
  - e12e 13y ago
    I'm not sure, but I think it is more of a "regulated market/fixed price w/index adjustments based on inflation". So a price will have been set at some point in the past, and is adjusted up a few percent every year, depending on inflation (typically less than 2% I think for Sweden). To be clear, there is a "black market" of sorts wrt apartments in Sweden -- not sure how that works, but I think it is people illegally sub-letting at a higher price and/or owners taking a "bribe" on top of the regulated rent -- and it can be hard to get apartments in certain areas (high demand, too few new buildings) -- but my impression is that on the whole, it works much better than an unregulated marked, like the one we have in Norway. Perhaps someone from Sweden can comment further.