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Rental housing (like garbage collection) is only efficient when there is more than enough housing (or memory) available to meet demand (of tenants, or of the ga

Rental housing (like garbage collection) is only efficient when there is more than enough housing (or memory) available to meet demand (of tenants, or of the garbage collection machinery). In obscenely undersupplied cities like SF, rents become absurdly high very, very fast. Case in point. In 1998 (At about the height of the Dot Com bubble) a one-bedroom apartment in my building rented out for ~$500/month. In 2010 (While the real-estate market was still recovering from its enormous collapse) that same apartment rented out for ~$1500/month. That's a 3X increase in "market price" of a good from the height of a superheated bubble to shortly after the collapse of another one. SF's rental market is seriously fucked by undersupply.

AnthonyMouse 12y ago
> In obscenely undersupplied cities like SF, rents become absurdly high very, very fast. That's what an efficient market is supposed to do. The high price then encourages the construction of more housing. There isn't enough supply because of rent control and other regulations that discourage or outright prohibit the construction of new or higher density housing. The market is doing exactly what an efficient market is supposed to do under those conditions: Increase the price until demand at that price no longer exceeds the artificially constrained supply.
- simoncion 12y ago
  Rent control isn't the source of the undersupply in SF. Restrictions on new construction (both legal and social) are the source of the undersupply in the city. Do you live in SF? If you did, you would know that in the few new residential buildings that have been constructed, rents are somewhere between $3000 and $4000 per bedroom. What developer could possibly refuse that income? Do you think that rent control is driving rents in newly construction apartments that high? Likewise, do you think that -with rental rates like that- developers are failing to build new stock because of existing rent controlled stock in SF? As an aside, if you didn't know how rent control works in SF, here's a quick intro. Buildings built before 1979 and rented as residential housing are covered by rent control. No other buildings -unless (as is happening in Trinity Place on Market Street) the landlord enters into a special agreement with his tenants- are covered by rent control. This means that new construction is NOT covered by rent control. Because new construction is not covered by the rent control ordinances, in a market with extreme undersupply, like SF's, there is no economic reason for a developer not to build new housing stock. Have you been enlightened? :)
  - AnthonyMouse 12y ago
    > Rent control isn't the source of the undersupply in SF. It's a contributing factor. > Because new construction is not covered by the rent control ordinances, in a market with extreme undersupply, like SF's, there is no economic reason for a developer not to build new housing stock. That isn't entirely true. A developer has to build new housing stock somewhere. In a developed area that commonly means demolishing old low density housing to build new higher density housing. But if the low density housing has tenants that won't leave because they're paying below market rents, developers can't do that. Rent control also contributes to high rents in another way: No matter how constrained supply becomes, tenants in rent controlled apartments don't feel any pressure to free up supply by moving somewhere else. Those units are effectively off the market, which requires new tenants to pay that much more to get one of the remaining units.

AnthonyMouse 12y ago

> In obscenely undersupplied cities like SF, rents become absurdly high very, very fast. That's what an efficient market is supposed to do. The high price then encourages the construction of more housing. There isn't enough supply because of rent control and other regulations that discourage or outright prohibit the construction of new or higher density housing. The market is doing exactly what an efficient market is supposed to do under those conditions: Increase the price until demand at that price no longer exceeds the artificially constrained supply.

simoncion 12y ago
Rent control isn't the source of the undersupply in SF. Restrictions on new construction (both legal and social) are the source of the undersupply in the city. Do you live in SF? If you did, you would know that in the few new residential buildings that have been constructed, rents are somewhere between $3000 and $4000 per bedroom. What developer could possibly refuse that income? Do you think that rent control is driving rents in newly construction apartments that high? Likewise, do you think that -with rental rates like that- developers are failing to build new stock because of existing rent controlled stock in SF? As an aside, if you didn't know how rent control works in SF, here's a quick intro. Buildings built before 1979 and rented as residential housing are covered by rent control. No other buildings -unless (as is happening in Trinity Place on Market Street) the landlord enters into a special agreement with his tenants- are covered by rent control. This means that new construction is NOT covered by rent control. Because new construction is not covered by the rent control ordinances, in a market with extreme undersupply, like SF's, there is no economic reason for a developer not to build new housing stock. Have you been enlightened? :)
- AnthonyMouse 12y ago
  > Rent control isn't the source of the undersupply in SF. It's a contributing factor. > Because new construction is not covered by the rent control ordinances, in a market with extreme undersupply, like SF's, there is no economic reason for a developer not to build new housing stock. That isn't entirely true. A developer has to build new housing stock somewhere. In a developed area that commonly means demolishing old low density housing to build new higher density housing. But if the low density housing has tenants that won't leave because they're paying below market rents, developers can't do that. Rent control also contributes to high rents in another way: No matter how constrained supply becomes, tenants in rent controlled apartments don't feel any pressure to free up supply by moving somewhere else. Those units are effectively off the market, which requires new tenants to pay that much more to get one of the remaining units.