5 ms·

The major flaw in your argument is that you can't do #2 with rent control in the picture. From the economist[0]: > Rent controls are a textbook example of a we

The major flaw in your argument is that you can't do #2 with rent control in the picture. From the economist[0]: > Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Even maintaining existing properties is discouraged because landlords see no return for their investment. Renters stay put in crumbling properties because controls often reset when tenants change. Who occupies housing ends up bearing little relation to who can make best use of it (ie, workers well-suited to local job opportunities). The mismatch reduces economy-wide productivity. The longer a tenant stays put, the bigger the disparity between the market rent and his payments, sharpening the incentive not to move. [0] https://www.economist.com/leaders/2019/09/19/rent-control-will-make-housing-shortages-worse https://www.economist.com/leaders/2019/09/19/rent-control-wi...

swiley 6y ago
Germany is one of the counties that tries to avoid getting themselves into situations where a violent revolution is the best path forward for most young people. I'm sure they'll figure this one out.
dragonwriter 6y ago
> Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Rent control tends to be adopted with the fairly explicit goal of prioritizing affordability for existing tenants in their current residences over either encouraging maintenance/updates or improving housing supply for people who aren't current tenants, so I don't think it's at all a policy that doesn't work. A policy whose purposes are at odds with other, arguably more important, policy goals, sure, and possibly even with other more important, if less inmediate, interests of current tenants. But saying it “doesn’t work” bases on it not encouraging things it is not meant to encourage is...not really useful.
- edbob 6y ago
  Your technical analysis is correct as usual, but I agree with sologoub's comment[0], "That’s not success, that’s picking winners and losers." [0] https://news.ycombinator.com/item?id=26316547 https://news.ycombinator.com/item?id=26316547
  - vkou 6y ago
    Markets pick winners and losers all the time. It's just that winners in market housing situations are always the people with the most money. It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'. Both are fundamentally unfair. Life, in general, isn't fair. Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.
    - edbob 6y ago
      > It's difficult to make an argument that it's a more virtuous way to select winners That's because it's a strawman that you've constructed. Real debates involve consideration of the needs of people who can't find housing in heavily-regulated areas. Existing tenants aren't the only people worth considering. They just happen to be the people with the votes and the political power, so it's no surprise that local government focuses on their needs at the expense of everyone else.
      - vkou 6y ago
        You're conflating rent control (which impacts long-term tenant-landlord relations - which are largely a zero-sum game that does not create any new housing units on the market) with zoning and building and lending regulation, and tax rates, and returns on investments in real estate and stock markets and debt (which impacts construction of new housing.) The entire purpose of this subthread is to tease the two apart. Rent control is a solution for the here and now. Building new housing stock is a solution for the future. The two are largely orthogonal, and the causal relationship between rent control and construction of new housing stock is incredibly weak. There are a million factors that have a far bigger influence on the latter, compared to rent control. If you want to encourage development, relax zoning, cut the red tape for construction, stop letting NIMBY groups veto projects, raise property taxes, and actually start non-rent controlled property at market values. If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors. You have a wrong impression of who most local governments focus on. They don't focus on the needs of the tenants - they focus on the needs of landlords (mostly concerned with keeping rents high by preventing any new construction) and property developers (mostly concerned with getting concessions and hand-outs from their municipalities.) Most city councils are squarely in the pocketbook of the latter. Both of those groups have a lot more money to spend on influencing campaigns and elections, compared to unorganized groups of tenants.
jariel 6y ago
No, this is not the reasoning that helps your argument at all. It's false to claim you need to kick people out of homes in order to have new developments. Though the notion of 'lack of investment in capped rentals' may be true, that has nothing to do with new housing. The entirety of Ontario and Quebec (and I'm going to bet most of the rest of Canada) has a form of rent control, in that at least there are caps on the amount of rental increase.
- 908B64B197 6y ago
  Would that explain why a lot of new constructions are condos and not rental units?
  - jariel 6y ago
    New builds are outside the scope of rent control, so I'm not sure it's a relevant factor in Berlin. I think a lot of this discussion may be around gentrification as much as anything. Some nice neighbourhoods in Berlin were on the E. Side and they were kind of run down, but over the last couple of decades the hipsters moved in, now the professionals.
    - 908B64B197 6y ago
      I meant, for Ontario and Quebec. I don't know how much new rental units are added every year as compared to condos.
      - jariel 6y ago
        I don't know the ratio, but it would be hard to determine anything from that because rules are broad and have been in place for some time. What I do know is that construction is vast and booming. Driving through Toronto over the last 20 years it seems there's a ton of new buildings every time I am there. There's entire area of Montreal that has gone vertical over the last few years (formerly industrial area). That said, there is a lot of immigration to Canada.
kelnos 6y ago
Well, it depends on how rent control is implemented. In California, units built after February 1995 cannot be placed under rent control[0] (and in SF, it's June 1979[1]). A new development will never be under rent control (unless the law changes; two ballot measures to make some changes have failed in the past few years), so building new homes can still be immensely profitable. In SF the reason it's not quite as profitable is because of the byzantine planning process and the inevitable lawsuits a developer has to win before even breaking ground. This is part of the reason why nearly all new SF housing construction is fairly high-end and expensive to buy/rent. [0] https://en.wikipedia.org/wiki/Costa%E2%80%93Hawkins_Rental_Housing_Act https://en.wikipedia.org/wiki/Costa%E2%80%93Hawkins_Rental_H... [1] https://sftu.org/rent-control/ https://sftu.org/rent-control/
HotHotLava 6y ago
> With rents capped, building new homes becomes less profitable. At least in Berlin, the rent control doesn't apply to newly built apartments (leading to the "split" market the title refers to), so this argument shouldn't apply.

swiley 6y ago

Germany is one of the counties that tries to avoid getting themselves into situations where a violent revolution is the best path forward for most young people. I'm sure they'll figure this one out.

dragonwriter 6y ago

> Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Rent control tends to be adopted with the fairly explicit goal of prioritizing affordability for existing tenants in their current residences over either encouraging maintenance/updates or improving housing supply for people who aren't current tenants, so I don't think it's at all a policy that doesn't work. A policy whose purposes are at odds with other, arguably more important, policy goals, sure, and possibly even with other more important, if less inmediate, interests of current tenants. But saying it “doesn’t work” bases on it not encouraging things it is not meant to encourage is...not really useful.

edbob 6y ago
Your technical analysis is correct as usual, but I agree with sologoub's comment[0], "That’s not success, that’s picking winners and losers." [0] https://news.ycombinator.com/item?id=26316547 https://news.ycombinator.com/item?id=26316547
- vkou 6y ago
  Markets pick winners and losers all the time. It's just that winners in market housing situations are always the people with the most money. It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'. Both are fundamentally unfair. Life, in general, isn't fair. Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.
  - edbob 6y ago
    > It's difficult to make an argument that it's a more virtuous way to select winners That's because it's a strawman that you've constructed. Real debates involve consideration of the needs of people who can't find housing in heavily-regulated areas. Existing tenants aren't the only people worth considering. They just happen to be the people with the votes and the political power, so it's no surprise that local government focuses on their needs at the expense of everyone else.
    - vkou 6y ago
      You're conflating rent control (which impacts long-term tenant-landlord relations - which are largely a zero-sum game that does not create any new housing units on the market) with zoning and building and lending regulation, and tax rates, and returns on investments in real estate and stock markets and debt (which impacts construction of new housing.) The entire purpose of this subthread is to tease the two apart. Rent control is a solution for the here and now. Building new housing stock is a solution for the future. The two are largely orthogonal, and the causal relationship between rent control and construction of new housing stock is incredibly weak. There are a million factors that have a far bigger influence on the latter, compared to rent control. If you want to encourage development, relax zoning, cut the red tape for construction, stop letting NIMBY groups veto projects, raise property taxes, and actually start non-rent controlled property at market values. If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors. You have a wrong impression of who most local governments focus on. They don't focus on the needs of the tenants - they focus on the needs of landlords (mostly concerned with keeping rents high by preventing any new construction) and property developers (mostly concerned with getting concessions and hand-outs from their municipalities.) Most city councils are squarely in the pocketbook of the latter. Both of those groups have a lot more money to spend on influencing campaigns and elections, compared to unorganized groups of tenants.

jariel 6y ago

No, this is not the reasoning that helps your argument at all. It's false to claim you need to kick people out of homes in order to have new developments. Though the notion of 'lack of investment in capped rentals' may be true, that has nothing to do with new housing. The entirety of Ontario and Quebec (and I'm going to bet most of the rest of Canada) has a form of rent control, in that at least there are caps on the amount of rental increase.

908B64B197 6y ago
Would that explain why a lot of new constructions are condos and not rental units?
- jariel 6y ago
  New builds are outside the scope of rent control, so I'm not sure it's a relevant factor in Berlin. I think a lot of this discussion may be around gentrification as much as anything. Some nice neighbourhoods in Berlin were on the E. Side and they were kind of run down, but over the last couple of decades the hipsters moved in, now the professionals.
  - 908B64B197 6y ago
    I meant, for Ontario and Quebec. I don't know how much new rental units are added every year as compared to condos.
    - jariel 6y ago
      I don't know the ratio, but it would be hard to determine anything from that because rules are broad and have been in place for some time. What I do know is that construction is vast and booming. Driving through Toronto over the last 20 years it seems there's a ton of new buildings every time I am there. There's entire area of Montreal that has gone vertical over the last few years (formerly industrial area). That said, there is a lot of immigration to Canada.

kelnos 6y ago

Well, it depends on how rent control is implemented. In California, units built after February 1995 cannot be placed under rent control[0] (and in SF, it's June 1979[1]). A new development will never be under rent control (unless the law changes; two ballot measures to make some changes have failed in the past few years), so building new homes can still be immensely profitable. In SF the reason it's not quite as profitable is because of the byzantine planning process and the inevitable lawsuits a developer has to win before even breaking ground. This is part of the reason why nearly all new SF housing construction is fairly high-end and expensive to buy/rent. [0] https://en.wikipedia.org/wiki/Costa%E2%80%93Hawkins_Rental_Housing_Act https://en.wikipedia.org/wiki/Costa%E2%80%93Hawkins_Rental_H... [1] https://sftu.org/rent-control/ https://sftu.org/rent-control/

HotHotLava 6y ago

> With rents capped, building new homes becomes less profitable. At least in Berlin, the rent control doesn't apply to newly built apartments (leading to the "split" market the title refers to), so this argument shouldn't apply.