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They would. But second order effects ensure that this very act leads to the decline of housing prices. These effects being eliminated by rent control makes it t

They would. But second order effects ensure that this very act leads to the decline of housing prices. These effects being eliminated by rent control makes it the premier anti-tenant policy.

dataflow 18d ago
What second-order effects...? Feels like such an oddly opqaue way to talk about them. And how do you ignore the effect of the fact that rent no longer rises during the life of the tenant, making it lower after a while than it would otherwise be...? (How) is it so obvious that that is dwarfed by the second-order effects of uncontrolled rent that it doesn't even warrant a mention? Because it isn't to me.
- lotsofpulp 18d ago
  Prices are a signal, and price changes are how market participants can determine which way supply and demand curves are moving. By legislating prices and price changes, the signal is muddied, and market participants cannot take action to match the movements of the supply and demand curves. Prop 13’s property tax rate increase cap is also price fixing. These kinds of laws are mostly ways to enrich and reward those who got or were born somewhere first, and run counter to the vaunted meritocracy that a so called free market can encourage. Edit: The most helpful thing the government can do is maximize price transparency, so the smaller entity can be on equal footing with the bigger entity about which way prices are moving. Tenant agreements should be public record, like land sales are, and that would not only help cops with kicking out squatters, but also give renters more power in negotiations.
  - tyre 18d ago
    When people are trying to afford living, “price transparency” is not the most helpful thing a government can provide. I agree that Prop 13 is god awful.
    - lotsofpulp 18d ago
      These side effects of these dynamics are not going to be evident or resolved in the short term. It took decades for prop 13’s (and other effects) to compound and become visible, and it will take decades to undo. There is no shortcut though, the incentives have to be set right, and there has to be patience for the results to show. Unfortunately, long term benefit at the expense of the short term is a core weakness in democracy.
      - rcpt 18d ago
        I don't think that's true. Prop 13 for example is priced into the market. Buyers bid higher because their taxes are frozen. This doesn't take decades to correct. Market reactions are instant. Once the policy is fixed we don't have to wait for a generation
        seanmcdirmid 18d ago
        Buyers bid higher because sellers are giving up their low property tax, not because the buyer will have a low property tax in a decade or two. Sellers are hesitant to sell because they are giving up a lot, California had to pass a special law just to let old people downsize without losing their low property tax on the big home they raised a family in.
- Aurornis 18d ago
  > And how do you ignore the effect of the fact that rent no longer rises during the life of the tenant, Rent control schemes don’t work like this, except in completely broken policies. Landlords are given an allowance for rent control increases year over year. The point is that they basically have to take the maximum allowed every year to avoid getting stuck.
  - tdeck 17d ago
    In CA many cities allow landlords to "bank" rent increases in some way. For example, in SF: https://www.sf.gov/information--banked-rent-increases https://www.sf.gov/information--banked-rent-increases
- Espressosaurus 18d ago
  If rent no longer rises then the profit doesn't rise commensurately with demand, so the money isn't there to build supply. Rent control crushes supply to the degree that the rent control caps rents below the actual market rate. If you're lucky enough to get rent controlled housing then you're in good shape. But good luck getting it when things get far enough down the timeline. Rent fixing is the other side where supply is manipulated to extract the maximum profit. In this case the coordinated rent pricing action behaves like an oligopoly.
  - tyre 18d ago
    If rents can’t rise quickly, then the expected profit of a building goes down, which means prices for land go down, which means it is cheaper to build, which means it balances out. If the balance is far enough off that everything turns into commercial real estate, that can be solved, too.
    - rcpt 18d ago
      > prices for land go down, which means it is cheaper to build By this logic San Francisco should be one of the cheapest places in the world to build
    - StevePrefontain 17d ago
      You’re misunderstanding 2 fundamental things. First is that it’s very expensive to build anything in major US cities with the high cost of labor, materials, and permitting. Rent control completely tips the balance against building housing that you’ll rent out. Second is that the value of land is not going to depreciate in these premier US cities just because it’s not profitable to build rental units. There’s many valuable things you can do with that land, rental units will just stop getting built in favor of other things.
      - tyre 17d ago
        Not if we zone them for residential.
    - 17d ago

They would. But second order effects ensure that this very act leads to the decline of housing prices. These effects being eliminated by rent control makes it the premier anti-tenant policy.

dataflow 18d ago

What second-order effects...? Feels like such an oddly opqaue way to talk about them. And how do you ignore the effect of the fact that rent no longer rises during the life of the tenant, making it lower after a while than it would otherwise be...? (How) is it so obvious that that is dwarfed by the second-order effects of uncontrolled rent that it doesn't even warrant a mention? Because it isn't to me.

lotsofpulp 18d ago
Prices are a signal, and price changes are how market participants can determine which way supply and demand curves are moving. By legislating prices and price changes, the signal is muddied, and market participants cannot take action to match the movements of the supply and demand curves. Prop 13’s property tax rate increase cap is also price fixing. These kinds of laws are mostly ways to enrich and reward those who got or were born somewhere first, and run counter to the vaunted meritocracy that a so called free market can encourage. Edit: The most helpful thing the government can do is maximize price transparency, so the smaller entity can be on equal footing with the bigger entity about which way prices are moving. Tenant agreements should be public record, like land sales are, and that would not only help cops with kicking out squatters, but also give renters more power in negotiations.
- tyre 18d ago
  When people are trying to afford living, “price transparency” is not the most helpful thing a government can provide. I agree that Prop 13 is god awful.
  - lotsofpulp 18d ago
    These side effects of these dynamics are not going to be evident or resolved in the short term. It took decades for prop 13’s (and other effects) to compound and become visible, and it will take decades to undo. There is no shortcut though, the incentives have to be set right, and there has to be patience for the results to show. Unfortunately, long term benefit at the expense of the short term is a core weakness in democracy.
    - rcpt 18d ago
      I don't think that's true. Prop 13 for example is priced into the market. Buyers bid higher because their taxes are frozen. This doesn't take decades to correct. Market reactions are instant. Once the policy is fixed we don't have to wait for a generation
      - seanmcdirmid 18d ago
        Buyers bid higher because sellers are giving up their low property tax, not because the buyer will have a low property tax in a decade or two. Sellers are hesitant to sell because they are giving up a lot, California had to pass a special law just to let old people downsize without losing their low property tax on the big home they raised a family in.
Aurornis 18d ago
> And how do you ignore the effect of the fact that rent no longer rises during the life of the tenant, Rent control schemes don’t work like this, except in completely broken policies. Landlords are given an allowance for rent control increases year over year. The point is that they basically have to take the maximum allowed every year to avoid getting stuck.
- tdeck 17d ago
  In CA many cities allow landlords to "bank" rent increases in some way. For example, in SF: https://www.sf.gov/information--banked-rent-increases https://www.sf.gov/information--banked-rent-increases
Espressosaurus 18d ago
If rent no longer rises then the profit doesn't rise commensurately with demand, so the money isn't there to build supply. Rent control crushes supply to the degree that the rent control caps rents below the actual market rate. If you're lucky enough to get rent controlled housing then you're in good shape. But good luck getting it when things get far enough down the timeline. Rent fixing is the other side where supply is manipulated to extract the maximum profit. In this case the coordinated rent pricing action behaves like an oligopoly.
- tyre 18d ago
  If rents can’t rise quickly, then the expected profit of a building goes down, which means prices for land go down, which means it is cheaper to build, which means it balances out. If the balance is far enough off that everything turns into commercial real estate, that can be solved, too.
  - rcpt 18d ago
    > prices for land go down, which means it is cheaper to build By this logic San Francisco should be one of the cheapest places in the world to build
  - StevePrefontain 17d ago
    You’re misunderstanding 2 fundamental things. First is that it’s very expensive to build anything in major US cities with the high cost of labor, materials, and permitting. Rent control completely tips the balance against building housing that you’ll rent out. Second is that the value of land is not going to depreciate in these premier US cities just because it’s not profitable to build rental units. There’s many valuable things you can do with that land, rental units will just stop getting built in favor of other things.
    - tyre 17d ago
      Not if we zone them for residential.
  - 17d ago