
Rent Control Creates Higher Rents in SF - nickstefan12
http://www.nickstefan.net/blog/view/sf-rent-control
======
spankalee
Rent control causes all kinds of bad effects.

As noted by others here, it discourages maintenance and property improvements
to rent control units. The landlord has an incentive to create a terrible
living situation to get the tenant to move out.

It also reduces tenant mobility. If you're a long time renter and have a
great, but maybe just affordable to you, rate, and then have any life change
where you'd normally want to move, you face a tough decision. Get a new job,
want to move in with someone, have a baby, need to take care of a parent, sell
or buy a car, etc... and when you would like to move, instead you're stuck.

Rent control also directly causes Ellis Act evictions, IMO. If your building
has occupants who've been there for a while then you're getting much lower
income than market rate. One way to retrieve the true value out of the
property is to sell it someone who will convert to private residence, thus
valuing the property much more than a landlord.

Rent control is a subsidy to renters paid by landlords. They bear almost all
of the financial responsibility for this attempt to make housing affordable.
Home owners don't, and employers and employees don't. And the subsidy is
incredibly unevenly applied: You get more a subsidy the longer you've been in
a rental, it's not dependent on how much you need the subsidy.

As long as the city deems it beneficial to have a rental subsidy, they should
just go ahead and have a real subsidy paid by taxes, and get rid of rent
control. There's a good argument that a diverse population is good for the the
city, so a subsidy funded by income, sales, corporate, property, and hotel tax
makes a lot of sense.

~~~
metaphorm
> It also reduces tenant mobility

this is such a great point and I wish it was talked about more in the
discussions of these issues. rent control basically traps people in a single
apartment for the rest of their lives. it traps their sons and daughters there
too (if they elect to "inherit" the apartment, which they frequently do).

this is one of the ways that ghettos come in to existence. the ability to move
to somewhere else is really fundamental to preserving a person's freedom and
quality of life. rent control takes that away and replaces it with a market
dislocation and transfer payment.

~~~
cyphunk
>> It also reduces tenant mobility

> rent control basically traps people in a single apartment for the rest of
> their lives.

so does buying a house. still, some people tend to appreciate it regardless of
how bad the added lack of mobility is for them.

~~~
tptacek
They stop appreciating it pretty fast when they're underwater and need to move
for a job. See: 2007. Part of the contract between a lessor and a tenant is
that the tenant is making some sacrifices in exchange for the ability to leave
their apartment any time they want to. You can't have it both ways.

It seems to be a strange and repeated message board blind spot that we're very
alert to equity in upside, but not in opportunity cost. The same thing happens
in virtually every HN discussion about the stock market. Everything always
seems to be based on the notion that prices are always rising, and our only
concern is sharing those profits as uniformly as possible. No. The market is
fundamentally structured around the likelihood that prices can go either way.

~~~
klipt
But pretty much everyone assumes that over the _longterm_ , the market will
rise.

Otherwise everyone investing in index funds for retirement is screwed.

------
xenadu02
Tech kids don't vote. An informal poll of my coworkers reveals those that live
in SF didn't vote last election, some because they thought you had to live
here for over a year before you can vote. Tech companies don't seem to do
anything to encourage people to register either.

I voted (especially for pro-building, pro-housing candidates). Maybe if
everyone else did the same we could change a few things.

~~~
GuiA
A lot of "tech kids", myself included, are immigrants and can't vote.

And, on a separate note, it's ridiculous that I have lived here for over 4
years and paid hundreds of thousands in taxes but do not have any way to
influence the democratic process (it is equally ridiculous that I can still
vote in my home country despite not setting foot there for more than 2 weeks
per year for the past 6 years and not contributing to its economy at all. The
current definition of citizenship is completely outdated in the globalized
world)

~~~
Kalium
Also, a lot of "tech kids" like myself aren't in SF proper and thus can't vote
on things like SF rent control. It's amazing how privilege acts to protect
itself.

~~~
superuser2
I'm sorry, what? Why should you be able to vote on a government that doesn't
have jurisdiction over you?

Remember that SF is an anomaly. Generally it's the wealthy in the suburbs and
the underprivileged in the city. Suburbanites voting on urban policy (in
general) is the _last_ thing you should support if you are concerned about
privilege.

~~~
hueving
>Generally it's the wealthy in the suburbs and the underprivileged in the
city.

That's why rent in Manhattan is so cheap.

~~~
superuser2
SF, New York, maybe parts of Chicago.

Consider the entire middle of the country.

------
100k
There is no way San Franciscans renters should give up rent control without
landlords giving up Prop 13. Landlords can hold property for decades without
seeing their taxes go up, yet they cry crocodile tears about rent control
(which resets every time a tenant leaves).

Rent control and Prop 13 are two sides of the same coin.

~~~
newman314
That's not going to happen without some sort of equalization.

Prop 13 benefits people that have owned property for a LONG time. I cringe
every time I see my prop tax bill while my neighbors who have been here for
decades pay a fraction of taxes only because they were here first [1]. But
Prop 13 props up housing prices which would drop like a rock if Prop 13 were
outright abolished. So there would need to be some sort of retro tax event to
help lessen the pain.

Additionally, I would make the distinction of this tax event for primary
residence, investment property and commercial property. Maybe it should just
apply for primary residence, I don't know the right answer to this but longer
term, I agree that rent control and Prop 13 need to be revisited.

[1]
[http://www.planetizen.com/node/40895](http://www.planetizen.com/node/40895)

~~~
kansface
The repeal of prop 13 is straightforward. Let property taxes rise more than
inflation each year. It could be capped at 2x or 3x, etc. It would be slow
enough to let people prepare, but fast enough to be painful.

~~~
gojomo
Indeed. Catch-up rates could also be a function of how far out-of-whack the
current property tax bill is.

This could even be part of a hybrid approach where owners have some protection
against rapid changes, but bills slowly catch-up to their neighbors… restoring
equal protection under the law regardless of date-of-purchase.

For example, the increase-cap could be "the larger of 1% [like Prop 13] or a
rate that, compounded 20 years, would reach parity with peer properties". As
long as your bill is only ~22% less than comparable properties, you're still
on the Prop 13 1% plan. But when things _really_ get out of whack, your rates
go up slightly more... and you have very strong visibility into the next two
decades' of rises, if you assume property values hold. (If you're paying half
your comparable-property new neighbors, your bill would go up around
3.5%/year.)

No surprises, small annual changes, but (over time) far less of a giant tax-
handout to the already-property-rich.

------
btilly
This is literally economics 101. If some of the supply is tied up in below
market prices to people who would not have bought at the market price, then
you shift the supply curve more than the demand curve and the price of the
free market bit will be higher.

Anyone who cares to know this, does. People who don't want to know this won't
be convinced by a carefully reasoned toy example.

But if you really want to understand the problems with the housing crisis,
[http://techcrunch.com/2014/11/02/so-you-want-to-fix-the-
hous...](http://techcrunch.com/2014/11/02/so-you-want-to-fix-the-housing-
crisis/) is unusually good.

------
Spooky23
Supply/Demand imbalance raises rents. Rent control is one contributor.

Rent control is more than an economic issue, it's a class and moral issue. Why
should only people with the means to buy property have the ability to live a
stable life? Imagine if your child had to change schools every year because
your one of the overwhelming number of people who cannot absorb rent
increases.

I personally have zero or negative sympathy for landlords charging usurious
rents while simultaneously crying proverty and getting all puffy about
property rights. If you can't handle the regulatory environment, nobody put a
gun to your head and made you a real estate speculator.

~~~
tolmasky
_> Rent control is more than an economic issue, it's a class and moral issue.
Why should only people with the means to buy property have the ability to live
a stable life? Imagine if your child had to change schools every year because
your one of the overwhelming number of people who cannot absorb rent
increases._

Rent control is more than an economic issue, it's a class and moral issue. Why
should someone pay less rent simply based on when they originally moved into
the apartment? Imagine if you are a poor immigrant just moving to the city and
having to pay market rate while reasonably well off people get to pay a rate
that made sense 5 years ago.

I personally have zero or negative sympathy for people paying lower rates than
everyone else while simultaneously crying proverty and getting all puffy about
the possibility of their rent going up. If you can't handle the price of the
city, no one put a gun to your head and forced you to move here.

------
b_rad
An explicit and anecdotal rent control inefficiency I was made aware of
firsthand in SF:

A young man lived in a rent controlled apartment for many years. He eventually
met a lovely woman and they began dating seriously. They moved into the
apartment together and enjoyed several years there together.

Eventually, they were ready to have children and moved to the East Bay, but
they decided to keep the rent controlled apartment for occasional weekends in
the city. At this point, between both of their incomes, it was a drop in the
bucket. That apartment to this day sits mostly empty, while a housing crisis
dwells around us and rents keep going higher.

We talk about pushing people out of neighborhoods — this literally has taken a
home away from someone that could be living and working in the city. No story
is the same, but the inefficiency is clear.

------
acomjean
I live in cambridge MA. We had rent control on some units, now we don't. It
seems to have done little to stem the tide of expensive rental units.

I think building more adding more supply is the only way to help keep rents
and sales prices at a reasonable level.

They charge higher taxes to non-resident owners, which is an interesting
tactic. But rents have gone up enough that people who leave my building often
opt to rent their units rather than sell them.

It doesn't help that my state doesn't seem to make public transit outside the
city core a priority (Boston, Cambridge, Somerville, Brookline), meaning
commutes into the city from outside can be painful.

~~~
psychometry
The other problems in the Boston area are oppressive zoning laws and height
restrictions that discourage or make impossible the construction of cheap,
high-occupancy buildings. Boston, despite its liberal reputation, is a very
conservative city economically speaking and is a perfect example of what
happens when NIMBYism runs amok. Cambridge and Brookline are probably worse in
this respect.

~~~
Shivetya
To be blunt, altruistic behavior is seemingly assigned to liberals without
question the end results of many of those actions seems to have the opposite
effect but when you dig down it had the effect they desired.

simply put, they don't want the type of people associated with that type of
housing messing up their neighborhood. The lesson learned in the 60s is that
it takes regulation to control who can move into an area by simply pricing it
beyond the means of the undesired groups from moving in.

The separation is now more money based than race, but a little of the latter
still exist; actually a lot of the latter still exists

------
j_baker
The argument (or lack thereof) that the author is making is hardly based on
sound economic analysis. This "thought experiment" ignores a few fundamental
facets of SF's rent control ordinance. As a "second-generation" rent control
ordinance, the economics surrounding the issue are less clear-cut.

For starters, the story doesn't account for the fact that new housing may be
built without being rent-controlled. This allows new housing stock to be built
without regard to whether it will be rented under rent-control.

Secondly, SF doesn't have a "rent control" ordinance per se. It has a rent
stabilization ordinance. Landlords can indeed increase a tenant's rent, but
there are restrictions on how much they can raise a tenant's rent. It's based
on the Consumer Price Index (though I don't think this is a good choice of
index to peg rental rates to).

What it basically boils down to is less about economics and more about social
mobility. Between rent control and prop 13, the Bay Area is set up for social
stability. It is intended to encourage people to stay where they are. Us
techies, mostly being from elsewhere in the world, are more inclined to push
for more mobility.

~~~
PublicEnemy111
Aren't SF residents actively fighting the building of new apartment complexes
to "preserve the skyline"?

~~~
Kalium
Generally, yes. Sometimes the goal is to stop the new construction to preserve
the character of the neighborhood. Sometimes it's to preserve "historic"
(read: old and I like it) buildings. Sometimes it's to demand that the new
complex be entirely below-market-rate housing.

Opposition is pretty much guaranteed, though.

------
bcg1
Price controls almost always lead to shortages, for the very reasons the
author described. If rent control is used to keep prices down, it is self
evident that the market clearing price must be higher for those units...
otherwise you could just get rid of rent control all together and there would
be no side effect.

I guess the real question in my mind is "cui bono?" Seems that this policy
would greatly benefit any landlords with non-rent-controlled property, since
the artificially low price would create an increase in demand... since the
price of those units can't increase the effects would presumably be felt in
the next best substitute(s), i.e. free market apartments and/or values in the
surrounding areas. Seems like property developers in the both the city and the
suburbs might have a strong interest in distorting the market in this way.

~~~
wuliwong
If I understood his argument, I think he was saying that only non rent
controlled apartments are factored into things like average rental price. So,
in this case, the rent controlled properties are basically just not part of
the market right now. So his argument was that removing the rent control would
more than double the apartments on the market. The price for the rent
controlled properties would increase but since they previously weren't being
counted, the average price would ultimately drop with the larger supply now
available to be bid on in the open market.

------
jkot
Prague had rent control for over two decades. Regulated rent was about 5x
lower than commercial. Over time this lead to some interesting stuff:

\- home owners would cut hot water and electricity, just to get tenants out.

\- there was regular black market where one could buy contract for cheaper
rent

\- tenants with lower price would subrent apartments for commercial price

\- in Prague it was highly discriminatory for students and other poor people,
who had to live in Prague.

\- It did not protected city center anyway, people eventually moved away.

\- there was huge conflict of interest. Some PM, government members, town hall
officials... lived in cheaper apartments.

~~~
mbca
> there was regular black market where one could buy contract for cheaper rent

A precursor to AirBnB!

~~~
jkot
It was more like buying new apartment. Contract (decret) was life-long cheap
rent, transferable to children and other family members. Price was very high.

------
ChainsawSurgery
Not to sound like a complete dick, but... duh? Is this a controversial opinion
really from a finance perspective? I was under the impression that almost all
arguments surrounding rent control are:

1) Moral/legal arguments

2) Whether rent control is the small problem and lack of housing development
due to zoning laws or NIMBYism or conspiracy or whatever is the much bigger
problem - i.e. rent control is one small facet of the housing issues in SF.

~~~
nullc
There are efficiency arguments as well.

The solution where each participant in a market acts to optimize their own
returns is sometimes nowhere near the global optimum allocation of resources
(for basically _any_ theory of optimum allocation other than "whatever the
market did").

------
meddlepal
Rent control isn't the only problem. We don't have rent control in
Boston/Cambridge but we also have skyrocketing rental prices. The fact is
supply needs to at a minimum match demand or outpace it to suppress severe
rent inflation. You can only get to that happy place if you make development
easier; both San Francisco and Boston have very strong NIMBY groups in the
various neighborhoods.

~~~
TheOtherHobbes
You can't have skyrocketing rental prices. That's economically impossible.

If you do have skyrocketing rental prices, you should buy yourself an Econ 101
textbook and educate yourself about why this is impossible.

Then the problem will go away.

>both San Francisco and Boston have very strong NIMBY groups in the various
neighborhoods.

Well, yes. In the real world - the one that doesn't consider 'just so' stories
an explanation of anything - it's well known that rents depend on a mix of
factors, not least of which is strong government support for affordable social
housing.

Germany has a very strong rental culture, and excellent availability. Rentals
remain reasonable, because there's a critical _political_ mass of renters who
would cause problems for politicians if they stopped being reasonable.

London, meanwhile, has limited housing stock and no rent control. The result
is that rents are increasingly insane, landlords are increasingly
disinterested in spending money on repairs (...so much for _that_ argument)
and most ordinary people are either sharing in overcrowded conditions, living
in spare rooms, or moving elsewhere.

As a test case, this is hardly a resounding success for the no-control lobby.

London used to have a solid reservoir of social housing, but that was
deliberately eliminated in the 80s. The result has been a steady cycle of
manic-depressive boom/bust explosions.

Currently property prices are being driven up by foreign speculators. Wherever
there's boom, capital flocks to it - until prices crash again, and then the
greater fools are left behind, trying to capitalise on decrepit slum
properties.

Rent control on its own isn't a solution to this. But an integrated and
thoughtful housing policy certainly can be.

~~~
myrryr
"You can't have skyrocketing rental prices. That's economically impossible."

"If you do have skyrocketing rental prices, you should buy yourself an Econ
101 textbook and educate yourself about why this is impossible."

ok, this made me laugh more then it should :)

------
tdaltonc
It's trivial to show out that rent control increases the cost of rent for new
renters. It's been talked about in the academic literature since the 40's[0].
The harder question is, "is it worth it?" Do the people who build a community
in a place, and contribute to it's value, deserve to be shielded from the
price increase they helped create? Home owners are incentives to help build a
valuable community, shouldn't renters?

[0] Friedman, Milton, and George Joseph Stigler. Roofs or Ceilings?: The
Current Housing Problem. Foundation for Economic Education, 1946.

------
mcdoug
Here's what I don't get about rent control: how is it actually benefitting the
renter? If a landlord has a few different units, some under rent control, some
not, and some cash to spend on improvements, why would he spend it on
improving the rent-controlled units? The Facebook post that was here yesterday
even said so much:

> The few of us who still remain in San Francisco have no choice but to live
> in sub-par conditions like mold, windows that don't shut, rodents and
> countless other issues because there is no other choice, because the rents
> are so high you can't move so you don't.

This is what you get when you set the price artificially below market value:
subpar product. Has anyone here seen Soviet-era apartments? They were exactly
like this. So in the long run, the place will fall apart around the renter,
and they will be pretty much powerless to do anything about it. And the bit
about "can't move" because it's too expensive just means that the area is now
too expensive for you and rent-control is the only thing allowing you to stay
here.

If the excuse is that your job is here, well maybe your job is not paying you
enough to live in SF. Perhaps founders should stop starting companies in this
incredibly expensive area, and explore greener pastures.

~~~
radley
The price wasn't far below anything. The price has historically been average,
if not above above average. Those problems persist because "bad landlord".

The only difference now is the skyrocketing rates in SF due to dot com 2.0
immigration. The same thing happened back in 1999-2000. _EVERYONE_ had to be
in SF for the boom back them, so rates skyrocketed. When the bubble burst,
rents leveled off while the rest of the country eventually (almost) caught up.

Plus there's the "Google / Facebook" stipend. Google & Facebook were having a
hard time hiring because employees couldn't find a place to live. Google / FB
started offering $1k / mo above asked monthly rates to help employees get
units quick. That also helped bump up even the worst apartments up to
unrealistic levels.

~~~
sbw1
I'm pretty sure this isn't a thing, at least as far as Google is concerned. At
least, I work there and live in SF and have never heard of it.

Pay is higher in the Bay Area due to high cost of living, like for most
companies, but I've never heard of a housing-specific "stipend" or anything
like that.

------
twblalock
Rent control is a case of the government forcing landlords to do something
that is really the government's job.

If the government wants housing to be affordable, it can build more of it, or
provide households with tax credits or vouchers to help them afford to pay
rent. Vouchers are less desirable than increasing supply, but they cause fewer
market distortions and bad incentives than rent control, which is a price
ceiling, which we know for sure leads to shortages.

Instead of taking on this public policy responsibility, the government of San
Francisco has decided to take the easy way out by capping rents on certain
units, which unfairly forces landlords to shoulder the burden of a job the
government ought to be doing. This incentivizes all kinds of crazy things,
including removing housing stock from the market under the Ellis Act.

~~~
nedwin
Great point!

Property owners are the ones wearing the pain, not the government. Doesn't
help that landlords are in the minority when it comes time to vote.

------
mc32
For me two of the biggest issues in the bay area, transportation and housing
stock availability suffer from a lack of regional authority which could make
decisions for the region as a whole. The Abag just does studies and isn't
binding.

I wish we had some county/city mergers like miami-dade. I think a regional
authority would weaken the nature of neighborhood politics which conflict with
larger regional goals. We could have an integrated transit system as well as
well planned -or at least better planned- housing policies and strategies.

Bay area nimbyism resulted in a fragmented Bart and uncoordinated transit
system as well as wasteful low rise housing developments. I can only hope this
changes. And also agree getting rid of rent control is a bitter but necessary
pill. Build more and rent will go down.

~~~
kansface
I don't think better trains would necessarily be the result of merging. There
is a good chance we'd just expand the 101 and build new Interstates through
neighborhoods.

~~~
mc32
Maybe not. But my wish is for a unified transit system and a coordinated and
progressive (for progress) housing policies. Allow density in the cores and
peripheries of cities. We're not a pastoral society anymore --not with the
population growth we're experiencing.

------
mathattack
This just seems very basic.

Rent control discourages investment in real estate. Less investment in real
estate means lower quality and fewer apartments. There are some lucky winners
who get cheap apartments, but the rest pay higher prices to live in worse
places. The same thing happens in New York City.

The economically sound answer is to make it as easy as possible for builders
to make large buildings with lots of apartments. Right now it is so hard to
build that only luxury apartments are profitable.

~~~
cbhl
It's worth noting that San Francisco sets a much higher burden on new
construction: it either charges the builder an "Affordable Housing Fee"
(~$200k to $522k per unit), or it requires a certain percentage of units (12%
of on-site or 20% of off-site) be made available for rental or sale at a price
specified by the city ("below market rate").

[http://sf-moh.org/index.aspx?page=308](http://sf-moh.org/index.aspx?page=308)

~~~
mathattack
Same issue in NYC. So a couple people win a lottery to get subsidized housing,
and can't ever move again, at the expense of the people paying full rent, the
developers, and everyone else who can't afford housing.

------
ghouse
And Prop 13 creates higher home prices in CA.

Both do little to protect their intended target (artists and elderly) both do
a lot to protect the non-mobile (and in fact discourage mobility).

~~~
digikata
Talking to relatives who live out of state, Prop 13 really does protect the
elderly from rising property taxes. I think you don't really see it because it
has largely solved the problem of rising-propery-tax-based evictions without
much fuss, so you don't really feel it in action.

One issue with Prop 13 is that it should maybe only protect property owners
who live in their property as a primary residence, but currently covers
commercial properties, vacation homes, etc..

Higher home prices get locked into the tax rate if the property changes hands
so I'm not sure what the link is to Prop 13 creating higher prices....

~~~
dragonwriter
> Higher home prices get locked into the tax rate if the property changes
> hands so I'm not sure what the link is to Prop 13 creating higher prices....

Prop 13 has several provisions, the two most important being:

1) It limits the nominal rate of _ad valorem_ property taxation.

2) It limits the increase in the tax basis value of property except when a
reset to the full assessed value is allowed for certain qualifying events
(changes of ownership and certain improvements.)

The first directly increases property values by making it more attractive to
own property because of lower cost of ownership and less tax risks regardless
of length of ownership.

The second restricts mobility (and therefore, both supply _and_ demand)
because it discourages exchanging one property for another, because doing so
increases almost always increases effective tax rates (and total tax costs for
like valued properties.) Because the it affects supply more than demand
(insofar as some demand comes from people moving from out of the state, who
aren't affected by Prop 13 on the demand side), this also increases prices,
though its main effect is to reduce market clearing volume independent of
price and thereby increases price volatility.

~~~
digikata
I just don't think that people forced to sell property because of high taxes
as a good way to encourage mobility...

~~~
nwah1
Personally, I think people should be allowed to monopolize prime locations
without having to pay a dime to anyone. It's only fair. They created the land.
Before them, it didn't exist. But now that it does, it belongs to them forever
and ever. Amen.

------
jskonhovd
While you all are enjoying your high rents, I would like to brag about my
hometown Memphis, TN. We just got some hype in the WSJ.

"In a nod to the youngsters, the survey found that the top markets offering
“the right live/work/play environment” for millennials were Nashville,
Brooklyn, Portland, and Memphis."[1]

In all seriousness, I think its a shame that SF can't keep up with housing.
It's a tough problem. I don't envy the people in Government that have to
balance all the different interests.

Then again, I would hate it if the majority of my paycheck went to my rent.

[1] [http://blogs.wsj.com/moneybeat/2015/03/11/u-s-regained-
top-s...](http://blogs.wsj.com/moneybeat/2015/03/11/u-s-regained-top-spot-for-
real-estate-investment-in-2014/)

~~~
bmelton
As a native, but former Memphian, while I've always thought that they get
plenty of things right, it's hard to compare it to San Francisco.

For one, there's the freedom to sprawl, while San Francisco proper is
constrained to a much smaller geographic space. That alone skews a lot of the
comparisons.

I was reading this today, and it struck a chord especially after yesterday's
"rent in SF" article, and while I feel that the Houston approach is indeed the
enlightened one, I don't know that it's appropriate for every particular
place.

[http://joshblackman.com/blog/2015/03/15/the-economist-
housto...](http://joshblackman.com/blog/2015/03/15/the-economist-houston-is-
not-pretty-but-it-thrives/)

Beyond that, of course, as much as it pains me to knock my home town, we left
Memphis because of the rapid rise in crime, and that hasn't seemed to improve
terribly. Since we've left, they've apparently done a fantastic job of
buggering up the schools.

The draw of home pulls strong on me, and I frequently contemplate moving back,
especially with the craft brew scene producing what I believe are some of the
best beers in the nation (especially High Cotton), but between the things I've
already mentioned and the oppressive summers, it's a tough sell.

------
moron4hire
All of the arguments I have heard for rent control act like the vast majority
of us who live in non-rent controlled areas are going through a Boschian
nightmare hellhole of landlords jacking up our rents, driving us out of our
ancestral homes, and sticking pitchforks in our collective asses.

<checks cranium> nope, no screw-vices here.

~~~
mrgordon
It's not relevant for less crowded areas but friends who live in NYC (or SF,
without rent control) often see 20%+ increases amounting to at least a few
hundred dollars per month. That's pretty rough after you found a place to live
and spent a year setting it up.

~~~
moron4hire
That's funny, because NYC has the longest-running rent control program in the
country.

~~~
mrgordon
Sure, but whether a city has rent control wasn't relevant to my comment, which
is why I mentioned San Francisco as well. I was saying that landlords in
popular areas whose properties are not subject to rent control (whether or not
the surrounding area predominantly has rent control) will naturally act in
their own self-interest and raise prices quickly. If the tenant improves the
property during their lease, then the landlord will immediately be able to
charge more for it which is another perverse incentive.

Here is an excerpt from an article that discusses rent control in Singapore &
Hong Kong, among other places:

"Rent controls [in Hong Kong] were renewed in 1973, to halt increases
exceeding 90% of prevailing market rates or hikes above 30%, for two years"

They actually had to add rent control there because the landlords acted
exactly as you described.

[http://www.theonlinecitizen.com/2014/05/is-regulating-
rents-...](http://www.theonlinecitizen.com/2014/05/is-regulating-rents-in-
singapore-the-answer-to-rising-rentals/)

------
guhcampos
I'm amused nobody brought the word Gentrification to the comments yet.

Yes, the arcticle does not mention that word. Neither the comments there or
the comments here.

But this is what giving up rent control encourages: gentrification. And it's
really bad.

I'm not a US citizen, I don't live there, but I've visited SF quite a few
times. You can see gentrification happening yearly after every visit. It's
sad.

Perhaps the discussion should not be "rent control" vs "no rent control" and
really "how to effectivelly control rent prices".

In Brazil, landlords are allowed to raise the rent every year by the same
ammount of one of the country's inflation indexes. It's not perfect, but
people seem to be more or less happy with it.

Also the rent price can never be more than a small percentage of the
property's declared value per month (if you want to change the declared value,
your ownership taxes will change accordingly). This helps a bit.

This is just an example of my point: stop thinking binary - yes or no - and
start thinking how.

------
unquietcode
One thing I've never understood (but would still like to) is where does the
imperative to build more and faster come from? I live in Berkeley, am very
nearly priced out at this point, but see no reason why the community is
required to take in more people. Permitting snd process ensures a snail's pace
for new construction here, but from the perspective of those that live here
(and most have rent control) why should they rush to grow?

All I'm saying is, market prices reflect supply and demand, but they also
balance the demand which would otherwise threaten to overwhelm the place. Who
am I to say 'I want to live here! Make it happen!!' We could be building the
city of our dreams, of the future, a mere 30 miles away.

~~~
spankalee
You're right to a large extent. This king-of-the-hill attitude towards
property is exactly what you see with Prop 13, rent control, severe building
code restrictions, etc.

Prop 13: The long-time home owners get to put a disproportionate amount of the
tax burden on newer buyers.

Rent control: long-term renters put a disproportionate cost of the rental
prices on newer renters, and landlords.

Building code: Land owners want to be able to build when it's their turn, but
as soon as they build they want to restrict others for obstructing their view,
or changing the character of the neighborhood.

Public transportation: Residents who don't use public transport have typically
fought against it coming to their neighborhood to keep the undesirables out,
then find out that their property values are lower, or shops aren't doing
well, because of this 30 years later. See Georgetown, DC.

Basically, everyone wants to lock in their position, then keep everyone else
out. That's really only rational, so I can't fault it that much. Where I
personally get annoyed is when those motivations aren't acknowledged and also
get paired with complaints about super high rent and property prices.

The "rush to grow" is simply the reasonable response to skyrocketing prices.
If the city doesn't want to grow, then it should be ok with those prices.
What's not reasonable to want to be a desirable place to live, not grow, and
have stable, affordable prices.

------
Karunamon
Perhaps I'm misunderstanding basic economics here, but:

 _The 20 people who originally couldn 't find houses in SF (who formerly would
have needed to bid $4), can bid $2 on some of the formerly rent controlled
houses. They get leases._

If the market rent is $4, and the control is $1, and the control disappears,
why on earth wouldn't the landlords in possession of the formerly-controlled
properties immediately raise their prices to the market price?

~~~
stephencanon
Because there aren't 100 people in the model city willing/able to pay $4 rent.
The landlords might attempt to do what you suggest, but as they fail to rent
their properties month after month, they will gradually drop the rent they are
asking until equilibrium is reached.

~~~
hiou
Here are a few reasons[0] you might want to look into about this fabled
"equilibrium" in commercial real estate.

[0] [http://www.ezracompany.com/2012/04/30/why-do-landlords-
let-s...](http://www.ezracompany.com/2012/04/30/why-do-landlords-let-spaces-
remain-vacant-2/)

------
fiatmoney
"The city needs people who make less than X to live here (teachers, social
workers etc). We shouldn't have a homogenous city of software engineers and
bankers."

This is mistaken. The cost of living is routinely taken into account when
people are deciding what wages they will demand. If literally no teachers can
afford to live in your city, and you wish your children to be educated, you'll
have to pay a lot in order to import a teacher who can then afford to live
there. That drives up wages to equilibrium.

Furthermore, if literally no teachers can afford to live in your city, and you
wish your children to be educated, you might very well decide to move to
somewhere with a lower cost of living. This drives down demand to equilibrium.

The only argument in favor of rent control is that it reduces short-term
volatility of rent. This only makes sense if moving entails huge negative
externalities. You do see people making this argument (they talk a lot about
long-term community cohesion).

------
stormbrew
Eliminating rent control without also making it possible to build up
(literally) to a degree that (afaik) is currently impossible due to building
and zoning restrictions would do little to ease the problem. By my
understanding, though, actually building new housing is about as unpopular
with the locals than ending rent control. There's no point in 'signalling to
developers that it's time to build,' as suggested in the article, if they
literally can't build anything.

The annoying thing with the fixation on rent control over zoning is that at
least rent control has some altruistic value to people who can't really afford
their rents being raised. The zoning rules largely benefit property owners, I
expect.

------
littletimmy
There seems to be an underlying thought in many answers here, something like
"the markets should be allowed to function".

This is a very naive idea. The "market" exists only as a system protected by
the state security apparatus. The state prohibits poor people to randomly
capture property from rich people, in effect protecting landlords with the
backing of violence. What do the poor get in return? Surely they must receive
something to opt into the social contract? In general, that "something" is
welfare. THAT is why welfare for poor renters is important, in the form of
rent control or subsidies or whatever else they demand.

A market propped up on the spectre of state violence is not "free".

~~~
justin_vanw
[https://www.youtube.com/watch?v=q3cUmHAs3yY](https://www.youtube.com/watch?v=q3cUmHAs3yY)

------
JimboOmega
I support building new buildings - if we let them build new buildings, those
buildings are exempt from rent control, too!

Also, let's not forget that SF also has a pretty large amount of subsidized
housing stock in the form of BMR (below market rent) units and other things.

I don't see a problem with having the rent control stock transitioned to some
sort of means-testing.

I'd love to see them building, building, building. The amount of fighting that
went on to knock down a Walgreens in the mission that was right next to a BART
stop though, leaves me wondering if that could ever happen.

Zoning protects owners, but remember that a tenant in rent control has a right
not unlike an ownership right; it's a perpetual lease at a fixed price. They
can sub-lease it, for instance. It is all but impossible for them to be
evicted. So rising property values and quality-of-life in their area benefits
them (the tenants) greatly; so opposing construction keeps the value and
exclusivity of their position high. The tenants are accruing a large economic
surplus that would normally accrue to the owner.

Anyway, I've heard of quite a few anecdotes that involve people making huge
salaries and having incredibly cheap rent-controlled apartments, or even
worse, sub-leases of one. Never mind the pied-a-terre accusations.

I have not seen any meaningful statistics, though.

~~~
x0x0
There has been an abandoned gas station, surrounded by a chainlink fence,
bums, and bumshit, at 23rd and valencia since _2008_. It still, afaik, isn't
being turned into housing.

[http://sf.curbed.com/archives/2013/12/05/whats_the_story_wit...](http://sf.curbed.com/archives/2013/12/05/whats_the_story_with_the_gas_station_at_23rd_valencia.php)

[http://missionlocal.org/2013/12/developers-turn-old-gas-
stat...](http://missionlocal.org/2013/12/developers-turn-old-gas-stations-
into-new-condos/)

------
jim_greco
You need more data. Just because 72% of apartments are under rent control
doesn't mean that 72% of apartments are going for under market rate rent.

Even with rent control, San Francisco would benefit from being denser. There's
a lack of all kinds of housing which is making it unaffordable. Manhattan is
70,000 people/mi2. Brooklyn is 35,000 people/mi2. SF is 17,000 people/mi2.

------
shittyanalogy
Rent Control is about enabling community through housing stability. Places
where the housing costs have skyrocketed out of the reach of anyone but
investors are also the places with the lowest community participation and
highest Landlord rights. If you want to run a city where only the rich have
rights then don't have any rent control. But if you rent to people who aren't
rich, and then when housing goes up you try to throw them out to make more
money, they're going to want to get together, contact their politicians, and
secure their housing stability. Just because you want to piggyback on the poor
and lower middle class to float your investment until it starts making real
money doesn't give you the right to complain about the poor and lower middle
class for still being there. If you consider housing in one of the densest
cities in the planet to be solely for investment purposes I think you have
something wrong with your moral compass.

~~~
taeric
These sound like bold claims, honestly. I have never lived in a rent
controlled area, but I have also never had the money to enter into the only
rent controlled areas I know of. Such that it is easier for me to understand
the possible negatives of rent control over the positives. Do you have good
reading on why they are false? (Basically, your moral argument sounds like I
could see the appeal, but mostly false. Whereas the other arguments lack any
appeal to morality, but seem much more likely.)

------
justin_vanw
This isn't a convincing argument. Regardless of the rates paid by the people
in rent control apartments, unless they vacate, the supply doesn't increase,
so the market isn't changed at all.

Since new buildings aren't rent controlled in SF, there is no discouragement
to building due to rent control.

The real answer is just geometry. SF is geographically constrained in such a
way that there isn't really a way to build more housing within commuting
distance. A city like Omaha (or even Berlin) has the available land go up with
the square of the commuting time. SF has the land available for development go
up roughly linearly (the valley doesn't get much wider until all the way to
San Jose)

The way to lower housing costs is to increase the available housing as a
function of commuting time. The easiest way to do this is high speed rail.

It's not a coincidence that all the communities in the valley have fought
tooth and nail against high speed rail.

[http://www.cahsrblog.com/2011/04/anti-hsr-activism-is-a-
rich...](http://www.cahsrblog.com/2011/04/anti-hsr-activism-is-a-rich-mans-
movement/)

Once it becomes possible to get to SF from Gilroy in 40 minutes, tons of
housing will be built far from the city, where land is available and cheap.
People won't have to choose between paying a huge premium to avoid a long
commute, or spending 3 hours of every day sitting in a car.

This is economics 101. The marginal property is south of San Jose, and the
premium for living in SF is about 2 hours * 20 days of commute time a month,
which if you are making $200k per year is about $4166 of lost time per month,
assuming a 40 hour work week and ability to convert that time into salary (a
bad assumption, but this is the actual analysis to figure out how much more
prices should be in SF, it just doesn't factor everything in appropriately).
It's not a coincidence that this is roughly the difference in rental costs
between these two areas.

------
zyxley
Rent control wouldn't have nearly this much of a distortive effect on the SF
housing market if SF actually had enough housing in the first place.

~~~
Joky
Maybe there would be more housing built if the area was not under rent
control?

~~~
x0x0
New housing in sf is not rent controlled.

------
notlisted
Simplistic model predicting major benefits, while none are likely.

Abolishing rent-control could never take effect immediately, but would be
phased out slowly to protect current occupants. Hence, the number of
apartments coming on the market would increase slowly, owners could rent this
'new' inventory out at "market rates" ($4, aka the max the market can bear
right now and 'the norm') and the best we can hope for is a (temporary) drop
or slowdown in rental rate increases.

With a more realistic ratio of people looking for apartments (250 for 100?
500?) there may be no slowdown or drop at all. End result: neighborhoods
pulled apart as long-term residents are forced to leave, rents not affected
measurably, $4 considered 'normal'.

PS I live in NYC, where local renters compete with people parking their money
due to overly lax taxes on non-residents, making it worthwhile to own but not
occupy. Many buildings are half empty as a result (many thousands of
apartments). Rents meanwhile go through the roof.

A good way to affect housing stock in NYC would be to make non-residential
ownership not longer interesting. I suspect the same is valid in SF. The
suggestion below of increasing housing stock by allowing bigger buildings and
improving commute times seems to be a much better long-term solution.

------
mrgordon
This article seems to miss a few important points. The people who have lived
in a city make that city what it is and you can't just switch in new higher
bidding tenets at every juncture and expect that community to remain. In
particular, the people in the middle who could pay higher than rent control
rates will still move away more frequently if you increase their rent by a
couple thousand to get it to (somewhat reduced) market rates. For example,
when they have kids and need more space then they won't be able to afford it
but with rent control they could have already locked in housing costs. Just as
their landlord was allowed to lock in property taxes so they wouldn't lose the
property due to tax increases.

------
ADRIANFR
If the City needs teachers, social workers and others with traditionally lower
wages, wouldn't it make sense that their wages would also go up (based on
demand) if the rent control goes away?

~~~
VLM
Bingo, the most important question that is not being discussed.

This whole discussion is a social class issue. The folks there have defined
their upper class and they actively don't want lower class people there.

Otherwise, if you insist on hyperinflation of tech salaries and hyperinflation
of property prices, there's no reason not to glorify a similar hyperinflation
in teachers salaries or a hyperinflation in social worker salaries. But no,
there's agony and terror that a lower class human might soil our pristine
streets if we paid them a living wage...

~~~
Kalium
Have you considered that it's simply a case where an unprivileged group is
unhappy with being denied access to a good or service available to a
privileged group?

I don't know anyone who wants to push out "lower class" people. I do know lots
of people who want to live in a San Francisco where _everyone_ can afford
rent. Everyone includes programmers, teachers, social workers, and
dishwashers.

------
chucksmart
Is there some reason a landlord can't pay a tenant to move out of a rent
control situation? So they can renovate and clear the market?

------
azinman2
The real answer is to increase supply. Build more housing in bigger and taller
buildings. SF gov is living in a fantasy land.

------
chaostheory
Here's something rent control proponents also ignore: there are also other
nice places in the Bay Area, that are way cheaper than SF, where you can live
with good access to public transportation. Most public transportation in the
Bay Area has good, cheap access to SF.

~~~
chipotle_coyote
It's hard to find places in the Bay Area that have good access to public
transportation and are actually _as cheap as rent-controlled apartments in San
Francisco._ Just being "way cheaper" than SF may not be enough if it still
doubles your rent -- anywhere on the Peninsula down into Silicon Valley merely
drops you from "most expensive in the country" to "in the top ten most
expensive in the country," and even most of the supposedly "cheap" East Bay
will run you far more than most other metro areas across the US. Apartments
around Palo Alto, Cupertino and Mountain View, where there has never been any
rent control, are not _nearly_ as far behind SF's market rate as I think
people sometimes imagine.

I'm not making an argument for rent control, per se -- it's hard to dispute
that it's a distorting influence on the market in San Francisco itself -- but
it's hard to appreciate just how banana crazypants the housing market across
this _whole_ region is right now.

~~~
nickstefan12
this. Its actually cheaper for me to live in rent controlled SF than "close to
BART" Oakland. Bart isn't cheap. Owning a car isn't cheap. With the state of
our transit, I would never want to live in Oakland without a car, but I would
definitely live in SF without one.

Basically, if we had the mass transit system of new york, the rest of the bay
might actually not be that bad compared to walking to work.

~~~
chaostheory
Oakland isn't the only place with access to bart. Plus if you live further
from bart, you can bike to bart as well.

------
anigbrowl
Of course it contributes, but this analysis is too shallow to be really
useful.

------
gress
"A cost control normally afforded to the privilege of owning"

This is the most important line here. This article is about reserving rights
to the already privileged. Nothing more, nothing less.

------
thowar2
Is it possible to waive your rent control and eviction "rights"? Seems like
one could negotiate a lower rent by giving the landlord some more optionality
with their property.

------
swehner
I don't think there is much reason to believe that SF would have lower rents
without rent control.

Obviously, many people want to live there.

Keyword: delusion.

------
ghouse
A more constructive discussion would be regarding what % cap in rent increases
best balances competing interests. Last year in SF rent-controlled housing
(muti-unit, built before 1978) had a cap of 1.9%.
[http://www.sftu.org/annualincrease.html](http://www.sftu.org/annualincrease.html)

------
yoanizer
Price control (not just rent control) causes similar effects in all
industries.

------
nwah1
The law of rent... not just a good idea. It's the law.

------
claudenm
It's falicious to think demand is fixed in SF. Removing rent control does
nothing to stem demand. Also arbitrary deeming '$2' affordable is made without
any supporting evidence.

------
alexnewman
Rent control crashes websites

------
tsotha
Duh?

------
dreamdu5t
75% of the rental stock in SF is rent-controlled! Yet the city is
"unaffordable." There are no statistics on how many of those people make
salaries that can afford market rate... but in my experience as a property
manager I more often than not saw people with totally middle-class jobs
benefiting from it - not poor people.

Why should someone who banks 80k a year get to keep a $700 apartment in the
Marina? _That_ is the problem with rent control.

------
michaelochurch
Also there's price inelasticity. If you reduce the supply availability by 5%,
you don't just get a 5% price increase. For something like housing, gasoline,
or illegal drugs (typical inelastic goods) prices could double. That's why San
Francisco is so expensive: not desirability, but regulatory corruption pushing
down supply of an extremely inelastic product.

I don't know if San Francisco has this problem, but New York has a lot of
upper-middle-class, well-connected people who bought their way into rent
control by paying "key money" and being named as family by a deceased
beneficiary (who need not be related to them). They're now in an arrangement
that is actually superior to ownership (because they don't pay property
taxes). It's pretty disgusting. People actually used to follow obituaries as a
way of finding available RC apartments.

------
davidf18
The housing shortages are caused by politically induced scarcity through
zoning density restrictions and overuse of historic landmark status. This has
been explained by many including Harvard economist Edward Glaeser and recently
referenced by Economics Nobelist Paul Krugman. In microeconomics this
polticially induced scarcity is called "rent seeking." Fix the "rent seeking"
by overturning the zoning and landmark status laws that create the scarcity
and your housing prices will drop.

------
irascible
The massive influx of money from .comers fleeing the psychosocial wasteland of
Silicon valley is what is driving rents up.

~~~
irascible
It is really really sad. SF used to feel a loophole in the American lie..
where interesting artists,creators, and thinkers could afford to live in a
beautiful place, without being wage slaves.. this freed people to make the
city even better by enriching it's culture. Now it's just filling up with Bros
and fauxhemians that bring nothing to the table.

------
kuni-toko-tachi
Government interference in the free exchange of goods between free individuals
causes problems? Why is anyone surprised?

------
radley
This has little to do with rent control; It's all about development costs. New
units get built with mortgage rates that are far above the standard rental
rates. Buyers can't rent units significantly below their cost so they hit the
market at the high rate. These units don't get rented, so they stay listed
prominently.

Meanwhile, a tenant leaves an old building and the landlord starts looking at
existing rental rates. What do you know, that one-bedroom I was renting for
$1500 two years ago now goes for $3500. I guess I'll up the rate! It's not as
nice as the new unit, but at least it's not stuck in BFE China Basin (people
will pay a premium to be near food / park / Muni).

That's how rent rates got so high: development costs > listing rates >
matching rates. Period.

~~~
crystaln
This is absolutely incorrect. Pricing is based on what people will pay, not
development costs. Developers have high loan costs, and can not afford to let
units sit on the table simply because they'd be "losing money" when measured
against a sunk cost. It is very common for developers to lose money by selling
units under cost in a down market. While there may be some resistance to
pricing under cost, developers are not idiots and understand that investment
made is already made.

Further, any truth in your statement would argue against rent control. If
owners could rent at discounted rates to fill their units, then raise rent to
market, everyone would be better off. With rent control (in SF new units are
not rent controlled) owners are incentivized to hold out for a higher initial
rent.

