
Rent Control: An Old, Bad Idea That Won't Go Away - oftenwrong
http://www.governing.com/gov-institute/voices/col-rent-control-bad-idea-making-comeback.html
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nimbius
I dont understand what the argument of this article is. As someone who has
tried to maintain a blue collar job in a large city (im an engine mechanic)
Its nearly impossible to live anywhere near your job without rent control.

It was good work and good pay, but spending 65% of it on rent? what incentive
do i have to stay when the median home price is a million dollars or more? the
thing this article does not take into account is the fact that without rent
control or some form of affordable housing, that "amazing city" you live in
grinds to a halt pretty fast.

Try living in a city where the bus system never sees regular maintenance
because the motor pool is 2 hours away. broken down garbage trucks just sit in
the road because wrecker crews cant afford to live anywhere near the
metropolis. Ambulances and fire trucks might, or might not, make it to a
destination because the fleet techs with diesel certification like myself dont
live in your city.

pipefitters and machinists need a place in your city if you want clean healthy
water and sewage service. And the next time a drunk backs over a telephone
pole, you're going to need a lineman or three to fix it.

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abfan1127
When there is high demand for a product, including housing, the market has to
respond. High prices attract investment in more housing, usually denser
housing. Rent Control prevents the market signals from working. There is no
incentive to construct more housing because its not worth it. Additionally, if
blue collar jobs can't be filled because its not worth the pay+commute, then
either wages have to raise or these go undone. If the market isn't allowed to
operate, then you can't expect these systems to work.

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romed
You don’t want to wreck individual lives just because you want efficient
price-finding. Rent control that protects tenants from super-nominal price
increases works fine in the presence of abundant supply and liquidity. You can
see how successful this can be in places like Belgium where standard lease is
rent controlled for nine years with an option for additional nine years. This
is enough time for a family to become established and raise children without
being sacrificed on the alter of market signals. It is the kind of policy you
get when you view tenants as people rather than revenue sources.

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JamesBarney
Why does an increase in rent wreck people's lives?

Also what does super nominal pricing mean?

And anyone can sign a lease for 9 years. But the vast majority of tenants do
not want to make a commitment for that long.

And they could also sign a lease with an option to renew for up to a number of
years similar to a commerical lease. But again no-tenant wants to pay the
option cost.

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westbywest
Leases aren't offered with such flexibility in markets where the supply of
available housing is small. I'm also interpreting "available" to mean
available at a resident's income level, i.e. overlapping with "affordable."
You sign the lease that's offered, or it goes to next candidate tenant.

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cwmma
For the record, rent subsidies are the thing that actually accomplishes the
thing that rent control tries to do, but is often a much harder sell because
the costs are much more upfront compared to something like rent control.

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jayd16
It doesn't accomplish anything except paying the land lord more money.

If the same tenant gets to stay, it doesn't increase housing availability. And
in fact, house prices up because the market is propped up higher by subsidies.

If the same tenant is priced out, it doesn't protect the renter.

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cwmma
> It doesn't accomplish anything except paying the land lord more money.

well yes this is the idea, and then more people want to be land lords to get
the sweet sweet rent subsidy money, which ideally would then cause more homes
to be built because of all the money coming in as rent, and which would then
cause rents to fall.

Compare to absolute rent control (i.e. there is a global cap on rents), now
landlords get less money, they don't have any incentive to invest in their
property because they can't get any money out of it, nobody wants to get into
the landlord business because its hard to make any money in it so there isn't
any incentive to build new apartments.

Or compare this to the rent control where you aren't allowed to raise rents on
specific tenants. If you have an apartment now, congrats you have a deal, as
long as you never have to move in which case you are screwed. Also woe to
anyone new to the market because you're rent is going to be higher in order to
subsidize the people that the people that have been there forever.

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jayd16
You're describing a fantasy world as far as I can tell.

The situation you're describing requires several facets.

\- Enough demand to warrant rent control having an effect.

\- Not enough demand to make new units profitable.

\- There is room for new development and the only roadblock is profitability.

In California at least, a subsidy would just be a payout to land lords without
addressing the major issue of zoning.

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occamrazor
nany rent control laws only limit the possibility for the landlords to
increase the rent on existing contracts. Their main objective is to avoid that
tenants be “priced out” of their own apartment and forcibly evicted.
Considering the large negative externalities of evictions, there are good
reasons to argue that some form of rent control is good for the society at
large, even if it causes some distortion in the real estate market.

On the other hand, to provide _new_ affordable housing the only long term
solution is an increase in the stock of buildings available for rent.

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abecedarius
Aren’t the costs of evictions borne primarily by the two parties? I’m not
saying there are no externalities, but that’s not the same as "evictions are
expensive", and you have to weigh them against the costs of the alternative.

~~~
occamrazor
For example the tenant has to take days off work and use them for moving (or
for court hearings) instead of productive work. The government has to pay the
judges, or the police for a forced eviction. Legal clinics use their scarce
time. The tenant may become homeless (homelessness is often considered as an
issue with strong negative externalities).

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emtel
The whole debate about rent control drives me nuts. It's framed as callous
libertarians vs compassionate progressives. But the debate conflates means and
ends in an obvious way that no one ever seems to notice.

If you are concerned about the ability of lower-income people to afford
housing, then give them a rent subsidy! As a mechanism, this is superior in
just about every way. It doesn't suppress housing supply, and it can be means-
tested so that high income people aren't occupying rent-controlled apartments
(which happens all the time now). It also gives low income people the freedom
to move without losing their rent controlled status.

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gwright
Subsidies just increase the market price of the properties. The subsidy will
be sucked up by the landlord, which of course leads to rent control. Which
provides disincentives on capital improvements.

This is similar to the way that student loans have resulted in higher
tuition/housing that once again just gets sucked up by the institutions. The
recent appeal for "free college" funded by the taxpayer will almost certainly
result in increased tuition.

If only we had a simple mechanism that balanced supply and demand. I think
there are areas where government regulation is necessary and appropriate
(safety, fraud avoidance, pollution, health, etc.) but regulating prices is
almost always a failure that leads to an ever expanding Rube Goldberg
collection of incentives, subsidies, rules, tax loopholes, and so on that are
much worse than just letting prices float naturally.

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emtel
There are numerous examples of subsidies in the real world that haven't led to
price controls. And yes, subsidies distort the market. I'm pretty sure 99% of
economists will agree that subsidies are _less_ distortionary than price
controls though.

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justizin
Did a rent write this?

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barrow-rider
Do rents write anything?

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pytester
A counter point, for those who are interested:
[https://www.nakedcapitalism.com/2014/03/17-million-
reasons-r...](https://www.nakedcapitalism.com/2014/03/17-million-reasons-rent-
control-efficient.html)

~~~
travisoneill1
Not a very good one. The author's point that negotiating with each individual
tenant is fundamentally the same as negotiating with the landlord so there is
no inefficiency is academic garbage. Negotiating separate deals with hundreds
of tenants with a strange prisoners dilemma incentive structure is massively
more complicated and uncertain in outcome than simply negotiating a price with
the owner.

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pytester
The author's point wasn't that. The point was that the main outcome of rent
control was simply to shift the distribution of economic rents. Instead of the
landlord capturing all of it, the renter got a large chunk of it.

The transaction costs are a red herring.

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Nelkins
Rent control does not always reduce the supply of housing. See this
article/study: [http://www.latimes.com/opinion/op-ed/la-oe-painter-rent-
cont...](http://www.latimes.com/opinion/op-ed/la-oe-painter-rent-control-
economist-20181031-story.html)

The argument is that rent-control can spur the creation of new housing, as
landlords are unable to make the same amount of money from their existing
units. Of course, this is predicated on the fact that developers/landlords
have the option of creating those new units (which they usually don't). That's
why I'm not against rent control per se, but I'm usually not in favor since it
tends to be suggested in areas with severe restrictions on building new
housing.

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emtel
This argument doesn't make any sense. If there are profits to be made from
building new housing and renting it out, some one is going to do that. The
higher those profits are, the higher the incentive to do so. People aren't
going to respond to artificially suppressed profit margins by doubling down.

This article is also full of other strange arguments. Consider:

"The fact that real estate developers have funded an anti-Proposition 10
campaign to the tune of $45 million suggests that they are eager to defend
their market power. If California were a truly competitive housing market
where home builders operated with slim margins, they’d load up their cranes
and build in some other state. But it’s clear these developers benefit from
the status quo and are fighting hard to keep it."

Selling retail gasoline is a low margin business. But you can bet that if
there was legislation to impose a price cap, gas stations and oil companies
would be opposed. In other words, everyone everywhere is always going to be
opposed to legislation that reduces how much they can charge for their
product. You don't need to posit other factors such as the existence of market
power or lack of competitiveness to explain the opposition.

