
Rent control will make housing shortages worse? - baron816
https://www.economist.com/leaders/2019/09/21/rent-control-will-make-housing-shortages-worse
======
dantheman
The housing problem is because CA et al fight new construction.

This does far more to hurt renters than anything else:
[https://www.latimes.com/local/lanow/la-me-ln-housing-bill-
co...](https://www.latimes.com/local/lanow/la-me-ln-housing-bill-
council-20180326-story.html)

~~~
rmrfrmrf
San Francisco has 100,000 vacant homes and 10,000 homeless people.

[1] [https://sf.curbed.com/2019/3/21/18276227/vacancy-rate-san-
jo...](https://sf.curbed.com/2019/3/21/18276227/vacancy-rate-san-jose-san-
francisco-lendingtree)

[2] [https://abc7news.com/society/homeless-population-history-
in-...](https://abc7news.com/society/homeless-population-history-in-bay-
area/5260657/)

~~~
epistasis
Though you messed up the basic numbers, I think that the larger point needs
addressing.

Why are these homes vacant? Should people be allowed to take a month of
vacation without losing their home? Is it ok for an apartment or house to be
empty for a few months in between residents?

One month in between tenants every two years is more than a 4% vacancy rate.
What should the vacancy rate be?

And what if in addition to housing the homeless we also want to house workers
with unreasonable commutes?

Every single person I know who has raise this X vacant homes and <X homeless
has not bothered to ask these very basic questions.

We need more homes. 25% more than we currently have, in the high demand areas.
We don't need hem in Detroit or Stockton, we need them next to jobs. And we
need to stop the profiteering home owners who speculate on the value of their
homes by blocking others from living close to them.

~~~
rmrfrmrf
LA and Boston did this and now just have vacant high-rises to show for it.
And, really, greedy homeowners are the least of our worries compared to real-
estate developers and landlords.

I've seen the idea of a vacancy tax thrown around. Not sure how effective it
would be, but might be worth trying.

~~~
epistasis
For a city of 4 million people, LA is building something like 9 thousand
apartments [1]. That's not a 25% increase in the number of homes, that's
nothing at all. It doesn't cover the number of births, the number of
immigrants. Building that few homes is a plan to displaced people from the
city.

It's time to stop treating housing as if numbers don't matter, and the only
thing that matters is our feelings about seeing a crane.

There is a massive housing shortage, and people that deny it are just as fact-
free as climate deniers.

[1]
[https://www.reddit.com/r/urbanplanning/comments/d0a9wb/top_2...](https://www.reddit.com/r/urbanplanning/comments/d0a9wb/top_20_us_metros_by_projected_new_apartments/)

------
jayd16
All these comments and threads fail to understand the purpose of rent control.
It is not to provide the most efficient housing to new residents but to
protect existing residents from being priced out.

Until there's a better solution than "tough shit" these policies will continue
to be popular.

~~~
chronic71819
> Until there's a better solution than "tough shit" these policies will
> continue to be popular.

Why do we need a better solution than "tough shit"?

Not everyone is entitled to live where they want. If you want that, try
Europe.

~~~
tomc1985
You say that but the vast majority of housing being built in CA is "luxury"
accommodations. Luxury homes, luxury apartments, luxury condos. Nothing else
justifies the cost of land, the developers say, and hence nothing else gets
built. Meanwhile short-term rentals are cannibalizing existing housing stock.
I was born here, and like hell would I tolerate some random fuck telling me
I'm not entitled to live here.

You're saying the only people entitled to live on desirable land are wealthy
assholes coming from afar? "I'm sorry, the only place you're entitled to live
at your income level is that shithole next to the
meatpacking/chemical/whatever plant. Why are you complaining? You can live
with all your other equally-abled friends!"

This is how you create ghettos.

~~~
chronic71819
> You're saying the only people entitled to live on desirable land are wealthy
> assholes coming from afar?

Rich or poor, asshole or not asshole: No one is entitled to live anywhere.

There is only a market price. That's all.

~~~
tomc1985
Means is a form of entitlement. Free market economics creates massive
inequality. That's the whole issue at stake here.

~~~
chii
But the other side of the argument is that if somebody worked hard, and
obtained monies, they should be able choose where to live using said monies.
If i found out that wealth gained means nothing, and that the 'mob' penalizes
wealth, then people would tend to create less wealth. Would society be worse
off then?

~~~
tomc1985
I don't know but Europe seems to be doing OK

------
crashedsnow
Yeah! I should have rent control! I should be able to live where I want and
pay below the market value. Screw the free market, I want to live in someone
else's house and pay them less than it's worth. I don't care if their costs go
up due to increased maintenance costs, or inflation, or wage increases. I
don't care if the value of their property increases due to basic, fundamental,
elementary economics like supply and demand, and their property taxes
increase. Screw them. It's my right to live where I really really want to
live. I especially don't care that nobody else can move to where I live
because there are no new houses being built, and therefore no new money into
the local economy. I'm not moving to a more affordable area, why should I? And
I'm definitely not going to save money for a deposit so I can borrow money at
some of history's lowest ever interest rates. Then I'd be working for the man.
Screw that, I've got avocado toast to pay for.

~~~
hnarn
I feel like this comment is way below par for HN.

~~~
imtringued
It is successful at showing the root cause: people don't want to change.

------
thrill
Absolutely. A market adjusts far more rapidly to match supply and demand than
any committee ever could, especially as groups of people that set prices have
agendas _other_ than seeking movement to a balanced price.

~~~
tonyarkles
Hmmm, I wish that were true. It seems like it would be, but my (Canadian)
province’s two major cities are showing how glacially slow the market is
reacting to an oversupply. Cheap interest rates mean that for a lot of
builders who overbuilt, it’s cheaper to pay the 2-3% interest for the year
than to lower prices 10-20%. Our prices went up like a rocket around
2006-2008, and are very very gradually dropping back down. There was, of
course, no significant salary increase in the same time period, or since then,
so entering the housing market for first time buyers has been much more very
difficult than it was in the past.

~~~
asdfasgasdgasdg
Which cities are these? It's (I think) pretty well known that housing prices
are a little sticky. Even if the market reacts to changes in supply and
demand, nobody wise says it reacts instantly. But, I think there's also a
chance you've been misled as to exactly how much oversupply there is.

~~~
tonyarkles
Saskatoon (worse) and Regina (not as bad). For a long read about Saskatoon,
see [https://jbuc61.wordpress.com/](https://jbuc61.wordpress.com/)

We recently moved from Saskatoon to Regina, and our family sold the Saskatoon
house. We priced it slightly below market and it sold in 3 days, but there
were many similar houses that had been on the market for months. The buyer
tried to flip it (it needed love for sure); I'd guess $15-20k worth of
supplies plus his own labour. It sat on the market for a long time, and
ultimately sold for only $40k more than he paid us for it.

------
cowpig
So many people in this message board hold strong normative opinions of free
markets (namely, that they are inherently good) and don't understand the
basics of them.

It surprises me, because economics seem so aligned with this board's
interests, and usually the conversations about these kinds of topics here are
informed or at least interesting. The "free market" seems to always be an
exception.

Here are a few _basic economic_ reasons why you might not want a "free" market
to determine the price of some good:

1\. It's "free" but not actually free. For a free market to exhibit the
beautiful self-organization and maximization of surplus, you need:

a. Zero-cost (or at least low-barrier), voluntary entry/exit from the
marketplace

b. Many participants

c. Information transparency

(a) doesn't apply to housing, healthcare, food, or anything else that's
required for survival, so there are no theoretical guarantees about "free"
markets in those cases.

2\. Self-organization and maximal surplus are not sufficient. This is a
question of values, and usually is a question of valuing equality over
efficiency. You might want, for example, for everyone to have a access to
something (like a home) even if it comes at an economic cost.

3\. There are costly externalities. Sometimes markets can self-organize and
provide efficient distribution of resources, but also cause a lot of problems
that aren't captured in the supply/demand curve. For example, not having a
home might cause you to do things that is socially harmful that you wouldn't
otherwise do. Like using the sidewalks as a toilet.

~~~
cowpig
I also want to challenge an implicit assumption made in the article, namely
that rent control inherently limits housing supply.

Suppose rentals were simply banned. That is, you can only buy, and the rental
market was eliminated. Would housing supply disappear?

I'd argue no, that you'd simply end up with more longer-term, higher-rate (to
compensate for default-risk) mortgages.

Which might be a good thing. You wouldn't have to worry about 40-year
residents being suddenly forced out of their homes any more, and still have a
"free" market.

------
WillPostForFood
What's up with the modified title? The article title is "Rent control will
make housing shortages worse" \- statement, not "Rent control will make
housing shortages worse?" \- question

------
pimmen
In Sweden we have a history of a very strict rent control (which will probably
be scrapped for newly built homes, because of current politics) while also
handing a lot of power to the local governments to regulate housing.

There are _a lot_ of reasons Sweden has absurd real estate prices (the
Gothenburg area in Sweden, which is the seat of moderately famous Volvo, has
real estate prices close to the Seattle area which is the seat of Boeing,
Amazon and Microsoft while the median incomes are not even remotely similar),
and why the bulk of the price hike happened during the last decade, but a big
one that's often overlooked is that local governments don't _want_ rentals.
Because of rent control they are mostly inhabited by low income earners, who
pay less tax. Rent control is set by the national government agencies, who of
course don't care where you live, they want everyone to have a decent home
without being gouged.

Not saying that rent control is necessarily a bad thing, but if implemented on
a national level they give local governments less tools to get rid of poor
people. In the end, they'll find a way, and that might create even more
problems.

------
tempsy
The California bill is hardly a win for renters. How many renters who do not
currently have rent control have their rents go up on average of 8% a year? I
have lived in SF since 2012 in non rent controlled units and have never
experienced that.

The only units I’ve seen that have rent increases that are greater than 10%
are the new luxury high rises, which will continue to be exempt. The only
landlords I really see this impacting are the corporate landlords like Avalon
that manage older rentals and squeeze rentals as much as they can.

~~~
pkaye
I just did the calculation on an apartment I rented back in 2000 in Fremont.
It was $1300 back in 2000 and $3200 now. So that is about 4.6% increase per
year. And this was a new apartment back then with pool, gym, covered parking,
laundry in unit, close to BART. Are people really seeing rates increase more
than 8% per year all around the bay area?

~~~
asdff
Maybe not consistently year over year, but bursts of rent increase can happen
to people and blindside them financially. Preventing price gouging is what
this law is intended for.

~~~
pkaye
I have a feeling though that landlords who used to do 5% now think it is
acceptable to do 8%. Obviously the market demands will restrict the increases
further but the law kind of codifies what is not price gouging. I guess we
will see in a few years.

------
kingkawn
Good landlords provide vital public service, and should be able to charge a
slight premium as compensation.

This is different than speculators who boot out tenants to take advantage of
market swings.

~~~
zelly
There will be no incentive to be a good landlord when it legally can't net you
more money than being a bad one. NYC made a law that banned landlords from
doing more than some percentage worth of capital improvements. The result is
nobody improves anything, and the buildings and living quality just gets worse
for everybody.

~~~
kingkawn
That hasn’t been the result in nyc to date, and there were plenty of abusive,
negligent landlords before. The only difference with the new laws is that
tenants have enhanced legal rights to prevent that abuse.

------
rolltiide
Ask a rent control proponent what market rate actually is and you’ll see why
they gravitate towards these bandaids

People view “market rate” as “expensive so lets do _something_ so people can
afford housing” , distinct from “influenced by supply and demand and a rent
control solution further constricts the supply of non controlled units further
exacerbating inequality”

------
skybrian
Can't read the article so I don't know if they cover it, but this whole topic
is unproductive due to binary thinking. The mild rent control being enacted
statewide in Oregon and California doesn't seem much like the strict rent
control resulting in people having far below-market rents?

~~~
asdff
It really just prevents price gouging. I believe on average market rents rise
at a lower rate than these rent control measures allow, and rent control
doesn't apply to new builds.

------
nicky19890202
The housing problem has always been the biggest problem for mankind and the
most basic problem for mankind.

------
bradlys
I'm sure this is being posted because California's state wide rent control is
going into effect soon enough.

Of course - my rent was just jacked up again. Got the letter in the mail
today. (Now paying about 22% more than two years ago) Landlord needed to get
another 10%+ rent increase in _before_ they're under rent control.

Figured this would happen. Just sad to see it actually go through. So much for
protecting existing renters...

~~~
pontifier
Check the wording on the bill... I think that isn't actually allowed.

I seem to remember that your rent in Jan 2020 must be lowered to what it was
in March 2019.

Edit: text from
[https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml...](https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB1482)

"...The bill would provide that these provisions apply to all rent increases
occurring on or after March 15, 2019. The bill would provide that in the event
that an owner increased the rent by more than the amount specified above
between March 15, 2019, and January 1, 2020, the applicable rent on January 1,
2020, shall be the rent as of March 15, 2019, plus the maximum permissible
increase, and the owner shall not be liable to the tenant for any
corresponding rent overpayment..."

~~~
bradlys
Interesting. This is in fact in there!

[https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml...](https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB1482)

------
smitty1e
Basic Economics, by Thomas Sowell[1]

There seems to be a requirement that policy makers _not_ have read this book.

[1] [https://www.amazon.com/Basic-Economics-Fifth-Common-
Economy/...](https://www.amazon.com/Basic-Economics-Fifth-Common-
Economy/dp/B00PKQMFT8/ref=sr_1_1)

------
fuzz4lyfe
I like to test my world view as policies are enacted. Decide a concrete
measure for a particular outcome, write it down and check the results once a
year (I do it on new years day). These rent control measures are a great
target for this regime.

~~~
fbonetti
Why don’t you just check out the numerous other historical examples of rent
control and see how they turned out.

------
bluquark
This article ignores the political dynamics. Pro-supply policies like zoning
reform are much more popular when bundled with anti-displacement measures,
which address people's anxiety about them.

A mild level of rent control such as the new California law is not nearly as
damaging to supply as policies like strict height limits. Knowing that rent
control isn't fully optimal, I'd still gladly trade one for the other.

------
equalunique
I'm not an expert on this, and as such, I would like to "favorite" this
submission on HN without actually bestowing upon it a "point." I'm not
informed enough to feel confident in _endorsing_ this with the point that
comes with "favoriting," rather, I just want to save this submission in the
discussion in the comments for later.

------
pier25
Here's the episode about rent control on Freakonomics:
[http://freakonomics.com/podcast/rent-
control/](http://freakonomics.com/podcast/rent-control/)

If you don't know the podcast (or the books) I highly recommend those.

------
sysbin
I wish there was a requirement of building 'x' homes before you can build 'y'
and rinse & repeat. Need incentives or people just build the best contract
deal.

------
zelly
If this were true, and I'm inclined to believe it is, then shouldn't current
landlords be campaigning for rent control?

It basically gives them a monopoly. Rent control serves as price fixing to
keep out competitors. The entrance fee (to build a new building) is too high
for the returns compared to alternative investments. For current landlords,
it's a trade-off of lower short-term profit for long-term stability. Isn't
stability the reason you invest in real estate (as opposed to say the S&P500)?

~~~
asdfadsfgfdda
The value of an asset is determined by the expected return to investors (i.e.
rent). If you reduce expected returns by limiting rent, your asset (the
apartment building) is suddenly worth less.

But the typical rent control regulation only covers older building. If you are
a developer of new apartments, you can benefit here. Your competition is under
rent control, so their current tenants have a strong incentive to remain in
older buildings. This reduces supply, and your new apartment building can
raise prices.

------
archie2
Get out of California while you still can. Gavin Newsom is hell bent on
completely destroying it.

------
CriticalCathed
I don't buy it. Even with strong rent control or tenant rights laws, there's
still a glut of profit to be extracted as a landlord. I understand the
arguments, and somewhat agree with the purported models of behavior that say
rent control will make things worse or at best maintain the status quo.

The whinging about rent control strikes me as misunderstanding the differences
between modern rent control legislation and the policies of the 20th century,
and also pure libertarian whinging. The arguments against rent control are
econ 101 mealy mouth crap that is not even representative of all econ theory.

I own four houses outright and rent three of them out to families, and I'm
currently invested in a quadplex whose rents I use to pay the loan off; and
I'm about to leverage all of these properties to invest in a 20 unit apartment
complex. Even considering taxes, maintenance, legal expenses, etc. I am
pulling in so much raw cash that I foresee that I will be able to expand my
business indefinitely -- even with Oregon's new rent control and tenant rights
law.

~~~
deelowe
I'm a landlord too and would love rent control in my area. No where else is a
8-10% increase year over year tolerable, but in rent controlled areas, it's
the norm.

~~~
asdff
When the maximum rent controlled rate increase is set above the market rate
increases, it's not going to affect prices.

~~~
speedplane
> When the maximum rent controlled rate increase is set above the market rate
> increases, it's not going to affect prices.

In theory, if real estate was a perfectly competitive market you'd be right.
But by setting a standard well-known rent control rate, it sets a standard
that landlords can follow. It allows landlords to act in concert and collude
on rent increases without any direct communication between them.

------
rthompsonhi
Rent is going to be a thing of the past as landlords decide to just sell their
real estate.

~~~
RcouF1uZ4gsC
Now they have the option instead of selling it, to make it a full time AirBnb
rental.

~~~
negrit
Many cities are actually regulating/pushing regulations against short-term
rentals.

~~~
asdff
With zero enforcement

~~~
negrit
Absolutely not true

------
djrobstep
Every time rent control comes up, you get a lot of Econ 101 critique of it,
but really, rent control is fine and can even encourage new development. This
is a good discussion of it:
[https://www.fresheconomicthinking.com/2019/09/rent-
control-i...](https://www.fresheconomicthinking.com/2019/09/rent-control-is-
totally-normal-price.html)

Like a lot of economic critique, rent control criticism is driven from
cultural allegiance to landlords and the rentier class, rather than good
faith.

~~~
leftyted
> Like a lot of economic critique, rent control criticism is driven from
> cultural allegiance to landlords and the rentier class, rather than good
> faith.

What a bizarre claim. There's plenty of "good faith" criticism of rent
control.

People think different things. You're allowed to advocate rent control. But
assuming bad faith because "I am right" or "my opponents are in the thrall of
the rentier class" is just astonishing.

~~~
djrobstep
Don't be naive. Think of key debates on economic issues: Deregulation,
monetary policy, minimum wage, rent control, taxation, etc.

People's opinions on these is overwhelmingly driven by their political values.

Trump doesn't love the Laffer Curve for its abstract mathematical beauty or
essential truth - it's merely a rhetorical device for justifying the policies
that he and other wealthy interests prefer.

~~~
rcoveson
"Assume good faith" and "avoid ad hominem" are not "naive." They are
necessary. You simply cannot have a fruitful discussion without both parties
agreeing on those rules. Even if you are convinced that your opposing party is
not arguing in good faith, it is still in your best interest and the interest
of those observing that you argue your own side using proper technique.

If you have given up on this, there's no point in participating at all.

~~~
djrobstep
I am not saying these things as a means to insult. I am not up on a debate
stage here debating Trump on a stage.

I'm simply describing what motivates people on the political right. There is
no end of literature to support this view.

You may find it troubling to accept that many people in politics aren't acting
in good faith or motivated by pure virtue. But it's true!

------
tehjoker
It's not like landlords provide housing to fulfill human need, they only serve
people with money. Rent control might make them sad and build less, that's why
we need to go further and provide universal public housing.

[https://www.jacobinmag.com/2016/10/housing-crisis-rent-
landl...](https://www.jacobinmag.com/2016/10/housing-crisis-rent-landlords-
homeless-affordability/)

~~~
weiming
Tell that to people living in NY public housing...

"Imagine paying rent for a home with rats, cockroaches, lead paint and mold.
That’s what far too many of the estimated 600,000 residents of New York City
public housing are doing, even after a lead paint scandal led to an
investigation by federal prosecutors." [1]

[1] [https://www.nytimes.com/2019/07/30/opinion/new-yorks-
public-...](https://www.nytimes.com/2019/07/30/opinion/new-yorks-public-
housing-nycha.html)

~~~
tehjoker
Yes, when you make programs target only the poor it breeds resentment and
makes them vulnerable to conservative attack. Thus they get defunded, look
like crap, and people can point to them and say they suck. Making them
universal creates a mass constituency like social security and Medicare that
is protective.

~~~
weiming
I don't think by any measurements the NY State/City gov'ts and/or New York
Times can be called conservative.

~~~
tehjoker
I would call them a mixture of conservative and liberal. They share in common
an interest in preserving the power of capital and private property. I am not
a liberal, but am a leftist.

I used the word conservative not because it's 100% accurate (liberals are
conservative compared to leftists though so it still is accurate), but because
it's the word that people more immediately understand.

[https://www.jacobinmag.com/2015/11/public-housing-social-
wel...](https://www.jacobinmag.com/2015/11/public-housing-social-welfare-
crisis-affordable-gentrification/)

------
wind0w
Housing should not be a commodity. Rent control is a solution to a specific
problem of housing being a commodity -- landlords spiking tenants' rents,
forcing them to relocate. It isn't a solution to the housing shortage. The
solution to the housing shortage, which, for example Bernie Sanders proposes
in his plan and this article fails to mention, is dramatically expanding
affordable public housing. There is simply no other solution to the housing
crisis than to decommodify housing, considering it a public good and a right.
The unregulated market has never and will never provide affordable housing to
all on its own.

Economists love to criticize rent control because in some abstract economic
sense it is "bad", but most people don't care about the market efficiency
(Which mostly means maximizing profit to landlords and developers) of the
housing market. They care that their communities are not destroyed by
gentrification and that they are able to stay in their homes without being
dislocated, both goals that rent control is successful at achieving.

~~~
roenxi
Housing is a resource. If you have a magic wand to make resources exempt from
economic forces, please wave it over food prices for the rest of us.

The reason economists get so excited about abstract issues of market
efficiency is because if supply and demand don't balance naturally there will
either be too much or not enough of something (effectively). Introducing rent
controls will push the market towards the not-enough end of the spectrum and
shortages will get worse.

> The unregulated market has never and will never provide affordable housing
> to all on its own.

That is a huge claim. If people could use their land as they like there
probably wouldn't be a housing shortage. Developers make large fortunes out of
install dense blocks of apartments; and doing that isn't going to make housing
more expensive.

~~~
wind0w
>Housing is a resource. If you have a magic wand to make resources exempt from
economic forces, please wave it over food prices for the rest of us.

That magic wand is called public policy. There are similar things you could
say about food -- i.e. how unregulated markets lead to developing countries
being forced to export cash crops instead of growing food that people in that
country need to actually eat.

>That is a huge claim. If people could use their land as they like there
probably wouldn't be a housing shortage. Developers make large fortunes out of
install dense blocks of apartments; and doing that isn't going to make housing
more expensive.

4.8 million households in the U.S. depend on Section 8 to afford rent. These
are direct subsidies _to landlords_ to house these people. In an unregulated
market, landlords would not rent to these people, and they would be homeless,
or they would live in actual slums, which don't really exist in the U.S., but
would have to in a fully unregulated market.

~~~
dodobirdlord
> That magic wand is called public policy.

Public policy doesn't exempt resources from economic forces, it's just a
mechanism to divert resources from one area to another. It just allows you to
fudge a little bit, push resources here and there. The Soviet Union eventually
collapsed because towards the end for all their fudging they couldn't keep up
net economic production. All effective policymaking comes from understanding
constraints and operating within them to achieve the best outcome. For that
reason - pretending that constraints don't exist is a recipe for bad policy.

