Courtesy Wikipedia, here’s Paul Krugman in 2000:
Surely if economists were so widely in support of such policies, the Times would have highlighted that fact.
Greg Mankiw did a list a while back about what economists agree on:
It allows for increases above and beyond inflation, and generally above the kind of returns one could get on the stock market (in Oregon’s case it’s 7% plus CPI).
There’s also a carve out for new construction. That incentivizes capital to go to increasing supply, as opposed to the current situation where flippers add a new coat of paint, buy some stainless steel appliances and then jack up the rent.
Removing or abstaining from rent control wouldn't address the fundamental problems. Indeed, I'd argue that expanded rent control could be used as a stick to pull the renters lobby away from NIMBY activists who have convinced renters that any new construction is against their interests.
Rent control can be viewed as a type of wealth transfer (social welfare) that all economists implicitly presume will be used to ameliorate distribution and dislocation inequities. Because "tax" is a four letter word in our society and cash transfers both stigmatized and disfavored, we rely on regulatory machinations like rent control or trade tariffs to implement the kind of wealth transfers that economists all presume would be done with taxes and cash payments.
Nobody disagrees that rent control increases the average rent. The question is whether it's a worthwhile trade-off. I tend to see it as a tax on the young for the benefit of families and the elderly. In a city like San Francisco a worthwhile trade-off.
In reality, turnover tends to be relatively high in cities, and especially in San Francisco. For large apartment buildings the marginal increase in rents induced by rent control are very small. For smaller apartment buildings the risk to the landlord is greater (potentially less turnover, fewer opportunities to reset baseline to market prices). This is why I think that rent control should go hand-in-hand with density.
Rent control also increases the appeal of renting relative to purchasing as it provides the same ongoing expenditure stability. If we get rid of rent control we should simultaneously remove all incentives for home ownership. But we all know that the latter is politically infeasible. Why should we expect rent control to be any less politically infeasible? Because we tend to perceive the proponents and beneficiaries of rent control as starry-eyed liberals?
In a city like San Francisco the biggest culprit of high rents, aside from sheer demand, is zoning and the arduous approval process. All this finger wagging over rent control is counterproductive and tone deaf. If we remove rent control the biggest problems will remain. If we address the biggest problems then the "problem" of rent control will largely recede.
The same logic applies to Georgist Land Value Taxes. Conceptually they're the best way to maximize efficient use of land. But we know that they're politically infeasible. No Georgist LVT system has ever survived without exceptions and loopholes making the system honored only in the breach. We cannot underestimate the social value of price stability for something as important as housing. If you ignore the fundamental need, bad things will happen like Proposition 13.
The solutions to expensive housing is complicated, obviously. Its about zoning, cancelling out NIMBYism, incentivizing affordable housing and basically matching supply with demand.
Rent control simply doesn't work. For any person it helps, it will disadvantage 10x more in the process.
I wonder if they are putting in vacancy controls as well. That would have the 1-2 punch of not only reducing rental stock but also significantly lowering property values (and property taxes in the process)
If high rent is the issue, vacant units should be pushed to the market instead of artificially limiting supply. Cities and residents would mutually benefit from a vacancy tax like Vancouver or similar, where international speculators are not using the units for anything useful to anyone in the city.
Two buildings are for sale. They are identical in rental income, quality, etc.. and cost the same.
The only difference between the two buildings is that one has enormous restrictions on how you own and operate the building. You as a landlord will have a cap on your potential upside in rent, but NO cap in the downside.
Which building will you buy, all other facts equal? Unless you are insane, it will be the non rent-controlled building. As such, the price of the rent-controlled building will have to be lowered to compete for a sale. Hence lower prices.
You've actually just convinced me rent control might do a city good by pushing capital investors into more useful pursuits, rather than simply "investing in land" which effectively does nothing of value for people.
I do think it's silly to treat the symptom without fixing the main problem which is zoning law and permit restrictions on building more housing stock. But why not both?
Might as well add the Land Value Tax while we're at it
> Using a 1994 law change, we exploit quasi-experimental variation in the assignment of rent control in San Francisco to study its impacts on tenants and landlords. Leveraging new data tracking individuals’ migration, we find rent control limits renters’ mobility by 20% and lowers displacement from San Francisco. Landlords treated by rent control reduce rental housing supplies by 15% by selling to owner-occupants and redeveloping buildings. Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.
In a market economy, which includes both housing construction and home rentals, price is the signal by which demand is measured. Rent control either eliminates or severely distorts that signal.
I’m going to predict that:1) fewer new homes will be constructed and 2) rents will sky rocket where it’s possible (tenant turnover).
Here there was a proposal to do a couple hundred units of entry level apartments and people shit their pants about it. It was about a quarter mile from the already poorest part of the county and people actually went to the planning commission and said stuff about not wanting the poors around there. One landlord basically argued he didn't want the competition.
In the end the state subsidies fell through anyway.
I think it's fair to say in a democracy most politicians are motivated by money or votes. There are plenty of people who probably see this as working in their favor.
> 1) fewer new homes will be constructed
Next usually comes the affordable housing bond because you're right, the private sector won't see it as a good investment.
Economic analysis that does not take these factors into account is not worth very much. It also fails to offer any useful solution for the underlying problem of rents rising faster than incomes.
And constrained by how the government allows that land to be used.
The lending market is designed to encourage spending and making higher offers. It brings new people into the housing market faster than they should be entering.
The tax breaks around owning a home encourage you to live there for 3 out of the last five years. There are also realtor fees that discourage you from selling. This, along with housing values appreciating discourages people from selling. When my home is appreciating in value, it makes it more attractive to buy as an investment or rent it out while I buy a new house.
If you encourage people to buy and discourage them from selling, you're going to get a high demand / low supply situation pretty quickly.
If you eliminate the tax breaks and reduce lending, you'd have a pretty balanced market.
But who wants to be the politician responsible for slowing home value appreciation?
It's not a perfect system, but still today in Montréal you can get a $400USD 1 bedroom apartment in a good part of town, thanks to this system. It ensures that the working class can live near their occupation, and they don't have to commute from a slum neighbourhood outside the city. In many quartiers, you have the very poor and the very wealthy living side by side.
I believe absolutely rent-control (in tandem with a few other policies) has enabled Montréal to situate itself as a hotbed of creativity. We have one of the most dynamic and diverse art scenes in all of North America, and with a population on the island of Montréal still less than 2 million.
I definitely support this kind of legislation.
I find that extremely hard to believe
& I know many dozens of people in the same scenario, or who pay less. There is definitely more expensive stuff out there, and you do need to hunt a little bit for this price (usually craigslist etc. is pricey), but I regularly see even bigger apartments go for the price I'm paying.
In fact I shit you not, my neighbour who has kept their place since the early 90s, pays 246.22 USD + electric for the same apartment as me. . .
>In fact I shit you not, my neighbour who has kept their place since the early 90s, pays 246.22 USD + electric for the same apartment as me. . .
Undoubtedly those that have rent controlled apartments do well. But that does not mean one can go and get an apartment and pay a rate similar to the one that they have.
Like I said, on Craigslist/Kijiji/etc it is difficult to find such a price, or when it goes online, it disappears very quickly. A price like this can be found by walking around and finding "à louer" signs and calling the number.
But here is one for $650CAD (492.47USD):
>But that does not mean one can go and get an apartment and pay a rate similar to the one that they have.
But when she dies (probably not far away), the place legally must be rented at the same price (+ inflation of one year), assuming no major renovations are undertaken. And if it get's renovated, the price can only rise to a certain point unless the whole building get's demoed. So someone will get it at about that price, eventually, unless the landlord illegally raises the price (which happens).
But if you suggest that, it reveals the NIMBY hypocracy. “We want the economy to keep growing just no more people moving here...” ie the existing residents want to get rich by extracting wealth from the job creators in their region via restriction of housing supply.
They do mention Oregon's land use laws. I didn't see it while skimming but (for west coast states) the land that is actually "state" instead of federal is also an issue (#1).
However the biggest issue is that the Supply vs Demand curves for housing are simply insane.
Demand is mostly dictated by jobs, and only slightly moderated by the quality of public transit and transportation infrastructure (mass transit AND freeways/parking included).
As a nation the US has been housing constrained for at least 20 years, probably longer.
Worse for a generation or two housing has been used as an investment rather than the cost center that it is; so all sorts of market incentives are massively messed up.
Finally "career" jobs, which allow someone to live in the same house for their entire adult life more or less began a long slow death in the 1980s, which is the true beginning of the destruction of communities.
Solutions to consider:
Tax, based on land use opportunity cost/value. This should have a built in history consideration that gradually introduces rising land use potential over a number of years. (E.G. sliding window over 10 or 20 years)
Tax, transparently, to fund infrastructure, and provide a place (website?) where someone can go to see what their tax dollars are actually being spent on. How they are getting value for services.
Zone and re-zone and do urban development more like Japan (#2) and Europe (? speculation) do; based on nuisance level.
Encourage, via help with red-tape, ignoring local opposition when exceeding code requirements, and co-coordinating funding and insurance bids for projects, that there is ample supply on the market to reach the desired rental price for an area. If builders don't want to service an area help local benefit corporations get started to fulfill this need.
Raise the building codes and promote buildings that are designed to last, be safe and comfortable to live in, and which encourage privacy at home while being responsible to the community around them.
Design transportation in city cores more like the Caves of Steel, and provide civic infrastructure (monitored parking garages/etc) at the edges to interface with the exterior world.
#1 https://www.youtube.com/watch?v=LruaD7XhQ50 "CGP Grey - what is (US) Federal Land"
#2 https://news.ycombinator.com/item?id=8540845 ----- http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
Edits - I can never remember what variant of markdown this site uses... please don't convert my text to italics.
HN doesn't use any variant of Markdown, it doesn't use Markdown at all.
The only formatting options here are:
1. Surround text with asterisks (not underscores) to italicize it.
2. Indent text by two spaces (not four spaces) for code formatting - but please never use this for block quotes as people often do by mistake or out of frustration over the lack of formatting options - it ruins readability on mobile.
3. Use a blank line to separate paragraphs (or wherever you want a blank line).
The asterisks filter triggered across MULTIPLE LINES.
When traveling abroad, it's amazing how clean everything is. The amount of trash on US highways, city sidewalks, public parks, etc. is pretty noticeable when you return.
I'm sure we could build beautiful housing pretty affordably, but I'm not sure we could keep it beautiful unless we treat affordable housing as an ongoing investment and not just build it and forget about it.
If you want something, and the market isn't providing it, you subsidize the supply or you buy it directly. That might distort prices relative to an independent market, but if your public policy is stable they'll still reflect relative demand and supply. Subsidizing purchases or constraining prices doesn't just alter the market, it degrades the signal - and usually doesn't fulfill the goal except in the very short term.
Also 8/10 pictures from Oregon are going to have that hazy white color cool. It's always cloudy there.
Glad to see this is being addressed because some just can't make that happen.