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Oregon expected to enact first state-wide rent control law (nytimes.com)
41 points by mykowebhn 57 days ago | hide | past | web | favorite | 59 comments



Bizarre to not mention the long-standing, broad consensus among economists that rent controls do more harm than good.

Courtesy Wikipedia, here’s Paul Krugman in 2000:

https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...

Surely if economists were so widely in support of such policies, the Times would have highlighted that fact.


That's the big thing that jumps out at me. There are very, very few serious economic policies that have this level of agreement among economists.

Greg Mankiw did a list a while back about what economists agree on: https://gregmankiw.blogspot.com/2009/02/news-flash-economist...


That’s an amazing list. I wish it went further to show the even less popular ideas. In particular I’m curious what shows up at the 50% mark.


While it’s true that rent control is Econ 101, what’s being proposed now a days is not a strict price cap.

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.


And yet the market seems not to have magically provided a supply of housing that is adequate for the market to reach an affordable equilibrium. I agree the article should have mentioned it and am also skeptical about the efficacy of rent control, but other approaches don't seem to be working out as hoped.


Is there local regulation or NIMBY-ism that prevents the market from providing new housing?


In San Francisco rent control only applies to pre-1979 buildings. Ceteris paribus, this incentivizes new construction to replace rent-controlled buildings. So why isn't there more supply? Because of zoning, approval, and the NIMBY activism that has captured those processes.

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.


I suggest you form your own assessment and see if other people find it plausible and actionable.


The broad market is in equilibrium. SV doesn't define the broad market, nor does Flint MI or Gary IN.


One has to look at the policy details. At 7 percent + CPI it is not going to create abandoned properties over the long term. It is more like preventing Uber style surge pricing. There is a reason why the association for the landlords are neutral on the limit.


Economists also universally agree that free trade creates the most wealth. But this assumes that distribution and dislocation effects are ameliorated with wealth transfers on the side.

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.


There is more consensus on Rent Control being harmful than there is on global warming. Its absolutely insane that it would be enacted.

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)


What do you mean by vacancy controls leading to reduced rental stock and lowering property values?

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.


I can easily explain this.

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.


What value does the expensive building offer the city if it's exactly the same?

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

https://en.wikipedia.org/wiki/Land_value_tax


That might work if you want to live in a tent in the forest, but if you want to live in a city with buildings and infrastructure, then you want investors in invest in land.


Here's a great paper about how rent control is counterproductive: https://web.stanford.edu/~diamondr/DMQ.pdf.

> 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.


Why do governments go this direction when it causes so many problems?

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).


The problem is that we are already doing 1 regardless of rent control.

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.


> Why do governments go this direction when it causes so many problems?

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.


Market economies work great in textbooks under idealized conditions of perfect competition, where all participants in the market are fully informed and have the option to enter or exit the market freely. In reality demand for housing is highly inelastic, significant informational asymmetries exist, the market is fundamentally constrained by the supply of land and the varying demands resulting from demographic change, and other factors.

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.


> the market is fundamentally constrained by the supply of land

And constrained by how the government allows that land to be used.


I'm going to predict that governments go this direction because of all the problems the housing market economy has caused.


Such as?


Massive housing price inflation relative to median incomes, for one, which the popularity of real estate and rental property ownership as an investment/speculation tool has greatly contributed to.


I'd argue it's the lending market and tax incentives, not the housing market.

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?


There's a whole article which we are commenting about a rent-control policy being passed. Why don't you consider the reasons stated for its passage in the article, instead of asking people here to restate them for you? Sealioning isn't a good way to have friendly discussions.


All the reasons listed in the article...


Market economies don't always result in higher prices. That's plainly obvious. Maybe it's something else?


In Québec we've had province-wide rent control since at least the early 70's. Landlords are allowed to raise rent annually up to a certain percentage determined by inflation (last year, up to 2.5%). Rent raises can also be appealed to the housing board if they seem unfair, or if the landlord has not been keeping up with maintenance. Prices can go up if significant renovations occur (which they almost never do), but even then costs must be split across all units in the building. In 10 years, across 9 apartments, I have not once had a landlord bother to raise my rent.

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.



> in Montréal you can get a $400USD 1 bedroom apartment in a good part of town

I find that extremely hard to believe


I pay $500 Canadian + electricity/heating ($80) / month for an apartment (half of top floor in duplex) in a good part of town, 20 minute walk from the very best part. That's 439.43USD including all utilities for a one bedroom, or '3.5' as it is called here (kitchen, living room, bedroom, bathroom).

& 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. . .


Do you have a link to an example?

>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.


>Do you have a link to an example?

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): https://www.kijiji.ca/v-appartement-condo/ville-de-montreal/...

>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).


Rent control is nativism just like prop 13. Provides special economic benefits unavailable to newcomers.


For arguments sake - is nativism inherently immoral?


It depends on what kind of world you want to live in, I suppose. It certainly isn’t egalitarian or inclusive, and I would argue it’s not very far removed from racism. The real debate would be around what amount of “us versus them,” favoring your chosen social group over all outsiders, is acceptable.


Is the morality what's in question here? To me, it seems nonsensical, as evidenced by the logical conclusion: no people should move from any city to any other city.


That's sort of the whole point, though. Long-time Portlanders are frustrated at getting priced out of the rentals they live in, as rents increase faster then their salaries increase because of newcomers competing for the same supply.


Everyone loves to regulate and restrict housing to try and keep anything from changing. If they would ban job creation then they’d get what they say they want.

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.


There are some great pictures in this PDF, entitled "Bomb Damage or Rent Control?". You really can't tell!

http://www.walterblock.com/wp-content/uploads/publications/R...


Rent control is a bandaid that tries to fix fundamental systemic flaws and lack of planning by society.

Problems:

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.


> 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).

https://news.ycombinator.com/formatdoc


Can I just have the site NOT try to be smart at all? Get out of my way, copy what I put in directly, and if I add a newline treat it at least as a BR entity if not a full P block?

The asterisks filter triggered across MULTIPLE LINES.


Another far less wonky solution to consider: public housing.


I've never met anyone in the US who has enjoyed their experience in public housing or low rent apartments.


Here are some examples from outside of the US of luxury public housing. https://jacobinmag.com/2018/11/beautiful-public-housing-red-...


I don't think it's an engineering challenge, I think it's a cultural challenge.

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.


The tricks tend to be affording enough of it, building enough of it, and maintaining it. Even places with widely lauded public housing systems, like Vienna, can't reliably manage all of these. Public housing in the US has a less pleasant record, often synonymous with concentrated poverty.


Public housing is hardly a libertarian's dream, but even from a laissez-faire viewpoint this makes vastly more sense than rent control.

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.


Oregon actually has pretty nice rental laws, strongly favoring tenants. This shows that continuing.

Also 8/10 pictures from Oregon are going to have that hazy white color cool. It's always cloudy there.


Boy do I ever love the rent control of San Fran and West LA! So affordable!


It'll work this time


Great news! (Oregonian here) We were kinda pushed into buying our first home because our rent went up $100/month in 2017 and then $200/month in 2018.. I saw where that was headed and we made home buying happen way sooner than we wanted too.

Glad to see this is being addressed because some just can't make that happen.


I see a lot of comments referring to a study that says it does more harm than good and I haven't read into them yet but my first question is: Does it measure the impact it has on community? As in does it take into account the fact that a community needs residents to stick around, not just live in boxes and not interact with each other. Because my experience with a $100 then $200/month rent increase showed me that it is going to destroy the community of long time renters in the neighborhood. Hopefully it addresses that.


Unconstitutional. It's a regulatory taking under the Fifth Amendment.


This is not going to work. Price controls will generate shortages.


Rent control causes urban blight




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