When I moved here I was warned of 100 people turning up to a flat viewing, and laughed it off as some hyperbole. Only later did I find out that it actually happens, albeit the maximum viewing I went to was around a meagre 50. Having come from the UK, I found the situation in Berlin to be absolutely ridiculous. There are already strict rental price limitations in place (based on location, size of the property etc.), and although these can be skirted, in general they're clearly very effective.
Again, I sympathise with city housing being very expensive, and don't believe that purely gentrified city centres are likely to be a good thing. Still, economics 101 seems to suggest that merely putting rental freezes in doesn't fix the problem. It just (as is already the case in Berlin), leads to excess demand. The solution is to build houses, but what kind of investor is going to throw their money at Berlin, where their opportunity to make a return on their investment is severely hampered? I just don't understand this stance at all.
There are lots of people where the rents of their current apartment have increased so much, that they had to move out. This solution is trying to fix that.
Also freezing rents doesn’t mean Berlin will stop building new houses. If there is big demand for housing in a city one needs both:
1. make sure people currently living in the city are able to do so in the future
2. make sure new people coming to the city have available space
Freezing rents is aimed at problem one. These solutions are not exclusive.
Look for example at Portland (OR) how the rent increase correlates with the population increase. The current urban hype alone can not explain these numbers.
Also another example since a few years a lot of high earning people in Paris are actively moving to cities with a better quality of life and climate (like Nantes, Bordeaux), in fact as high than 80% would do it if they could . Yet bizarrely this has absolutely no impact on the market.
Ironically, certain types of rent control laws could lead to the rental market being influenced by speculation. Rent control laws effectively turn tenants into partial owners - this means, depending on the law, it may make sense to rent at an above-market rate, if that allows you to keep renting the same unit at what would later be a below-market rate. Likewise, from the landlord's perspective, it may not make sense to rent even at a market rate, because to do so may lock you out of getting what would be a higher market rate in the future.
Not an expert, but seems to me they could indirectly, by reducing supply of rentable apartments:
Consider district X with n rentable apartments located in m buildings.
Now some buildings get vacated and are kept empty by speculators.
The apartments from those houses are not anymore available for rent, however, the demand for rentable apartments stays the same - therefore landlords of the remaining apartments now have leeway to raise rent without being punished by the market.
Generally speaking, wherever you have a strong rental market, vacancy is low - it doesn't make sense to keep units vacant in a strong rental market. Speculators aren't some magical creatures to whom normal rules don't apply - real estate speculators are merely investors who believe that prices will move in their favor in the future. That doesn't mean they are any more incentivized to forego rental income, which generally is a large component of the return on any real estate investment.
Edit: I'll add that if you go by classical economics, you'd predict rent to go down if price speculation is excessive, since builders respond to real estate price and if price is sufficiently above cost of construction, this leads to construction of more units, which increases supply and depresses rent.
My general understanding is that this doesn't necessarily work that way because the fundamental factors behind what makes a location attractive don't change - within reason, if you build more, in the long run, you just become a larger, denser version of what you were, which just attracts more people.
Someone pretty smart once said you can't have both real estate as an infinitely increasing source of wealth _and_ affordable housing at the same time. You only get to pick one.
While I agree that we have an unsolved problem here, isn't a city's government mainly responsible to do good by the people who inhabit that city and make up its electorate? That's how western democracies work, so no surprises there.
I know of many people all over the world who would like to move to the US and still the 'insanely high demand' has not been supported.
Which sounds like another vote for remote work instead of clumping and clustering. Why care about proximity and the time it takes to travel when everyone you'd want to meet, regardless of location, is a message, call or video conference away and reachable from your home, favorite coffee shop or local office?
And no, I'm not saying that this has to replace all face to face interaction, but I think it should become the default for work environments that are compatible with this approach.
Of course the problem goes deeper than raw infrastructure - the mindset for a digital life isn't there yet. This appleis to businesses and particularly to official government bodies. Think about your interactions with the government, simple errands like renewing your ID or registering your car - there are awfully complicated and outdated processes everywhere. I've said it before but I look with envy to competent, easy to navigate portals like https://www.gov.uk/.
Consider virtual reality and remote work. I imagine much of the workforce will move to virtual offices in the near to medium-far future when corporations finally come around to realizing they don't have to waste so much money on rent. There's no need for programmers, graphic designers, reporters, and employees of lots of other professions to work in a physical office. So really, as cities become less of a necessity to certain jobs, I expect a moderate exodus to nicer areas, halting growth or even decreasing population in urban centers.
Everyone wants to move to the big cities, especially Berlin, as they provide culture and a sense of freedom.
You are able to meet like-minded people and are able to experience culture and infrastructure that simply does not exist in rural areas.
This of course makes makes the situation for the villages worse as many young people move away. Who's left are old people and those who are not qualified to find work or education elsewhere.
The population decline in those regions also means a decline in infrastructure, economy and cultural events, which makes those regions even more unattractive, perpetuating the cycle.
There is a slight trend of dropouts creating alternative living communities in those areas as abandoned houses & property can be had for very cheap.
But their isolated nature means that often they will not last as their inhabitants move back to the city were their original peer group is.
This is a city right next to DC, in an essentially recession proof area with lots of jobs.
I've known a number of people who were big proponents of living in cities until either (a) they were robbed, or (b) they had kids and realized there was no decent school there, and (c) they had no chance of impacting the government in any way to affect change. They all ended up moving to the burbs.
Are schools in the suburbs better than those in the city?
Why is it easier to affect government in suburbs?
I'm not sure if you're discussing Baltimore in particular or if you are making these points generally. I'm not sure on robberies, but I live in Sydney and I don't think there is a big gap between school quality and government participation in suburbs vs cities.
Without rent freezing, rents continue to increase substantially enough that investors either build more housing in/near the urban centers to meet demand OR the price shifts high enough to make the decisions to live in rural areas much more appealing.
I work with people who live in the inner city and commute outwards daily for their job, because their job is just a way to pay for what they actually want, and what they actually want is to be in that city.
But city living is sad, yeah you can have all the social fun, but none of the quiet, peace, living and hobby space.
I like living 10 miles from the city, lots of space, quiet and green, can drive 20 minutes to the shity anytime.
Maybe invest in new glasses. I didn't say 15.
A city that has a boundary defined enough that you can reasonably say you live ten miles from it, and that you can drive into in 20 minutes? You're thinking of a town.
People have been saying this for decades. Personally, I'd like nothing more than for it to be true so that I can ditch my expensive Silicon Valley apartment. But it's not. Lately I've even been seeing a lot of pushback from people who feel more productive in an office setting and don't want to work remotely.
This sounds like a love letter I suppose and I realize you were talking about cities in general. But anyway, I can understand why everyone wants go there.
Well, since you were in Berlin, that's probably survivorship bias. I live in Dresden, a city of 500k inhabitants about 200km south of Berlin. To me, Dresden is just the right size. Not as vast as Berlin, where it can easily take over one hour to get to the other side for a meetup, but still large enough to have enough interesting stuff going on in it.
What? Is every other Berliner dead and can't tell their story?
What I mean is that, since they're in Berlin, they're mostly interacting with other people who live in Berlin. They're not going to hear from people who don't want to live in Berlin, even if those exist.
Which also seems to be supported by the general population trends. Rural cities are dying, with the younger generations moving closer to urban centers. Remote work and virtual offices will give you a better choice of city, but people are not likely to move out to places where there's nothing to do, terrible infrastructure and less opportunity in the scenario where you choose to find a new job.
And people have been saying that remote work will cause the trends to reverse any day now. So far that hasn't stopped companies even in SV; instead they just build new offices in other cities.
Things to do in the Hudson Valley, the example I have in mind of a non-city area: expansive hiking trails for walking/biking, a river for rafting/skiing/boating/fishing, great family-owned restaurants all over, lots of nice historic sites such as the FDR estate and Vanderbelt mansion, a drive-in (unfortunately a rare institution these days, and obviously there are tons of normal movie theaters around), lots of good thrift/antique stores, hunting, tasting the fresh cider/whatever from local orchards (and getting great meat/produce from farmer's markets along with that), some concert halls around that play orchestras, horseback riding. If you want some stuff like classic theater/art galleries/etc you can find those around too, and a lot of stuff done by colleges. I'm sure I've missed a lot but this should be enough to make my point.
The city has some good stuff like the Museum of Natural History but not enough for me to want to live there.
Many city dwellers do not drive a car and a significant proportion of those never even learned how. Does your rural area support a dockless shared bike scheme? Can teenagers travel independently or do they need to rely on their parents to drive them around? How much carbon does it cost the average family to get groceries?
On entertainment, and specifically in relation to Berlin: do you have a clubbing scene? Where can people go to dance to electronic music? Can they go out Saturday night after 9pm? Is there still public transport to take them home in the wee hours?
I live alone and everything I own fits in a backpack. Are there single room apartments available for people who choose to live minimal lifestyles? Is it even possible for people to rent? If not, how far away is the trailer park from the cultural center? And how close is that to the nearest Greyhound stop?
Things like walkability, access to rental accommodation, 24 hour entertainment and services... These kinds of things are taken for granted by people who live in cities. Of course this kind of lifestyle is not for everyone, but for those that value it, rural and suburban areas do not even come close.
You don't need a bikeshare if you have space to store your own bike. Teenagers can get a license at 16, ride bikes around, walk around, use skateboards, lots of options, but I don't see the big deal about getting rides from their parents sometimes. I don't think carbon use of individuals is much of a concern, with mpg getting better all the time and electric vehicles getting more popular.
I don't know anything about clubbing scenes but there probably are some. There are small cities like Poughkeepsie interspersed with the more suburban and rural areas around there. Quick google search shows some nightclubs exist. I could ask you about the availability of a bunch of things the city might lack too like places like this: https://en.wikipedia.org/wiki/Minnewaska_State_Park_Preserve
Maybe there are single room apartments around, I haven't checked, but there are definitely some small ones with a few rooms that probably cost a lot less than a single-room in a city anyway. Yes it's possible to rent, do you really think people don't rent outside the city? Honestly I think it's a problem, too much real estate is snatched up by people who then rent it out, making homeownership less available.
What do you mean by cultural center? There are bus stops around of various degrees of private or subsidized, with routes either within the city areas of Poughkeepsie etc or farther-reaching.
24 hour services are less than a city but they're still there. Wal Mart, Dunkin Donuts, various liquor stores, lots of stuff is 24 hours out there.
I have lived in the country. I don't want that lifestyle. Billions of people around the world do not want that lifestyle. They do not want to own a car. They do not want to own a bicycle. They do not want to own a house. They do not want to maintain a garden or have a forest on all sides. They do not want to go to the one nightclub for miles around. They want to have bars and restaurants and theaters and all those things that you are lucky enough to have in upstate New York, but they want it 5 minutes walk from their front door. And they want to choose from 20 different options. They want to get vegan food or bubble tea or something a little more interesting than Dunkin Donuts at 2am.
I understand that there are people who really appreciate the rural lifestyle, but please also understand there are many people who do not.
Besides that, people who would prefer to not own any car, rent bicycles instead of owning them if they're a bicyclist, and wouldn't want to own a house if they had the option sound like a niche minority to me.
As someone living in and enjoying rural live with lots of space and quiet I really understand your point, but slightly belittling and disregarding comments like these don't help your argument. It's not that hard to see the attraction of big cities as long as you can imagine that someone might have different interests than you. Of course, this applies to city dwellers unable to see the appeal of rural life as well.
> Besides that, people who would prefer to not own any car, rent bicycles instead of owning them if they're a bicyclist, and wouldn't want to own a house if they had the option sound like a niche minority to me.
I wouldn't put the idea of not owning a car in the same category as your other examples. A car is the first thing I'd get rid of if it wasn't required and I have no doubt that a large and increasing number of people feel the same way.
This means almost all of the rural areas in America are off-limits for me, because not only is the public transportation infrastructure abysmal but it also heavily restricts my options if I wanted to get food, travel or do any form of recreation.
Whenever people bring up living in areas far outside of the city, they never factor in car ownership as part of the equation because they assume that's just a given.
You're assuming that essentially the entire world ("billions of people around the world") thinks as you do, just because you think so.
I've lived in cities of different sizes (magnitudes of 10⁴ to 10⁶), and those who don't want any personal mean of transport, not even a bike ("They do not want to own a car. They do not want to own a bicycle."), are a tiny minority.
I guess you must be in your 20s/early 30s, since something that actually happens IRL is that when people start to have children, instead of moving to more dense locations, which are more convient according to the theory you expose, move to more sparse locations (towards the suburbs), which actually require a personal mean of transport (of course, this is part of a variety of reasons).
IMHO, one is expected to grow out of that. The next phase of life awaits.
Much later, when you are widowed and you move into an assisted living facility, you can once again have high-density living with few belongings and a shared means of transportation.
As rural living reminds me of elementary school, the same could be said for rural living.
I assume you grew up in the United States?
What's so bad about the Albany area? I haven't been there since I went as a kid for some medical facility.
Country living can be great, but your experience some number of years ago doesn't speak to the current data.
I don't buy any of this. Growing up, everyone around me saw the suburbs as somewhere you begrudgingly went out of necessity and only lived there if you had no choice, and I'm inclined to agree. In virtually every aspect I find more urban living much more pleasant.
Funny how that works.
Prices aren't just arbitrary numbers attributed to goods. They convey information. Information that cannot be captured by any one group alone. That's the point of prices.
Freezing rents will create a lot of unintended consequences, as price controls normally do. I imagine that apartments would be poorly maintained as landlords won't need to attract new tenants. Many people will illegally sublet their homes and capture market rents. Landlords will be suspicious and begin treating their tenants with contempt. Investment in building real estate will reduce considerably. The city would be less vibrant and it will be harder to attract young talent or new businesses.
You realize that, logically speaking -- there's no analogy to be made here.
On the issue of new housing, who would risk capital to build new housing when their returns would be subject to the whims of rent caps? What’s the incentive to improve existing housing when the revenue for doing so is limited? Basically, what’s the point of making non-legally required improvements if you can’t raise rent to cover those expenses. That’s going to result in a decline of housing quality over time.
Unless the government is also going to reduce taxes and expenses and inflation for property owners to help offset the lack of revenue growth? Property owner expenses are going down are they? That lack of revenue growth also means less future capital to build more housing.
Rent control benefits a specific group, but ends up costing the whole far more than it saves the few. It’s popular to “protect” the visible because they are visible and typically sympathetic figures. But there is a greater harm being effected that is less noticed because the face of that effect is the “greedy” property owner, but the invisible victim is the overall public.
>because people won’t move if their rent stays “affordable,”
This is the issue rent control is trying to solve. There will always be rich people that can afford to live in the city, and they basically raise the bar on what developers and landlords think people can afford. They stay comfy while the rest basically pour all their paycheck into rent, forgo savings, and feel stuck. What about the rest of the people that work in the city with median income (or lower) jobs? They get pushed out further and further from city centres. In turn, that creates enormous strain on public transit and traffic congestion becomes unbearable.
That being said I don't believe rent control is the proper solution, but it's the only one most people agree on right now. I'd like to hear about more solutions if there are any.
I don't think you fully understand the issue. You focus on one specific case: richer renters displacing poorer renters because they're willing to pay more. But there is so much more to the housing market, and to people moving from one home to another than that.
Maybe I got children, and I want a bigger apartment. Maybe my children moved out, and I now want a smaller one. Maybe I changed jobs, and I want to move to a different part of the city closer to work. Maybe I want to move to a different city where I got offered a job. And so on.
In a "normal" housing market, you can do all of these things. I can get an apartment in any part of the city within a week, because people move around all the time and leave empty apartments. I don't have to be richer than them, I will pay the same price they used to pay. In a normal housing market, people move around, which means other people can also move around. In a housing market that gives special privileges to current renters, people get "entrenched" in their apartment and don't want to leave for any reason. So these apartments never appear on the market.
In my city, there are rent controls for certain apartments (fortunately very small percentage). I know a few people who live in such apartments, and most of them never intend to move for any reason (unless the rent controls are revoked, which might happen). It is not because they consider this apartment the best possible place for them to be. It's because they don't want to lose their privileges. A renter in a rent-controlled home has an extremely strong artificial incentive to stay exactly where they are. This is inefficient, because as a result, people can't move around.
Now you do have a point, in the sense that it might cause people with lower incomes to be "pushed out". I am not familiar with Berlin, I know my city is fully mixed usage and there is not some huge dropoff in rent as you move away from the center (in fact, some parts further away are more expensive than some nearer). Also jobs are not concentrated in the center, so it's not like most people are commuting into the city center every day. There is pretty much everything everywhere.
If you artificially depress the price of a commodity, you induce a scarcity. Apartments are slightly less liquid than say apples, but the principle still stands. It should express itself in demand outstripping supply. If supply and demand were in equilibrium, there would be no point in rent control.
Being less wealthy doesn’t mean a job is less valuable. Police officers, firefighters, bakers, artists, nurses… currently struggle living in attractive cities because they cannot afford it. This makes these cities less liveable for everyone.
If people who are doing some job cannot afford to live in a city, then they will move away or find a different job. This will cause a shortage of people performing the job.
If there is a shortage of people doing the job, and the results of that job are sufficiently valued, then employers will be forced to raise wages until they can attract the number of employees required.
For example, if a city has a shortage of police offers, then they can solve that shortage by paying police officers a higher wage. If the city cannot recruit police without a higher wage, then the city will need to allocate more funds to police compensation so that they can pay a higher wage. If the city doesn't have the funds, then they may need to take the issue to the voters, who can approve some form of appropriation like a new tax to pay for it.
Alternatively, perhaps the voters will not approve a tax, and the city will not pay a higher wage for police, and there will be a police shortage. That's the voters' decision. The city will experience the consequence of the police shortage, whatever that may be. Later, the voters may change their mind and decide to approve the tax.
My point is that the fact of there being a labor shortage will cause a correction naturally via market forces.
Well, there are two solutions, either make the voters less influential or change the behavior of the voters.
Sure. As a voter, if my region was experiencing a shortage of public sector workers, and that shortage was affecting my quality of life, or the life of people that I care about, then I would certainly be willing to vote in favor of a pay raise.
> The logic of the market is to drive wages to the bottom and replace workers when they break.
No, this is not true. Markets exhibit emergent behavior. They don't have any logic per se, although we can reason about how we expect them to behave. If markets have any "logic", then their logic is to reach an equilibrium price.
This does not necessarily mean that wages are driven to the bottom. What happens to wages is a function of supply and demand. If very few people are capable of performing a job in some area, and that job is in high demand, then the result of supply/demand dynamics will be a very high wage. On the other hand, if lots of people are capable of performing a job, and/or the job is in low demand, then the result might be a low wage.
It is certainly the case that everyone wants to pay the lowest price that they can for acceptable quality goods and services. Who wants to pay more at the grocery store, or the dentist, or the doctor's office? The cost of labor is a dominant cost in the price of all goods and services that we consume. The fact that automation is replacing labor in many industries has directly lead to the phenomenally low prices for many goods in the modern world.
For example, before the Industrial Revolution, clothing was exceptionally expensive. Clothing required a massive amount of human labor, and so a single shirt might have cost the equivalent of $3,500 modern dollars. As a result of this, poor people could afford very little clothing - resulting the trope of peasants wearing rags to tatters. Most of our fabrics and clothing are produced by machines now, and so the cost of clothing has come down by orders of magnitude. The result is now that even fairly poor people across the globe can afford adequate clothing.
Automation in most cases results in an increase of quality, not a reduction in quality. For another perspective on this, examine how the cost of lighting has decreased over time: https://ourworldindata.org/light#price-of-light-over-the-lon...
It is a good thing for everyone that the costs of goods and services comes down over time (or equivalently: the quality of goods and services increases while the price remains steady). This directly leads to a better quality of life for everyone -- this is exactly the way in which economic growth leads to an improved standard of living: the same dollar can buy more than it could before, either a greater amount of goods, or goods of greater quality.
As for it not working in Berlin, I have a hard time to come up with _anything_ that works there, so my hunch would be that the housing market in Berlin is broken not because of rent control, but because it's Berlin.
Ultimately, if you want to reduce rents AND have a functioning market, you have two options (or a combination of them): (1) reduce demand, (2) increase supply.
Lots of people living in rent-controlled apartments around the world would disagree.
Doll ownership isn’t a great analogy for housing.
This is economically and environmentally inefficient, because it traps people in less desirable jobs due to proximity, and prevents them from moving closer to work.
They already might live there with their parents, but if they want to move out and stand on their own feet, they would have to pay double or triple compared to their neighbours. Hence they can not move out from mum's basement if they don't want to move away.
Of course this helps resident retirees who don't move and whose children have moved out, even if it is an economically retarded policy -- and retirees vote. Same as California's prop 13, really.
I know if done in excess it could lead to fire code violations, landlords dislike not getting an increased share/concerns about increased maintenance, and would turn controlled rent holders into beneficiaries of a free cash stream over others not privledged but those are either technically separate issues or already in place really for the last one without subletting.
This is a pretty strong claim to make. Can you provide data to substantiate?
How? Pretty much all large cities are much more expensive than Berlin, rent-wise (and in most other things).
Not without tradeoffs, mind you. But it does basically work.
When a vacant rental is first advertised, it is essentially "put on the market" and it's price could be determined by supply and demand in a more or less fair way (assuming "gentrification" is just demand).
But signing a lease and renewing it are very different. For the renter, leaving a rental incurs a very real cost (searching for another place, packing, moving, stress, change of habits etc). It's true that there's also a cost to the owner but it's much smaller (adverting, viewings, risk of unknown tenants etc).
So the "rational" thing for the owner to do is to try and take advantage of this by hiking up the price to include the leaving cost of the tenant. If the market is left to it's own accord, it will cause this.
Of course freezing hampers with the fluidity of the market price. A good middle ground is a predetermined max price increase agreed upon in the lease.
(Wohnungsneubau wird vom Gesetz gänzlich ausgenommen.)
When the next freeze takes place, your residential construction won't be "new" anymore.
In berlin, the rent limits don't work, because of various reasons, one for example is that companies simply rise the costs that are not rent for appartment, force the people living there out and then raise the rent.
The rent limit is not the only thing that has to be done but it is a step in the right direction.
I always hear the argument about investors and the rent limit, but there are multiple reason why that is a bad argument.
The investors had about 20 years time to fix this issues and make a good living out of it. Instead they raised the rents to exorbitant values and didn't built new appartments.
Investors can still make good money of appartments if they just rent them for a fair amount.
Of course that means they don't get a 200% percent profit, but I don't think that should be the case anyway.
Homes are not up for speculation and profit and they should never have been.
A good chunk of the houses in berlin where owned by the city and state and sold for far too little.
Amen. Here's a bit by Stewart Lee that I consider more insightful than funny:
> Basically, what's happened is, somewhere along the line, as a society, we confused the notion of home with the possibility of an investment opportunity. What kind of creature wants to live in an investment opportunity? Only man. The fox has his den, the bee has his hive, the stoat has a a stoat hole. But only man, ladies and gentlemen, the worst animal of all, chooses to make his nest in an investment opportunity. Mmm, snuggle down in the lovely credit. All warm in the mortgage payment.
> Mmm! But home is not the same thing as an investment opportunity. Home is a basic requirement of life, like food.
> When a hamster hides hamster food in his hamster cheeks, he doesn't keep it there in the hope that it will rise in value.
And when a squirrel hides a nut, he's not trying to play the acorn market. And having eaten the nut, he doesn't keep the shell in the hope of setting up a lucrative sideline making tiny hats for elves. And when a dog buries a bone, he doesn't keep that bone buried until the point where it's reached its maximum market value. He digs it up when he's hungry.
> And if estate agents were dogs burying bones, not only would they leave those bones buried until they'd reached their maximum market value, but they'd run around starting rumours about imminent increases in the price of bones in the hope of driving up the market, and they'd invite loads of boneless dogs to all view the bone at the same time in the hope of giving the impression there was a massive demand for bones. And they would photograph the bone in such a way as to make it look much more juicy than it really was, airbrushing out the maggots and cropping the rotten meat.
In reality 60+% of rental apartments in Germany are actually rented by private owners, for most of them it's their retirement plan. Around 10% of German households receive some rental income. 75% of landlords have ROI of less than 1% per year, almost one half even 0 or negative.
But hey, evil landlords, evil corporations. Corporations would be just fine, someone managing 100000 apartments is much more efficient than someone managing one or two. Those small guys would be just pushed out of market, and only corporations would just buy them out in next decade or two. Then we'll have real rent problem.
Do you have examples of this happening? Nebenkosten are controlled by the government or the responsible agencies as well, and you get a detailed invoice of any costs so the landlord can't just bill whatever they want.
I totally agree with this assessment. I've never seen a city where you struggle to get a flat even if you have the money or can pay more.
The market is absolutely broken with literally everyone competing for the same pool of flats.
If an 'ideal' free market means the rich get the houses and the poor are on the street, because developers don't have motivation to build, then I'm happy to see everyone compete for the same housing and seeing both the rich and the poor on the street while we figure out a real solution.
In the case of Berlin, it is surrounded by Brandenburg. Brandenburg is extremely cheap, and one could easily live there officially (but in practice only on weekends) and only spend weekdays in the city, perhaps in a hotel (the price difference of weekend home in Brandenburg plus hotel in Berlin vs. anything in SanFran makes this look sane). Or you could live a short walk from Leipzig Hbf. and take the high-speed train to Berlin which is only about one hour and thus similar to my tram/bus/U-Bahn/S-Bahn commute to the the city center from just inside the city limits.
My ideal is not a free market either, but rather government built homes. I may however be rose-tinting the past, as my mental model is what the UK used to call “council houses”.
Edit: also, I’m not actually German, I’ve just lived here for 10 months and am still learning about everything.
We're talking here about middle class people, your teachers, pharmacists, taxi drivers, clerks etc.
Think of two families that want to get the same house, both having about the same wealth, but one is desperate to get the house and therefore willing to pay more, say because of health problems, while the second family can wait for another property.
You lose a lot when you "leave capitalism at the door".
It’s baffling how much “adding more housing” is always a non starter solution. Everyone seems to understand that if flood the market with something like diamonds then the prices of diamonds will go down, but when it comes to housing then basic economics go out the window.
Rent control is an incredibly pro-landlord policy. In high growth cities, land owners can simply sit on property, never invest in that property (they don’t have to compete) and simply watch their value skyrocket as they never have to worry about new supply driving the market down.
Uh, the state. It's strange to me that someone can honestly ask this question. The free market has failed as is its wont in these matters, this failure always needs to be addressed by the state. Where were you for the last global economic collapse?
And in many major cities, things like zoning are preventing developers from building nearly as much housing as they’d like.
I guess I’m just kind of baffled as to how you’ve reached the conclusions you have. I’d love some clarification.
In a free market, all those who poured billions into the bubble would have gone bankrupt and all of their real assets would have been sold off in bankruptcy proceedings to responsible players who are less likely to over leverage themselves and exacerbate the speculatory frenzy in the next bubble.
The only reason the market hasn't solved the housing problem is government interventions like rent control. In places without these interventions and with strong enforcement of private property and contract rights, the market does an absolutely excellent job of providing housing.
The effects of rent control have been observed for a hundred years. In city after city rent control has been observed to cause more harm than good for the population at large.
Kevin Erdmann agrees with you. Here is his blog post about the housing shortage associated with the 2008 bust
This is Berlin, which actually used the slogan "arm aber sexy" (roughly: impovershed, but sexy).
They don´t have the cash to start building flats with no ROI.
The Bay Area has a rather efficient solution to this problem: limit the open house to 15 minutes. I wish I was kidding, but I saw multiple open houses that were literally 15 minutes long, and if you arrived 16 minutes after it started, too bad. And, unless you show up with a pre-filled application, credit report, blood sample, and your checkbook, there's no guarantee you'll even have a shot at the place.
Ok, the blood sample is a bit of an exaggeration, but not much. Apartment hunting in the Bay Area is not something I'd wish on anyone. I'm pretty sure Dante wrote about it in the Inferno somewhere.
The housing you make margins off are expensive housing in expensive locations.
The reason to keep rents affordable is that it’s generally a good thing in terms of keeping gentrificarion and segregation in check.
Cap on rent can’t be the only policy though.
I see the exact same situation in Stockholm, and there’s a concensus that profit margins are not good enough.
How to solve it?
Either sprinkle lots of tax money in some shape or form or do a quatar fotball world cup kind of setup?
I’m curious, as I see this situation all over, and frankly no one seems to offer a complete solution.
To fund the program you institute luxury property taxes on units larger than what you want your average citizen to afford and actually property tax businesses (which many cities do not do, because they bribed companies to locate there with agreement they would have substantially reduced taxes). Both should be at progressive rates, the larger companies and homeowners paying more. In any city that has the modern housing price crisis in effect there is plenty of money floating around to pay this and would not "kill" the city to institute because demand is so high already.
Then, with the revenue, you A) invest in public and modernized infrastructure and B) rezone for mixed use or simply dezone your city (the only real valid arguments for zoning nowadays are to avoid overburdening infrastructure and to maintain specific skylines, but policies that prevent vertically entirely are wholly draconian and cannot stand - there needs to be an avenue for vertical growth no matter what).
The infrastructure is ridiculously expensive. Decomissioning streets to build functional bike and walkable space infrastructure, building a comprehensive subway / light rail / tram / trolly network, supporting comprehensive bus service are all major projects. Every city, though, needs to be doing all of these. Private car ownership has to trend towards 0 for anyone living in the city proper, and proper zoning and tax code should incentivize almost anyone within a substantial difference to move towards the city because its cheaper.
Its cheaper to live in a 50 story condo building when you factor in all externalized costs - the lifetime of the building, the heating / cooling efficiency, the infrastructure requirements, the construction efficiency, the materials efficiency, the cost of public services to support the building, the access to productive labor and jobs local to the residence, the climate damaged caused by long commutes from suburbs, the environmental impact of sprawl, the maintenance on infrastructure to support it. People look at how 2500 condos might cost 100 million for the building alone and think that means its inefficient and too expensive... but in practice A) the costs are inflated due to regulatory impedance B) there isn't enough high density demand in most western countries to get economies of scale reducing prices of construction the way they are in Asia and C) even when the building is more expensive everything else is cheaper.
Which probably comes back to the fundamental reason we are in this state in the first place. Externalities are not factored in. Environmental harm, infrastructure & services upkeep, human potential lost, etc all factor in to cost the modern sprawl low density lifestyle and our societies dearly. Cities are actively hurting their responsibility to grow to mitigate this damage, but its also on nations as a whole to stop subsidizing lifestyles that hurt the plant, nations, and people themselves. Cities don't have money to build because money is siphoned to maintain the status quo and that keeps this unnatural unsustainable relationship in place.
Can you name a capital city that have a non dysfunctional system in place?
I seem to remember reading about Wienna having an interesting model in play.
Additionally in the same way public policy hinders development today it could be reversed to help development. Subsidizing density and mixed use would do a lot of good to jump start the much needed urbanization of most western populations.
Berlin is partially doing that. The "Wohnungsbaugesellschaft Berlin-Mitte" is a housing association owned by the City of Berlin that builds and rents out apartments. They more or less act like other investors, just with more focus on social factors than on high profits.
Which is basically a political issue, because they will say "some people are more equal than others". Personally, I prefer naked capitalism over this "you need to know somebody in the party to get a good flat"-stuff.
Here in Stockholm a lot of the public good properties have been sold out which have left precious little for too many to contend.
Prices of labour and land are so expensive that, allegedly, profit margins are not good enough.
The "know somebody" bit goes for plain hard capitalism as well, but is less in effect in a society that actually focus on the social side of things. IMO.
What you describe in Stockholm has happened around here too. Still, I prefer it: this way I do have a chance to get a (nice) apartment, even though I was born to a family where nobody was a member of the local ruling party. Sure, I may not get the great flat at the greatest location for a third the market price, but at least I can get one, even if it's more expensive. I'm happy to pay a higher price to be able to actually buy something.
I just think you’re a bit binary here. I come from a struggling family but have managed to buy a place for my own family in a really attractive location.
The problem is that thanks to virtually no regulations on the banks for lending the whole market is inflated, both for property and land.
It’s simply not a question about supply and demand - it’s “how much money can I borrow”.
A study showed that roughly 25% of people owning housing i Stockholm cannot manage a lowish “normal” interest rate.
Banks love printing money for free!
Capitalism only works when properly regulated by sane policy.
I don't see that. I'm not with the mainstream politics at all in my country, yet I face very little inconveniences precisely because money determines whether I can buy a phone, not politics.
We might talk about different kind of politics. You want regulation (for example on predatory lending), and I'm fine with that. I don't want "social criteria" (as in "what gender are you?", "what's your political world view?", "are you married?", "did you go to university?" etc) to determine whether I can rent an apartment. I prefer the worst neoliberal unregulated free market system to that, simply because in that terrible market I still have a chance if I'm not part of the "more equal" group. In the other I don't, no matter how hard I work. It's like a feudal society where your class if fixed at birth. I prefer pure capitalism over that.
That's not to say that I prefer pure capitalism over everything, I just believe that even in its shittiest form, it's still more fair than a thoroughly politicized system. Fortunately, we still have a lot of market economy, so we're not anywhere near a place where only politics matter, but whenever somebody asks for "social factors" to play a role in deciding who will get a flat (or a job, or a car, or food), I can't help but see the writing on the wall.
> It's like a feudal society where your class if fixed at birth. I prefer pure capitalism over that.
Edit: Nothing in my comment is inaccurate. Just because you hide arguments doesn't make yours any better, in fact it makes them worse. And if you don't revaluate your own opinion when the mob tries to censor those they feel are wrong you can't expect to be smart.
I, too, like it when a group a part of gets privileges.
is what you get in naked or even non-naked capitalism.
> you need to know somebody in the party to get a good flat
The SED dictatorship has been abolished 30 years ago. We don't have much of a corruption problem.
Yeah, but naked capitalism is closer to meritocracy, albeit not nearly there.
> The SED dictatorship has been abolished 30 years ago. We don't have much of a corruption problem.
It's still there, just not to the same extent, and more subtle. The market economy helps because it provides mostly unbiased. You're not required to know people, but it still helps enormously if you do.
But just as far from equality.
> It's still there, just not to the same extent, and more subtle.
"not much of a"
> The market economy helps because it provides mostly unbiased. You're not required to know people, but it still helps enormously if you do.
A market economy is by design biased towards wealthy people. A democratic state with rule of law is mostly unbiased.
Oh yeah. Like, it's nearly impossible to find a place to live. Economics 101, true, artificially lowered price is leading to deficit.
Without that a solution is difficult to find. Just to give you an example: one major trend is that people live by themselves. Is that a core driver? Another is that there are huge amounts of capital flowing in buying properties. Another could be the that people’s expectations how sqm per household person have increased dramatically. Yet another is that with 1 mio refugees entering the country in 2015/16 the pressure on housing has increased, etc. Is it all of them? Another ones?
Why, exactly? Does the person who runs the city with the highest per capita tax receipts get some sort of award? I assume his/her rent would get driven up with the rest.
If you want to manage a liveable city instead of a slum, you want that kind of people.
Why not mandate rent increases?
In SF it swung hard in favor of landlords with the outcome of it being unaffordable for tenants and anyone except the ultra rich. Berlin seems to be swinging in the opposite direction and is attempting to fix things for tenants.
And realistically, anyone not taking action to secure their home or investment would be considered an irrational actor by any free market standard.
Thereby increasing rental supply. People can and should arbitrage differences between purchase and rental prices.
> or let them just sit there empty to visit for 2 weeks a year.
Vancouver figured out how to fix this particular problem — tax vacant houses.
It's one option among many.
And by itself -- most likely not a sufficient solution (or any kind of a game changer).
I just don't understand this stance at all.
Basically the main reason this "stance" is that the locals know better: that simply allowing newer (unregulated) construction isn't going to bring their rents down -- or that is to say: do something about availability in their income brackets, and not just yours and mine -- anytime soon.
This is a deeply American hyper-capitalist stance. I understand you're not American, but it's an insidious American mindset that permeates the world, and must be resisted.
A successful society is not just a rampant pursuit of economics and profits at the expense of everything else.
There are investors who will make their choices about more than just "which decision gives me the most profit at any point in time?"
There are many policies that are pro-business and pro economic stimulation that actually have huge negative externalities on the quality of life of individual people.
And, not to go all granola on you, but PEOPLE is what it's all about. All - society, culture, our reason for existence.
Anytime government regulations are introduced that favour people at the expense of corporations there is screaming of the sky falling and that the economy is going to collapse, etc. I suspect it's frequently not in good faith, and doesn't consider a holistic approach to maximizing human happiness.
Edit: we've had to warn you about this before. Please don't do it again so we don't have to ban you.
Right, but people are incentivized by the profit motive and generally do what they can to meet it.
To just say "think of the people" is swimming upstream; you're more likely to succeed by finding a way to modify the system to drive people towards actions that benefit each other.
Unfortunately it is not very human to forgo money, power, fame in exchange for what they think is the right thing to do. That's why we've had to create economic or political systems that saddle the drive for those things and steer it towards things that benefit society.
(The measure is also typically bourgeois; it throws some crumbs to fix the outcry so the capitalist system can remain in place)
You would accumulate a good percentage of madly overpriced rentals that no one wants then they go bankrupt one by one. You get those delicious market dynamics we [apparently] crave more than any social convention. Buildings should be hot potatoes that you don't want to hold for to long. With this much demand it wont even affect housing prices but even if it did, who cares?
Gradually, (in stead of rent) people pay tax at market rates. We can keep the large scale wealth extraction and continue to force people into productivity only it would be the government doing it.
The same logic applies as with the teachers, taxi drivers, cleaners, garbage men, restaurant employees etc: If you don't like it you can just leave the city. Get some of that delicious mobility going and gtfo. They can just leave for the sake of efficiency and availability. Its that simple: Just go away.
If you have to chose between [say] 1) a corner store OR 2) a land lord it should be obvious which one to get rid of.
If they are contributing to quality of life by selling food and employing people we should consider giving the store a tax cut. One could also extend the tax cut to the people working there and have cheap stores.
Its hilariously unproductive to have a usury scheme of greedy unproductive rent seekers extracting wealth from every transaction that is some how remotely related to real estate.
I just want to pay for the ice cream, pay the people involved in making the ice cream happen. Why would I pay 80% to someone who doesn't do anything I need?
I don’t think we want that. Although some do want that. S better alternative is Tokyo or Singapore (though they had their state built flats too —which inspired state built flats in Brazil.)
No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy. Why stop two consenting people from entering into rental agreements, both of whom believe it's in their interest?
Some people prefer to rent: they don't want to be obligated to live somewhere for 10 to 30 years. They prefer to be free of commitments and loans (and/or don't have enough cash to buy). I wanted to live somewhere for a medium period of time (a few years) with no significant commitment or risk, then move on. I had just moved to the city and wasn't sure where I would ultimately want to live long-term. Landlords can also rent properties to people who have far worse credit and far fewer assets than would be required to buy the same property. I was able to rent a property much nicer than I could have afforded to buy at the time, since I had income but little wealth and credit. (The landlord in that case is taking on unsecured risk that I will default on our contract.)
Landlords also provide useful services to their tenants: they are responsible for all upkeep associated with the property. When I rented, I was glad not to have to deal with any of that. Landlord takes care of all the yard, or common spaces in an apartment, and if something breaks I just call the landlord. If you own appliances and real estate yourself, then you are potentially on the hook for significant costs if something breaks. Maybe the refrigerator breaks and you need to buy a new one: the landlord needs to budget or purchase insurance for that, while a renter does not. Landlords also assume liability for their property: if e.g. asbestos is found on the land, they may be responsible for paying for the cleanup.
Property owners are forced to tie up their assets in the real estate. Renters don't have to. Let's say that I have $1 million in cash, and I want to live somewhere. I don't necessarily want to have to invest all of my cash in real estate - not even a down payment on a mortgage. Renting might be a preferable alternative so that I can use my cash for other higher-value investments or to fund a business.
Lastly, landlords assume risk. If they can't find a tenant for their property, then it sits idle and they take a loss. When you own property, you can lose a significant amount of money if the property depreciates, as happened during the last recession. When you're renting, your risk is capped - you owe the rent but that's it.
Renting isn't wealth extraction. Like staying in a hotel, it's commerce, an exchange of money (rent) for services (temporary right to occupy a property). If you want to buy a property from its current owner, instead of renting it from them in a landlord-tenant relationship, then make them an offer, and if you both agree then you can do that instead.
Ok, how does this work. In germany, you usually need to pay 20-30% of the full price from your own saved funds when buying property. 100% financing is rare and usually only available for people that have sufficient assets. So people that have a low income basically never have a chance to buy. They don’t choose to rent. Their only alternative is living in the street.
Rents in Berlin have been rising substantially faster than wages for the last decade or so, turning this into a vicious circle that even the middle class cannot escape from.
That's a pretty weird statement to make.
Do you really believe that everyone (or even a majority) of people who currently rent are in a position to buy a place to live if they wanted to?
Cities have high property prices because they are extremely desirable. Lots of people would like to live there, but there is limited land, and not everyone can afford to live there. There must be a way of determining who has the right to occupy the scarce resource that is land, and the market is the solution to that problem in most countries.
Although not everyone might be able to afford to buy property in the most desirable cities on earth, such as Berlin, most people can certainly afford to buy property somewhere else. For example, a house that costs $1 million in San Francisco might cost $20k-$50k in Detroit. The further you move away from cities, the cheaper property gets.
I think it is reasonable that not everyone can afford to buy property in literally the most desirable, high-demand places in the world, like Berlin or London. People can still afford to buy property elsewhere.
There is scarcity which mean those selling can reduce the set of candidates by pumping up the prices. Its a simple mechanic, not a very sophisticated approach...
> There must be a way of determining who has the right to occupy the scarce resource..
yes! exactly! We haven't attempted to examine the question let alone attempt to answer it.
Lets say we have:
1) renters serving small numbers of customers.
2) renters serving large numbers of people.
3) renters rarely serving the same customers.
4) renters regularly serving the same customers.
Lets say (for sake of simplicity) people spend half their income on rent, lets say we can infinitely increase rent as the bill is (inevitably) forwarded to the customer they serve (everything involving labor becomes more expensive) and lets assume perfect scaling.
Then you can (and we do) have a city where wages are low and everything ("produced" locally) is cheap OR you can have a city where everything ("produced" locally) is very expensive and wages are high.
You somewhat increase productivity by forcing out people who can only do manual labor but it doesn't scale nicely. Eventually the buildings only serve as investment vehicles rather than nurturing the cities productivity.
We should wonder where the money goes really. I have a mental picture where eggs are cheap but if you want a fried egg with a slice of bread it is going to cost you 100 times the price of an egg because the fried egg is mostly made up out of rent.
I think it would make much more sense to have government do the wealth extraction and to configure rent to have the proverbial eggs fried cheaply.
Cities not just import stuff produced elsewhere (because they cant do it themselves) but they also export a lot of valuable services. Those would be a lot more attractive if they didn't scale with rent prices 1:1.
I'm not claiming this is the holy grail, its a rather raw train of thought. It seems to me to have as much economic activity as possible one could force the price of the raw resources down by a whole lot. Forcing people to fry the egg at home doesn't make much economic sense, we can have professionals do it for you at scale.
It could be interesting to run the numbers on room service vs having your own kitchen? Why do we need a million kitchens in our city? They are just sitting there taking up space not being used? It seems as bad as having the empty buildings increasing their own value by making the resource more scarce.
One more thought:
Do we want university graduates or do we want land lords? Why would we want land lords to enrich themselves with money the students don't really have? The student automatically becomes an expensive employee. Education turns into a scarce resource. If it was a game (and it is) the "let the market figure it out" approach is easily defeated.
Say we live in a town where we make all the decisions and our word is law. Our imaginary town needs 2 garbage men, one to pick up the bags, one to drive the truck. We need a truck, fuel, some place to dump, our garbage men need some cloths, a place to sleep and they need to eat.
We take some city land, build 2 house and a garage.
With them serving tens of thousands of customers we can both pay them a nice salary and make the service cheap.
Now we can add a 3rd person who does nothing and pay him a huge sum for his services. We can make fancy documents dressed up with powerful geometry and invent some fancy title for this 3rd person. Say we call them Lords.
With tens of thousands of customers it seems like it doesn't matter. They can pay an extra 100 bucks annually and we could easily finance the 3rd or perhaps a 4th person who also doesn't work. They could live in great wealth without anyone getting upset over it. We could lower the salaries from the first 2 and make room to add a 5th.
Then one day the plumbing starts to leak. It might be portrayed as if the Lords repair the plumbing but the reality is that it requires a plumber.
What I'm trying to say is that however complex we make the bureaucracy, the way stuff works hardly changes. At least not until the bureaucracy becomes so important than there is no more room for the work.
I think that problem can be solved long before.
> No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy. Why stop two consenting people from entering into rental agreements, both of whom believe it's in their interest?
In the existing formula our 2 garbage men are obligated to rent a property. The citizens will have to pay whatever the greedy unproductive landlords want them to pay.
That people can afford this only makes the problem worse.
It's consent only if the other voluntarily agrees. Individually they could chose not to be garbage men but that doesn't mean we no longer need garbage men.
Sure, we can have a thousand applicants and the winning one could be someone willing to drive 2 hours to get to work.
On a personal level that might seem like a reasonable way of doing things, as a town or city trying to organize it self its just poorly done. The citizens pay more than it costs and they are not getting anything for it.
We've sacrificed efficiency for exploitation. Or we've collectively done a half ass job organizing our shit and now we have to pay for it.
>Some people prefer to rent: they don't want to be obligated to live somewhere for 10 to 30 years. They prefer to be free of commitments and loans.
There is never any obligation to live some place. That would be inefficient. If rent contracts are replaced by lease buy contracts you don't need credit. You can pay rent 12 months then leave. The land lord would be obligated to buy back your share of the house or he has to sell it.
> Landlords also provide useful services to their tenants: they are responsible for all upkeep associated with the property.
I don't want their services because they are madly overpriced. I want the actual market to do these things.
> Property owners are forced to tie up their assets in the real estate.
no no no, they chose to do this because it makes a good investment. We can regulate it to be highly undesirable to own property which will drown out everyone except those who really need it.
> Lastly, landlords assume risk. If they can't find a tenant for their property, then it sits idle and they take a loss.
This would be the desirable mechanism. Sadly there is so much demand they would have to ask absurd amounts of rent to be able to not find anyone.
> When you own property, you can lose a significant amount of money if the property depreciates, as happened during the last recession.
This can only happen if the market value grows beyond the new value. Don't feel sorry for investors. We are currently forcing people out of their home to satisfy all that greedy exploitation. Investors only risk losing part of their investment. Its not like they are out on the street like tenants during the great recession.
> When you're renting, your risk is capped - you owe the rent but that's it.
I'm perhaps a lot older than you. I've seen many cases where people died and the relatives had to pay rent, clean out the house and return it into the claimed original state in less than 30 days OR pay some truly insane amount of money.
Say the previous owner build a garage, do you want it? Say they moved some walls around, put in a fire place and got a fancy kitchen? Say there are 20 trees in the back yard?
Mum died, you get 30 days. Don't forget to dig out the swimming pool as well.
Greedy unproductive cruel dictators they are AND they own you. Its a much to attractive scheme, it should be heavily discouraged in favor of economic activity, efficiency and quality of life.
I've paid the construction cost of my house 3 times now but every year I have to work more hours per month to live there???
Maintenance involved 1 phone call every 2 years and roughly 0.005% of the value of the place.
Almost every house on the block has the same owner. A decade ago we were allowed to buy it. Now they only sell houses to investors with the tenants still in them. The market value is about 7 times the construction cost.
They take 10 times the value of the house and not do any work.
If rather than me paying them they paid me the rent they would still be making crazy money without lifting a finger.
I work, other people have to pay for my work. Half of their money goes towars lazy greedy unproductive dictators. 1/3 of their money went to lazy greedy unproductive dictators too.
Then add taxes and they have to work 8 hours to get 1 hour of my labor.
And that my friend is ruining economic activity. Cut them all out and you will have an explosion of enterprise. Let the ponzi people take a risk and invest in that.
I didn't start pondering what is wrong until I see people having to pay rent for flooded houses.
Without risk it is not investment, it's pure exploitation and we are forcing people into it.
Then, there is the problem of the suburbs. A lot of people suggest moving to the suburbs and embracing a longer commute as the solution. The problem is, suburbs also control their own zoning laws, just like cities, and surprise - they also don't want their neighborhoods bulldozed for luxury apartments.
So the problem is essentially a power issue - who holds the power? Without the political power to make zoning changes, little new housing will be built. I don't see a solution here. So it seems that the local people embrace rent control as the best possible solution among alternatives. Viewed from that perspective, it's not so bad after all. The city's residents will feel the impacts, and if it's not working out, they will eventually repeal the law. Big deal.
Is it just Japanese cultural collectivism that made this work? How did they make this happen when we failed so badly? I have no idea.
In the U.S. you might have some neighborhoods that have been largely the same for the past 50-100 years. Since there's no absolute need to replace housing stock unless disaster, people are much more emotionally invested in the existing layouts of their neighborhoods, and advocate against their own economic interests by voting down new developments or zoning changes.
Post-WW2 buildings in Japan were crap so I can see why they'd replace those. But I think recent buildings are a lot more long-term. My sense is that they replaced because of the post-WW2 cheap building boom, not because of the climate/mold. It's no warmer or wetter than many places in America, and northern Japan is quite dry and chilly.
For the "never bombed America" argument, I'd just point to Europe, which was bombed. Or to new American cities built 1950 onwards, which suffer the same problems. I'd also point to Kyoto, which wasn't destroyed in WW2, but is still functional in terms of real estate AFAIK (though I'd love to hear otherwise).
You can either have affordable housing that’s not an appreciating asset or let finance/real estate Capital run roughshod over everything in speculative flurries, leading to the insane state of affairs in many western cities today. You can’t have both.
unfortunately productivity is pretty stagnant across developed economies, including japan
if capital and business owners have no need for new/enhanced labor as is the case in many developed economies where offshoring/new hire cycling is rampant, then a housing affordability crisis definitely builds up, unless:
(1) the municipal/federal government steps in to regulate rent as it has done in Berlin
(2) there is a good architectural/geological/tax incentive that prevents NIMBYISM
(3) cultural/work factors allow the younger gen to live at home/work remotely
1.) Supply is inelastic because construction work and building approvals are limited by current capacity. It is not feasible to expect the market to react as quickly as 600,000 new inhabitants over 10 years required.
2.) A lot of policy is still considering this to be a fad before cities become less popular again. Berlin's plans had for instance foreseen falling demand for schools due to demographic change and now rising birthrates (good economic situation) and influx of young people into cities are causing a trend change (for how long?).
3.) Current ECB rates are causing a housing bubble in Germany where many people are buying property for the first time. Because these properties are mostly rented when purchased but renters can't be terminated in Germany, the only way to evict is by raising rent until renters give up. Putting a rent freeze into place makes sense to prevent this and the rampant luxury renovations which don't create more supply.
4.) Berlin at its peak (1944) had still more than half a million more people and is surrounded by mostly empty countryside. It could easily grow to 10m as Paris or London.
Yes, with 2 - 3 times more flats per every floor in a building. And with whole multi-generational families living in every one of them. Don't forget sharing one bathroom between all this families and sometimes toilets just being wooden huts outside.
Try visiting Mitte Museum in Gesundbrunnen, you'd see how miserable pre-war housing was, yes even in the very centre.
The area around Ackerstr. was much more dangerous than Alex or Kotti is today.
Regarding 3: landlords are successfully invoking the "right of own use" to evict tenants. They are basically claiming that they need the apartment for themselves, a relative, etc. 
Furthermore, thanks a relatively recent law, the landlord can't raise the rent for older buildings indefinitely - there's a cap.
New buildings are exempt. For those rents start high and there's a standard ~2.5% increase per year.
 Article in German: https://www.spiegel.de/wirtschaft/soziales/mietwohnungen-eig...
Which is very ironic because Berlin is one of the least prosperous cities in the federation.
The only way this happens is if cities like Berlin putting rent freezes prevent construction that would increase capacity and lower prices to allow people to live in cities. There will be no new economic growth where people are spread thin - all future productivity will only emerge where people are. Any country trying to do anything but centralize their human capital in cities will find themselves at economic disadvantage going forward.
People keep saying stuff like this but this is a economic theory with very little actual support in any evidence or even in most economic theory of how montary policy works.
Cause: insufficient housing supply
Solution: disincentivize new construction?
Oh but half the city is under construction work right now, they're building shopping centers, offices and hotels (I can count at least 6 10+ storey buildings being constructed in a 600m radius from my place, only one is for flats)
Investors want to max out how much money they make, tourists bring way more money than the general population, especially in Berlin
Housing isn't profitable, so it's not being built. And more and longer rent freezes will worsen the problem.
The developers are being very rational here in what they're choosing to build.
Average joes, especially those who want to live in the city but cannot afford it, do not get a seat at the table.
So maybe capping land prices and forcing sales for desirable schemes would work better. It will of course never happen as ownership is fundamental to our thinking in the west. I actually find the idea of the government forcing me to sell land I own at below market value quite offensive. I understand that is irrational.
Maybe this problem is quite complicated?
I was pondering a high annual ground tax instead of a capital gains tax
Something neat I've noticed locally is that condos with high property management fees have proportionally lower selling prices.
If all 2 bedroom units in an area/city are $3000/month and one building had property management fees of $1000 instead of $500, the unit's value is $500/month lower (approx. $100,000 selling price).
I'm not sure how that would be implemented on a city scale though.
For density: If you drastically raise property taxes to be proportional to square footage instead of appraised value, you instantly incentivize higher density building. If you're paying $1000 tax per square foot of ground floor, you can spread that over a single floor, or 40 floors.
Was that your thought?
Property tax is just now being redone in Germany. Unfortunately it seems that it might end up depending on the square meters of the house, not the underlying property.
The people who are abusing the system are equity investors who demand a return on their investment within as little as 2-3 years, leading to unrealistically high rents. All rent control is doing in this case is forcing investors to take a longer period of return.
It's called LIQUID for a reason. If another place has better investment opportunities, the investment will simply cease. Why would anyone take their LIQUID assets and put it into real estate (in german it's called IMMOBILIEN, meaning immovables to make it clear) in a place that actively discourages return on invest?
Why aren't we trying to fix the supply problems, instead of trying to... what are we trying? I don't understand the whole ideology that sees any reasoning that could lead to this.
But there's a funny thing about investors: They look at what governments have done in the past to judge the risk of things happening in the future. Set a precedent that you'll meddle in the market for political reasons, and every potential real estate investor will be worried that you'll do it again in the future -- even if you're not doing it to them yet.
I have the option to buy a rental property in Berlin, I can either buy an old rental property and not be allowed to increase rents for 5 years. Or I can buy a new build rental property (which already sell for above market value in most places), and can charge more rent but I will be less able to find renters as they are looking to lock in 5 years worth of zero rent increase.
I really don't get how either situation encourages me to become a landlord.
Cities don't want or need more landlords. It needs more landOWNER residents.
- I can move out when my life circumstances change.
- I can move out when the district changes.
- I don’t need to take a credit just for living somewhere.
- I don’t need to worry about people renting my apartments.
- I don’t need to worry about maintenance.
If you have the money to buy fine, but for most people renting is way better.
I personally agree with you, but thats my specific lifestyle, and I put my money into other investments. But generally, owning a house is a good place to park your assets if you live a "typical" life.
One of the biggest reasons I want more landOWNER residents? So that my neighbours actually care what's happening in the neighborhood+condo, and do something about.
I'm renting from a Chinese investor. He doesn't speak English and doesn't have a clue what's going on around here, and doesn't care to get involved with helping things run better.
I can communicate my issues with the real estate agent who handles the unit for him, but he's just going to shoot off a short email and move on with his day.
Over 50% of this building is this way. The board of directors has a huge accountability issue because of this, and residents and owners are suffering for it.
If you rent, you care what happens locally, but you have no say.
(Granted, demand for existing housing should increase if they are cheaper, but presumably supply will decrease as well as fewer people living there will move out - so I guess it shouldn't affect the pricing of new housing much?)
In Berlin there's many cases of people being pushed out of their homes because of rent increases, people having to do apartment tours with 50+ other people and having spill all details about their private lives to have a chance at being chosen, etc.
The situation's crappy already. Even if the current tenants will be protected, that's already a small victory.
The same logic applies to planning new underground lines and keeping the city airport functional.
Don't expect rational decisions from this city.
Legislative efforts to limit prices pretty much guarantees that additional capacity will not be forthcoming and that shortages and high prices will continue.
Presumably you also believe that government bureaucrats are somehow better able to ascertain exactly when to stop issuing building permits so as to avoid "overbuilt" construction. And of course they will know when to resume issuing building permits also to ensure there are no shortages.
How is it that these government bureaucrats are better able to predict demand and arrange for supply than market mechanisms and the free economic choices of individuals?
You are making an argument for a planned economy over a free market, for limiting the freedom of individuals to invest as they see fit with their own resources in favor of giving power to government employees to block or to subsidize their favored economic activity.
The historical track record for central planning is overwhelmingly negative. I don't understand why people continue to advocate for it.
Strawman. That is not the question here.
And now you are suggesting that my assumption that you were implying that the government should do the allocating is also incorrect.
So what is your alternative suggestion?
Wrong. Please read what I write instead of "presuming" what I might think.
Aside from regular market issues, there could be a number of external factors (i.e. non-berliner ownership) that might be exacerbating the problem.