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California Approves Statewide Rent Control (nytimes.com)
670 points by dawhizkid 10 days ago | hide | past | web | favorite | 962 comments

I am a landlord in Oregon, but not California. The curious, although ultimately predictable, outcome of the new rent control measure in Oregon is that while I have historically had an arrangement with my property management to be restrained in annual rent increases, they are now advising a default annual increase of the maximum allowed (7 percent before inflation). This is because larger adjustments cannot be made if and when necessary due to market conditions, so it's smart to just steadily increase rent at the maximum rate permitted. If I agree, I believe the result will be more profitable for landlords, and hurtful to tenants.

The real solution to a housing problem is to incentivize and facilitate the building of more housing. ADUs, relaxed zoning, reduced building regulations, reduced fees for permitting, etc. I fear rent control is actually going to do more damage to the housing market than good.

The entire point of the law is to prevent you from being able to make those larger adjustments, though.

How often do you replace tenants? And what's your occupancy rate? If you're in a situation where you can reliably raise rent 7% YoY indefinitely without decreasing your occupancy rate, then you were severely underpriced for the market (and you should probably fire that management company for pricing you that absurdly low). 7% YoY after inflation is a big increase that outstrips average wage increases.

If you aren't severely underpriced, then what's going to happen is that when you increase by 7%, the tenants will choose to end the lease because they can find something cheaper (or they emmigrate from the city because nothing is affordable), and you'll struggle to replace them with wealthier tenants willing to pay what you think is market price, so you'll have to lower rent to attract a tenant. Once you get to the point where your price is roughly in line with what the market will bear, you'll only be able to squeeze one or two years of rent increases out of a tenant before the non-monetary costs of moving are outweighed by the cheaper rent, so constantly trying for 7% YoY post inflation will just mean a decrease in your occupancy rate, both because you'll be replacing tenants more frequently and because finding new ones will take longer.

What in your second paragraph doesn’t apply without rent control? In other words, what makes 7% the magic number? Your entire argument seems based on market forces (if you raise too much, your tenant leaves and if there’s no wealthy people to replace them, you're stuck). How is this not the case without rent control? Do wealthy tenants somehow appear without rent control?

Nothing. The parent comment was arguing that because the law now says that rent couldn't increase by more than 7% they were now being advised to increase rent by that much every year (ostensibly because they are now planning to do this), and my response is that it's absurd to claim that anything in the law will change things so that you could make that sort of increase now if you couldn't already make that increase before the law existed.

Many landlords are not paperclip maximizers. REITs are, but small time families often charge below-market rents to the long term tenants they personally like or can’t be bothered to replace. They feel comfortable doing this because they can always revert to market rate later. With that long-term optionality going away, some will revert to market rate or as close as legally possible right now.

So in other words, landlords love to reserve the right to kick a tenant they stop liking out at the drop of a hat for no specific reason, by jacking the rent up as high as they want. As compensation for this power, they are willing to charge well below market rates to help indigent tenants.

If they lose this “right”, they insist on becoming pure profit maximizing machines?

> So in other words, landlords love to reserve the right to kick a tenant they stop liking out at the drop of a hat for no specific reason, by jacking the rent up as high as they want.

It's disingenuous to pretend like the landlord is the only party with any control. Landlords cannot remove a tenant at "the drop of a hat" by any stretch of the imagination, nor can they arbitrarily increase rental prices. Rentals usually involve a lease that protects the tenant from arbitrary removal and price modifications as much as it protects the landlord from unexpected vacancy. If you're renting, you should know when your lease is up and know that the landlord has the option not to renew and/or to modify the price. (If you're in California, you should also know that the new law punishes your landlord for trying to do you a solid and keep your rent stable across lease terms.)

On top of conventional lease protections, virtually every state has default tenant protections written into statute that can't be overridden by lease agreements, and that include a default implicit month-to-month tenancy term, providing at least basic protection from out-of-the-blue demands to vacate.

If an eviction must occur, it has to be conducted as prescribed in state law. Tenants overstaying or defaulting on their leases frequently can't be removed without 3-6 months of legal wrangling, which is no fun.

>>> (If you're in California, you should also know that the new law punishes your landlord for trying to do you a solid and keep your rent stable across lease terms.)

The CA law allows the rental price to reset to market rate for a new tenant, so unless the landlord doing you a solid was planning to stick you specifically with a rent increase down the line to recapture the present solid, they can still keep your rent stable across lease terms.

I am a CA landlord of a single house. Keeping track of “market rate” is an annoying exercise and I tend to just leave the rate unchanged for multiple years (3-5) then bring it up in one go. The last time I did this the rent increased ~12%.

Before, the tenant was happy because they got below market rent for 4 years, and I was happy because I could defer pricing work without long term penalty or risking a move-out during an already busy year. This new law will likely result in my tenant paying more, and me working more at times I don’t want to work.

It’s not the end of the world, it’s just one more annoying piece of red tape that doesn’t seem to help anyone.

Was the tenant happy when you increased it? Increasing rent 12% in one go effectively kicks out most tenants. A smaller annual increase will give them time to adjust to market conditions and choose over a longer period whether or not to move and to save up to do so.

You are doing no one any favors except short-term renters who never get an increase. In other words, your so-called benefit is actually a detriment to long-term renters.

I have done this twice with the same tenant without complaint or moveout. My tenant was presumably getting basic inflation based increases at work, which offset most of the delta.

Unclear on why doing it all at once is worse than doing it regularly and extracting more rent in the period in between. Is the theory that they will be unable to adjust their budget in 60 days?

It's beyond me why people would think this is worse for the tenant. Can I move to CA and be your tenant? You're basically giving your tenants free money.

Let's say the rent is $1000/month (for simplicity). That's $12000/yr in the first year. If you increase the rent by 12% ever 4 years they'll have 3 years of paying $1000/month, followed by a 4th year of $1120/month and so on.

If you instead raised it yearly by 2.87%, which give-or-take is the same as a 12% one-off increase we can calculate the net rent paid over the period in the two scenarios:

    $1000*12*3 = 36000

    (r*x^1*12)+(r*x^2*12)+(r*x^3*12) =~ $38106
The result is that by deferring rental increases you've given your tenant a benefit of $2106, and we can safely assume the rent is a lot higher than $1000/month. I.e. every month of the rent not keeping with market increases is more money for the piggy bank.

Not only that, the money saved in the short term (those 4 years without a rent increase) can be allocated however the tenant chooses. It can be frivolous spending, or the tenant can choose to turn it into long-term investments for compounding effect. I love being a tenant in these scenarios.

I think people that are arguing bigger rent increases that happen less often are bad are assuming tenants are stretching their housing budget to the max and won't be able to afford the large hikes. In which case they wouldn't have been able to afford it with smaller increases either.

Getting a surprise bill for 48 months of interest free credit is still a surprise bill. The landlord in question admits both to deferring out of disinterest in tracking market value (which as a trend is simply not hard work to determine) and to increasing the rent enough to recoup the rent lost by deferring the increase. During this time a tenant has no idea there is a claim on some undisclosed portion of their budget and has every incentive to set their operating budget accordingly.

It is well known that most people can not afford significant sudden expenses. I think the inability of some folks here to recognize how bad a 4 year rent hike can be have the privilege of not being in that group.

Renters generally understand that rent can be changed when the lease runs out and should be braced for the possibility that there will be a moderate increase. If the renter doesn't understand that, they probably haven't rented much before, and they'll learn it the first time their rent increases. If you are lucky enough to go multiple years without any adjustment, you should expect that the landlord will want to correct the differential at some point and budget accordingly.

Note this works both ways. If the market goes down, if no one wants to live there anymore, tenants have a lot of room to negotiate. Vacancies are expensive and the hassle of getting a new tenant is not something many people want to handle even in good conditions.

To clarify, when I increase, I bring it up to market rate, not over market rate. So my losses on missed rent are not recouped.

I also contend that not all markets make this easy. I rent a single family home in a town of 4,000. This is not a super liquid market. There are not a lot of good comps - my house is a block from the town’s best park, and walking distance to the small downtown. On the other side, it is a substantially smaller lot than the average house. There are essentially zero houses that are equivalent, and I have to do a lot of digging (including calling up other folks I know that are landlords) to figure it out.

My tenant is not on the verge of financial collapse. They’re a manager at a local business, they probably spend about 20% of their gross pay on rent. They have demonstrated an ability to absorb the bump without issue.

> Was the tenant happy when you increased it? Increasing rent 12% in one go effectively kicks out most tenants.

No, the market kicked out most tenants. The tenant should be expected to also monitor market prices for their rental and know automatically when they're getting a deal or when to expect an increase.

If I own a house or an apartment complex, my costs are relatively fixed -- that is, after all, the primary argument for owning rather than renting -- which means that if I am leasing that house or units in that complex to someone else, there is nothing requiring me to raise rents to keep up with "the market" rather than merely keeping up with my own actual costs. I can choose to make the same absolute amount of net income year after year. If "the market" is increasing faster than inflation and property tax, I can choose to take advantage of that.

"The market" is not an entity with its own volition, and speaking of it as if it were obscures the reality that it's comprised of individuals and collectives making individual or collective choices about what to charge and what to pay.

Sorry, didn't mean to ehumanize it. In the aggregate, it could be viewed as having its own volition.

Two viewpoints, one tree.

Could the tenant not save the amount of money the rent was not going up to be prepared for the day when rent did go up? The tenant could have saved 5%’s worth of increase, invested it in an index fund for the day that the rent eventually did rise. A 12% rise after 3-5 years would be no big deal since the tenant would have been prepared.

You can still do it that way. But instead of raising the rent 12% in one year, you can just raise it by 7% one year and then by 4% the next year.

The tenant still gets below market rent for 4 years, you and can defer pricing work for as long as you want without penalty or risking a move out during a busy year.

I think you might be overly worried for your situation. Your 12% example is an amortized difference of at most 1.5% compared to the new 7% cap (1.12yroot3 vs 1.07yroot5).

The point is, if you decline an increase now-- and costs increase unexpectedly, you have a hard cap on how much you can do to adjust. This incents landlords to be more aggressive with pricing, because a mispricing now can extend to be mispriced for many years.

It also may change the equilibrium behavior, because it upsets a social norm and affects landlords' estimations of what other landlords will do.

FWIW, this is still more bookkeeping for me (have to track when to raise, how much remaining to raise). I also personally feel like a dick every time I serve the rent notice - it’s a small town and everything feels a little personal.

It’s not a lot of work, but my FT job isn’t being a landlord, and we’re talking about a property that nets maybe $8k/year. It’s been a better rate of return than the stock market, but the alpha is small relative to my SWE salary.

I guess another possible outcome of this is pushing marginal small landlords out, or pushing them to use property management firms since the fees possibly start making more sense. Neither of these seem like good outcomes to me.

An increase by 7% followed by 4% is an increase of 11.28%, not 12%.

$1000 +7% = $1070, $1070 +4% = $1112.80

$1000 +12 = $1120.


Increase by 7% followed by an increase of 4.67289719626168224299065420561‬%.

The point is that the 12% hike every 3 to 5 years can be accomplished over the same time frame because the max the law allows for is 22.5043‬% in 3 years and 40.25517307‬% in 5 years.

But the reality is that landlords aren't going to want to take the risk that they'll have to spend extra time at a below-market rate, and since there's no way to predict what the market is going to do, there's no guarantee that they'll only be missing 4% of that value for only one year. Landlords are thus incentivized to increase rent by the legal maximum each year to keep the risk minimized.

Your hypothetical also assumes that in the next year, the market value will stay the same, when in reality the expectation would be that it would increase another percentage point or two, meaning they'd have to come close to maxing that second year's increase to fully recapture the value.

It also creates an effect where now that there's a legal range, the landlord will still feel like a nice guy by increasing rent "only" 4% each year, for example, and that's worse for tenants overall. It strongly incentivizes small-time landlords to imitate commercial landlords and squeeze the tenant for more each year, which other posters have adequately demonstrated is a significant loss to the tenant over a simple periodic adjustment every 3-5 years.

These policies may be better justified in high-density areas like San Francisco (probably still net negative), but applying them state-wide is crazy. California is a very large state and they just made things substantially more complicated for both tenants and landlords throughout.

A better way to think about it is that a social norm that constrains landlords will be completely upended by the new legal norm. This legal norm will likely encourage behavior that otherwise wouldn't be exhibited, due to unintended consequences - in particular the landlord's estimation of what other landlords are going to do under the new law.

More like a household renting to a family friend, a student, an artist, someone who helps with child- or elder-care, etc. Homeowners put situations like that on the "market" in large part because they're allowed to change their minds later when the lease is up.

Landlords love to reserve the right to increase their prices.

Maybe inflation gets crazy, maybe taxes increase, maybe maintenance turns out to be more expensive, maybe they realize they've been underpricing, maybe they sell the property to someone who has the same reasons.

If you tell them that you will limit their freedom to choose the rent price, they will try to retain as much freedom as they can.

It's like a use-it-or-you-lose-it budget game.

The landlords own the building. They don’t owe the tenant anything beyond the lease.

Dude, they own the property. This is OK.

Sure some absolutely will, but there were enough paperclip maximizers relative to the total available rental units that a law limiting their maximizations had enough political will to actually pass through the legislature even though it's blindingly obvious that putting a limit on rent increases encourages all landlords to always increase rent by the maximum allowed.

If eligible landlords in SF all started raising rents by 7% per year, every year, the city would empty out. As much as housing is crazy expensive in SF, there's no way the market would bear those kinds of increases

SF already has rent control, which limits most landlords to increasing rent at 60% of inflation.

Needless to say, costs are increasing faster than 60% of inflation... In turn, landlords are only willing to write leases at very high prices and the supply of rental units is even lower than it would be otherwise...

You can still revert to market rate if your tenant leaves. As a landlord who values consistent occupancy over maximizing profit, I am fine with this. And I agree with above comment, if you are raising rent 7% every year then you or your prop manager lowballed your rent, that’s not the fault of rent control.

you didn't have to make that response before the law, as a hot market that drove up rates by 15% could be addressed shortly. If you loose the option to make quick upward decisions and any downward movement is essentially irreversible, game theory suggests you'll try to minimize how much increase you leave on the table.

Downward movement isn't irreversible, it's rate of reverse is capped. And the rate limit is pegged to inflation. And roughly equivalent with expected average stock market returns [1].


What has changed with the new rent control law is the risk to the landlord increases, and that means rents rise to pay for the risk.

The thing that would be different is the game theoretic situation where every landlord feels compelled to do that so the market rate increases by 7% per annum.

They could already do that. Nothing was stopping them from forming an oligopoly or landlords association/guild or whatever you want to call it and raising rent in lockstep by 7% each year. The entire point of the 7% cap is to stop that from happening above 7%, because certain hotzones experience that already, not because of a formal agreement, but because the demand outstrips supply by that much and supply can't (or won't) catch up.

However, there's an issue with how you're calculating the market rate: You're assuming that tenants can/will bear that cost indefinitely, so the market rate can be "whatever the landlords want to make it". That won't always be true, not just from landlord defectors who might try to undercut the oligopoly on price, but because the tenants can move elsewhere and effectively remove demand.

> Nothing was stopping them from forming an oligopoly or landlords association/guild or whatever you want to call it and raising rent in lockstep by 7% each year

Well, “Nothing” is an unusual way of referring to the Sherman Anti-Trust Act.

With the current administration and Supreme Court, it's a very apt way of referring to the Sherman Anti-Trust Act.

Let me put it more simply, all that rent control does is put a damper on large increases [1], but the rental market will still seek a market price. The only way to do that is to spread the increases to leaner years where the natural rate increase would be lower than the cap. Every landlord would independently conclude the same, no collusion needed.

To undercut that this year would mean being below market price in a future year. The only arbitrage would be between present and future prices. Perhaps some subset of landlords only seek to rent out for the front-end years, so they would have a different calculus, but all that would do is to pull down the average transaction price by a little, according to their size in the market. So if the current price demands a natural increase of 2%, maybe the market will clear at 5% instead of the 7% max, but it remains the case that there will necessarily be years where the clearing price is higher than without rent control.

[1] This is assuming the government "guesses" it right that 7% is the average rate of increase over the long term. If it is below average, then the market gets severely distorted.

I'm saying that game theoretic situation you proposed where every landlord raises their price by a similar amount is exactly what the law is working to limit to a fixed ceiling because the situation you described already exists in enough areas that there's political will to do something to limit the maximum yearly percentage increase.

And the cap was explicitly set to be below the average rates of increase for many areas because the effects of the higher increases in those areas is what the law is explicitly trying to prevent.

Spreading the increase to a leaner year only works if the unit is below the market rate. If the unit is already within 7% or so of market rate, then market won't bear that increase. Instead the tenant will move out to a market rate unit. If the entire city increases in lockstep that means people near the bottom of the market will be literally priced out and either move to another city or resort to sleeping in their cars or become homeless, but everyone else will just downgrade the size of the unit they rent since once the price of the current unit exceeds their ability to pay. At the very top end of the market that will mean units will have decreasing occupancy rates assuming the landlord refuses to compete on price to increase demand and insists on capturing the 7% increase.

> Nothing was stopping them from forming an oligopoly [...]

You are forgetting about transaction costs.

The new law does provide a Schelling point. (But I do agree that it's probably not going to be an important one.)

These guys going to pretend they did not raise rents out of the goodness of their hearts and not cold hard economic reality. What's even the point except to spread FUD?

I think your argument is contradicting itself at least partially because you say if an LL (landlord/landlady) was already getting market price, they’d price themselves out of the market so the 7% cap is more than enough... so in essence you’re saying the market will tell the LL not to raise the rent... which then means you’re relying on market forces... but you’re saying despite that you need a YoY cap... so something seems amiss...

No no that's not my argument here at all. I'm not making any argument about whether the cap is enough or needed. The parent comment was arguing that because the law now says that rent couldn't increase by more than 7% they were now being advised to increase rent by that much every year (ostensibly because they are now planning to do this), and my response is that it's absurd to claim that anything in the law will change things so that you could make that sort of increase now if you couldn't already make that increase before the law existed.

Ah, gotcha I see what you are saying.

I think what OP was saying was that in an unrestricted market they have wider range (due to discretion) but given this shackle on hikes, they are going to max it out. Maxing it out means there will not be downward adjustments when warranted (economic trends) and will instead ride it out (not make it avail at lower price) because when the economy picks up they’ll more than make the loss up.

what you are arguing is the captured surplus under the supply curve. We can assume that demand is essentially inelastic for a relatively large price range (hence the introduction of rent control) so the extracted value is the area under a curve that changes rapidly over the short term, or a less volatile curve that shifts out 7% every year. I don't see how either of you can be confident in the expected future actuals.

You’re missing a few things:

- He may be socially responsible and not want to charge through the roof. E.g. likes the tenants, prefers stability etc.

- The whole point of the law is indeed to prevent large raises. But what if expenses suddenly skyrocket, or inflation does, and he has to increase more or go bankrupt? That’s the worry here. No, the law won’t react quickly enough. It’s preventing him from being socially responsible.

- You assume annual 7% would not work eventually because it will raise the price too much in the market. This assumes free market, but you don’t have it anymore, now you’re regulated. In particular, your missing that everybody else will adopt the same rational self-preserving policy. Approximately the entire market is going to grow 7% YoY now.

- nitpicking: 7% before, not after

This makes me curious... is it the property management company or the landlord that sets the rental price? I recently rented a house and tried to haggle with the PM but they refused to budge on price but were willing to negotiate on other factors (like lease term and property rules), which made me wonder if the PM's hands were tied re: price.

I don't know exact specifics of typical PM agreements, but usually yeah the PM follows whatever the landlord specifies. If the PM doesn't like the landlord's terms, they will just decline to do business with them, but ultimately they're just the landlord's agent.

I'd hazard that the PM charges a percent of the gross rent, but has a minimum irrespective of the rent actually charged, so the landlord will then just tell them that they don't want the PM to rent at a price where the PM's minimum fee is more than the fixed percentage. (or in hard numbers. If the PM requires the greater of 10% or $100, then the landlord will just say "don't rent below $1000")

Most property owners leave rent decisions to their property managers, as they're treating their property as a somewhat passive investment. It's basically the entire point of having a property manager.

Some PMs will try to act the opposite, but if you're the property owner, you're HIRING the property manager to find you tenants and/or manage the rental process. Their responsibilities are defined in the property management contract.

Sadly, their contracts are pretty slimy - they usually absolve the property manager of any wrongdoing whatsoever. Do they hold up in court? KINDA. Unless you're incredibly rich and have a fantastic lawyer.

So then what’s the point of not being able to make those larger adjustments?

There's certain hot zones in cities where the rent can increase by much greater than 7% YoY. In those hot zones no one's wages are rising at the same rate, so that law is the only thing that prevents the people previously living there from being forced to move even if they would rather stay. Essentially, it's the policy that is in response to all the stories about retirees being forced out of a home they rented for decades or the stories about the cops and firemen sleeping in their cars because their job is a 20 hour drive from their house and they can't afford anything closer to their job.

Cops and fire fighters are unionized, protected and well paid. For years the argument for higher pay for cops in Frisco was that cops couldn’t afford to live where they worked. That was effective marketing, cops never wanted to live in the city they all live in Santa Rosa. Perhaps using teachers as an example would be better.

What happens to the people that want to live there and are willing to pay a higher price for it?

"What happens to the firemen and teachers?" is a more important question than "What happens to the tech workers?"


They outbid everyone else on every available unit.

They use their money to build new units in that area or entice someone to build new units on their behalf on which they will then outbid everyone else.

In Ontario the rent control is even worse. It’s set by the landlord tenant board at a number near inflation, this year it’s 2.2%, the last few it’s been 1.8%.

Similarly, i tell my tenants that they should expect the minimum increase yearly as i cannot make up for any lost increases nor can i make larger increases if something about the economics of the house changes.

The real issue here is the cost to provide housing, and the limited amount that exists. I wanted to finish a basement in one of my places, to do this legally, i owe the city $140k in fees alone. This is around 5-6years of rent. You can probably imagine why i opted to put this money in a bunch of index funds and do nothing instead...

This is really bad policy... Treating the symptom while making the root problem worse.

The core issue is there is not enough good housing for everyone in California.

The real solution is to greatly loosen building regulation and make getting permits much faster and easier statewide. Then entrepreneurs will double or triple the housing supply and drop the costs of renting or buying a home by 80%. You could see rents go from $2500 per month in LA to $1000 a month or less.

I would argue the core issue is actually overpopulation (or in the case of California too many people wanting to live there but also trying to balance preservation of Nature). And it's certainly much more acute in California. Tokyo is not a desirable way to live, but neither are the suburbs. Too many people means the density gets too high, and poor zoning regulation and poor building incentives get us mcmansions. Every little European city that you've ever been to that was lovely, walkable, and sensible, is the objectively best way for humans to live. You know it and I know it. Loosening building restrictions won't really work if you think that you're going to build single-family homes. It would be a disaster. You have to build entirely new neighborhoods where people can't use cars at all, but I've never seen any level of government in the US allow that. Otherwise you will just end up building suburbs and then the state will build 15 lane highways ad nauseam. Traffic will continue to get worse, it'll be a dystopia.

And you build more and more housing, you'll wind up with 4-lane highways to and through Yosemite or something - that's not at all desirable is it? How would you handle the traffic and flow of people? Giant hotels, McDonalds, and huge traffic stops? It's just not sustainable.

California's problem is that it's not sustainable for the amount of people that want to live there. I think it's a global problem in general too. Less people, and no cars would be most desirable to me.

Sorry for a bit of a discoherent rant.

Tokyo is a fantastic city, I spent two weeks there and loved it. It is extremely clean and safe, loads of good restaurants and entertainment, and good outdoor spaces. If I could speak the language and work there, I would move in a second.

California is in no danger of being overpopulated... The issue is as you say - single family homes are a brain dead way to live. Every homeowner has to spend hours a day maintaining his house... We stopped running our own internet servers after the first ten years of the web. Why can't we do the same with housing? Convert everything to medium (4 story buildings) or high (10+ story) density housing. You would completely get rid of suburban sprawl and everyone rich and poor could live within a mile of the ocean or mountains, walk or ride a five minute train to work, and solve climate change at the same time.

I don’t think high rises are ideal either. Amsterdam or somewhere like that is more ideal to me.

Counterpoint: Paris is denser than Tokyo (by almost a factor of 3! 21k persons/km for Paris vs 7k persons/km for Tokyo, only a little higher than NYC). While I’ve never heard Tokyo referred to as “undesirable” (though I have heard “crowded”) in the first place, to say Paris is “undesirable” is to objectively fly in the face of mass media and popular perception of society’s regard for the “city of love”

Density does not automatically mean low quality of life, and in fact could just as easily enhance it: what matters is good city planning and design, and I’d very much argue that in e.g. LA (where I live) the vast majority of single family homes in the city are in areas where it makes no sense for them to be, lowering the quality of life for even those that own and live in the home (e.g. single family homes right next to highways and commercial corridors? why?)

In my opinion, the idea that California is “full” is immensely dangerous. Especially considering the fact that SF and LA are losing net population yearly — and yet the rents are still increasing and our suburbs are still sprawling further and further out. Density is the solution, not sprawl and not limiting who can come here.

Your on the right track but there's a ton of regulation we need to get rid of before we can truely increase the supply with new innovations in housing production.

I got out of renting out a place I owned in CA a few years ago for this very reason. The company that bought it eventually turned it into a parking lot. I’m just glad it’s not my problem anymore.

You are absolutely correct: rent control (1) increases upward pressure, and (2) decreases rental supplies (and therefore drives up the price of rent) , and (3) benefits high-income earners when not coupled with income limits.

(1) Since rent control laws put limits on increases (and not decreases) every landlord understands that he/she should test the upper boundary at all times to avoid renting severly below market rates during boom years. With sufficient landlords undertaking this task, rents should go higher than without this limitation. Moreover, the cost of moving is higher for the tenant (who has to find a home and move his/her property) than the landlord (who has to find a new tenant).

(2) real estate becomes less attractive builders and buyers, given the mandated constraints on charging rent. See https://web.stanford.edu/~diamondr/DMQ.pd. For a counter, see https://www.housinghumanright.org/wp-content/uploads/2018/11... (you'll have to wade through ad hominem attacks).

(3) high-income earners tend to benefit the most on rent control over time. As market rates for rentals increase (i.e., property up for rent), only higher-income individuals can afford to move in. Over time that leads to the displacement of lower-income individuals. Anecdotally, I can attest how some of my high-income earning friends pay very little for housing in SF because they locked in rates before 2011.

Lastly, pro-rent-control reports/papers I read highlighted the need for a comprehensive housing strategy beyond rent control, like increasing rental supply by making it easier to build ("It is also critical to recognize that the need for reforms extends beyond rent control and housing policy more broadly ... This includes developing new funding sources for affordable housing development and addressing exclusionary zoning policies at the root of the displacement crisis, https://haasinstitute.berkeley.edu/opening-door-rent-control). As the article already mentions, Scott Wiener's bill to override local zoning laws was shelved. The CA legislature did not have the stomach to address the underlying cause.

A far more sensible solution (IMO) is: (1) override zoning laws / ordinances that prohibit building more homes (2) tie rent control to income.

In Montreal we've had universal rent control all my life, and it actually works quite well. The rents are comparatively low. We have a decent tech scene, but it's still an affordable, left-leaning city, where even struggling artists can scrape by if they want to dedicate themselves to artistic work. I'm sure some people would argue that apartments in Montreal are less well-maintained as a result of universal rent control, but I've lived in the bay area, been to San Francisco many times, and uh, a two-bedroom San Francisco shithole which rents for over 3000 USD/month would rent for about 700 CAD here (~550 USD). If you go to the 800USD/month+ range, you can find very nice apartments.

Funnily enough though, I would say that Montreal has less of a supply problem, despite being on an island with no room to expand into an infinite suburban sprawl like the bay area has. Construction still seems to happen here. People are bitching that too many condos are being built, but I think more supply is good.

Anyway, I think rent control can work pretty well, as exemplified by this Canadian city. At the very least measures to prevent surprise rent tripling while someone is renting an apartment are very much a good thing. Sidenote: I think that rent control can also help prevent property price explosions. It makes no sense to buy an apartment for over a million dollars when its rental value is only 1000/month.

Montreal has a large supply of old housing stock. Its population growth has also been much slower than Vancouver and Toronto's over the last few decades:


>>Montreal is not shrinking, but it is growing slower than other big Canadian cities – driving down rental demand in the process. From 2013 to 2014, despite gaining nearly 43,000 immigrants from other parts of the world, Montreal tallied a net loss of 10,000 residents to other provinces.

If either Vancouver or Toronto had had more stringent rent control in place over the last few decades, the housing situation in these cities would be much worse than it is right now.

The effects of rent control have been heavily studied and are well-known:


A note: EconLib appears to be run by the Liberty Fund, which is a group that certainly has a slant of its own[0]: an essentially anti-regulation stance in the name of personal liberty. I have attended a colloqium put on by a Liberty Fund-sponsored think-tank, and can attest to that slant.

I'm not saying the contents of the article is wrong, but just be aware of its source/publisher.

[0] https://en.wikipedia.org/wiki/Liberty_Fund#Criticism

Yes you should definitely judge the content on its own merit and not blindly trust the source. The article is well sourced and even cites "left-wing" economists (yes they exist) and political figures.

the reason rent control works in that case is because the difference between the rent control the amount dictated by the free market is very close. In that case, efffectively, the rent control doesn't really do much at all and hence isn't interfering with the pricing signals and incentives to build. In CA, the rent controlled prices are currently so far lower than the current cost of building it makes it pretty much impossible to build.

Another thing to consider is that rent control can depress interest in building more housing units. Why build if you won't be able to make the profit you'd expect due to price controls? More generally, this is an effect of price controls, especially those that can't easily be worked around.

> (2) tie rent control to income.

Give one moment's thought to the most likely side effect of that...

Keep in mind that CA has been operating with a variant of rent control since 1978 and the broader populace expresses wild support for it.

Landlords who choose to increase rents at the maximum rate permitted each year do so at the risk that they will be undercut by competing property owners who do not do so. Given this, I think that your property management company is offering you bad advice.

Most landlords already increase rents at the maximum rate that the market will bear. Capping annual increases at 7% just ensures that in a year when the market would allow landlords to get away with increasing rents by over 7%, they won't be able to do so.

I do not follow when you say that the strategy of increasing rents by the maximum amount permissible is necessary "because larger adjustments cannot be made if and when necessary due to market conditions". In what scenario would larger adjustments be necessary? If you made a viable investment in a property and are currently renting it out, wouldn't rent increases just need to equal inflation in order for you to maintain the same level of profitability? Sure, increasing by more than inflation allows you to increase profits, but I hardly see why maximizing profits should be seen as a necessity---especially when it comes at the cost of pushing people out onto the streets.

>Landlords who choose to increase rents at the maximum rate permitted each year do so at the risk that they will be undercut by competing property owners who do not do so.

Price ceilings (even non-binding ones) can create market power for suppliers by providing a focal point for tacit collusion.

[0] Knittel and Stango (2003), Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards https://pdfs.semanticscholar.org/3848/b5c04ae02c17c0b5135841...

[1] DeYoung and Phillips (2009), Payday Loan Pricing https://pdfs.semanticscholar.org/c587/58d243ad0653b052b1c77a...

Fascinating. Makes sense from a game theory perspective.

That’s how large corporations behave, but what the OP is voicing is a common sentiment for smaller investors or people doing landlording as a side gig or housing hack to financial independence.

If the market can support it, these laws guarantee the maximum increase. If the market cannot, well you are already at the top of the market aren’t you? So no benefit here.

>>> If you made a viable investment in a property and are currently renting it out, wouldn't rent increases just need to equal inflation in order for you to maintain the same level of profitability?

Not necessarily - taxes on property owners don't follow inflation. They may go up greatly compared with inflation.

>>> I hardly see why maximizing profits should be seen as a necessity---especially when it comes at the cost of pushing people out onto the streets.

Because if don't allow it to be profitable people won't do it. Particularly in California it can be quite risky the rent out a property. It's an extremely tenant friendly location, so much so that evictions for major infractions can take several months, or in some cases years.

> Not necessarily - taxes on property owners don't follow inflation. They may go up greatly compared with inflation.

Except in Cal where they go up much lower than inflation...

Maybe more people selling property instead of collecting money forever for winning the land lottery 50 years ago it is a good thing.

That would remove rental units from the market and further increase cost of living for folks who can’t purchase.

What would be the positive effects?

It also takes a tenant out of the market. So the net effect on other renters is pretty slim.

In Chicago, a lot of multi-units (2+ flats) are converted to single large SFH, so the net effect could be worse especially if prices were to go down that it would be attainable to do that.

Interesting! I wonder about the economics of that?

Do they just knock down a wall in the middle? Or is there any new construction involved? (Usually the developer wants to go for higher intensity to sell more units per land.)

One example I could imagine is that a landlord may not want to raise rents significantly on a long-term reliable tenant, but would want to increase rents when the reliable tenant leaves. “Market price” probably doesn’t include the cost risks of having a nightmare tenant.

Don't those laws usually allow a reset when you switch tenants?

(However, your example would still work, if the reliable tenant turns into a nightmare tenant.)

There's not much risk to it. Sure, others could undercut you, but when you see that happening you're free to lower the rent and have a tenant again.

The Hilarious thing in Oregon is some of the 'marketing' for this new rent control law stressed over and over that rent had grown 25% in Oregon over the last 4 years, so 'something needed to be done'. So they capped at 7% per year.. Someone really, really sucks at math...

Yikes, 31% (1.04^4 - 1) instead of 25%.

Yes: the people targeted by those ads. "Look! We did something for you! Vote for us!"

It also results in a lot of empty units.

I was talking with a real estate agent in SF and he said it’s not unusual for landlords looking to sell their rent controlled building to just let units sit empty.

Why? Because it can increase the value of the building by hundreds of thousands of dollars. Losing out on $24k worth of rent each year is easy if you know it comes with an extra $300k in your pocket when you sell.

Vacancy rates in San Francisco are very low compared to the rest of the state and the country. Rent control in SF is problematic not because it leads to vacancies but because the allowable increase is far too low, way below inflation.

Vacancy rates are empty units that are available as a percent of all units available for rent. It doesn’t typically include units that aren’t available for rent.

The estimate is there are 100,000 empty homes in the SF area.[1]

I’ve seen an estimate of 20,000 for SF proper.

This [2] report to SF Planning states the number of empty units has doubled over time.

[1]https://www.sfgate.com/realestate/article/An-estimated-100-0... [2]http://ternercenter.berkeley.edu/uploads/CR_Final_2.3.19.pdf

> I’ve seen an estimate of 20,000 for SF proper.

Even if that was added to the vacancy rate, that would still leave SF with around the national average (~7%) vacancy rate, and that's without counting the off-the-market housing anywhere else in the average (and not double counting actual on-the-market vacancies everywhere else, either.) Anyway you cut it, SF has a low vacancy rate/rate of empty homes.

Yeah, but 2% to 7% vacancy rate can mean the difference between rents that are $2000 per month and rents that are $4000 per month.

SF added 2,000 jobs in 2019 alone. If those were put on the market even in a huge lump sum, there's no way it would cut rent prices in half. Maybe it would keep the prices from rising for a year or so?

It's low no matter what measure you look at.

You'd also have to consider all the people that would be happy to rent out their in-law but decide not to because of rent control.

Not saying it would solve the housing crisis, but adding another 20,000+ units onto the market would certainly help.

yea, vacancy rates in SF are 2 - 3%, way way below the national median, and way below the california median as well

What units go into the vacancy rate? The comment seems to be saying these units aren't even listed as available. Would they still show up in the vacancy calculation? How do they get in there?

Which is why vacant property tax makes sense for popular areas

So solve a problem created by regulations with more regulations?

The presumption (right or wrong) is that the problem the first regulations solved is bigger than the problem that the regulations created. After seeing this new (smaller) problem, more regulations are applied creating a new even smaller problem. Making life better.

This may or may not be true, but that is the idea.

Rent control (regulation) creates more problem, I agree with that.

But I don't think it's fair to say that expensive housing, full stop, is a product of regulation.

There are desirably places to live that have housing that goes up at a good enough rate to be considered an investment. As long as there are people of sufficient means, some of them will add property to their portfolio of assets. A home that sits unused on prime real estate is, frankly, more of a drain on that community than $100,000 in cash sitting under a mattress going unused.

It's not perfect, and it IS a regulation, but penalizing people for hoovering up housing stock and then not using it, can benefit society.

I'm not sure I'm in favour of rent control in the first place, but as a Vancouver renter I have seen vacancy tax really help with both house prices and rental availability. It also seems to be a fair tax, you are being taxed on a luxury that affects other people negatively.

It’s not so easy, how do you prove this?

What if someone’s on vacation or has mail being delivered there etc. or comes in once in a while or Airbnb’s it’s much harder to impliment I think than it sounds.

Well, what you do is get rid of prop 13 and do yearly appraisals. Then you just tax the property on what it's worth, and if a landlord refuses to rent, then the tax is now a vacancy tax.

The real problem is we're not taxing these properties at the true value they could provide to society, so a massive market inefficiency exists.

A vacancy tax is indeed a bit more complicated.

You hint at the easier solution: repeal prop 14 and increase property taxes. A lot. Problem solved.

(If you want to be a bit more sophisticated, look into land value taxes.)

Repeal prop13 and landlords will just pass the additional taxes on to their tenants. You'll only succeed in displacing a different group of people. And you won't be the one buying those homes at a sweet discount. Assuming some real estate mogul, rich kid, tech bro doesn't out bid you, you'll be paying all those mega property taxes every year too.

The real issue is that there is no central authority at the CA State or even Bay Area level planning growth holistically.

A company can hire 5,000 people tomorrow and they'll all just move here and look for a place to live, regardless of whether the city their employer is based in has any housing or not. That drives up rent. It creates the absurd traffic that we now get to enjoy every day of the week. It drives up the costs of goods and services.

Bay Area leadership and California leadership need to sit down and have a discussion with employers and cities about how to effectively and responsibly grow, and then move towards developing new infrastructure to support the plan that comes out of those discussions.

I know that was a typo but CA Prop 14 is maybe the only thing worse than Prop 13 that CA voters ever passed.

If the fact that allowing landlords race-based leasing won the vote isn't enough to convince you that direct democracy is a stupid idea I don't know what is.


You are pure evil.

My landlord's building is worth $5 million ($5,000k) and he pays $3k a year in property taxes. He can evict all tenants and wait for someone to pay him $10 million for the property. He can wait for generations and never pay more than $4k a year because of how prop 13 is structured.

But you do you.

Sure but you also want to force anyone who has recently managed to buy a home and doesn’t have a huge extra income out of it and out of the area.

Your landlord may be able to evict one building’s worth of people, but your goal is to evict many more than that.

Your landlord is harmless by comparison.

Who said eviction? I said to charge to the property tax as it's valued today. Put a lien on the property and collect at time of transfer. There's no reason to evict people based on property taxes. Texas handles this just fine.

What happens when the tax liens outweigh the value of the property?

I'm trying to understand: are you saying landlords should be able to not pay property taxes on the current value, not get their property seized by the state if they don't pay property taxes, collect market rate rents from tenants, and also keep all of the profit from property value gains once they sell?

But ignoring that absurdity - property taxes are usually 2% of the property value. So you'd need to what... Not pay any property tax at all for 100+ years for that scenario to play out?

But let's say we allowed that to happen, and we're somehow sympathetic to that owner. You still don't evict anyone over property taxes. The next buyer will just have to work it out. See Detroit and its $1 homes with $20k in back taxes.

I guess the problem here is I don't see housing as something anyone should expect a guaranteed profit from. I view it just like anything else - there's real risk, and if you're going to privatize the profit, you damn sure better privatize the risk, too.

Nobody is guaranteed a profit from housing.

Just like any other asset you can pay too much, buy something unsuitable, or mis-predict market forces.

Are you against private ownership of property outright?

Do you favor being taxed on the value of other things you own, how about your laptop, stove, etc?

I'm very much for private ownership of property, not sure why you would think otherwise. All I've said is to do what just about every other state does: if your property is worth $200k, you pay $2k that year in property taxes. If it's worth $2 million, you pay $20k. This isn't hard, and it isn't controversial.

Edit: just to appeal to authority: every single legitimate economist agrees with me on this as well.

What if someone’s on vacation or has mail being delivered there etc. or comes in once in a while or Airbnb’s it’s much harder to impliment I think than it sounds.

If you're putting the place up on AirBnB more often than not, the unit is not your primary residence and shouldn't be afforded benefits as such. If the goal of a vacancy tax is to increase rental supply, AirBnB does pretty much the opposite.

In California, and most of the US, property assessments are done by elected officials on an annual basis. In California the rate of increase is severely capped, but you're free to apply for a reduction if the value of your property decreases. If you're legitimately on vacation (or whatever), apply for an exemption. It's not that complex.

As a landlord this doesn’t make too much sense. The value of the property is net operating income divided by cap rate, so vacancies would lower value. It doesn’t matter what the gross scheduled rent is in that calculation.

You can also look at the value as discounted future cash flow. And in that calculation, an empty apartment that the buyer is confident they can fill quickly and rent for $5k is worth more than a full one renting for $4k.

Also, if you take your reasoning to the extreme then an empty apartment building has a negative value.

If you have a tenant paying $1000 per month when market rate is $3000, an empty units drastically increase income and thus the value of the property.

It also opens it up to people who want to buy the building and move in.

I would suggest you fire your property management company. Any relatively savvy tenant is not going to pay above market rate. Then you'll be out of a presumably stable tenant and taking a risk on a new one. You'll also forfeit the money while your unit is vacant. Lastly you're gonna have some repair and cleaning costs. All in all unless there's crazy price appreciation in your market this strategy is going to cost you money.

> it's smart to just steadily increase rent at the maximum rate permitted.

FWIW rent control advocates agree with you.[1] It’s a point in which the “PHIMBY” left[2] and the real estate lobby agree.

The reasoning is that it’s not actually a full rent control bill (it just stops the most extreme cases of gouging) which is why the California Apartment Association stopped opposing it. Thus it doesn’t go nearly far enough to stabilize rents.

I know there are a lot of supply siders on HN champing at the bit to dump on rent control, but this particular bill is a bit more nuanced.

[1] https://twitter.com/rcmoya84/status/1171972636294840320?s=21

[2] https://www.kqed.org/news/11731580/forget-yimby-vs-nimby-cou...

> The real solution to a housing problem is to incentivize and facilitate the building of more housing.

You need to have some degree of control. I live in a suburb close to a tech hub in WA. They built a lot of housing in the past 3 years. And I mean a lot. At least a couple of hundred of apartments on the market every year, after raising 3-4 buildings at the same time, in a town of 20k people.

One would think that the price would go down based on supply and demand, right? More than half of the apartments were empty while the management companies were not budging on the price. Nobody wanted to go below 2k/month for a one bedroom and they were sitting around with empty apartments. Finally they managed to reel in some suckers by offering 2-3 months free rent but again, no rent was going below 2k so the next year, you pay up or move out.

Right now, people are moving out and the apartment buildings aren't what you'd call full but again, the rent is not going down. It actually increased. Because what happens is that they're owned by large landlord corporations which can take the hit for a year or two to keep the prices up. I know this because I used to live in one. They increased my rent (years ago) from 1.2k to 1.7k and I moved out. The apartment was on the market afterwards for about a year and they didn't try too hard to get new tenants, they just posted it periodically on Craigslist. I tried to negotiate to bring it down to 1.4k and they said no. It was way profitable for anyone to keep the price up, although they lost a year of rent from it.

This tends to happen with new apartment buildings for the first 2 years or so, and its an artifact of real estate finance. For finance purposes, the building is valued on the theoretical sum of its leases when its at full capacity. If you have a 100 unit building where each unit rents for exactly 2.5k/month, then your building is valued on a multiple of of the $250000/month it generates. That value is used as capital for the real estate company that owns the building to use to get a loan to build another apartment complex. Where this gets tricky is that the max cashflow a building can generate is decreased when you lower rents in leases for for finance and accounting purposes,but when you give someone 1/2/3 months free rent the "max theoretical monthly rent" remains the same as if you hadn't given them the free rent. Thus, while the 2 months free rent is an effective ~18% rent decrease for the tenant, it doesn't impact the ability for the development company to borrow, and thats why it is widely used.

This seems about right. Also, there is a time frame when a new complex after completion transitions from a short term builder/construction loan to a long term permanent loan. For that loan as mentioned above the building is valued at theoretical sum of it leases by the bank. Thus for that loan it is better to show high actual rents and extrapolate to secure a better loan value / term.

For a town of 20k people, a couple hundred apartments doesn't seem like much at all to me. That's probably less than 5% population growth, right?

A big big problem is that we have underbuilt for decades, which has normalized underhousing for younger people.

Nobody says the rent will go down. That's not the argument.

Increasing supply simply ensures tomorrow's rent is lower than it would be otherwise.

Losing an entire year of 1.2K rent breaks even with 1.7K rent after roughly 3.3 years, breaks even (1.7(x-12)=1.2x, x = 40 months). And that’s if the new tenants stay with no churn and you don’t play the same game forcing them out for another year. Had they just raised your rent $200, the break even point becomes almost 6 years. I don’t understand your landlords at all.

With regard to the story before it, it sounds like they actually lowered rent to about $1600 (2 months free is a 17% reduction, which is pretty hefty. Sure, you’re betting on them staying after, but it switches to month to month usually after a year so it’s risky).

I believe part of the explanation for this is that big landlords have more ways to make money off property than just collecting rent over long periods of time due to the way buildings are valued in the commercial real estate market. Building net operating income has a direct relationship to market value; the ratio of these things gives you the capitalization rate, which tends to be known for a given type of building in a given market.

If the unit sits vacant for a while but they do eventually succeed in growing building revenue through rent increases, they don't have to wait out the full breakeven timeline to make money since they can sell it on to the next buyer at the newer higher price indicated by the latest year's financials.

Let's take an example building where the local market has apartments trading at a 3% cap rate. If there are 30 units renting at 1.2k with no vacancy, that's $432k in annual rent. Let's say running this property requires a $80k property manager, $80k in property taxes, $40k in utilities, $40k in insurance, and $25k in miscellaneous expenses for a total of $265k/yr in expenses. The net operating income is $432k - $265k = $167k/yr. The market value of this building to a prospective buyer would be $167k/0.03=~$5.56M

Renting the 30 units at $1.7k (41% rent increase), gross rents would be $612k. Expenses constant at $265k/yr (taxes would go up, but this is napkin math), the NOI is now $347k and the building is worth $347k/0.03=$11.56M .

In this example, a 41% rent increase more than doubled the value of the building. For an investor with deep enough pockets, the $6M of equity created by renting units at the higher price is enough to cover the cost of a long vacancy / rehab process. But they can't get too greedy or the units will never rent and they're just stuck holding the bag on a high-vacancy underperforming property.

These dynamics amount to what is basically a slow-motion flip playing out over 4-10 years. Some REITs do this across their entire portfolio to achieve healthy annualized returns.

Alright, that makes sense. But can we all agree that it's a problem?

When I said there needs to be some level of control (and apparently nobody agrees), I was referring to something like the taxes put in place by local governments against foreigners buying up property, keeping it unoccupied thus creating scarcity and driving prices up.

In this particular case, the local government practically gave away building permits, changed codes, the whole town was at the developer's feet (roads closed, free traffic enforcement, less green space, redesigned roads to deal with the forecasted traffic, etc..) under the promise of building plenty of 'affordable housing'.

But when after you build it (tons of this crap https://www.bloomberg.com/news/features/2019-02-13/why-ameri...) you raise the rent for no reason and practically drive people away (I'm not saying it's gentrification, I'm saying it's well-off young professionals who are now choosing to move to a different city), the local market stops being competitive, you sit around with empty apartments, somebody went wrong somewhere. All new developments are under the ownership of two or three giant entities which have a vested interest of keeping prices very high as opposed to competing among themselves. The management companies who own these also made sure to buy a lot of the existing (crappy) apartment buildings.

The argument I was trying to make is that more housing does not necessarily solve the rent price problem, especially if the new housing is governed by a handful of large corporations. And that is usually the case.

There's some weird legal implications that I know that I don't understand.

I see this all the time where a large ownership company will leave apartments or commercial real estate totally unoccupied rather than allow a cheaper rent.

I don't understand what they gain.

Losses on rental, including depreciation and fixed costs like property tax can be counted against profits on other units. These losses can be carried forward and applied against future taxes indefinitely in the US.

So, leaving an apartment empty that could be rented for $X isnt quite a straightforward loss of $X, since you also gain the ability to offset future taxes.

Perhaps it's similar to the economics of retail gasoline prices at gas stations.

If it's true what you say that "the result will be more profitable for landlords, and hurtful to tenants," then it seems odd that landlords are not universally applauding rent control.

From the article: "[The measure] was unopposed by the state’s biggest landlords’ group."

It shouldn't be a surprise that more landlord-friendly rent control measures get less resistance from landlords.

Landlords want to be able to raise rents at whatever rate maximizes profit without generating turn over - except when they want turn over (to get renters out).

When the market will bear an increase less than rent control, it gives landlords something to point at as justification and help mitigate turn over. When the market will bear a greater increase, it is unfair and harmful to communities, etc. etc. etc.

The tendency for government regulation is to subsidize demand (rent control, housing assistance) and restrict supply (zoning, permitting, etc). The side effect is always higher prices.

>they are now advising a default annual increase of the maximum allowed (7 percent before inflation)

Is the property management company collecting an extra commission each time a new tenant moves in? Because all this strategy is going to do is let tenants quit once the rent goes considerably above the market rate.

A much wiser strategy, IMO, would be to watch the market rates and keep the existing tenants' rate constant until the market rate climbs considerably higher (7% sounds like reasonable threshold) and then raising it to be marginally below the market, incentivizing the tenant to stay.

Isn't OP saying they are doing this because of rent control? (e.g not being able to change rent selectively, only able to constantly increase rent?)

Specifically, it's an attempt to hedge against the possibility of the market rate increasing by more than 7% in a year.

The entire market is going to do this. Legalizing a 7 percent increase basically means mandating the entire market move at this rate.


2. Realize that not everybody in the world needs to or should live in the Bay Area/Hollywood.

3. Don't pass statewide laws catering primarily to the group of people aspiring to do so.

Bay Area has more jobs than it does housing for the people who work those jobs. There just isn't an option for everyone to move away from the bay area and still have work.

Take your "I've got mine so screw everyone else" attitude out of the bay area, we don't have room here for people with so little empathy for their neighbors.

"There just isn't an option for everyone to move away from the bay area and still have work."


If you can't afford to live in a box in San Jose, obviously staying isn't an option either.


"Take your "I've got mine so screw everyone else" attitude out of the bay area, we don't have room here for people with so little empathy for their neighbors."


Oh I don't live in the Bay Area. Theres an entire nation outside of San Francisco, large parts of which are better than the bay area in every objective fashion other than this weird cult obsession with having to live in the poop filled streets of Silicon Valley.

It's a fair comment. You entirely brushed aside point 3 by using a personal criticism on the parent poster to ignore the fact that rent control is imposing a cost on an entire massive state, in order to regulate a thing that is an issue in a small number of counties.

Every tenant, regardless of what county they live in, needs basic protections for their home.

This law is not targeted at SF per-se because SF already has strong rental protections, this law offers the bare minimum of protection for everyone in the state. The bay area should, and must, pass stronger protections than this statewide law.

Bay Area is one of the most productive parts of the USA. (And one of the most productive places on earth.)

Excluding people from work in productive areas perpetuates poverty.

Why do people NEED to work in san francisco/LA? You may think you're contributing something valuable being a barista or adjunct ethnic studies professor in the Bay Area but if you can't survive there maybe the others don't agree. Move to a house bigger than a shoebox with less traffic, less filth, and less crazy politicians, and lower costs. Whats the hangup? I don't understand these people who watched pirates of silicon valley and now they have to live in a shack on location.

You are right that it is a bit weird and hard to understand why productivity differs so much.

But that labour productivity (eg measured in salaries the market can bear) differs so much is a fact. Whether we like it or not.

That puzzle is mostly about productivity differences for tech workers. For the baristas in the Bay Area relatively standard explanations like the Baumol effect do most of the explanatory work.

The productivity is higher because you have one of the highest concentrations in the world of big companies at the top of the field employing the best people and most resources. Not rocket science.

This has nothing to do with people that think they deserve to work there (which I frankly don't get what the big deal is, you're not a teenager scoping out the best colleges anymore) but obviously the marketplace disagrees.

I'm not sure it has much to do with anyone deserving anything. It's just good for the economy if more people work in more productive places.

So if the best companies could employ more people in those places and pay them high salaries, those people would also pay high income taxes that could finance public infrastructure for the rest of the country.

This needs to be talked about more.

Entitlement was never a core tenant (no pun intended) of the American dream.

It's tenet if you don't intend the pun, by the way.

You have been successful in calling me cheeky on The Internet :)

I don't think so.

I've been tenant in France, with restrained rent increases. Every year my rent was increasing 20 euros or so.

I've been tenant in California without rent control. After one year, my rent went up 500 dollars.

But well, maybe that's because in France the allowed increase is calculated from a rent index in the area, not a fixed number like "7%" (no idea where it comes from).

Also, don't say "necessary due to market conditions" when the reality is just "can get away with it due to market conditions". It's not like the increase of the rent market causes you more fees or increase your mortgage.

> because larger adjustments cannot be made if and when necessary due to market conditions

When are "larger adjustments" necessary vs just opportunistically profitable?

The question I always see is "why shouldn't I have the right to make as much money as possible from my investment," but the answer seems pretty clear: because evictions and massive rent hikes have nasty social consequences, as does treating rent-seeking as an investment.

If the marked could bear annual 7% increases, why didn't you make them before?

What will probably happen is that you'll have a hard time filling your property after 1-2 years at the latest, and everything goes back to normal.

A new rent control law changes the market. If the tenant leaves, they will need to sign a new lease, and the leasor will build in extra rent because they are worried they won't be able to raise it enough later.

In other words, it scares all the landlords at once, and they all raise prices a little because of it.

It all depends if tenants can afford it. On a scale this could be "happy with rent"->"rent too high but can afford"->"cannot afford rent, in arrears".

Are average renters getting 7% pay raises every year in perpetuity?

> It all depends if tenants can afford it

In extreme markets, perhaps.

Normally one landlord's ability to raise rents is constrained by the prices other landlords charge.

Counter anecdote: I've lived in a rent controlled apartment in Santa Monica for 5 years. My rent increases by the maximum allowed every year, but that's drastically lower than the non-rent controlled apartments in Santa Monica and West LA. My rent is now pretty significantly below market.

Yes, the real solution is to make life as easy as possible for real estate developers and strip tenants of their rights. That is definitely good for tenants, according to landlords such as yourself. For the rest of us, I hope you understand why this sounds fairly nonsensical. "More housing" does not automatically translate to "affordable housing" and many regulations are there for a reason--including regulations protecting tenants from unscrupulous landlords.

> "More housing" does not automatically translate to "affordable housing"

Imagine two hypothetical cites, each with one million residents. The first one has half a million apartments, while the second one has ten million apartments.

Which city would have cheaper apartments?

What city are you imagining where ten million apartments would be built with no demand for them? I'm assuming the city with ten million apartments and half a million residents is economically depressed, since that many apartments were clearly built for a much larger number of people.

Here's a better question: under a realistic model of building, where building slows down when landlords and property owners feel they have maximized the profit they will get out of it, by what date do you think housing prices will be low enough that current residents who rely on rent control to stay in SF will be able to live there again? 2025? 2035? 2050? What is your recommendation for those people in the meantime?

Nobody is entitled to live in posh neighborhoods. That is a false argument.

You don't see any reason why it might be worse for someone who lives in an area, and already has a life there, to be kicked out, than it would be for someone else not to be able to move in?

How does more housing not translate to more affordable housing?

Do rich people to afford that extra housing get created out of thin air?

As amazing as it seems, a lot of far left people in the Bay Area who engage in the housing debate actually don’t believe in supply and demand. Hard to have any kind of discussion on that basis.

I believe that, on average, housing prices increase when housing is limited and decrease when it is not. I don't believe this relationship is nearly as linear as people imagine, especially since not all "demand" for housing comes from people wanting to live in it (thanks to rampant speculation in the market). I also don't believe that even a tremendous increase in available housing will cause the price to decrease enough that rent is actually affordable for the people who currently depend on rent control, and I am not willing to treat those people as "collateral damage" in the quest to lower housing prices in SF.

If we built lots more housing, there are two mutually exclusive possibilities (though honestly, they are on a spectrum):

A) Housing becomes affordable, or B) housing stays expensive.

The latter means we added trillions of dollars to the national wealth.

By the way, please go ahead and do tax property a lot. Ideally, you'd only tax the unterlying land with a land value tax. But even a naive property tax is OK.

That way foreigners buying up local real estate for speculation means foreigners paying for local services.

The government is perfectly capable of paying for housing if it is so inclined. It is also capable of providing incentives for creating new housing in certain markets, such as discounts; the idea that this can only be incentivized by charging new and existing tenants insanely high rents is the problem. Perhaps it could get some of the money required to do this by extracting it from the tremendous number of wealthy people living in SF, many of whom are probably browsing HN right now. It would likely be easier to do that if their rents weren't so astronomical, of course...

As for "does not translate to affordable housing"--right now landlords and property developers have two ways of extracting money from the system: charge high rents, or pass the property on to other landlords. Maximizing profit on either of these requires rents to keep going up, and for the second there's no particular reason to actually have tenants. Beyond that, "market rate" in SF right now is nowhere close to affordable for most people and will not be for the foreseeable future, even if building greatly increases, which means that the people currently protected by rent control--those who can't afford "market rate", like the vast majority of people in the U.S.--aren't helped one bit by the creation of new housing.

Thats why cities like oakland allowed landlords to 'store' rental increases if they didn't increase it to the max in previous years AFAIK.

Have there been leasing periods in your past where rent increases exceeded 7 percent? Is that common?

Also, I assume there is some market pressure to consider, if your increases outpace supply and demand, then tenants would simply move, right?

Before Mountain View landed rent control a few years ago, my rent was being increased 10% year over year - I had enough after 3 years and moved to Sunnyvale where my rent was $50 more a month for an extra bedroom and 300-400 sqft extra.

Interestingly, my rent has remained stable ever since moving - guess it's possible to have much better luck with smaller landlords.

In the US, it is very common the past decade or so.

I'm in bumblefudge-nowhere-Midwest USA, and even we've averaged 10% yearly rent increases, for more than 5+ years now. Every top-20 metro area I've looked at, has had it worse than us on rental price increases.

It really depends on the landlord. I just renewed my lease on a single-family home in a relatively hot market with no price increase. Of the 7 or 8 different units I've rented across 4 different states, only 2 of them had landlords that routinely nudged the rent upward at lease renewal. My personal experience is that unless someone is really working to maximize profit per unit, they're usually content to leave well enough alone, and only raise rates when the unit goes empty. I know multiple people who've rented for 15+ years with no increase in rent.

Indexes and aggregations may show something, but it's important to remember that they're lossier than many people appreciate. You'd have to dig into the data to learn how representative it may or may not be. Since small-time landlords are hard to collect data from, most of these city rental indexes are probably relying on large-scale apartment landlords who are constantly trying to squeeze maximum price-per-unit. I'd say you'd do well to take it with a grain of salt.

I’ve been back in the USA for more than 3 years now and haven’t experienced this yet. I’ve lived in hot housing markets also (LA and then the Seattle area).

Seattle's rent, specifically, has risen an average of 8% year-over-year for the past 4 years now. (According to Zillow's rental data - https://www.zillow.com/downtown-seattle-seattle-wa/home-valu...).

And I strongly suspect these numbers are below real-world ones (they use Zillow-listing advertised price, which like most advertisements, are usually slightly lower than the actual price a real person would have to pay)

I’ve been told that supply “caught” up in 2017 when I moved into downtown Bellevue, so the market has been weak on apartments (indeed everyone was offering incentives). Anyways, as anecdotal, we aren’t paying more than 7% more for our third leasing period in 2019 as we were in our first leasing period in 2017.

Agree! Here is a great epidose on why Rent Control does not work by Freakonomics. http://freakonomics.com/podcast/rent-control/

Landlord here in Oregon with just a single unit. I was a renter and now I’m fortunate enough to be an owner and I go out of my way to do right by my tenant. Rent increases are just for inflation for me 1-3% on renewal only.

There is a lot of knock on affects that rent control brings that are negative that I don’t have time to go into

It is the case in New York City, and also in this California Bill (I don't know the case in Oregon) that you can charge a tenant less than the "legal" rent by offering incentives and discounts.

In other words, it is totally permissible to increase the legal rent by the officially allowed 7%, but increase the effective rent paid by your tenants by only 2% (or whatever you want). There does not appear to be any restrictions about removing such incentives/concessions/discounts in the future.

It also appears that the California law resets as soon as the tenancy changes hands; so as soon as there is a vacancy the landlord is free to increase the rent by as much as they want. This is not the case for NYC rent stabilization; there the increase in the legal rent is a property of the unit, not of the tenancy.

Not really, landlords who choose to increase rent with rent control in effect , will increase rent no matter what. The only thing stopping any landlord to not increase rent are supply/demand (market conditions)

Hah, thanks for the insight.

I was simply thinking, Unintended Consequences in 5,4,3,2,1...but that's one I hadn't thought of. Of course people will push up against the limit in order to buffer out market values.

You could easily see rents above where they should be from a market standpoint simply because of the inertia in a system of annual increases.

It also makes me wonder if you are allowed to increase rents if you improve a dwelling. If not, nothing gets fixed beyond the bare minimum.

This same thing happens prior to rent control coming into effect - landlords institute a forward looking rent increase to compensate for the fact they’ll be limited in the future.

Same when a rent control unit opens up in SF, the goal is to push the rent as high as possible since it’s not going up much after that.

> they are now advising a default annual increase of the maximum allowed (7 percent before inflation).

7 percent is a pretty high allowed increase. I suspect that it really doesn't do much except stop gouging in the case of someone who had really cheap rent in a place that gentrified suddenly.

Agreed, here in Montreal it's something like 2%.

I don’t know if this a direct result of the laws passed but prices definitely seem to have dropped from last year to this year (don’t have numbers, just perception of someone living here)

> The real solution to a housing problem is to incentivize and facilitate the building of more housing.

This argument comes up here in Australia with regards to Sydney and Melbourne in particular -- the two largest cities.

Building more houses only makes more sprawl. Increasing density causes problems for current residents and puts enormous strain on existing infrastructure[1].

The only real solution is to get people to live in other places that have more and cheaper housing.

[1] Not just utility infrastructure like water, sewer, power, gas, (roads, sanitation, what the Romans did for us etc) but natural environment and leisure like sport and recreation areas, parks and bush land, and (particularly in Sydney) beaches. It's really hard making new beaches for the increased population.

That’s not a real solution, that’s just wishing the problem would go away on its own. What you are advocating for here is that prices should be more expensive due to limited supply, so that people are forced away due to inability to afford living there.

It's not wishing anything. People ARE ALREADY struggling to afford rent in Sydney and other large cities. They have been getting bigger and bigger in the past decade yet the problem only gets worse (like building highways to solve traffic congestion).

The solution is to make other places attractive for living and have hood opportunities for employment.

Look at it this way: your house or apartment or whatever can probably fit double the people in it. They might be on the floor or on the sofa or whatever, we can double the density. The quality of life will be decreased for everybody.

At what point do we say "It's full, go somewhere else."

In a country with freedom of movement? Never. Your wishful thinking won’t change that. But by all means go ahead advocating to build housing where nobody wants to live, and continue your NIMBY policies to price people out of desirable locations.

I hear what you're saying, but can do without the NIMBY rhetoric. The discussion about "build more houses to reduce housing cost" is exactly the same as "build more highways to reduce traffic congestion" in that it doesn't work for long.

What needs to happen is effort put in to make other cities and towns attractive. This could mean encouraging commerce and industry to re-locate or set up new factories or offices. It certainly means ensuring city-level standards of health care and education, something that is a good thing to do anyway

Lastly there needs to be a campaign to encourage people to move to these places. Australia already has migration programs that require people to live anywhere other than the main capital cities.

Australia has a scarcity of fresh water, and low rainfall. Our inland rivers are dying because water is diverted to irrigation for farming; Sydney's water supply is pretty stretched and the option to build more dams is neither environmentally desirable nor possible, because all the rivers have already been dammed, and most are less than full due to low rainfall.

So without resorting to calling NIMBY, at what point can we say "we cannot support any more people"?

There are key differences between building more highways and building more dense housing.

I suspect induced demand is more of an effect with highways than housing. People can change their driving habits from day to day more easily than they can change their living habits.

Expand a highway, and more people in the area start taking more car trips on it.

Add housing, and more people don't instantly come into existence to occupy it. (Maybe, over a few years, people stop cramming themselves into crowded roommate arrangements as much, and over decades they have more kids.)

But if I granted that induced demand applied to both...

Driving is a means to an end. People stuck in traffic are suffering.

Having a home is an end in itself. People need shelter, and living near your community/job/family is a huge quality of life improvement.

Plus, when you expand a highway, strictly more mileage is created. It's not like the additional car trips in this city are taking the place of car trips in another state. It's a net loss for society and the environment.

Whereas, when you add housing, even if it induces more people to move into that city, they're moving out of some other city, easing the demand in the housing market there.

I agree with your final statement, even if zoning and build regs are revamped rent control restricts the potential profit of those new buildings which will cause developers to build elsewhere.

Indeed. If you have a crises stemming from "not enough housing", increasing the number of potential customers for that housing is only going to make the lack of supply worse.

Makes sense.

This is the use-it-or-lose-it budget game, landlord style.

Wouldn't you lose tenants, if rent goes too high?

I'm shocked at the ideological fervor here and the fact that virtually no one seems to have looked at the details of the actual bill. This is nothing like the rent control ordinance in SF that has caused $3000 units to get stuck at $500 rents. That will never happen under this law. The allowable increases are so much higher than "normal" rent control laws that any given unit will catch up to market rates in a matter of years, at most. Whereas the laws we love to hate result in units getting stuck far below market for decades or even generations.

The difference with this law is that a 20% rent hike will take 3-4 years to be implemented instead of 30 or 60 days. That difference, while not enough to allow all families to remain in place, will allow families time to adjust or move within a reasonable time frame.

This law is different. If you want to complain about rent control in SF or NYC or elsewhere, have at it, but know that most of your complaints do not apply to this law.

The lack of affordable housing always has been and always will be a supply problem. When demand for homes outpaces the number of homes being built, prices go up. Plain and simple.

Homes that are built for renting (mainly apartments and condos, but some houses, too) are built for profit. If you make it less profitable to build, fewer will be built. If fewer homes are built, the problem is compounded, not rectified.

If you want to make housing more affordable, make it as cheap and profitable as possible to build new homes. Get rid of the fees that can push over $100,000 for a single family home in some counties, before the builder even buys a nail or 2x4. In most states you can build a home for less than the price of permission to build a home in some California counties.

I used to think so too. Now I'm on the fence. High interest rates means people can borrow less, and has a dampening effect on house prices, low interest rates means people can borrow more, so house prices go up.

Our current environment of low interest rates means that borrowing is cheap - which has pushed up prices, as now people can now afford larger mortgages. This has come at the same time as a withdrawal of mortgage finance from first-time-buyers, so effectively people who have bought before can buy another house, while those who haven't can't get on 'the housing ladder'. This is according to economist Ian Mulheirn, and is very much based on the UK (although similar arguments might apply elsewhere). Supply is part of the problem, but according to him, the smallest part.


> low interest rates means people can borrow more, so house prices go up.

Sure, but they go up by the amount of money you saved on the mortgage, the net price is the same. The amount homebuyers can afford to pay doesn't change with interest rates.

> The amount homebuyers can afford to pay doesn't change with interest rates.

The amount people can afford to pay doesn't change, but the cost of the house does change.

Assume a 30 year mortgage. If the interest rate is 2%, and I spend 1.5k a month on my mortgage, I can afford a mortgage of 406,000 and own the home at the end. However, if interest rates are 10%, even if I'm still earning 1.5k a month, I can only afford a mortgage of 171000 in order to pay it off by the end. You can double check my figures using this calculator - https://www.bankrate.com/uk/mortgages/mortgage-repayment-cal...

Given that deposits are usually at a minimum 10% of the house price, it's very hard for first-time buyers to gather that amount of money - while people who have purchased before can sell their existing home.

The issue the paper describes is that interest rates have gone down, so house prices have gone up, _and at the same time_ it's harder to get your first mortgage (i.e. you need a larger deposit) - which most new buyers cannot afford.

The error in your logic is assuming the bank is going to want the same % down payment for a 2% and a 10% mortgage.

A down payment is usually a percentage of the value of the house (typically 10-20%). If the house is worth more, the down payment is higher. As I said before "effectively people who have bought before can buy another house, while those who haven't can't". A higher downpayment is yet another barrier. However those who have houses already can use their existing previous equity as a downpayment and therefore can sell their home and buy another.

This underscores the view I was promoting - that interest rates play a large part in the difficulties besetting new buyers.

But it results in a higher overall level of societal leverage despite consuming the same quantity of housing.

> The lack of affordable housing always has been and always will be a supply problem.

Yes, but in the expensive parts of California the limiting supply factor isn't how much people want to build but how much they are allowed to build because of zoning and other constraints, so there is a fairly large range where reducing the incentive to build will have no effect on actual results.

But, anyway, does this really reduce incentives for new construction? It seems to me rent control and eviction restrictions of this type increases the expected profits for new construction, because it doesn't limit existing rents, and doesn't allow high-end demand to be met by bouncing tenants out of lower-end units and renovating them and raising the prices. So, it reduces the competition new units face from existing ones at the top of the market while leaving the rents that can be charged initially for those new units unrestricted. (And, by limiting the ability to bounce unprofitable tenants in favor of new ones, if it doesn't spur new rental-focussed unit construction and housing demand remains the same it creates a greater incentive to build for sale as owner-occupied housing where, again, prices are unrestricted.)

The real danger isn't lack of incentive to build, it's lack of incentive to maintain existing units instead of milking what remaining profits can be made in the short term, then letting them fail in isolated, judgement proof, limited liability business enterprises by not reinvesting because you can't recover reinvestment with rent increases, while reinvesting the extracted profits elsewhere.

Doesn't zoning fall under the same category as high permit prices when it comes to roadblocks for new units? Even when you say

> It seems to me rent control and eviction restrictions of this type increases the expected profits for new construction

Zoning and high fees will still be a problem, new units can be rented/sold at a premium but then we have the issue of it being affordable in rent or credit. My guess is that the new rule protects(temporarily) whoever is already in the game, any new comer will still get screwed.

Prop 13 also plays a huge part in why vacant areas don't get developed.

> Homes that are built for renting (mainly apartments and condos, but some houses, too) are built for profit. If you make it less profitable to build, fewer will be built. If fewer homes are built, the problem is compounded, not rectified.

Arguments like this continue to be made for more and more aspects of our market: pharmaceuticals, heathcare services, elder care services, and now housing. Everywhere you look the markets seem ill equipped to handle the needs of people.

Maybe the problem is markets then? Maybe the problem is expecting our entire society to work based on profit motive? I don't deny it's served us fairly well for awhile, but it seems like we're hitting the wall a lot lately.

Markets are hardly perfect, but in this specific case it should be the most efficient solution to the problem - if you could fix the zoning and other laws that distort it so badly that it's dysfunctional. And your still going to want to add incentives for things you value but the market does not - perhaps like lower income housing. In some of the other cases you mentioned markets are not necessarily the best solution. Canada benefits greatly from having a single buyer for pharmaceuticals - that concentrates the negotiating power and we get better prices because of it.

What are the zoning laws you see as the problem? Serious question, I'm not in that area and don't know much about SF's zoning issues.

There are severe restrictions on density and heavy parking requirements just to start. It’s much much more complex than that, but to simplify - people who lived in a given area want it to remain the same.

SF Bay Area is creating 3+ jobs per new unit built (any unit). So the gap is growing rather rapidly, resulting in demand far outpacing supply.

Most of the peninsula cities/towns do not want any growth and want to remain single family home neighborhoods. However, based on demand, they should probably evolve more into either denser row houses or apartment/townhome type.

The way to restrict this from happening is to require more land per sq.ft. of housing and require more parking per bedroom and guest parking for Multifamily housing. All this makes land use less efficient and therefore more expensive, deterring development.

The reason that supply is not meeting demand is because the market is not free to expand to meet the needs of the people.

Kind of. It's improper regulation. You need some regulation or people die, but when regulation is bad it can sometimes be worse than no regulation at all.

In the SF/Bay Area (and possibly CA as a whole) there is more space allocated for businesses than there are for houses. Likewise, zoning is spread out so people have to commute to work. This is why, eg, the greater Los Angeles area has some of the worst traffic in the US, only beaten by Texas and DC.

The history behind these bad regulations comes from racism. In the 50s suburbia was created in such a way to isolate residence selling safety. I don't want to go into the details here, but it's a fascinating piece of US history.

When businesses and commercial are interwoven with residential people stop fighting for the few places close to work, which stops spiking up the price of those areas. Likewise, when the ratio is right there stops being a supply problem, even if it is the same amount of houses. In CA's situation it could mean less business buildings or more urban housing.

Well sure; I didn't mean to imply that there should be no zoning/housing regulations, only that it has gone too far in some areas, which has stifled development and caused prices to skyrocket.

Right instead of a society in which everyone behaves accorsing to their own free choices, and incentivized to make a socially helpful choice via some kind of personal reward (profit), we should instead have a society in which people are incentivized to work for others because of what? Force?

You could make the opposite argument as well, that if the market was "freer" or less regulated or whatever then anyone could build and supply would better match demand. It's a situation where you can skew the message whichever way you want to benefit an agenda since most of our systems are neither pure free-market capitalism nor pure socialism. Obviously zealots from either side are going to say our shortcomings are because we've given too many concessions to the other.

Lack of supply is a problem, but is it caused by an inability to turn a profit? It seems like developers have no trouble making money from new construction. The difficult part, and the part that limits supply, is getting permission to build.

They aren't unrelated. The more hoops a developer has to jump through to get permission to build anything the more outside returns are required to get people to push to do that. The people who thrive in this environment aren't the most ethical of business people and you'd get more ethical developers if there were clear rules allowing certain things to be built and less outsized returns. But better that than nothing getting built.

You’re totally right. It just looks like the current situation in places like SF is almost entirely due to difficulty in getting permission. Remove rent control entirely and the supply wouldn’t increase much. It’s different in various other places.

> If you make it less profitable to build, fewer will be built.

.. and fewer will be speculated on, driving up the underlying price, which is then translated into rent.

this is my problem with simple smithian models of real estate - they ignore the wider capital market impacts.

not a fan of rent control, but also not a fan of fund fueled real estate bubbles, and both influence the cost of rent.

Not American, so my knowledge on the matter is limited. Is it that expensive even outside SF and LA areas?

Also, AFAIK, these two areas (and surroundings) are very, very stressed in terms of traffic, and more housing means more people, and more cars. Can those cities deal with more traffic?

> more housing means more people, and more cars.

More housing in SF requires design that supports fewer cars. That's not as true in LA, perhaps, but it would still be the best way to do it.

Remember the US is a federal system so costs vary greatly depending on state/municipality. California regulatory costs result in high prices even though the state is less dense than many others like Ohio with far cheaper housing. https://finance.yahoo.com/news/house-costs-500000-build-sell....

Very expensive. When you leave a lot of major metro areas, housing costs way less. There are 3+ BR homes on ½ acre of land (approx half an American football field or half a soccer pitch) in the South roughly 15 minutes from downtown areas for $125k - $175k USD. The cost of living in areas like SF and NYC are very high compared to the rest of the country. Housing is a major part of that cost of living hike.

> Get rid of the fees that can push over $100,000 for a single family home in some counties.

It depends on what outcome you wish to achieve. Single family zoning is backwards policy in urban environments.


Thats incorrect - not all land is equally valuable, so just building more buildings doesn’t mean that housing is solved.

Infrastructure around the builds also matter, which means just building denser isn’t a solution.

Complimentary services like schools, stores, pubs, churches, skate parks, parks etc change the value of a location as well, and change it differently for different demographics.

So making it cheap and profitable only makes it profitable to build - it does not solve the problem of affordable housing.

The rent control laws in NYC aren't even nearly as bad as SF, despite how much they get demonized here on HN.

In NYC units that might be _actually cheap_, as in rent controlled and not stabilized, number roughly 17k units _in total_. And only about 1/3 of those are significantly below market or in desirable neighborhoods. It's almost insignificant and the number of rent controlled units has gone down by roughly HALF in the last 5 years, because the tenants in them are dying and income limits on any descendants usually kick the units out of being controlled into stabilized.

NYC has a much larger number of rent stabilized units, which is somewhere near 1/3 of all available units that are renting at or below $2700 (twice the national average, btw). The overwhelming majority of these are within a few hundred dollars of market rate.

There are about 4.2M housing units in NYC with roughly 30k being added every year. The "cheap" rent-controlled units are a rounding error.

That is not anything like the situation folks in SF are rightfully railing against.

I think rent stabilized apartments can go a lot higher than $2700. Lots of luxury buildings are taking tax abatements in exchange for rent stabilization and setting aside a number of rent controlled units.

Nope. Units deregulate at $2700. Also there's no such thing as new rent controlled or rent stabilized units since 1970.

There's other housing programs like Mitchell-Lama, some that are like what you mentioned, but that's a completely separate thing and a small amount of units. "Rent controlled" and "Rent stabilized" are technical terms in NY.

Your information is correct in general, but there are many exceptions that prove the grandparent correct. My apartment was built in the last 10 years (i.e., after 1970), rents for close to $4k, and IS rent stabilized. See information here:



"Also, some newly constructed buildings may be stabilized due to a 421-a or J-51 tax exemption even if the rent is $2,000 or more."

A program that a significant number of developers have taken advantage of.

Yup, that's exactly what I was thinking about. Same deal here, rent is nearly $4k but I know it can only go up by guideline amounts.

Do tell me how your $4k apartment rental, at nearly 3 times the national average rent and above market for most of NYC, is the scourge of housing markets, forcing rents up for everyone and preventing new construction.

Because that's what rent regulation's detractors are arguing, even though your empirical evidence (and mine) suggest the opposite. That's the context we're discussing this in.

OP and my apartments are actually new developments benefiting from these breaks.

Missing the forest for the trees.

I'm not sure you even know my opinion on rent control from this interaction. You asked a very specific question:

> is the scourge of housing markets, forcing rents up for everyone and preventing new construction.

The tax abatements obviously fuel new construction and bring in a new class of rent control to NYC. Is that a good thing? Or a bad thing?

I don't claim to know, but this type of apartment definitely filled a need for myself and others who want decently managed apartments without worrying about spontaneous jumps in rent (i.e. if Amazon had moved out here). And obviously, we're not the crowd of people totting around kids, barely making ends meet but at the end of the day, I still have to go to work to pay rent or I'm screwed with the rest of them...so it's nice to at least know that my taxes (tax breaks) bought me some stability.

PS: these buildings are also required to set aside a number of units for lower income residents, which again, I'm happy to pay taxes towards.

Anyway, what was your point?

I guess the sarcasm missed you completely.

I didn't care about your specific opinion on rent control because you didn't express one, I'm saying that your comments to give counter-evidence to what I was saying didn't even have any context in the discussion and will be used as fuel for the anti-regulation people that I said don't know what they're talking about.

You basically injected a non-sequitur into the discussion and are using it to start an argument, which is silly, because I believe rent regulation is a necessary evil.

/edit never mind, I get it. I actually think you're taking this a little too close to heart. I may be guilty of having missed your sarcasm, but I was addressing a point you inadvertently made. That's not the same as looking for a fight.

Hey no worries. Sorry, I do take this very close to heart as I grew up extremely poor and I owe a lot to the fact that I had rent control growing up. This is a pretty inflammatory topic on HN in general and I have a long history of being flamed into oblivion every time it comes up.

Lotta contempt for the poor on here, but this thread has actually been a rare exception. Might be the only set of posts that don't have 30 downvotes attached to them.

I'm right there with you man. As a mildly successful adult, I'm more than happy to pay taxes for all those things I took advantage of growing up.

NY State repealed high-rent deregulation in the Housing Stability and Tenant Protection act of 2019. https://www.nysenate.gov/legislation/bills/2019/s6458

I live in a rent stabilized apartment in NYC and my rent is 3400.

The rent control laws in SF aren’t even as bad as HN comments would have you believe.

Rent control doesn’t apply to new construction in SF. It also allows a regulated annual increase, and rent automatically jumps back up to market upon a number of different conditions - not the least of which is that the owner can push you out to renovate the building!

HN commenters are usually just repeating stuff they heard somewhere, and have no idea what the laws actually say.

Moreover, while there are indeed lots of publications on the theoretical impacts of rent control, few of those publications consider laws as they actually exist, or if they do, the scope of the impacts is rarely communicated when translated into HN talking points. Every study I’m aware of has shown, at worst, diffuse, long-term negative impacts to housing costs. Meanwhile, many of them do exactly what they set out to do: stabilize short-term prices for vulnerable populations.

These laws are simply not the boogeymen that comments here make them seem.

Rent control in SF really is that bad. Rent increase limits are 60% of CPI, so it can’t even match inflation. If your costs go up (utilities) or you want to do capital improvements, good luck getting the rent board to approve a pass through. Want to prevent other people than the tenant from moving into a 1 bedroom? Tough, can’t say no to that, it just has to be under 3 people. Want to move into your own house? Sure, just pay the tenant a few tens of thousands in “pay off”.

SF rent control is absolutely onerous and definitely shrinks the pool of potential landlords and thus potential units.

Why should I care about the woes of landlords as opposed to renters?

Because if it is uneconomical to rent out, there are few units available to rent and the few that are are super expensive. And the property won't be maintained properly. These unintended consequences ultimately hit tenants.

In Paris there is a similar impact of bad regulation. It has become so hard to expel a tenant that has stopped paying that landlords will demand extraordinary guaranties: bank credit lines, guaranties from relatives, sometimes even medical exam, etc and will be super picky. I knew of a foreign investment banker, high salary, not allowed to get in financial dispute because of his profession, who just couldn't find a place to rent in Paris because he couldn't provide some of those.

Because it is hurting the would-be renter group even more?

I personally know two people who are renting rent-controlled apartments in SF and don't live in them. Their lives have moved elsewhere and they don't need the place anymore. One uses it as a weekend getaway and the other one visits rarely.

Thanks to rent control their rent is so cheap that it's worth hanging on to it even though they don't live there.

So these two units are off the rental market effectively forever, sitting empty most of the time.

Because landlords start being unable to afford repairs, and you get a bunch of decrepit buildings falling apart all over the city (with all the dangers that implies, not just to occupants, but to nearby buildings as well). It happened in my home town, and it wasn't pretty.

Landlords are not social security. It's probably better for the city to forcefully buy them out and create a new management model of the buildings than to impose strangling limits on prices.

Rents are growing insanely fast in SF compare to anything else. The idea that landlords can't afford to make repairs because they aren't extracting maximum rent from the property is completely ludicrous on the face of it. Do you actually believe these arguments?

That crosses into personal attack. Please don't do that on HN.


I know a few landlords and that’s exactly what’s happening. I’m not sure why you find it hard to believe.

When you have a 3 unit building and everyone is paying less than 1/3 the market rate, it’s not worthwhile in the least for a landlord to fix up the building beyond the absolute minimum. Contractor rates have skyrocketed in SF, so even just repainting the building might cost $15k, which might represent several years of profit.

The skyrocketing rates for services are directly tied to the skyrocketing rent increases. The cost of performing these services does not change substantially from city to city, or else landlords renting to people in cities with more reasonably priced units would not be able to repair them. The big difference is the cost of living for the contractors, which gets passed to the people paying for repairs--and by far the largest component of cost of living in SF is rent. Like I said in the other comment, this is a largely self-imposed problem.

Not sure how big an impact that is. There aren't many contractors moving into the area like tech workers. Most of them are locals who have lived here for decades, so either have a rent controlled place or bought a home when prices were more reasonable.

Yup, our three floor building was 40k to repaint and fix a few custom windows (with plastic instead of custom wrapped glass) . Hadn’t been painted in over 20 years though.

You assume the rents are actually going to and staying with the landlords. In reality, landlords also have bills --

big bills (mortgages, property taxes) and bills that move [upwards] dynamically (gas, electricity, water, repairmen).

Property taxes in California are miniscule. Mortgages are only as high as they are because people assume they can extract ridiculous rents from tenants, so this is a self-made problem that should go away with sufficiently stringent rent control. The other bills do not vary significantly enough from city to city to justify the absurd rent differences between them.

So no, I'm not assuming anything of the sort. Beyond that, landlords are extremely notorious for spending much less money on repairs than they should and saddling their tenants with the bills.

Are you talking about all rents, or controlled ones? The post above wrote that rent control rules in SF limit increases to "60% of CPI, so it can’t even match inflation". If that's false, then my post doesn't apply, sure.

Rent is far above its CPI-inflated average right now, so saying that rent increases must match inflation makes no sense. The time to do that would've been long ago. But in any case I'm pretty sure rent increases are capped at much higher than inflation.

One possible scenario is if a landlord purchased property at a price factoring in assuming certain increases in rent, then they’re constrained by the debt payments.

Then they were taking a gamble by purchasing a property they couldn't actually afford, and lost. If you want risk-free investments, try bonds.

Do you think contractor costs and material costs are going down?

Do you think they are going up faster than rents in SF have?

Perhaps... I don't know. Thats why I asked.

No. They haven't.

According to https://www.sfchronicle.com/business/article/San-Francisco-p..., construction costs in SF rose 5% last year (2018). Also according to the SF chronicle (https://www.sfchronicle.com/business/networth/article/After-...), rents increased 3.7% year over year.

According to https://www.curbed.com/2018/12/17/18144657/construction-home..., San Francisco's high construction cost is mainly driven by the high cost of construction labor. It is disproportionately driven by labor cost when compared to all other cities.

So we have some data now, rather than just pithy statements, and I don't think it agrees with what you want.

Because the result is that small landlords who can't deal with the fixed costs hassles simply sell out and consolidate into larger ones with more clout with politicians to weaken renter rights and legal resources to fight pesky tenants whom they simply don't want, or create shared blacklist databases like has been done in New York. If you're going to gird up for class warfare, realize that tenants are probably going to lose as long as zoning restricts your options

My experience has always been that dealing with a large PMC like IMT or Greystar is far preferable to dealing with some guy who's renting his property out.

Wow, I literally belly laughed.

If a renter can't find a landlord to rent from, then what?

"Why should I care about the woes of water treatment plants as opposed to water drinkers?" Do you want drinkable water, or not?

Because shrinking the number of landlords shrinks the number of units available, raising rents, _hurting renters_.

are these vanishing landlord eating their properties or just throwing them into the sea

That reasoning works on land. (Hence a land value tax can't be passed on to tenants.)

But it doesn't work on the houses on top of the land. Because we can build more or less of them. Or higher.

No. They let population growth take care of that while they decide not to invest in rental properties.

Your flippant argument can be flipped around too. If there is a housing shortage, by what mechanism does rent control conjure new housing units?

who the what now

my point is, vanishing landlord or no, the units remain

>my point is, vanishing landlord or no, the units remain

Still wrong:

1) Apartments get converted to condos, or re-purposed because the property has value, but renting doesn't.

2) The population keeps growing meaning that your same number of units don't meet the needs.

3) Rental supply also drops as people opt not to move and sit on their rent-controlled apartments, limiting the supply for those looking.

This is why rent-control has the effect of making housing worse, even if the rental supply is maintained.

> Still wrong:

ah, ok, they eat them. thanks for clearing that up

You do realize there is a second, third, and even a fourth line (and more) after this first line.

oh yeah, I see them. thanks for clearing that up

No, just leaving them vacant while the value increases.

Cool- next up, a tax on vacant properties. Maybe they will have to sell.

Perhaps the people can again seize the means of production (part of that being stable housing).

I’d far rather know another 100,000 units are owned by the people that live in them than 100 landlords owning and profiteering from those units.

If this “disrupts” the entire rental industry, that’s fine with me. Didn’t bring much value anyway

That’s worked great everywhere it’s been tried!

> I’d far rather know another 100,000 units are owned by the people that live in them than 100 landlords owning and profiteering from those units.

I'd rather have that too! But it's not the result of these patchwork rules. Fix it properly instead.

SF Metro vacancy rate is below the national average for large metro areas.[0]

[0] https://www.sfchronicle.com/realestate/article/An-estimated-...

And if those markets were the same except for the rent control rules, we could conclude that rent control doesn't increase the vacancy rate. But they aren't.

Also it lowers incentive to build new units if renting them out becomes too much of a hassle.

Ok. Then care about the tenants. Do you have one shred of evidence that rent control, broadly, helps tenants? Because every economist I ever heard on this topic, left or right, argues rent control is bad for tenants.

Rent control is good for politicians getting elected. No point in analyzing farther than that.

Unless you have the capital to build your own house or apartment, you need landlords to put up their own capital to do that. It’s not like landlords are just assigned houses for free from the government to then lord over renter peons.

Because landlords supply housing and renters don't.

Why should I care about the woes of you opposed to me? Why should I care about the woes of the poor opposed to the rich?

... But Prop 13 guarentees every landlord in the state that they won’t have to pay their share, and they get it even on >1980 construction, unlike rent control.

It seems fair to me that if you’re going to protect landlords (and companies !) you need to protect tenants as well.

A lot of what you're saying in here is blatantly incorrect or misleading. Water is frequently covered in utilities, but other utilities generally are not. Leases are very specific on the number of people in a unit for rent controlled apartments and is one the few things a tenant can be evicted for. The board frequently approves pass throughs. Increases tend to be higher than inflation.

If you lease out your house and you want to take back ownership, yeah, you need to pay out the tenant and that's completely fair. You're upending another family's lives, and they may not be able to afford to stay. You're paying them moving costs and covering a period of time of adjustment for them. If you think this is unfair, you have poor morals.

Also, for good measure: fuck the landlords.

You need to do more research.

The rent increase law is 60% of CPI. Look it up.

SF introduced a new law a couple years ago that additional people can live in a unit even if they are not on the lease. They only instituted caps on how many. Google search it.

Plenty of apartments have not only water, but also heating included in the rent. If that goes up drastically, the rent board will likely tell the landlord “tough”.

And I’m not against buying out tenants. I am against them having to pay $100,000 or more.



This amount is based on 60% of the increase in the Consumer Price Index for All Urban Consumers in the Bay Area, which was 4.4% as posted in November 2018 by the Bureau of Labor Statistics.[1]

Legislation that went into effect November 9, 2015 allows tenants covered under rent control to add occupants, if reasonable, despite restrictions in the rental agreement.

[1]https://sfrb.org/sites/default/files/Document/Form/571%20All... [2]https://www.sftu.org/roommates/

You need to exaggerate less.

The maximum rent increase rate is 60% of the trailing twelve months CPI in the bay area. But landlords’ costs do not scale with the CPI. Mortgage rates are fixed (if a landlord has a mortgage at all), taxes are independent of CPI, and principal+interest+taxes are the vast majority of a landlord’s expenses. Maintenance is typically a small fraction of that number.

Landlords are not obligated to pay your heat or water under rent control. Mine certainly never did.

The roommate law changes you mention are not rent control, but tenant protections applicable to all rentals in SF. The 2015 change brought rent controlled units up to par, because landlords were evicting people for doing things like getting married or switching roommates (horrors!) Basically: preventing predatory landlords from being scumbags.

I’m going to go with the GP on this and say that if you think people should have their rent hiked for getting married or changing roommates or having a kid, you have poor morals.

In essence, you don’t like being told what you can do, you have a theory that it hurts the housing market, and you’re inventing reasons to justify your theory of reality.

Exaggerate? I said it was 60% of CPI and it is. Yes, the mortgage is likely fixed, but expenses such as maintenance and other associated costs are not - renovation cost have gone through the roof the last 10 years. Maintenance is generally 1% of the value of the building, so in SF that can be tens of thousands per year.

No, landlords are not obligated to pay heat or water (I never said that!), but many buildings (all the ones I lived in) do not have separate meters for water and sometimes heating, the landlord just pays the bill. Rent to a single person and they have two other people move in and use 200% more water? Tough shit says the rent board!

And the other problem with allowing additional people to live there is that if those additional people can demonstrate that they were an "established tenant", then they get full rent control and tenancy even after the original tenant (only name on the lease!) leaves. Show the rent board the lease they signed? Tough shit says the rent board.

It sounds like you aren't that familiar with the tenant laws in SF, so I'm not surprised you don't think it's a problem. Suffice to say being a landlord in SF is not a very attractive proposition, so it shouldn't surprise anyone that we have a housing shortage.

Well, now that you’ve agreed with everything I wrote, you’re stuck with arguing trivialities: landlords are failing en masse because of maintenance, water, roommates, etc.

Math lesson: If my mortgage is $X (which I more than cover with my rents, since to do otherwise would indicate that I am a phenomenally stupid real estate investor), and I pay .05X per year in maintenance, the total annual increase in costs is currently CPI x .05 x X.

I don’t know if you noticed this while you were becoming an expert on SF landlord tenant laws, but 0.6 x CPI x X is bigger than that number. The annual increase in rent is literally 12x larger than the thing you’re complaining about. Room left over for taxes and evil, deadbeat babies, even.

In other words: as long as maintenance, water, taxes remain a small percentage of the mortgage+principal, the allowable rent increases more than cover the inflated costs. It’s almost like they designed the law that way!

Again: you’re just trying to find reasons to justify your opinion, and you’ve done a bang-up job of demonstrating what I originally wrote: people irrationally demonize rent control in SF.

>Rent control doesn’t apply to new construction in SF.

Conveniently, SF doesn't allow new construction either.

Well said. It is weird to see so many people jumping out to lay the accusations of 'uninformed!', 'never works', etc...

In fact, the CA, especially in bay area, the rent is already top among this country. 7% on top of that is still a quite sizable increase. And it is hilarious to see those (aspiring) landlords playing the blame-the-game-not-the-player rhetoric here to blame the government not allowing more houses to be built, while themselves being one of the biggest opponents to such initiative.

It is uninformed. Note that in a survey of economists ~80% of economists disagreed with the statement below and only 2% agreed:

> Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them. [0]

The negative effects of price controls, especially when it comes to rents is the most unifying issue in economics. Rent control isn't a new idea, but there is agreement that it's a bad idea. It's not the landlords who say this, its the people who study this stuff. Paul Krugman wrote about this in 2000 [1].

Putting in arbitrary controls on prices to fight cost increases is about as effective as putting arbitrary controls on thermometers to fight global warming.

[0] http://www.igmchicago.org/surveys/rent-control

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

Your quote is completely irrelevant to this discussion, because increasing "amount and quality of broadly affordable rental housing" is not the goal of this law as described by your GP.

The law is supposed to give families enough time to adjust or move away and find affordable housing elsewhere, without becoming bankrupt in the meantime.

A completely different goal. Quoting opinions on something that is at best tangentially related does nothing.

How is "economists broadly agree that rent control is bad" irrelevant to a discussion of rent control?

The intention of the law is what's irrelevant. What matters is what the law will actually do. Economists broadly agree that rent control will drive down supply. Are they right? Is this law different? Time will tell. But there's every reason to be skeptical.

This is not really an apples-to-apples comparison. Yes, it is a form of rent control, but it's not the "rent control" that people typically think of or was referenced in that quote given its link to SF and NYC. While there are some increase limits, they are large and not on a scale likely to have a material limiting impact. What is definitely impacted is the timeframe in which the changes are applied.

> Is this law different?

Yes, it is, both in intention (i.e., to give people time to move vs. enabling them to stay where they live) and in details. I think this will certainly reduce investment groups buying properties though, which I personally think is a great thing overall. I think that clearly something needs to be done, I'm glad California is trying to find a middle-ground here. Not to say they shouldn't also find ways to increase supply as well, but to me the two are not mutually exclusive.

But hey, maybe I'm wrong and totally off-base. I think it's a worthwhile bill though, and look forward to seeing the impact one way or the other.

Saying "7% on top of that is still a quite sizable increase" is not a fact, it's an opinion. Furthermore it's like my employer telling me "you should take this 7% raise and be happy even if the market dictates a 20% raise. It's still a quite sizable increase".

Then you make an ad-hominem argument about landlords being hypocrites which isn't relevant. Landlords act in the best interest of landlords.

I don't yet know what I think about the bill so I'm reading the HN comments to form an opinion. The points you're making aren't very convincing.

It’s fair to say that 7% is faster than wages increase for many people on average. Why should my rent outpace my income?

> Landlords act in the best interest of landlords.

That is the point. Landlords will gather information or their side of evidence to push for their arguments, as well as ones that called for rent control.

All players are just playing our own shares in the game here. Is rent control necessarily good or bad in this particular case? Only future number can verify that. But because the landlord-just-be-landlord arguments, it is probably not good for the renters to take the other side of stories for granted.

Let the bullet fly for a moment.

"blame-the-game-not-the-player" is so typical of polite SF (and greater CA). A lot of homeowners are quietly rubbing their hands knowing their houses suddenly got more valuable.

My experience with SF rent control is that it's really only valuable if you've got limited resources. I lived there for 5 years, saw market rent double, and my landlady politely asked me to pay a "generous discount from market", which was about a 50% increase and I declined - it would have busted my budget.

Then eviction proceedings started: completely made up, and I lawyered up. I was threatened with OMI (there's no defense if they actually do move in), and I negotiated a settlement. Because if I'd won I'd have a super hostile situation ending in OMI, and if I'd lost I'd have killed a substantial portion of my savings.

If I'd had nothing to lose, I'd have hung on for dear life.

I agree with you. I’m renting out a previous condo, and as a landlord, this law strikes me as reasonable and measured. The market will still find its natural level. These controls merely dampen short-term shocks, allowing tenants and communities time to adjust as market conditions change.

To take the other side of the argument here I'm completely against this change but I'm happy that it passed. The reason is simple: without data we're all just speculating. If I'm correct, now I will have real bias-free (since we're looking at this exact location as opposed to other locations where rent control has had... issues) data to support my views.

And of course only a fool would cling to certainty on issues this complex. It's very possible my views are wrong. And if they are then that's a great outcome. If they're not? Well the cost of this experiment is not going to be that big, and it can be reversed relatively easily.

The one thing I think both sides often fail to do though is to set falsifiable metrics before running such an experiment. Take a group of qualified individuals against the program, and those for the program. And have them sit down and work out their expectations of the program. So for instance homelessness. The pro side probably expects this will cause it to decline, the neg side probably does not expect it to have much of an effect. Why not convert those views to numbers collected in a mutually agreed upon fashion, which can then be regularly published - alongside results? And let's see who's right, with accurate data. Of course there are confounders. If we hit a major recession, homelessness will increase regardless. These factors could be mentioned alongside such data.

Instead without doing things beforehand both sides are simply going to spin arguments entirely in their favor, such as with the case of minimum wage increases. Did minimum wage increases collapse the economies? No. Did they cause some economic damage? Yes. Did they bring about a great life for low earners? No. Did they improve the quality of life of some low earners? Yes. And so both sides just create disingenuous arguments painting themselves as 100% correct, which informs nobody and divides everybody, since both sides come back with 'told ya so!'

"Did minimum wage increases . . . cause some economic damage? Yes."

Citation needed. My admittedly cursory review of the latest results suggest no damage at all.

There's a reasonable related article here [1]. It discusses two different studies on the effects of Seattle's minimum wage increases. The first is from Berkeley and based on limited data. It suggested there was mostly just a small reduction in employment with an overall positive effect. The other study was from the University of Washington and had access to detailed low level data on hours worked, salaries, etc. It found numerous very negative affects, many of which were worse than even minimum wage critics generally suggest might occur. This included an overall gross decline in overall wages due to declines in hours being worked - overall wages rose 3% while the number of hours worked declined 9%.

The reason I mention the Berkeley study at all is because this now led to arguments based on after-the-fact retrofitting. In particular increase supporters have now tried to argue that Seattle was in a unique boom phase and so the study was comparing against a local max, and thus there was actually no damage - but just Seattle 'regressing to the mean' if you will. But the Washington study also considered this possibility and contrasted it against other control cities within Washington that did not increase wages, and found that they did not experience the negative effects. And so on back and forth it goes.

And so who do you believe? Probably whoever you want to be right. This is why I'd suggest laying out metrics beforehand. If Seattle was in a unique boom phase before the minimum wage increases then this is something everybody could agree on beforehand. When you do after-the-fact analysis, you risk peoples biases getting in the way of things. And because of the complexity of systems such as these, it's always going to be pretty easy to prove X and also prove not X after the fact.

[1] - https://www.nytimes.com/2017/06/26/business/economy/seattle-...


It's not entirely unreasonable to think landlords somewhere in the state will take this "5% + inflation" as automatically what's called-for. Conceivably a few landlords who otherwise would have held the line will do this. But given this was more or less already standard for the large landlords and given the landlords who have been really, really gouging, this sad collateral.

The Urbanist has an article on how modern rent control proposals differ from older ones, and the ramifications thereof: https://www.theurbanist.org/2019/08/05/the-case-for-rent-con...

At a basic level I would not have any issues with these laws if they also limited expenses. In other words, if you are going to use force to limit income then landlords ought to have the right to limit expenses proportionately. For example, make tenants responsible for wear and tear on the property, just like you pay for mileage on a rental car and are responsible for damages.

As it is, they are using force to limit income while expecting the landlord to offer the same product and services and foot the bill on unlimited expenses.

How about legally limiting salary increases while requiring the same or more work? And, when you change jobs, you are only allowed to make 10% more. Oh, yes, but you have to spend thousands to renew your credentials.

And how about truly severe penalties for tenants who destroy or damage property?

Anyone who has been a landlord for with more than a handful of properties knows how much of a nightmare it can often be.

Try running 10, 20 or 100 units and see how quickly you are going to bug out once even this mild form of rent control rears it’s ugly head. Because you know, with almost absolute certainty, that this is the proverbial slippery slope. And nobody wants to be the guy waiting for the last seat out of the Titanic.

Oh, yeah, unintended consequences: If Airbnb is more profitable than conventional renting...

No one should own 10, 20, or 100 units of housing.

When people finally realize that, there will be hell to pay.

Why not?

At a maximum 5% increase per year, it takes 37 years for a $500 unit to catch up to the $3000 market price. So this law doesn't help that much with that particular case.

I think the example was that this law will not create such a scenario, in the way that previous rent control schemes have.

The example given is of a 500% increase in rent, by definition no rent control law should make such an increase possible in a short time frame.

Some reasonable law might allow that.

Eg a law could allow any increase up to some benchmark, and up to 5% per year when above the benchmark.

(No clue whether that would be a good idea or not.)

For those like me who do not subscribe to the nytimes, the text of the bill is here: https://leginfo.legislature.ca.gov/faces/billCompareClient.x...

This has been tried in several countries, and it failed miserably. Rent control never worked. In Sweden you have to wait 20 years to get a flat with rent control. The only solution for the people is to increase the offer, how? by deregulating and allowing others to build more.

But this is not what the new bill is about. It doesn't cap total costs, it allows 5% per year increase, it doesn't apply to new homes, etc.

> It doesn't cap total costs, it allows 5% per year increase, it doesn't apply to new homes

If you tell everyone that you cannot increase more than 5% a year, this is used as a signal to all landlords to increase 5% a year. It's a coordination mechanism. And it helps hedge for years in which the market rent has increased by more than 5% and the landlord is unable to adjust. A commenter who is a landlord confirmed this as well.

And this will increase the incentive to build new homes. This could be good but new homes tend to be more expensive and serve the high end. Much like the median price of a new car is significantly higher than the median price of all cars on the market.

There are entire industries in New York that focus on buying units and converting them from rent stabilized/controlled to market rents through any means (direct payment, intimidation, legal, etc). To think this will somehow lower what people actually pay for housing is naive.

New homes being nicer is not a problem. It's good. (See https://www.planetizen.com/blogs/100293-how-filtering-increa... ) It's how we upgrade the national housing stock over time.

Landlords already charge as much as the market can bear. Coordination isn't really necessary.

> Landlords already charge as much as the market can bear. Coordination isn't really necessary.

This statement doesn't mean anything.

Consider a game where you try to maximize revenue. You play along with other players with the same goal. If you set your rent too high, other players undercut you. You set the price too low, you leave money on the table. Now consider a rule that says you can at most raise the prices x% a year and the same is true for all players. Now you're anchored to this increase and an equilibrium is more likely to emerge such that every participant increases prices by that amount every year. Much like a minimum wage gives a signal to employers who rely on low cost labor to pay the minimum wage allowed. If you look at distribution of wages, you'll see a huge spike at the minimum as employers essentially use that value to coordinate among themselves.

[0] https://pbs.twimg.com/media/DBkn94UVoAEqBey.png

With rent if the increase is above what the market accepts, units will stay empty. That limits price increases to what the market will accept.

The cost of moving is always a factor, rent will be at market the first year then above market thereafter until it rises to the point that the cost of moving is worthwhile.

If you allow new players to enter the game or existing players to expand their supply, the coordination strategy you outline invites defection.

If there is any attempt to rent control is what I mentioned, not any particular point of the bill. The truth and I don't get it why people downvote me for just plainly state a fact, any kind of rent control and construction regulations just bring housing problems. Making caps (control) will not ease the crisis. Areas like SF or NY are very crowded and need more offer, not caps.

Yah - all you have to do is deal with the super awesome and efficient state government every time you want to do anything with your own property that you're responsible for. The responsible agencies will never let feature creep create ever more strangling regulations based on this law, and ever more byzantine procedures to interact with them.

Given the booming demand and restricted supply for homes in San Francisco, the market rate for rent could easily outstrip inflation by 3% per year. That means it would take a decade for a rental rate that is currently 20% below market rate to catch up.

This should be the top comment. The upshot is that if you are a family that is renting, you won't be forced out of your home on short notice.

Try - for a moment - to imagine you are living close to your maximum expenses and your landlord increases your rent by 20% next year.

This happened to a family I know, except it was 50%. The building was purchased, "refurbished" and the rent was reset to a very high number.

> The building was purchased, "refurbished" and the rent was reset to a very high number.

And if someone was willing to pay that number, then that's what the place was worth.

Yea but moving as an individual is stressful and 10x moreso for families. We’re trying to keep people off the streets and from having to make bad decisions without hurting the landlords ability to capitalize on their investment. This is a compromise.

Not to mention a sudden, unexpected expense in a situation where renters are on a tight budget and likely don't have much or any savings.

That’s it. That’s all this is. The law is just regulating shitty behavior. But you always have those who say “well I can legally raise blah and if I don’t less money.”

Well now they can’t. Good. We’ve made it slightly hard to be a major cunt.

It's interesting to compare what happened under rent control in medieval Europe. Under the feudal system, land rents were permanently fixed. They could never increase or decrease by any amount. This had the advantage that everyone knew what they were.

...sort of. What actually happened was that lords meddled with the size of units. The dues for a plot of land may be fixed at 3 bushels of grain, but if you can make the bushel bigger you can pass a rent increase anyway. So a major concern of European peasant movements was stable and uniform units.

What are you talking about... One of the nicest things about being a renter is being able to choose to live in a place where you can get those savings.

Spoken as if many people have a true choice about whether or not to rent.


Oh why didn't I think of that?

That doesn't help the housing issues... which is the whole point of this article and the comment your replied to.

While what you're saying isn't false it's not going to solve anything. Unless you don't think there is a housing issue.

True, but if someone is already using it, it's shitty to increase the price that much. It makes it a bait-and-switch: offer for a reasonable price first, and once the family is all settled, jump a massive price increase on them. That's absolutely something that needs to be banned by law.

It's bad behaviour all right, but that doesn't automatically mean a law is the best fix.

Tenants could ask for contract terms that forbid such raises.

Or, if landlords are not forthcoming, they could take out insurance.

And yes, such insurance would need to have its terms written carefully. And it probably doesn't exist as a product at the moment. But eg sponsoring the development of such insurance would be an easier to justify action by the government than a law. Also less likely to backfire.

In any case, the underlying problem is lots of pent up demand for building, and permits only being given out in a trickle. If there was more building, landlords couldn't pull those tricks, at least not profitably.

To me, it's working against reality (and will have unintended consequences) if the price of rent is being held back from market price.

If I were a landlord, this just means that rather than charging a higher rent following renovations, I'd have to front load my raising of rent while they were being planned / ongoing. It might become more standard practice to raise rent closer to that limit proactively in the state.

Proponents might argue that's fine--at least it gives a family more time to adjust or move out. In practice, though, it may just make it easier for that family to weather through the first bump and be in an even worse situation when they absolutely can't afford it next time around. They might have been better off moving with more money available when a bigger hike comes later.

But hey, we've never known California to shy away from band-aid legislation.

I'm not sure what insurance is going to accomplish here. Tenants could negotiate it in the contract, but most people are not lawyers who will understand and negotiate the finer details on a contract.

The law is not automatically the best fix for all kinds of bad behaviour, and in many cases it clearly isn't, but I think this is one of those cases where it really is. Dramatically raising rent prices on someone who is already living there, is taking of a situation where the other party cannot simply refuse the offer, because moving every year gets really expensive quick. With many other kind of subscriptions, if the vendor suddenly doubles the price, they're easy to cancel. But not when it's the place where you live. It's taking advantage of a kind of vendor lock-in. A kind of monopolistic abuse.

And it's exactly the kind of thing that many countries do try to protect tenants from.

And no, the problem here is not pent up demand for building. That would be a likely cause when it's the initial rent for a new tenant that's too high. That's a sign there are simply not enough houses and too many potential tenants. But when the initial price is low, the landlord clearly does want to rent it to you. And when they then dramatically raise the rent, they're taking advantage of the power they have over your living situation. Preventing that by law is entirely reasonable.

Individual people would likely not negotiate themselves directly, because they are not lawyers. But they would take contract terms into account when comparing places to rent.

"700 USD per week" vs "800 USD per week and rent increases limited to 7% a year" are relatively straight forward things to compare.

You are right that landlords have a limited monopoly power when people have moved in. (And depending on market conditions tenants also have limited monopsony powers, because it's a bit of a hassle to find a new tenant.)

But those kind of longer term engagements are pretty common in the commercial world. And they are often solved with contracts.

What's keeping people from coming up with those terms themselves?

Note: I am not suggesting that landlords agree to those terms out of the goodness of their heart. They would offer such a ceiling on the increase eg in return for a higher starting rent. They are essentially selling a call option.

If they price the option premium right, they would make money. Just like any other kind of extended waranty you can buy.

A lot of units require seismic retrofitting and that’s super expensive. If you can’t pass that cost on a lot of these buildings won’t be retrofitted

As counter-intuitive as it seems, this should happen. People should not look at rental property with no rent stabilization provision as a stable housing arrangement. If there is a sudden shortage in housing, we need prices to suddenly reflect that shortage, in order for people to be suddenly incentivised to and compensated for building housing to fill that shortage.

Shortage is pain and rent control simply distributes that pain in a different way than the market would and does so in a way that reduces the ability of the market to gradually alleviate that pain.

The more the government intervenes in rental contracts to mandate that they be like a lifetime lease agreement, the less incentives and sustenance there is to build a rental property overall. Society is better off having more rental units that have prices that are not legislatively stabilized than have a smaller supply of rental units with mandatorily stabilize prices.

If someone wants stabilized rental prices and they should sign a lease agreement with the landlord that gives them that at the price of a slightly higher per month rental rate. These kinds of things should arranged by actors in the market rather than having the government ban all alternatives in order to force people into stabalized rent contracts.

> I'm shocked at the ideological fervor here

Really? This is pretty common on HN. This is IMO one of its weaknesses.

There are certain topics that bring out political rants. One is regulation and another is housing prices in the bay area. This story brings out both.

>> I'm shocked at the ideological fervor here > Really? This is pretty common on HN. This is IMO one of its weaknesses.

HN is heavily focused on the Bay Area. This fervor seems like a persistent feature of that region's culture and not HN in particular.

Plastic, climate change, and identity politics also bring out radical behavior.

Also, privacy and anything somehow related to Google or Facebook.

Are there any provisions for periods of high inflation in the market?

The limit is 5% plus inflation.

So ... you are arguing rent control is good? Or that this isn't rent control? Or that some rent control is good, but more is really bad?

The point was that this CA statewide bill is quite different from places like SF.

New state law: 5% + inflation

SF: 60% of inflation. This has has never been over 2.9% a year since the law changed in 1992 from a fixed 4% [0].

I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restriction, while limiting increases to significantly below inflation is not.

[0] https://sfrb.org/sites/default/files/Document/Form/571%20All...

It is still rent control. The problems you see will not be fixed by the law.

>I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restrictio

Based on what data?

And no, it's not a 'sane' argument:

1) if 5% + inflation is above market rates then this rent control is either a no-op or detrimental because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes.

2) if it is below market rates, then it's just rent control and it comes with all the same baggage and detrimental effects we always see.

Rent control does not work. I don't understand the appeal to continue experimenting.

> 1) if 5% + inflation is above market rates then this rent control is either a no-op or detrimental because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes.

It incentivizes landlords to even out their rent increases over time, and to avoid sudden jumps. Especially for lower-income people, price shocks are devastating; having warning of an expected rise in prices, so that you can move or downsize with a year or two of notice, is a boon, and this kind of measure forces landlords to do that work.

>It incentivizes landlords to even out their rent increases over time, and to avoid sudden jumps.

No. It doesn't 'incentivize', it mandates.

Also, I have no idea why you're arguing this point, this is rent-control. This is how rent-control works. It sets a cap on what you can charge for rent.

>Especially for lower-income people, price shocks are devastating;

Rent-control is devastating for lower-income people.

Price shocks are a result of spirling supply in face of rising demand. THIS DOES NOT FIX THAT. Rent control does not fix this problem and you can't just wish it away. Rent control makes it worse. In a normal market, prices stabilize. Landlords don't just spike prices over a month because either a) there's a lease agreement which sets these terms out, b) they won't be able to rent the unit out at the higher prices, or c) Good tenants are hard to find and finding tenants takes time and is expensive while your apartment sits there not generating income.

Rent control that permanently keeps units below market price is devastating for lower-income people. Rent control that simply smooths out price increases, and loses landlords perhaps a year of the new price during sudden spikes, is pretty innocuous.

> No. It doesn't 'incentivize', it mandates.

Well, they always have the option of not keeping up with market-rate increases. Not that I think anyone will take that option.

> Price shocks are a result of spirling supply in face of rising demand. THIS DOES NOT FIX THAT.

The point isn't to "fix" the increase in price. It's to give renters a year or two to adapt to the change, either by moving out, finding new sources of income, or getting roommates.

> Landlords don't just spike prices over a month

#NotAllLandlords. But enough do to create a serious public policy problem

>Rent control that simply smooths out price increases, and loses landlords perhaps a year of the new price during sudden spikes, is pretty innocuous.

Says who? You're just making things up now.

>they always have the option of not keeping up with market-rate increases. Not that I think anyone will take that option.

No you're just distorting words. Rent-control is a mandate. Saying it isn't a mandate because you can just drop the rent is dishonest. Why are you playing these word-games?

>The point isn't to "fix" the increase in price.

But that's what it does. You're capping what rent can be and your only argument that somehow it isn't rent-control and won't suffer the same consequence as every rent-control policy is that isn't as disastrous as something that San Francisco did.

>But enough do to create a serious public policy problem

Serious public policy problem? What are you even talking about? Housing shortage and homelessness is a serious public policy problem. This is a non-problem that if solved through this measure actually magnifies those real issues.

You're also making up the reason why this policy was put in place. It was put in place "to deal with housing crunch"[1], and not deal with the 'serious public policy problem' of some fictional landlord spiking rent for fictional renters. We know from hundreds of studies that rent-control does not actually solve either problem..


The essential feature of this bill is that the rate of increase allowed is well above long-term market trends. This is qualitatively different from a rent control policy that aims to keep rents perpetually below market rate.

The "housing crunch" is a very general term; the specific symptom addressed by this bill is drastic increases of rent on, for example, a change of ownership of a building. See https://www.latimes.com/california/story/2019-09-05/how-cali..., which has actual references to advocates of the bill.

> Supporters of the measure have pitched it as a way to prevent sudden increases in rents at levels that could drive people from their homes as the state experiences a surge in housing costs.

Assembly members in favor of the bill talked about "providing certainty", not about keeping prices low.

Also "some fictional landlord spiking rent for fictional renters"? The article I linked describes sudden increases to rents during changes in local housing markets:

> In Boyle Heights, apartments without rent controls saw rents increase from a median $1,200 a month to $1,700 between 2016 and 2017.

The OP references this area:

> Sandra Zamora, a 27-year-old preschool teacher, lives in a one-bedroom apartment in Menlo Park, Calif., a short drive from Facebook’s expanding headquarters. A year ago, Ms. Zamora’s building got a new owner, and the rent jumped to $1,900 from $1,100, a rise of over 70 percent. Most of her neighbors left. Ms. Zamora stayed, adding a roommate to the 600-square-foot space and taking a weekend job as a barista.

This rent control bill would force the new owner to spread that increase over several years.

>The "housing crunch" is a very general term; the specific symptom addressed by this bill is drastic increases of rent on

Right ... except the bill aggravates the "housing crunch". Again, you're trying to solve a small problem by magnifying the major cause of the problem you're trying to solve.

Your linked articled quotes an economists who says this will hurt people who "are upwardly mobile, striving families who are middle-income or lower-income in Irvine, who can’t afford to buy a house but where renting might be in their reach,", because:

1) "landlords who might have held rents for existing tenants at below-market rates with the knowledge they could increase them at any time might decide to hike rents every year."

2) "restrictions on rent hikes encourage owners to convert their apartments into condominiums, which removes properties from rental stock"

So, this policy makes rent broadly more expensive, and it lowers housing supply - which makes rent more expensive. Come on man.

What if you California introduced legislation that targeted the underlying cause of the rent spike ... i.e. the 'housing crunch'. This way, you can solve both problems, the housing crunch and rental spikes.

> [...] because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes.

Relatively unlikely to have a big impact. Even without such a law they already have an incentive to raise rents as how as possible: profit.

Mostly the law should be a no-op.

I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily?

>Mostly the law should be a no-op.

Mostly? Uh huh.

Sorry - then why are we wasting time with this law in then? Because OP and supporters certainly don't think it's a no-op. California doesn't think it's a no-op.

>Even without such a law they already have an incentive to raise rents as how as possible: profit.

That is such a shallow, nonsensical argument. By your logic explain why Starbucks isn't charging $5000 for a coffee ... because after all: profit.

I'm sure landlords would love to raise prices to astronomical levels. I'm sure tenants would love to live in the apartment for free. So tell me, why doesn't that happen? Why is it that prices in a market will tend to stable point?

>I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily?

They can. That's called a 'lease'. It's common.

> I'm sure landlords would love to raise prices to astronomical levels. I'm sure tenants would love to live in the apartment for free. So tell me, why doesn't that happen? Why is it that prices in a market will tend to stable point?

I'm not sure we are disagreeing?

> They can. That's called a 'lease'. It's common.

Indeed. And I'm saying that if people want what the law is providing, they can negotiate it voluntarily. So there's no good orthodox economic argument for the law. (Basically, no argument from market failure.)

(And, if you have a sufficiently clever financial derivative structurer, you could probably get around the law as well, if you really want to. Basically, you'd construct a swap between a fixed rent and a variable rent. Similar to an interest rate swap.

One big problem with such an insane scheme would of course be transaction costs---ie too much hassle to set up complicated derivatives or repo agreements etc for a private tenancy. Especially since a court might not allow a normal unsophisticated person to be bound by such a complicated contract, even if they wanted to. Tenants are treated like children.)

What if the market clearing price increases at greater than 5% plus inflation?

This isn’t a free lunch, the tradeoff of a price cap is under provision of a good.

We currently have a drastic under provision of a good to the tune of 3.5 million homes in CA alone.

This under provision is not because building new homes isn't profitable, it is because realtors, landlords and homeowners are actively blocking new supply in order to extract above market rents from desperate people.

Adding a rent cap of MORE THAN DOUBLE inflation will have no affect on supply, it is ridiculously profitable to rent out your property right now.

CA would have to do something like cap rents at less than $500 per bedroom before profit margins would affect supply.

> it is ridiculously profitable to rent out your property right now

I'd be curious if you can share specific numbers on where this is true?

Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance? A link to the MLS listing would be appreciated.

Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out.

> Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out.

'Maybe' in the case of buying a new property now to rent. But it's clearly the case for many or there wouldn't be places to rent.

"Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance?"

Anecdata for sure, but I know of more than a handful of landlords in SF that charge more rent (and get more rental income) than mortgage+insurance+taxes+maintenance. Moreover, that equation ignores the increase in value of the property. You are confusing cashflow with making money, which are two very different things.

My current landlord just bought our entirely rent-controlled building three years ago. As part of the sale/marketing, gross income from the building was made available at a very granular level. It is certain that our landlord is losing money in terms of income-(mortgage+insurance+taxes+maintenance). However, it is equally certain that the landlord has profited greatly. First you have the fact that the building itself has increased in value by about 20% over the last three years. Accordingly, the landlord has made a profit in the low seven figures. Second, you have the straightline depreciation, which is a massive tax benefit if you have other appreciable income.

renting is profitable if you can rent for more than

interest_on_mortgage+insurance+taxes+maintenance-raise_in_house_valuation no?

If your formula was the one, renting would never make any sense...

There's always risk your tenant could disappear, stop paying and lawyer up, and/or trash the place.

Market-wide price increases of 5%+inflation are rare; sustained market-wide price increases of 5%+inflation are very rare.

This forces landlords to do two things:

* When there is a sustained rise in fair market rent, they will need to implement that increase over time instead of falling behind, and then raising it all at once 5 years later when they realize they're leaving 20% on the table. This allows people being priced out advance warning.

* When there is a spike in fair market rent, like the 8-10% spikes of '14-'15 in the Bay, they will need to spread that rise over multiple years. Since this doesn't affect the profits of new units brought onto the market in response to the demand spike, it should have minimal if any effect on supplier behavior.

(And what happens when market clearing price does increase at 5%+inflation for years on end? Then housing will come to dominate the CPI, and the "inflation" term will more and more closely track housing prices.)

This will still affect new units as it changes the forecasted rates over the lifetime of the loan (usually 10 year balloon) so instead of being able to forecast market rate increases the max value is now 7%. And maybe less if all units aren’t filled right away and you miss a year of increases. It’s not a huge impact but it does put a cap on the upside profits against potential huge losses

> sustained market-wide price increases of 5%+inflation are very rare.

No sane investor forecasts an increase in rent of over 5% over a decade.

> if all units aren’t filled right away and you miss a year of increases

If a unit isn't filled, then you don't miss out; when it is filled you can immediately charge market rates.

Why does someone have to be arguing anything? They wrote what happened and described it adequately with no disclaimers or partisan copy-pasta to assign favor to any mob.

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