Aside from anecdotes, do you have access to any data that substantiates the claim that "The rent controlled units went to people with high incomes and political power" -- can you put a figure on it (50%, 60%, higher?).
My grandparents lived in rent controlled apartments in NYC that they could not have afforded to stay in -- moved there in the 30's in neighborhoods that filled with gang violence -- but gentrified around them and became very expensive. There are anecdotes both ways.
My grandparents lived in rent controlled apartments in NYC that they could not have afforded to stay in
This is selection bias. Suppose the government raised the federal minimum wage to $50/hr. This would cause massive unemployment (and, no doubt, a thriving black market for labor), but some lucky low-income workers would keep their jobs. You could then point to one of those workers and say, "Hey, I know someone who has a high-paying job that wouldn't exist but for the new minimum wage." But this ignores the damage done to everyone else through unemployment and higher prices. And so it goes with your lucky grandparents.
You can avoid these sorts of errors by consistent application of the following rule:
The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
I gave a counter-example to show how ridiculous it is to talk about this through anecdotes. Yes, it's selection bias -- the entire top-rated comment on this thread is full of anecdotes are data arguments. Thanks for the pointers on avoiding this error in the future -- sheesh.
Okay, fine, but the op that he's replying to suffered the same flaw by pointing to cases of politically connected wealthy people in rent-controlled apartments. Where's the proof that rent-control inflicts large systemic damage across all groups? It's certainly not in the topic's article (see my other post).
Indeed. I live in a rent-controlled apartment in San Francisco, and it is not squalid, the landlord is not crooked, and neither I, nor the other tenants, are politically powerful.
I heard a lot of horror stories about rent control before I moved here, but so far the stories haven't approximated the reality. Perhaps the problem lies the details of the rent control policies in question, and not with the concept of rent control itself.
I also live in a rent-controlled apartment in SF. I'm not sure what the particular policy in Boston is, but here they can increase the rent by 3%/year (I think) while I live there. After I leave, they can reset it to whatever they like.
So, in principle, if market rents increase a lot, the landlord has an incentive for me to leave. I think there's another side to this though: I've been a great tenant for a while and always pay on time -- if I leave, he runs the risk of getting a scammer who just won't pay and will take a year to evict.
Also, since I've locked in a nice rate, I have an incentive to stay and even make minor improvements (like clearing all the dead growth from the patio, etc.)
I think rent control probably is not a great idea in many places, but in SF it seems to work. My pet theory is that the boom-bust cycle here is much more severe and without rent control the city would have no stable population.
The question for both of you is how did you get the rent controlled apartment? I bet it wasn't through craigslist. Everybody I know in the city who lives under rent control (which, admittedly, is not very many) found their places through friends.
Not that it's a bad thing, but it supports the idea that you have to be "connected" to get a place. Maybe not a lawyer or a judge, but having been around the city helps.
It was through Craigslist... the deal is that every building in San Francisco built before a certain year (I don't remember which year) is rent controlled, so you don't really need a connection. The year cutoff is, I assume, to encourage developers to build new rental properties.
There was a proposition to ban rent control in California, which failed to pass.
I lived in a rent-controlled apt in SF that I found through craiglist. It wasn't cheap, nor squalid - Similar to what the other people say. My experiences over 20 years of renting also say - landlords treat good tenants like gold - if you don't make noise, don't sell drugs, and pay on time, they generally are happy to not raise your rent.
> My grandparents lived in rent controlled apartments in NYC that they could not have afforded to stay in [...]
This is how rent-control can create shortages.
Under rent-control, older people who would otherwise downsize have no incentive to do so. Younger people who might still be able to live with their parents instead rent separate apartments.
The fundamental problem is there's not enough housing for everyone to get as much of it as they want. So, there's a need to economize.
The additional problem is that your residence is not a commodity to you. Being forced, by the market, to move out of your place is very traumatic, even if it could be better used by someone else.
The point of the anecdote was to show how anecdotes aren't a good way to argue. The anecdote doesn't show anything -- not my point, and not yours either.
Their specific story is not the point -- my point was that if you want to cherry-pick anecdotes of a program not working, one can always counter-argue with other anecdotes.
Either you believe that it is in the public interest to have some availability of low-income housing or you don't. I do think it's in my interest and I accept that I will pay more to have it be available.
Is rent-control the best way to achieve that goal -- I don't know -- this isn't an area of my expertise (judging from this thread, it isn't any HNer's) -- I haven't heard anyone propose something better -- just complain about it based on hearsay.
> Is rent-control the best way to achieve that goal -- I don't know -- [...] -- I haven't heard anyone propose something better -- just complain about it based on hearsay.
What if rent control is actually causing shortages were there's no physical scarcity? We can mostly agree on intent, but sometimes, collectively, we enact plans that cause the opposite of what we want.
It happens that I'm just reading Thomas Sowell's Basic Economics. In the chapter on price controls, he argues that rent control (and price controls, in general) cause shortages where there is no scarcity of the underlying commodity.
As you point out, I'm not an expert, and FWIW I haven't read the original sources. I have some problems with his analysis of medical care price controls, but I'll get to that later.
Here are some quotes and his cites...
All the quotes are from:
Sowell, T. (2007). Basic Economics. A Common Sense Guide to the Economy. 3rd ed. New York: Basic Books.
"Before rent control was imposed in Sweden, less than one-fourth of all unmarried adults there lived in their own separate housing units in 1940, but that proportion rose over the years until just over half did by 1975." (p.41)
... from the article, "The Rise, Fall and Revival of Swedish Rent Control", in the book Roofs or Ceilings? by Milton Friedman and George Stigler.
"In San Francisco, a study in 2001 showed that 49 percent of that city's rent-controlled apartments had only a single occupant, while a severe housing shortage in the city had thousands of people living considerable distances away and making long commutes to their jobs in San Francisco." (p.41)
... from p.21 of San Francisco Housing DataBook, commissioned by the city, and produced by consultants Bay Area Economics, in 2001.
"Meanwhile, a Census report showed likewise that 48 percent of all households in Manhattan, where most apartments are under some form of rent control, are occupied by only one person." (p.41)
... from page A2 of the September 3, 2005 issue of the San Francisco Chronicle, title: "Census: More Americans Living Alone."
"A study published in 2001 showed that more than one-fourth of the occupants of rent-controlled apartments in San Francisco had household incomes of more than $100,000 a year." (p.48)
... not sure where he got this -- I need to get back to coding -- if you care, check out his Sources chapter.
Without looking further into the issue, I'm reasonably convinced that rent control drives up rental prices, and creates housing shortages (at the artificially low price levels).
BUT ...
What this doesn't consider is that my home is not a fungible or liquid asset for most people. You may be able to change residences easily, but it will take time for your new residence to become your home.
It's a lot easier to consume a bit less power, produce a bit less garbage, or spend a little less money in response to changing market conditions.
Because of this, people feel very strongly about holding on to their homes, even if by this hoarding, they're harming others.
My grandparents lived in rent controlled apartments in NYC that they could not have afforded to stay in -- moved there in the 30's in neighborhoods that filled with gang violence -- but gentrified around them and became very expensive. There are anecdotes both ways.