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Comment by abfan1127 | Hacker News Reader

When there is high demand for a product, including housing, the market has to respond. High prices attract investment in more housing, usually denser housing. Rent Control prevents the market signals from working. There is no incentive to construct more housing because its not worth it. Additionally, if blue collar jobs can't be filled because its not worth the pay+commute, then either wages have to raise or these go undone. If the market isn't allowed to operate, then you can't expect these systems to work.

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the problem is there is market failure. The Housing Asset is more valuable as a financial instrument than the actual utility it provides. This is why you see homes sitting empty in Manhattan.

The market is failing because of the distortions introduced by things like mortgage tax deduction, 30-year term mortgages, restrictions on new housing, etc.

Could you please elaborate on that? Thanks

There are gov't policies that make it much easier to get money to purchase a home. 30 year mortgages were created by the gov't which locks in low payments. Mortgage tax deduction lowers the effective cost of a mortgage. Easier to get money to buy a home -> price of homes go up.

Normally when prices go up, supplier (homebuilders) have an incentive to produce more housing, countering the increase in price. However, many cities (SF is a great example) make it very hard to build new housing. Restriction on supply with increasing demand -> price of homes go up.

85% of SF bans apartment buildings. Projects take years to get approved. All of those costs get rolled into the final amount.

> restrictions on new housing

Unfortunately they are not making any more land.

When land is scarce, the only thing left to do is build up!

Demand for Empty Condo’s has never been higher!

> High prices attract investment in more housing,

Often planning laws restrict new housing...

> usually denser housing

...and denser housing

> Rent Control prevents the market signals from working.

Rent control is also unfair, if some people (selected how?) are entitled to it and other people not entitled.

I am against rent controls unless it is a right for all. By this I mean that anyone[1] living in a city can go to the local authority and say "I want a rent-controlled flat" and the local authority would be legally entitled to let them one, building new houses where necessary. This would mean the local authority would be required to act on market signals of people wanting rent-controlled housing.

1: with maybe a few qualifications like residence in that city for a year, citizenship, etc.

Rent control, at least in San Francisco, applies to buildings/units of a certain type. It is not given to people or applied for. You get it automatically if you live in a unit that qualifies.

So it is a right for all... just live in a building that qualifies. Most older buildings already do, so rent control is already applied to the cheapest units (again, in SF)

Why don’t more people just rent a rent control apartment instead of paying higher rent at other places?

The non-rent controlled places are newer/nicer.

> You get it automatically if you live in a unit that qualifies.

And how do you get to live in a unit that qualifies? That isn't something everyone has the right to do.

> just live in a building that qualifies

"Being rich is easy, just be born to rich parents."

You don’t want to wreck individual lives just because you want efficient price-finding. Rent control that protects tenants from super-nominal price increases works fine in the presence of abundant supply and liquidity. You can see how successful this can be in places like Belgium where standard lease is rent controlled for nine years with an option for additional nine years. This is enough time for a family to become established and raise children without being sacrificed on the alter of market signals. It is the kind of policy you get when you view tenants as people rather than revenue sources.

Are individual lives ruined by having to move? I understand the pros and cons of rent control and there are valid arguments on both sides, but it doesn't sound like people's lives are being ruined. IMO, a lot of political and cultural tension comes from tying our identity to a piece of land. Maybe if we moved around more often we might be more tolerant of new cultures and people?

This attitude is why American cities aren’t real places. Yes, being forced to move far away, as in the Bay Area where we evict people from Oakland and expect them to live in Antoich, is highly disruptive to lives. It severs friendships, increases travel, and all manner of negative effects.

It does. I know several kids who suffered severe depression because they had to move far away several times and had no real friend, no feeling of belonging, no home.

Why does an increase in rent wreck people's lives?

Also what does super nominal pricing mean?

And anyone can sign a lease for 9 years. But the vast majority of tenants do not want to make a commitment for that long.

And they could also sign a lease with an option to renew for up to a number of years similar to a commerical lease. But again no-tenant wants to pay the option cost.

No landlord in America will give you a nine-year lease on residential property. You need the power of law to step in and set those boundaries.

Super nominal: greater than the rate of general inflation.

Leases aren't offered with such flexibility in markets where the supply of available housing is small. I'm also interpreting "available" to mean available at a resident's income level, i.e. overlapping with "affordable." You sign the lease that's offered, or it goes to next candidate tenant.

Rent control...works fine in the presence of abundant supply and liquidity

In other words, rent control has no effect if prices would have remained stable anyway. It's also pointless in that case.

Sure, but the point is that rent control removes the incentive that would otherwise exist for landlords to create scarcity.

In San Francisco, this problem was "solved," by not subjecting new development to rent control.

"san francisco". "new development". hahaha. you don't need to worry about no rent control if you don't allow any new developments. guy_tapping_temple.gif

How many new developments are there in the outer sunset?

That's a zoning issue, not rent control.

That's case law and state law, not SF specific.

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