Berlin approves 5-year rent freeze | Hacker News Reader

Berlin approves 5-year rent freeze

reuters.com

276 pointsciceryadam574 comments

As much as I can sympathise with the predicament, this decision, and the Berlin housing market in general, absolutely baffles me.

When I moved here I was warned of 100 people turning up to a flat viewing, and laughed it off as some hyperbole. Only later did I find out that it actually happens, albeit the maximum viewing I went to was around a meagre 50. Having come from the UK, I found the situation in Berlin to be absolutely ridiculous. There are already strict rental price limitations in place (based on location, size of the property etc.), and although these can be skirted, in general they're clearly very effective.

Again, I sympathise with city housing being very expensive, and don't believe that purely gentrified city centres are likely to be a good thing. Still, economics 101 seems to suggest that merely putting rental freezes in doesn't fix the problem. It just (as is already the case in Berlin), leads to excess demand. The solution is to build houses, but what kind of investor is going to throw their money at Berlin, where their opportunity to make a return on their investment is severely hampered? I just don't understand this stance at all.

It’s an interesting catch 22.

The housing you make margins off are expensive housing in expensive locations.

The reason to keep rents affordable is that it’s generally a good thing in terms of keeping gentrificarion and segregation in check.

Cap on rent can’t be the only policy though.

I see the exact same situation in Stockholm, and there’s a concensus that profit margins are not good enough.

How to solve it?

Either sprinkle lots of tax money in some shape or form or do a quatar fotball world cup kind of setup?

I’m curious, as I see this situation all over, and frankly no one seems to offer a complete solution.

If the city wants something the market can't provide the solution is to do it yourself.

Berlin is partially doing that. The "Wohnungsbaugesellschaft Berlin-Mitte" is a housing association owned by the City of Berlin that builds and rents out apartments. They more or less act like other investors, just with more focus on social factors than on high profits.

> just with more focus on social factors than on high profits

Which is basically a political issue, because they will say "some people are more equal than others". Personally, I prefer naked capitalism over this "you need to know somebody in the party to get a good flat"-stuff.

Isn't the black market that occurs a form of naked capitalism?

Here in Stockholm a lot of the public good properties have been sold out which have left precious little for too many to contend.

Prices of labour and land are so expensive that, allegedly, profit margins are not good enough.

The "know somebody" bit goes for plain hard capitalism as well, but is less in effect in a society that actually focus on the social side of things. IMO.

I don't know, I've always liked the "if you have money, you can buy it" part of capitalism. You can make money, but you can't change the fundamentals. In a racist white society, having money will not help you if you're black. In a politicized society, having money will not help you if you don't have the right worldview, or were born into the wrong family. In my home town, having money will not help you get into a (private) housing cooperative if you don't match the social criteria.

What you describe in Stockholm has happened around here too. Still, I prefer it: this way I do have a chance to get a (nice) apartment, even though I was born to a family where nobody was a member of the local ruling party. Sure, I may not get the great flat at the greatest location for a third the market price, but at least I can get one, even if it's more expensive. I'm happy to pay a higher price to be able to actually buy something.

I’m just saying that with capitalism comes politics. Always have, always will. To believe otherwise is a bit naive. Politics can be used to even things out as was done over here from the turn of the century up until, I’d say, 70-80s. The last few decades have been way to market/neoliberal policy wise, and in many ways we’re seeing the effect today.

I just think you’re a bit binary here. I come from a struggling family but have managed to buy a place for my own family in a really attractive location. The problem is that thanks to virtually no regulations on the banks for lending the whole market is inflated, both for property and land. It’s simply not a question about supply and demand - it’s “how much money can I borrow”. A study showed that roughly 25% of people owning housing i Stockholm cannot manage a lowish “normal” interest rate.

Banks love printing money for free!

Capitalism only works when properly regulated by sane policy.

> I’m just saying that with capitalism comes politics.

I don't see that. I'm not with the mainstream politics at all in my country, yet I face very little inconveniences precisely because money determines whether I can buy a phone, not politics.

We might talk about different kind of politics. You want regulation (for example on predatory lending), and I'm fine with that. I don't want "social criteria" (as in "what gender are you?", "what's your political world view?", "are you married?", "did you go to university?" etc) to determine whether I can rent an apartment. I prefer the worst neoliberal unregulated free market system to that, simply because in that terrible market I still have a chance if I'm not part of the "more equal" group. In the other I don't, no matter how hard I work. It's like a feudal society where your class if fixed at birth. I prefer pure capitalism over that.

That's not to say that I prefer pure capitalism over everything, I just believe that even in its shittiest form, it's still more fair than a thoroughly politicized system. Fortunately, we still have a lot of market economy, so we're not anywhere near a place where only politics matter, but whenever somebody asks for "social factors" to play a role in deciding who will get a flat (or a job, or a car, or food), I can't help but see the writing on the wall.

I just don't think that makes much sense. Social criteria like where you went to school is one of the most important things in very capitalist countries. It didn't used to be very important in Sweden 20 years ago. There were also essentially no social housing, university dorms, private kindergartens, minimum wage or employer provided health care. Social criteria are a big thing in capitalist countries where inequality is accepted. Countries like Sweden have less social criteria as most people getting the same deal, so there is less of a need to treat people differently. At the same time the Nordic countries have had the best social mobility in the developed world (at least in terms of income).

> It's like a feudal society where your class if fixed at birth. I prefer pure capitalism over that.

What?

Edit: Nothing in my comment is inaccurate. Just because you hide arguments doesn't make yours any better, in fact it makes them worse. And if you don't revaluate your own opinion when the mob tries to censor those they feel are wrong you can't expect to be smart.

> I don't know, I've always liked the "if you have money, you can buy it" part of capitalism.

I, too, like it when a group a part of gets privileges.

The point is: you can become part of that group. You can't become part of the privileged group if it's some arbitrary criteria like heritage, race, gender, political opinion etc.

Although discriminating against people without talents the market values or with disabilities that reduce their earning power is more useful than racist etc. discrimination, not everyone can become part of the privileged group.

> some people are more equal than others

is what you get in naked or even non-naked capitalism.

> you need to know somebody in the party to get a good flat

The SED dictatorship has been abolished 30 years ago. We don't have much of a corruption problem.

> > some people are more equal than others > is what you get in naked or even non-naked capitalism.

Yeah, but naked capitalism is closer to meritocracy, albeit not nearly there.

> The SED dictatorship has been abolished 30 years ago. We don't have much of a corruption problem.

It's still there, just not to the same extent, and more subtle. The market economy helps because it provides mostly unbiased. You're not required to know people, but it still helps enormously if you do.

> Yeah, but naked capitalism is closer to meritocracy, albeit not nearly there.

But just as far from equality.

> It's still there, just not to the same extent, and more subtle.

"not much of a"

> The market economy helps because it provides mostly unbiased. You're not required to know people, but it still helps enormously if you do.

A market economy is by design biased towards wealthy people. A democratic state with rule of law is mostly unbiased.

The solution is pretty basic and was proven to work for centuries before extreme zoning intervention by governments happened at the behest of property owners wanting their gentrification.

To fund the program you institute luxury property taxes on units larger than what you want your average citizen to afford and actually property tax businesses (which many cities do not do, because they bribed companies to locate there with agreement they would have substantially reduced taxes). Both should be at progressive rates, the larger companies and homeowners paying more. In any city that has the modern housing price crisis in effect there is plenty of money floating around to pay this and would not "kill" the city to institute because demand is so high already.

Then, with the revenue, you A) invest in public and modernized infrastructure and B) rezone for mixed use or simply dezone your city (the only real valid arguments for zoning nowadays are to avoid overburdening infrastructure and to maintain specific skylines, but policies that prevent vertically entirely are wholly draconian and cannot stand - there needs to be an avenue for vertical growth no matter what).

The infrastructure is ridiculously expensive. Decomissioning streets to build functional bike and walkable space infrastructure, building a comprehensive subway / light rail / tram / trolly network, supporting comprehensive bus service are all major projects. Every city, though, needs to be doing all of these. Private car ownership has to trend towards 0 for anyone living in the city proper, and proper zoning and tax code should incentivize almost anyone within a substantial difference to move towards the city because its cheaper.

Its cheaper to live in a 50 story condo building when you factor in all externalized costs - the lifetime of the building, the heating / cooling efficiency, the infrastructure requirements, the construction efficiency, the materials efficiency, the cost of public services to support the building, the access to productive labor and jobs local to the residence, the climate damaged caused by long commutes from suburbs, the environmental impact of sprawl, the maintenance on infrastructure to support it. People look at how 2500 condos might cost 100 million for the building alone and think that means its inefficient and too expensive... but in practice A) the costs are inflated due to regulatory impedance B) there isn't enough high density demand in most western countries to get economies of scale reducing prices of construction the way they are in Asia and C) even when the building is more expensive everything else is cheaper.

Which probably comes back to the fundamental reason we are in this state in the first place. Externalities are not factored in. Environmental harm, infrastructure & services upkeep, human potential lost, etc all factor in to cost the modern sprawl low density lifestyle and our societies dearly. Cities are actively hurting their responsibility to grow to mitigate this damage, but its also on nations as a whole to stop subsidizing lifestyles that hurt the plant, nations, and people themselves. Cities don't have money to build because money is siphoned to maintain the status quo and that keeps this unnatural unsustainable relationship in place.

This all relies on central planning by the city to implement?

You don't build a city without some kind of central planning. Even in the total absence of zoning someone needs to build the infrastructure to link it all together. That is in large part why "just deregulate zoning" alone isn't an answer - cities in large part are in bureaucratic gridlock on developing infrastructure and wouldn't be able to supply new construction adequately. But as a society we simply cannot have private companies bulldozing blocks or razing roads to build rail or bike lanes.

Additionally in the same way public policy hinders development today it could be reversed to help development. Subsidizing density and mixed use would do a lot of good to jump start the much needed urbanization of most western populations.

Thank you for such a thorough reply and your perspective.

Can you name a capital city that have a non dysfunctional system in place?

I seem to remember reading about Wienna having an interesting model in play.

Tokyo, but that´s mostly because of zoning laws.

Encourage people to buy land and build their own houses?

Freezing rents is not meant to be a solution for a lack of housing. It’s a solution to the explosive increase of rents of existing ones.

There are lots of people where the rents of their current apartment have increased so much, that they had to move out. This solution is trying to fix that.

Also freezing rents doesn’t mean Berlin will stop building new houses. If there is big demand for housing in a city one needs both:

1. make sure people currently living in the city are able to do so in the future

2. make sure new people coming to the city have available space

Freezing rents is aimed at problem one. These solutions are not exclusive.

Pretty much every western nation has systemically failed to recognize or support the insanely high demand for high density living in the 21st century. That is where the future of economics is, where the future of humanity in general pretty much is, and every democracy is consistently demonstrating the total inability for legislatures to sacrifice the advantage of those lucky enough to inhabit cities as they exist now for the benefit of all those who would grow the economy and future in the cities tomorrow. Largely because those in the cities have the money and influence to buy the politicians.

I don't buy any of this. Growing up everyone around me saw the city as somewhere you begrudgingly went out of necessity and only lived there if you had no choice, and I'm inclined to agree. In virtually every aspect I find more countryside-ish living much more pleasant.

Consider virtual reality and remote work. I imagine much of the workforce will move to virtual offices in the near to medium-far future when corporations finally come around to realizing they don't have to waste so much money on rent. There's no need for programmers, graphic designers, reporters, and employees of lots of other professions to work in a physical office. So really, as cities become less of a necessity to certain jobs, I expect a moderate exodus to nicer areas, halting growth or even decreasing population in urban centers.

>Growing up everyone around me saw the city as somewhere you begrudgingly went out of necessity and only lived there if you had no choice

I assume you grew up in the United States?

Cause European cities are so much better? They're not. Overcrowded, overpriced, just for jobs and getting out asap.

Yes, upstate NY.

Where? I ran screaming from the Albany area first thing I could when I turned 18.

Hudson Valley, somewhere around Hyde Park. I went over some of the features of the area here: https://news.ycombinator.com/item?id=20218742

What's so bad about the Albany area? I haven't been there since I went as a kid for some medical facility.

>Consider virtual reality and remote work. I imagine much of the workforce will move to virtual offices in the near to medium-far future when corporations finally come around to realizing they don't have to waste so much money on rent. There's no need for programmers, graphic designers, reporters, and employees of lots of other professions to work in a physical office. So really, as cities become less of a necessity to certain jobs, I expect a moderate exodus to nicer areas, halting growth or even decreasing population in urban centers.

People have been saying this for decades. Personally, I'd like nothing more than for it to be true so that I can ditch my expensive Silicon Valley apartment. But it's not. Lately I've even been seeing a lot of pushback from people who feel more productive in an office setting and don't want to work remotely.

Unfortunately everything points to the effect being the opposite. Remote means you don't have to be in Detroit, but can contract a factory in China from New York or run a data center anywhere from the Bay Area.

Depends on what you want, I suppose. High density humanity simply makes practical and economically viable gatherings, grouping and other activities that just don't work in low-density populations. Classes, meetups, specialist stores, hobbies, clubs, shows, lectures, institutions and just plain bubbling, embryonic interactions; all of it an order of magnitude more intense in a big city. Travel even fifty miles away from a big city and suddenly so much opportunity vanishes, or necessitates a two hour round trip into the city to take advantage of. For the people who want these things, the city is the only option. I don't work in a city because that's where my job is; I work in (the outskirts of) a city because that's where everything else I want is.

I work with people who live in the inner city and commute outwards daily for their job, because their job is just a way to pay for what they actually want, and what they actually want is to be in that city.

15 miles, 2 hours? Hmmm, maybe invest in New roads.

But city living is sad, yeah you can have all the social fun, but none of the quiet, peace, living and hobby space.

I like living 10 miles from the city, lots of space, quiet and green, can drive 20 minutes to the shity anytime.

15 miles, 2 hours? Hmmm, maybe invest in New roads.

Maybe invest in new glasses. I didn't say 15.

A city that has a boundary defined enough that you can reasonably say you live ten miles from it, and that you can drive into in 20 minutes? You're thinking of a town.

Almost all that stuff exists just fine outside major cities in my experience. I went over some of the great stuff around where I'm from in NY here: https://news.ycombinator.com/item?id=20218742

Yeah, living in the suburbs of or reasonably close to a large metropolis is where it's at. As soon as you want/need a good or service that goes even slightly outside of the local mainstream, it will almost always be available only in a big city. The bigger the more likely that it will be available.

That's sort of the opposite of my experience, where everyone couldn't wait to get out of the stultifying small town, where there was no work and no future.

That's odd because it it's pretty much the polar opposite of what I've experienced.

Everyone wants to move to the big cities, especially Berlin, as they provide culture and a sense of freedom. You are able to meet like-minded people and are able to experience culture and infrastructure that simply does not exist in rural areas.

This of course makes makes the situation for the villages worse as many young people move away. Who's left are old people and those who are not qualified to find work or education elsewhere.

The population decline in those regions also means a decline in infrastructure, economy and cultural events, which makes those regions even more unattractive, perpetuating the cycle.

There is a slight trend of dropouts creating alternative living communities in those areas as abandoned houses & property can be had for very cheap. But their isolated nature means that often they will not last as their inhabitants move back to the city were their original peer group is.

Young people want to go to Berlin but people with money want to settle away from it.

And IMO that's also a product of rent freezing.

Without rent freezing, rents continue to increase substantially enough that investors either build more housing in/near the urban centers to meet demand OR the price shifts high enough to make the decisions to live in rural areas much more appealing.

The problem with cities is that they have really bad failure modes. Consider Baltimore. The city has been run by a single political party for decades, and run right into the ground. Notice the trend in these population stats:

https://www.biggestuscities.com/city/baltimore-maryland

This is a city right next to DC, in an essentially recession proof area with lots of jobs.

I've known a number of people who were big proponents of living in cities until either (a) they were robbed, or (b) they had kids and realized there was no decent school there, and (c) they had no chance of impacting the government in any way to affect change. They all ended up moving to the burbs.

Are robberies less common in the suburbs?

Are schools in the suburbs better than those in the city?

Why is it easier to affect government in suburbs?

I'm not sure if you're discussing Baltimore in particular or if you are making these points generally. I'm not sure on robberies, but I live in Sydney and I don't think there is a big gap between school quality and government participation in suburbs vs cities.

My experience has been yes to all three of those. I’ve lived for decades in both Orange County (suburbs) and Los Angeles (city).

Where I grew up it was the exact opposite. I lived in a small suburbanish town which was 50% college students and 50% retirees. Almost all of my friends and fellow graduates left for the larger cities where job opportunities were far more abundant and where there was generally a lot more to do and see.

Which also seems to be supported by the general population trends. Rural cities are dying, with the younger generations moving closer to urban centers. Remote work and virtual offices will give you a better choice of city, but people are not likely to move out to places where there's nothing to do, terrible infrastructure and less opportunity in the scenario where you choose to find a new job.

And people have been saying that remote work will cause the trends to reverse any day now. So far that hasn't stopped companies even in SV; instead they just build new offices in other cities.

What do you mean by "nothing to do"? What is there to do only in the city that's supposed to be so attractive, clubs, modern art galleries? I'm genuinely curious because this never resonated with me.

Things to do in the Hudson Valley, the example I have in mind of a non-city area: expansive hiking trails for walking/biking, a river for rafting/skiing/boating/fishing, great family-owned restaurants all over, lots of nice historic sites such as the FDR estate and Vanderbelt mansion, a drive-in (unfortunately a rare institution these days, and obviously there are tons of normal movie theaters around), lots of good thrift/antique stores, hunting, tasting the fresh cider/whatever from local orchards (and getting great meat/produce from farmer's markets along with that), some concert halls around that play orchestras, horseback riding. If you want some stuff like classic theater/art galleries/etc you can find those around too, and a lot of stuff done by colleges. I'm sure I've missed a lot but this should be enough to make my point.

The city has some good stuff like the Museum of Natural History but not enough for me to want to live there.

I think you are missing the kinds of things that city people consider important. For instance, can you walk from your house to the market, and to the theater, and to the hiking trails? I live in an dense city in Asia and I can do this.

Many city dwellers do not drive a car and a significant proportion of those never even learned how. Does your rural area support a dockless shared bike scheme? Can teenagers travel independently or do they need to rely on their parents to drive them around? How much carbon does it cost the average family to get groceries?

On entertainment, and specifically in relation to Berlin: do you have a clubbing scene? Where can people go to dance to electronic music? Can they go out Saturday night after 9pm? Is there still public transport to take them home in the wee hours?

I live alone and everything I own fits in a backpack. Are there single room apartments available for people who choose to live minimal lifestyles? Is it even possible for people to rent? If not, how far away is the trailer park from the cultural center? And how close is that to the nearest Greyhound stop?

Things like walkability, access to rental accommodation, 24 hour entertainment and services... These kinds of things are taken for granted by people who live in cities. Of course this kind of lifestyle is not for everyone, but for those that value it, rural and suburban areas do not even come close.

Most people including me don't mind having to drive places, but there actually are a lot of places where you can walk to businesses if you live there. I'd rather have a more private house surrounded by forest on all sides.

You don't need a bikeshare if you have space to store your own bike. Teenagers can get a license at 16, ride bikes around, walk around, use skateboards, lots of options, but I don't see the big deal about getting rides from their parents sometimes. I don't think carbon use of individuals is much of a concern, with mpg getting better all the time and electric vehicles getting more popular.

I don't know anything about clubbing scenes but there probably are some. There are small cities like Poughkeepsie interspersed with the more suburban and rural areas around there. Quick google search shows some nightclubs exist. I could ask you about the availability of a bunch of things the city might lack too like places like this: https://en.wikipedia.org/wiki/Minnewaska_State_Park_Preserve

Maybe there are single room apartments around, I haven't checked, but there are definitely some small ones with a few rooms that probably cost a lot less than a single-room in a city anyway. Yes it's possible to rent, do you really think people don't rent outside the city? Honestly I think it's a problem, too much real estate is snatched up by people who then rent it out, making homeownership less available.

What do you mean by cultural center? There are bus stops around of various degrees of private or subsidized, with routes either within the city areas of Poughkeepsie etc or farther-reaching.

24 hour services are less than a city but they're still there. Wal Mart, Dunkin Donuts, various liquor stores, lots of stuff is 24 hours out there.

I have lived and traveled a lot outside of the city, in North America, Australia and Europe. Trust me when I say the vast majority of rural areas do not have public transport that is remotely comparable to what people enjoy in large cities. I am talking buses, trains, bikes, scooters, all available within a few minutes to take you anywhere you want to go. There is a whole expanse of North America - notably west of the Missouri - where you can't even get into or out of the small towns because Greyhound doesn't run there any more and Amtrak never did.

I have lived in the country. I don't want that lifestyle. Billions of people around the world do not want that lifestyle. They do not want to own a car. They do not want to own a bicycle. They do not want to own a house. They do not want to maintain a garden or have a forest on all sides. They do not want to go to the one nightclub for miles around. They want to have bars and restaurants and theaters and all those things that you are lucky enough to have in upstate New York, but they want it 5 minutes walk from their front door. And they want to choose from 20 different options. They want to get vegan food or bubble tea or something a little more interesting than Dunkin Donuts at 2am.

I understand that there are people who really appreciate the rural lifestyle, but please also understand there are many people who do not.

That's fine if it works for you. The point here is there's lots to do outside the city, even a lot of exclusive activities. I'm tired of seeing it said that there's "nothing to do" outside the city. Maybe if your only hobbies are nightclubs and getting mugged.

Besides that, people who would prefer to not own any car, rent bicycles instead of owning them if they're a bicyclist, and wouldn't want to own a house if they had the option sound like a niche minority to me.

> Maybe if your only hobbies are nightclubs and getting mugged.

As someone living in and enjoying rural live with lots of space and quiet I really understand your point, but slightly belittling and disregarding comments like these don't help your argument. It's not that hard to see the attraction of big cities as long as you can imagine that someone might have different interests than you. Of course, this applies to city dwellers unable to see the appeal of rural life as well.

> Besides that, people who would prefer to not own any car, rent bicycles instead of owning them if they're a bicyclist, and wouldn't want to own a house if they had the option sound like a niche minority to me.

I wouldn't put the idea of not owning a car in the same category as your other examples. A car is the first thing I'd get rid of if it wasn't required and I have no doubt that a large and increasing number of people feel the same way.

I don't think most people would choose not to own a car if there wasn't a concern of money involved. Car ownership can certainly be less economical than sticking to transit/biking in some areas, but I think most people in such situations would still hypothetically prefer having the option of driving available.

I don't own a car, nor do I ever intend to do so. Cars are expensive, dangerous and overall something I've never needed to get around.

This means almost all of the rural areas in America are off-limits for me, because not only is the public transportation infrastructure abysmal but it also heavily restricts my options if I wanted to get food, travel or do any form of recreation.

Whenever people bring up living in areas far outside of the city, they never factor in car ownership as part of the equation because they assume that's just a given.

Car ownership is not just a given. Instead of owning a car, you could lease a pick-up truck. That would get you around pretty well, especially if you get one with AWD. Fill the back with cooking gear so you can have food. If you want to be real cheap about that, route the exhaust up into a smoker so that the truck heats your food as you drive.

> Billions of people around the world do not want that lifestyle. They do not want to own a car. They do not want to own a bicycle. They do not want to own a house [...] they want it 5 minutes walk from their front door. [...]

You're assuming that essentially the entire world ("billions of people around the world") thinks as you do, just because you think so.

I've lived in cities of different sizes (magnitudes of 10⁴ to 10⁶), and those who don't want any personal mean of transport, not even a bike ("They do not want to own a car. They do not want to own a bicycle."), are a tiny minority.

I guess you must be in your 20s/early 30s, since something that actually happens IRL is that when people start to have children, instead of moving to more dense locations, which are more convient according to the theory you expose, move to more sparse locations (towards the suburbs), which actually require a personal mean of transport (of course, this is part of a variety of reasons).

That all sounds like college, with dorms and a campus shuttle and so on.

IMHO, one is expected to grow out of that. The next phase of life awaits.

Much later, when you are widowed and you move into an assisted living facility, you can once again have high-density living with few belongings and a shared means of transportation.

> IMHO, one is expected to grow out of that. The next phase of life awaits.

As rural living reminds me of elementary school, the same could be said for rural living.

> I don't buy any of this. Growing up everyone around me saw the city as somewhere you begrudgingly went out of necessity and only lived there if you had no choice, and I'm inclined to agree. In virtually every aspect I find more countryside-ish living much more pleasant.

I don't buy any of this. Growing up, everyone around me saw the suburbs as somewhere you begrudgingly went out of necessity and only lived there if you had no choice, and I'm inclined to agree. In virtually every aspect I find more urban living much more pleasant.

Funny how that works.

I'm always wondering... Where do those city dwellers put their heavy machinery? What? You don't have heavy machinery? Well, no hardware projects for you then. Do people seriously lift a half a ton lathe to the 10th floor of their apartment building and then just go at it?

My (small by international standards) city has several locations where you pay a monthly fee to use a shared workshop.

He wasn't talking about suburbs which technically are a part of a city and not of the countryside.

Suburban and rural can be blurry. I'm not sure what I'd call some of the areas I grew up around where there are both farms/orchards and a lot of cul-de-sacs/other houses. When it comes to that odd pattern of development where there are a bunch of cookie cutter houses really close together with little yards, I'm not a fan of that.

I've heard this change (the definite shift in desirability from suburbs and small towns to cities, which admittedly you seem to have somewhat blinkered out) attributed to the vast improvements in air quality / waste management / crime / public transport in cities, and that explanation seems reasonable to me.

Country living can be great, but your experience some number of years ago doesn't speak to the current data.

I was living in Berlin in 2015/2016 and believe me in no way at all are people coming here begrudgingly. Pretty much everyone between 20 and 35 wants to live here. And I can't blame them. I wanted to go and I still love the city to bits. There is nothing you can't to there. Tons of very interesting people to collaborate on projects with. Extremely good food and cultural attractions. Pretty much the most progressive place I've ever come across. Easily the best nightlife in the world.

This sounds like a love letter I suppose and I realize you were talking about cities in general. But anyway, I can understand why everyone wants go there.

> Pretty much everyone between 20 and 35 wants to live here.

Well, since you were in Berlin, that's probably survivorship bias. I live in Dresden, a city of 500k inhabitants about 200km south of Berlin. To me, Dresden is just the right size. Not as vast as Berlin, where it can easily take over one hour to get to the other side for a meetup, but still large enough to have enough interesting stuff going on in it.

> that's probably survivorship bias.

What? Is every other Berliner dead and can't tell their story?

Survivorship bias can apply to things other than literal survivors.

What I mean is that, since they're in Berlin, they're mostly interacting with other people who live in Berlin. They're not going to hear from people who don't want to live in Berlin, even if those exist.

Agreed. I'm still shocked about how pervasive it is. New York, San Francisco, Denver, Austin, Vancouver, Montreal, London, Paris, Berlin, Warsaw. It seems like a complete binary: cities are either dying or in the midst of a "housing crisis".

>Pretty much every western nation has systemically failed to recognize or support the insanely high demand for high density living in the 21st century.

While I agree that we have an unsolved problem here, isn't a city's government mainly responsible to do good by the people who inhabit that city and make up its electorate? That's how western democracies work, so no surprises there.

I know of many people all over the world who would like to move to the US and still the 'insanely high demand' has not been supported.

Because the root cause is not always high demand, it’s also speculation. Real Estate is now cool again (just look at investing forums or subreddits), and foreign investor money is flowing.

Look for example at Portland (OR) how the rent increase correlates with the population increase. The current urban hype alone can not explain these numbers.

Also another example since a few years a lot of high earning people in Paris are actively moving to cities with a better quality of life and climate (like Nantes, Bordeaux), in fact as high than 80% would do it if they could [1]. Yet bizarrely this has absolutely no impact on the market.

[1] https://www.lepoint.fr/dossiers/economie/bac8-saut-secteur-p...

I would give you 10 upvotes if I could. The main reason for rent (and housing prices in general) increases is speculation and investment. There is billions of dollars in rentals and mortgages, and it's in everyone's interest that real estate worth goes up... unless you're trying to rent an apartment or buy a house.

Someone pretty smart once said you can't have both real estate as an infinitely increasing source of wealth _and_ affordable housing at the same time. You only get to pick one.

This doesn't make any sense - real estate speculation would increase the purchase price of real estate but cannot directly impact rental rates. Speculation means people are bidding up prices for real estate beyond what's supportable by current demand, based on expected future demand. This generally doesn't make sense in the rental market - as a tenant, you're not entitled to benefit from any future increase in demand and it doesn't make sense to pay more that what the rental is worth to you now. This means rents, in aggregate, are a relatively accurate measure of the current supply and demand, free of speculative intents.

Ironically, certain types of rent control laws could lead to the rental market being influenced by speculation. Rent control laws effectively turn tenants into partial owners - this means, depending on the law, it may make sense to rent at an above-market rate, if that allows you to keep renting the same unit at what would later be a below-market rate. Likewise, from the landlord's perspective, it may not make sense to rent even at a market rate, because to do so may lock you out of getting what would be a higher market rate in the future.

> This doesn't make any sense - real estate speculation would increase the purchase price of real estate but cannot directly impact rental rates.

Not an expert, but seems to me they could indirectly, by reducing supply of rentable apartments:

Consider district X with n rentable apartments located in m buildings.

Now some buildings get vacated and are kept empty by speculators.

The apartments from those houses are not anymore available for rent, however, the demand for rentable apartments stays the same - therefore landlords of the remaining apartments now have leeway to raise rent without being punished by the market.

This doesn't have much to do with speculation - the decision to rent or not is something that every owner can make and the economics of the decision don't depend on whether your investment was based on price speculation.

Generally speaking, wherever you have a strong rental market, vacancy is low - it doesn't make sense to keep units vacant in a strong rental market. Speculators aren't some magical creatures to whom normal rules don't apply - real estate speculators are merely investors who believe that prices will move in their favor in the future. That doesn't mean they are any more incentivized to forego rental income, which generally is a large component of the return on any real estate investment.

Edit: I'll add that if you go by classical economics, you'd predict rent to go down if price speculation is excessive, since builders respond to real estate price and if price is sufficiently above cost of construction, this leads to construction of more units, which increases supply and depresses rent.

My general understanding is that this doesn't necessarily work that way because the fundamental factors behind what makes a location attractive don't change - within reason, if you build more, in the long run, you just become a larger, denser version of what you were, which just attracts more people.

It's so strange - the promise of the "information super-highway" in the 90s was that proximity wouldn't matter as much. But if anything it matters more, since every minute spent idle (e.g. travelling to meet someone) has a higher associated cost due to the opportunity cost of lost productivity. So we tend to clump and cluster.

> But if anything it matters more, since every minute spent idle (e.g. travelling to meet someone) has a higher associated cost due to the opportunity cost of lost productivity.

Which sounds like another vote for remote work instead of clumping and clustering. Why care about proximity and the time it takes to travel when everyone you'd want to meet, regardless of location, is a message, call or video conference away and reachable from your home, favorite coffee shop or local office?

And no, I'm not saying that this has to replace all face to face interaction, but I think it should become the default for work environments that are compatible with this approach.

I totally agree. I'm just trying to get my head around why it seems that our promised decentralisation never came to be. Maybe old habits just die hard.

It is decentralized, just family rather than work.

Speaking as a German, a big part of why this decentralization isn't happening is that Germany's internet infrastructure is a fucking joke. I'm sometimes even having trouble with getting consistent 3G coverage in large city centers. When driving around the countryside, it's frequently 2G or no service at all. And it's looking similarly bad for broadband internet access in homes. My parents don't have any broadband service whatsoever. They use a 4G hotspot to go online, and get an average connection speed of 170 KB/s. This is par for the course in rural Germany.

As a fellow german, I'm aware. In fact I'm living in a quiet, rural place about 45 minutes from a very large city. My only broadband option is LTE, which thankfully has very good coverage here (steady 50 Mbit) and features an unlimited plan (Telekom Magenta Hybrid), but up until a few years ago everyone around here was limited to 1 Mbit DSL.

Of course the problem goes deeper than raw infrastructure - the mindset for a digital life isn't there yet. This appleis to businesses and particularly to official government bodies. Think about your interactions with the government, simple errands like renewing your ID or registering your car - there are awfully complicated and outdated processes everywhere. I've said it before but I look with envy to competent, easy to navigate portals like https://www.gov.uk/.

Yes and no. Yes your want to make an offer to those arriving, but you also don't want to destroy a city by letting prices go so high that only a certain caste of people is able to afford it - think SF. Not everyone can be rich enough to afford decent living inside a city. And yet you still want cheap burgers and services, as well as public schools and trash collection and police. None of those can afford big city living if you allow the tech & big business crowd to simply price them out of the market.

They are necessarily connected. Supply and demand is connected. If rents are frozen, that lowers housing liquidity (because people won’t move if their rent stays “affordable,”) which reduces supply and necessarily creates a shortage. It lowers mobility as well since there is a shortage of available housing which leads to inefficiency— if someone moves to another job in another part of the city, that person would be less likely to be able to move. Then, there’s added stress on transit since people must commute less optimally.

On the issue of new housing, who would risk capital to build new housing when their returns would be subject to the whims of rent caps? What’s the incentive to improve existing housing when the revenue for doing so is limited? Basically, what’s the point of making non-legally required improvements if you can’t raise rent to cover those expenses. That’s going to result in a decline of housing quality over time.

Unless the government is also going to reduce taxes and expenses and inflation for property owners to help offset the lack of revenue growth? Property owner expenses are going down are they? That lack of revenue growth also means less future capital to build more housing.

Rent control benefits a specific group, but ends up costing the whole far more than it saves the few. It’s popular to “protect” the visible because they are visible and typically sympathetic figures. But there is a greater harm being effected that is less noticed because the face of that effect is the “greedy” property owner, but the invisible victim is the overall public.

I agree with some of your points but I think you're misguided on a couple.

>because people won’t move if their rent stays “affordable,”

This is the issue rent control is trying to solve. There will always be rich people that can afford to live in the city, and they basically raise the bar on what developers and landlords think people can afford. They stay comfy while the rest basically pour all their paycheck into rent, forgo savings, and feel stuck. What about the rest of the people that work in the city with median income (or lower) jobs? They get pushed out further and further from city centres. In turn, that creates enormous strain on public transit and traffic congestion becomes unbearable.

That being said I don't believe rent control is the proper solution, but it's the only one most people agree on right now. I'd like to hear about more solutions if there are any.

Rent controls are just a fancy way to say "price caps".

If you artificially depress the price of a commodity, you induce a scarcity. Apartments are slightly less liquid than say apples, but the principle still stands. It should express itself in demand outstripping supply. If supply and demand were in equilibrium, there would be no point in rent control.

> This is the issue rent control is trying to solve.

I don't think you fully understand the issue. You focus on one specific case: richer renters displacing poorer renters because they're willing to pay more. But there is so much more to the housing market, and to people moving from one home to another than that.

Maybe I got children, and I want a bigger apartment. Maybe my children moved out, and I now want a smaller one. Maybe I changed jobs, and I want to move to a different part of the city closer to work. Maybe I want to move to a different city where I got offered a job. And so on.

In a "normal" housing market, you can do all of these things. I can get an apartment in any part of the city within a week, because people move around all the time and leave empty apartments. I don't have to be richer than them, I will pay the same price they used to pay. In a normal housing market, people move around, which means other people can also move around. In a housing market that gives special privileges to current renters, people get "entrenched" in their apartment and don't want to leave for any reason. So these apartments never appear on the market.

In my city, there are rent controls for certain apartments (fortunately very small percentage). I know a few people who live in such apartments, and most of them never intend to move for any reason (unless the rent controls are revoked, which might happen). It is not because they consider this apartment the best possible place for them to be. It's because they don't want to lose their privileges. A renter in a rent-controlled home has an extremely strong artificial incentive to stay exactly where they are. This is inefficient, because as a result, people can't move around.

Now you do have a point, in the sense that it might cause people with lower incomes to be "pushed out". I am not familiar with Berlin, I know my city is fully mixed usage and there is not some huge dropoff in rent as you move away from the center (in fact, some parts further away are more expensive than some nearer). Also jobs are not concentrated in the center, so it's not like most people are commuting into the city center every day. There is pretty much everything everywhere.

I get the argument of less investment into maintenance, but new buildings with higher capacity (instead of higher quality) could still make you more profit than current ones while boosting supply. Sadly new constructions will continue to target the high price market, since the new caps seem to specifically exclude them.

Why must people currently living in a city be able to do so in the future? I think it makes sense to allow people whose skills are more valuable to a city to take the place of those whose skills are ... more valuable elsewhere. Cities evolve. Do I deserve to continue living in a city in perpetuity just because I happened to get to the city before others?

Why should we exclude some people from living in attractive cities?

Being less wealthy doesn’t mean a job is less valuable. Police officers, firefighters, bakers, artists, nurses… currently struggle living in attractive cities because they cannot afford it. This makes these cities less liveable for everyone.

I see no reason why a productive city with a high-earning, tax-paying population won't be able to pay police officers, firefighters, nurses, etc. as much as they need to be paid in order to do their important jobs well. I don't see why artists who do important work e.g. for Apple won't be paid well too.

This seems like a problem that is naturally solved by market forces, supply and demand. If some job is sufficiently valued in a city, then businesses and government will pay whatever wage is necessary to hire people to perform that job.

If people who are doing some job cannot afford to live in a city, then they will move away or find a different job. This will cause a shortage of people performing the job.

If there is a shortage of people doing the job, and the results of that job are sufficiently valued, then employers will be forced to raise wages until they can attract the number of employees required.

For example, if a city has a shortage of police offers, then they can solve that shortage by paying police officers a higher wage. If the city cannot recruit police without a higher wage, then the city will need to allocate more funds to police compensation so that they can pay a higher wage. If the city doesn't have the funds, then they may need to take the issue to the voters, who can approve some form of appropriation like a new tax to pay for it.

Alternatively, perhaps the voters will not approve a tax, and the city will not pay a higher wage for police, and there will be a police shortage. That's the voters' decision. The city will experience the consequence of the police shortage, whatever that may be. Later, the voters may change their mind and decide to approve the tax.

My point is that the fact of there being a labor shortage will cause a correction naturally via market forces.

What are you talking about? Nurses, teachers and public sector workers all critical for the functioning of cities are claiming welfare. Some nurses in the NHS are eating patients' left-over food. The logic of the market is to drive wages to the bottom and replace workers when they break. It leads to the destruction of service quality, social cohesion and increased deaths in our hospitals. Please stay off the Ayn Rand methamphetamine.

The argument is that if the voters are not willing to fund those vulnerable workers then it clearly means that the voters have made the concious decision that these workers are not important to their community and therefore they think the workers should leave.

Well, there are two solutions, either make the voters less influential or change the behavior of the voters.

> Nurses, teachers and public sector workers all critical for the functioning of cities

Sure. As a voter, if my region was experiencing a shortage of public sector workers, and that shortage was affecting my quality of life, or the life of people that I care about, then I would certainly be willing to vote in favor of a pay raise.

> The logic of the market is to drive wages to the bottom and replace workers when they break.

No, this is not true. Markets exhibit emergent behavior. They don't have any logic per se, although we can reason about how we expect them to behave. If markets have any "logic", then their logic is to reach an equilibrium price.

This does not necessarily mean that wages are driven to the bottom. What happens to wages is a function of supply and demand. If very few people are capable of performing a job in some area, and that job is in high demand, then the result of supply/demand dynamics will be a very high wage. On the other hand, if lots of people are capable of performing a job, and/or the job is in low demand, then the result might be a low wage.

It is certainly the case that everyone wants to pay the lowest price that they can for acceptable quality goods and services. Who wants to pay more at the grocery store, or the dentist, or the doctor's office? The cost of labor is a dominant cost in the price of all goods and services that we consume. The fact that automation is replacing labor in many industries has directly lead to the phenomenally low prices for many goods in the modern world.

For example, before the Industrial Revolution, clothing was exceptionally expensive. Clothing required a massive amount of human labor, and so a single shirt might have cost the equivalent of $3,500 modern dollars. As a result of this, poor people could afford very little clothing - resulting the trope of peasants wearing rags to tatters. Most of our fabrics and clothing are produced by machines now, and so the cost of clothing has come down by orders of magnitude. The result is now that even fairly poor people across the globe can afford adequate clothing.

https://www.sleuthsayers.org/2013/06/the-3500-shirt-history-...

Automation in most cases results in an increase of quality, not a reduction in quality. For another perspective on this, examine how the cost of lighting has decreased over time: https://ourworldindata.org/light#price-of-light-over-the-lon...

It is a good thing for everyone that the costs of goods and services comes down over time (or equivalently: the quality of goods and services increases while the price remains steady). This directly leads to a better quality of life for everyone -- this is exactly the way in which economic growth leads to an improved standard of living: the same dollar can buy more than it could before, either a greater amount of goods, or goods of greater quality.

Freezing rents to fight increasing costs makes as much sense as limiting the maximum reading on thermometers to fight increasing temperatures.

Prices aren't just arbitrary numbers attributed to goods. They convey information. Information that cannot be captured by any one group alone. That's the point of prices.

Freezing rents will create a lot of unintended consequences, as price controls normally do. I imagine that apartments would be poorly maintained as landlords won't need to attract new tenants. Many people will illegally sublet their homes and capture market rents. Landlords will be suspicious and begin treating their tenants with contempt. Investment in building real estate will reduce considerably. The city would be less vibrant and it will be harder to attract young talent or new businesses.

Freezing rents to fight increasing costs makes as much sense as limiting the maximum reading on thermometers to fight increasing temperatures.

You realize that, logically speaking -- there's no analogy to be made here.

Right?

Rent control never works, but that never dissuades governments from trying it again and again.

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

Because it's a very effective populist policy to get support from the electorate.

It works reasonably well in the rest of Germany.

As for it not working in Berlin, I have a hard time to come up with _anything_ that works there, so my hunch would be that the housing market in Berlin is broken not because of rent control, but because it's Berlin.

> It works reasonably well in the rest of Germany.

How? Pretty much all large cities are much more expensive than Berlin, rent-wise (and in most other things).

It "works" (in that it doesn't cause problems like rationing by other means like queueing, under the table payments, subletting, or any one of the myriad other problems rent control produces) because it actually does nothing - it results in rents which are equal to what the open market price would have been.

Ultimately, if you want to reduce rents AND have a functioning market, you have two options (or a combination of them): (1) reduce demand, (2) increase supply.

> it actually does nothing - it results in rents which are equal to what the open market price would have been.

Lots of people living in rent-controlled apartments around the world would disagree.

And it screws over anyone who wasn’t lucky enough to win that lottery.

The lottery of having already lived there? Only in the same sense as if I have a doll, you're screwed out of having that doll.

Rent control diminishes the incentive to make new housing, and causes rents on remaining housing stock to rise, generally. It privileges the people who have held onto their apartments for a long time at the expense of everyone who has had to move recently, at least as it’s been implemented in American cities.

Doll ownership isn’t a great analogy for housing.

It also nails the feet of the people who live there to the floor, because they know they can't get such a deal again if they move.

This is economically and environmentally inefficient, because it traps people in less desirable jobs due to proximity, and prevents them from moving closer to work.

Ah yeah, another huge problem that I forgot to mention. This really kills the liquidity of the market. You see the same dynamic with sales in CA due to Prop 13 - this makes it so that elderly people can’t afford to downsize, because their property taxes would go up 10-20x for many of them if they moved to an equivalent place, and it’s economical for people to sit on extremely valuable undeveloped land and wait for it to appreciate, because there’s next to no holding cost.

If there weren't for things like rent control or prop 13 those people would just be suffering anyway as rents or property values would increase where they live as well. So I don't see that argument making much sense. Thing like prop 13 is probably damaging because it inflates property values however.

Have you ever noticed the odd fact that children sometimes grow up and wish to rent a home themselves?

They already might live there with their parents, but if they want to move out and stand on their own feet, they would have to pay double or triple compared to their neighbours. Hence they can not move out from mum's basement if they don't want to move away.

Of course this helps resident retirees who don't move and whose children have moved out, even if it is an economically retarded policy -- and retirees vote. Same as California's prop 13, really.

With your pithy reply you miss the critical fact that the german version of rent control isn't actually rent control. It just pegs how much rent for any given apartment can increase to how much the rent in that area has recently increased. In practice this means that all rents increase at the same rate as before the "control" was put in place.

Wait is subletting an actual problem in itself? Am I missing something?

I know if done in excess it could lead to fire code violations, landlords dislike not getting an increased share/concerns about increased maintenance, and would turn controlled rent holders into beneficiaries of a free cash stream over others not privledged but those are either technically separate issues or already in place really for the last one without subletting.

In this context (ie subletting against the terms of the agreement), I'd say it's a direct interference with the property rights of the owner, which to me is a problem, although I accept others might take a different view on that. But it also often comes with all the usual issues with gray markets - subtenants might in practice have very few enforceable rights, tax evasion can be common, etc etc.

It results in rents which are equal to what the open market price would have been.

This is a pretty strong claim to make. Can you provide data to substantiate?

The German Institute for Economic Research (DIW)'s study from June 2016 came to this conclusion:

https://www.diw.de/de/diw_01.c.535261.de/themen_nachrichten/...

You can't build forever anyway.. the demand is going to shrink in the future. Look at those countries where in 80s and 90s built too many houses (Italy, Spain for instance).. most of them are rotting now or are abandoned due to poor economy

So where does "not rent control" work for long term affordable housing in in-demand areas? I don't think I know of any city comparable to Berlin, in at least size and prospects, that hasn't had significant rent increases in the last five years.

It works fairly well in NYC, too.

Not without tradeoffs, mind you. But it does basically work.

> I found the situation in Berlin to be absolutely ridiculous.

I totally agree with this assessment. I've never seen a city where you struggle to get a flat even if you have the money or can pay more.

The market is absolutely broken with literally everyone competing for the same pool of flats.

I don't know, there's something utopian about what you describe. If the city doesn't have housing for everyone, why should the rich get it first? Leave capitalism at the door, we're talking about a roof over your head for janitors vs. business executives.

If an 'ideal' free market means the rich get the houses and the poor are on the street, because developers don't have motivation to build, then I'm happy to see everyone compete for the same housing and seeing both the rich and the poor on the street while we figure out a real solution.

The opposite of: "only the rich can get a house" is not "everyone gets a fair chance of getting a house", but "not even the rich can get a house".

Think of two families that want to get the same house, both having about the same wealth, but one is desperate to get the house and therefore willing to pay more, say because of health problems, while the second family can wait for another property.

You lose a lot when you "leave capitalism at the door".

By that logic, there would be no way at all for the poor to get a house.

Yes there is. You _build_ more so that prices go down.

It’s baffling how much “adding more housing” is always a non starter solution. Everyone seems to understand that if flood the market with something like diamonds then the prices of diamonds will go down, but when it comes to housing then basic economics go out the window.

Rent control is an incredibly pro-landlord policy. In high growth cities, land owners can simply sit on property, never invest in that property (they don’t have to compete) and simply watch their value skyrocket as they never have to worry about new supply driving the market down.

High price demand is filled before low price demand. In the context of limited space and inability to, say, build high (as in Berlin), what you propose could literally mean that there is no housing for the poor.

My friend, this is not about the top-hat/monocle wearing rich.

We're talking here about middle class people, your teachers, pharmacists, taxi drivers, clerks etc.

The rich, as always, have options that aren’t available to the poor.

In the case of Berlin, it is surrounded by Brandenburg. Brandenburg is extremely cheap, and one could easily live there officially (but in practice only on weekends) and only spend weekdays in the city, perhaps in a hotel (the price difference of weekend home in Brandenburg plus hotel in Berlin vs. anything in SanFran makes this look sane). Or you could live a short walk from Leipzig Hbf. and take the high-speed train to Berlin which is only about one hour and thus similar to my tram/bus/U-Bahn/S-Bahn commute to the the city center from just inside the city limits.

My ideal is not a free market either, but rather government built homes. I may however be rose-tinting the past, as my mental model is what the UK used to call “council houses”.

Edit: also, I’m not actually German, I’ve just lived here for 10 months and am still learning about everything.

Sorry, but comparing prices in Berlin and San Fran without comparing salaries doesn't make any sense. Average "rich" manager in Berlin would make like 40k after taxes which is more comparable to the janitor than a manager in SF.

This is a terse comment with not a lot of context, but I think it is misleading to say the "market is broken" as it suggests that the market mechanism is at fault but in reading these comments it sounds like the government regulations are the source of the problem.

Sorry for the shortcut. You're correct and that's basically my impression, the market is bludgeoned by illogical policies.

A market can be broken through the actions of private actors too. Monopolies and other anti-competitive organizations, criminals, poorly educated market participants, externalities not properly accounted for, etc can “break” a market. In this case a large number of voters seem to believe that rents should not increase even if demand vastly outstrips supply, forcing the government to create short-sighted policies to try to appease them.

Sure markets can be affected by private actors, but I still think "broken" isn't a helpful way to think about market conditions. High and low prices are examples of the market working exactly as needed by signaling that there is un-met demand (high prices) or mis-allocated resources (low prices).

The rental freeze does not apply for new housing.

(Wohnungsneubau wird vom Gesetz gänzlich ausgenommen.)

https://www.berlin.de/rbmskzl/aktuelles/pressemitteilungen/2...

This time.

When the next freeze takes place, your residential construction won't be "new" anymore.

Freezes have always been possible. Nationalization below market rates have always been possible. Neither discourages construction. That's just FUD.

While it is true, that there are simply not enough apartments the rest of your argument is wrong.

In berlin, the rent limits don't work, because of various reasons, one for example is that companies simply rise the costs that are not rent for appartment, force the people living there out and then raise the rent.

The rent limit is not the only thing that has to be done but it is a step in the right direction.

I always hear the argument about investors and the rent limit, but there are multiple reason why that is a bad argument.

The investors had about 20 years time to fix this issues and make a good living out of it. Instead they raised the rents to exorbitant values and didn't built new appartments.

Investors can still make good money of appartments if they just rent them for a fair amount.

Of course that means they don't get a 200% percent profit, but I don't think that should be the case anyway.

Homes are not up for speculation and profit and they should never have been.

A good chunk of the houses in berlin where owned by the city and state and sold for far too little.

> In berlin, the rent limits don't work, because of various reasons, one for example is that companies simply rise the costs that are not rent for appartment, force the people living there out and then raise the rent.

Do you have examples of this happening? Nebenkosten are controlled by the government or the responsible agencies as well, and you get a detailed invoice of any costs so the landlord can't just bill whatever they want.

Afaik there was a winter service which was billed and nobody ever saw that winterservice happening. Or there were addons built to the house that where not necessary and would force the people out.

> Homes are not up for speculation and profit and they should never have been.

Amen. Here's a bit by Stewart Lee that I consider more insightful than funny:

> Basically, what's happened is, somewhere along the line, as a society, we confused the notion of home with the possibility of an investment opportunity. What kind of creature wants to live in an investment opportunity? Only man. The fox has his den, the bee has his hive, the stoat has a a stoat hole. But only man, ladies and gentlemen, the worst animal of all, chooses to make his nest in an investment opportunity. Mmm, snuggle down in the lovely credit. All warm in the mortgage payment.

> Mmm! But home is not the same thing as an investment opportunity. Home is a basic requirement of life, like food.

> When a hamster hides hamster food in his hamster cheeks, he doesn't keep it there in the hope that it will rise in value. And when a squirrel hides a nut, he's not trying to play the acorn market. And having eaten the nut, he doesn't keep the shell in the hope of setting up a lucrative sideline making tiny hats for elves. And when a dog buries a bone, he doesn't keep that bone buried until the point where it's reached its maximum market value. He digs it up when he's hungry.

> And if estate agents were dogs burying bones, not only would they leave those bones buried until they'd reached their maximum market value, but they'd run around starting rumours about imminent increases in the price of bones in the hope of driving up the market, and they'd invite loads of boneless dogs to all view the bone at the same time in the hope of giving the impression there was a massive demand for bones. And they would photograph the bone in such a way as to make it look much more juicy than it really was, airbrushing out the maggots and cropping the rotten meat.

Why everyone in Germany fixates with "big investors" and fighting them?

In reality 60+% of rental apartments in Germany are actually rented by private owners, for most of them it's their retirement plan. Around 10% of German households receive some rental income. 75% of landlords have ROI of less than 1% per year, almost one half even 0 or negative.

But hey, evil landlords, evil corporations. Corporations would be just fine, someone managing 100000 apartments is much more efficient than someone managing one or two. Those small guys would be just pushed out of market, and only corporations would just buy them out in next decade or two. Then we'll have real rent problem.

[flagged]

>A successful society is not just a rampant pursuit of economics and profits at the expense of everything else.

Right, but people are incentivized by the profit motive and generally do what they can to meet it.

To just say "think of the people" is swimming upstream; you're more likely to succeed by finding a way to modify the system to drive people towards actions that benefit each other.

Unfortunately it is not very human to forgo money, power, fame in exchange for what they think is the right thing to do. That's why we've had to create economic or political systems that saddle the drive for those things and steer it towards things that benefit society.

While I don't necessarily disagree with rent controls, portraying this measure as people vs corps is simplistic. As long as the city relies on private investors to build new residences, lower investment also means the PEOPLE who could have lived in Berlin are left out.

(The measure is also typically bourgeois; it throws some crumbs to fix the outcry so the capitalist system can remain in place)

I'm not American, but I share this opinion. Berlin needs housing - but what they're doing is to make it maximally unattractive to invest in housing. That's just illogical, and even critized by non-profit housing orgs (Baugenossenschaften).

Nationalistic and ideological flamewar are not allowed here. Please don't post like this to HN.

https://news.ycombinator.com/newsguidelines.html

Edit: we've had to warn you about this before. Please don't do it again so we don't have to ban you.

There isn't massive sub letting going on then?

I'm not aware of massive subletting going on but in general if you sublet without letting your landlord know about it you risk losing the apartment entirely, and most landlords won't let you sublet for longer than six months. Of course sometimes it does happen. A couple of friends of mine have been in the same sublet for the better part of a year but they're also looking to move to a more stable place. The renter has basically moved out but is keeping the flat around "just in case"

I am not sure if building houses is the solution. Wealthy people from around the globe will still buy them to rent them out for a profit or let them just sit there empty to visit for 2 weeks a year. There is even a name for that effect, it is called "induced demand".

See: https://en.wikipedia.org/wiki/Induced_demand

I feel that the problem is that too many people want to live in Berlin, the solution is for a large fraction of those people to choose to live elsewhere, and the rising rents would have been a good way to achieve that outcome.

Well, in that case, either the rent lock will actually work - or it will increase the difficulty for everyone to get a flat, which essentially would have the same effect of driving people to the outskirts.

The people who can afford to pay higher rents are generally the most productive. They have important skills that employers are willing to pay high salaries for. They also pay more taxes and spend more money. If I ran a city, I would want more of those highly skilled workers in my city.

So, you're actually in favor of higher rents.

Why not mandate rent increases?

This is silly. Your counter-argument is basically also meddling in the market.

There is no such thing as not meddling in the market, because people that move to cities will work to enact policies to ensure that they can continue to either live in those cities or grow their own property value.

In SF it swung hard in favor of landlords with the outcome of it being unaffordable for tenants and anyone except the ultra rich. Berlin seems to be swinging in the opposite direction and is attempting to fix things for tenants.

And realistically, anyone not taking action to secure their home or investment would be considered an irrational actor by any free market standard.

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

> If I ran a city, I would want more of those highly skilled workers in my city.

Why, exactly? Does the person who runs the city with the highest per capita tax receipts get some sort of award? I assume his/her rent would get driven up with the rest.

People with higher capita tax receipts are also less likely to be ill, less likely to indulge in violent crime, less likely to hold extremist views, less likely to litter or cause other trouble.

If you want to manage a liveable city instead of a slum, you want that kind of people.

I like how those kind of views eventually reveal how they are actually just social darwinism.

Do you deny that these effects exist, or is there another level of argument that I don't get in your apparent defensive posture behind a politically loaded term?

That is exactly what happened with San Francisco though. Then those fraction of people in Berlin become entrenched in local politics, prevent any further housing or development and the end result is a city that's nigh-unlivable. Last I checked, SF gets a lot of criticism for that reason.

Another way to do it would be to turn new entrants away, unless people who were already there chose to leave. To the people living in Berlin, it's arguably not at all a problem that too many people want to live in Berlin until the rents rise as a result.

Or we could just limit rent rises and allow rent contracts to be limited to 5 years. After all, why does anyone have a higher "right" to live in their preferred place?

Are you saying that shortages are not reduced by having more of the thing that there is a shortage of?

It is at least clearly like that with roads (see Wikipedia link). With housing I can imagine a similar effect.

So why not actually destroy roads and housing then? Won't that make things better?

With roads it has been done successfully, see again Wikipedia article. As you can see from our discussion, a detailed analysis of what the underlying drivers of the rent crisis is missing.

Without that a solution is difficult to find. Just to give you an example: one major trend is that people live by themselves. Is that a core driver? Another is that there are huge amounts of capital flowing in buying properties. Another could be the that people’s expectations how sqm per household person have increased dramatically. Yet another is that with 1 mio refugees entering the country in 2015/16 the pressure on housing has increased, etc. Is it all of them? Another ones?

Lacking new construction they'll buy up the larger, older family homes as investments instead. That's what happened to San Francisco with its lack of development. If a foreign investor invested $1 million dollars into real estate, isn't it preferable for it to be a few small units in a highrise rather than a good part of a traditional residential street?

> Wealthy people from around the globe will still buy them to rent them out for a profit

Thereby increasing rental supply. People can and should arbitrage differences between purchase and rental prices.

> or let them just sit there empty to visit for 2 weeks a year.

Vancouver figured out how to fix this particular problem — tax vacant houses.

This measure discourages investors to purchase already existing property, for sure. But this also leaves the opportunity to put the money in construction. The market in Berlin is still very attractive due to very high demand, so lets see how quickly can the local councils allocate land for new housing. Some time ago I’ve also heard the complaints that city has no enough capacity to give building permits quickly. Those could be the real bottlenecks in the city which grows by 200 000 every year. It’s also interesting to compare it with Moscow - nearly the same area, but 4 times smaller population and plenty of badly used space (like Tegel airport). Will it be able to keep growing while maintaining high living standards?

>in general they're clearly very effective.

Oh yeah. Like, it's nearly impossible to find a place to live. Economics 101, true, artificially lowered price is leading to deficit.

My take is that from an "economics 101" perspective, a rental isn't a normal commodity.

When a vacant rental is first advertised, it is essentially "put on the market" and it's price could be determined by supply and demand in a more or less fair way (assuming "gentrification" is just demand).

But signing a lease and renewing it are very different. For the renter, leaving a rental incurs a very real cost (searching for another place, packing, moving, stress, change of habits etc). It's true that there's also a cost to the owner but it's much smaller (adverting, viewings, risk of unknown tenants etc).

So the "rational" thing for the owner to do is to try and take advantage of this by hiking up the price to include the leaving cost of the tenant. If the market is left to it's own accord, it will cause this.

Of course freezing hampers with the fluidity of the market price. A good middle ground is a predetermined max price increase agreed upon in the lease.

I think you underestimate owner costs of turnover. Risking an empty apartment for even a few weeks can erase your yield for the whole year. Landlords, then, are only likely to hike rent aggressively if it's worth that risk, in other words, when the market price is dramatically higher than the current rent rate.

>The solution is to build houses, but what kind of investor is going to throw their money at Berlin, where their opportunity to make a return on their investment is severely hampered?

Uh, the state. It's strange to me that someone can honestly ask this question. The free market has failed as is its wont in these matters, this failure always needs to be addressed by the state. Where were you for the last global economic collapse?

What does the last global debt crisis (which was caused by central banks around the world keeping interest rates incredibly low for a long time, which allowed housing debt/speculation to balloon massively, and then tightening suddenly) have to do with the failures of the free market to develop sufficient housing?

And in many major cities, things like zoning are preventing developers from building nearly as much housing as they’d like.

I guess I’m just kind of baffled as to how you’ve reached the conclusions you have. I’d love some clarification.

The last global financial crisis was created by the world's largest Central Bank. It had absolutely nothing to do with the free market when the largest banks were dealing with government-guaranteed securities and were speculating on a government created bubble.

In a free market, all those who poured billions into the bubble would have gone bankrupt and all of their real assets would have been sold off in bankruptcy proceedings to responsible players who are less likely to over leverage themselves and exacerbate the speculatory frenzy in the next bubble.

The only reason the market hasn't solved the housing problem is government interventions like rent control. In places without these interventions and with strong enforcement of private property and contract rights, the market does an absolutely excellent job of providing housing.

The effects of rent control have been observed for a hundred years. In city after city rent control has been observed to cause more harm than good for the population at large.

https://www.idiosyncraticwhisk.com/2016/10/housing-part-183-...

Kevin Erdmann agrees with you. Here is his blog post about the housing shortage associated with the 2008 bust

> Uh, the state.

This is Berlin, which actually used the slogan "arm aber sexy" (roughly: impovershed, but sexy).

They don´t have the cash to start building flats with no ROI.

I have a hard time being sympathetic to people wishing to displace.

The solution is to build houses,

It's one option among many.

And by itself -- most likely not a sufficient solution (or any kind of a game changer).

I just don't understand this stance at all.

Basically the main reason this "stance" is that the locals know better: that simply allowing newer (unregulated) construction isn't going to bring their rents down -- or that is to say: do something about availability in their income brackets, and not just yours and mine -- anytime soon.

> When I moved here I was warned of 100 people turning up to a flat viewing, and laughed it off as some hyperbole. Only later did I find out that it actually happens, albeit the maximum viewing I went to was around a meagre 50.

The Bay Area has a rather efficient solution to this problem: limit the open house to 15 minutes. I wish I was kidding, but I saw multiple open houses that were literally 15 minutes long, and if you arrived 16 minutes after it started, too bad. And, unless you show up with a pre-filled application, credit report, blood sample, and your checkbook, there's no guarantee you'll even have a shot at the place.

Ok, the blood sample is a bit of an exaggeration, but not much. Apartment hunting in the Bay Area is not something I'd wish on anyone. I'm pretty sure Dante wrote about it in the Inferno somewhere.

The problem isn’t the number of people showing up, it’s the number of people who want any given apartment. Limiting viewings to 15 minutes may solve disruption to neighbours, but it doesn’t help with the demand-supply ratio.

Its really simple. We should tax property AND rent to the point where it becomes unprofitable to hoard it for purposes of unproductive wealth extraction. Then change all rent contracts into lease-buy contracts.

You would accumulate a good percentage of madly overpriced rentals that no one wants then they go bankrupt one by one. You get those delicious market dynamics we [apparently] crave more than any social convention. Buildings should be hot potatoes that you don't want to hold for to long. With this much demand it wont even affect housing prices but even if it did, who cares?

Gradually, (in stead of rent) people pay tax at market rates. We can keep the large scale wealth extraction and continue to force people into productivity only it would be the government doing it.

The same logic applies as with the teachers, taxi drivers, cleaners, garbage men, restaurant employees etc: If you don't like it you can just leave the city. Get some of that delicious mobility going and gtfo. They can just leave for the sake of efficiency and availability. Its that simple: Just go away.

If you have to chose between [say] 1) a corner store OR 2) a land lord it should be obvious which one to get rid of.

If they are contributing to quality of life by selling food and employing people we should consider giving the store a tax cut. One could also extend the tax cut to the people working there and have cheap stores.

Its hilariously unproductive to have a usury scheme of greedy unproductive rent seekers extracting wealth from every transaction that is some how remotely related to real estate.

I just want to pay for the ice cream, pay the people involved in making the ice cream happen. Why would I pay 80% to someone who doesn't do anything I need?

Can you clarify what problem you are trying to solve with this proposal?

No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy. Why stop two consenting people from entering into rental agreements, both of whom believe it's in their interest?

Some people prefer to rent: they don't want to be obligated to live somewhere for 10 to 30 years. They prefer to be free of commitments and loans (and/or don't have enough cash to buy). I wanted to live somewhere for a medium period of time (a few years) with no significant commitment or risk, then move on. I had just moved to the city and wasn't sure where I would ultimately want to live long-term. Landlords can also rent properties to people who have far worse credit and far fewer assets than would be required to buy the same property. I was able to rent a property much nicer than I could have afforded to buy at the time, since I had income but little wealth and credit. (The landlord in that case is taking on unsecured risk that I will default on our contract.)

Landlords also provide useful services to their tenants: they are responsible for all upkeep associated with the property. When I rented, I was glad not to have to deal with any of that. Landlord takes care of all the yard, or common spaces in an apartment, and if something breaks I just call the landlord. If you own appliances and real estate yourself, then you are potentially on the hook for significant costs if something breaks. Maybe the refrigerator breaks and you need to buy a new one: the landlord needs to budget or purchase insurance for that, while a renter does not. Landlords also assume liability for their property: if e.g. asbestos is found on the land, they may be responsible for paying for the cleanup.

Property owners are forced to tie up their assets in the real estate. Renters don't have to. Let's say that I have $1 million in cash, and I want to live somewhere. I don't necessarily want to have to invest all of my cash in real estate - not even a down payment on a mortgage. Renting might be a preferable alternative so that I can use my cash for other higher-value investments or to fund a business.

Lastly, landlords assume risk. If they can't find a tenant for their property, then it sits idle and they take a loss. When you own property, you can lose a significant amount of money if the property depreciates, as happened during the last recession. When you're renting, your risk is capped - you owe the rent but that's it.

Renting isn't wealth extraction. Like staying in a hotel, it's commerce, an exchange of money (rent) for services (temporary right to occupy a property). If you want to buy a property from its current owner, instead of renting it from them in a landlord-tenant relationship, then make them an offer, and if you both agree then you can do that instead.

> No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy.

Ok, how does this work. In germany, you usually need to pay 20-30% of the full price from your own saved funds when buying property. 100% financing is rare and usually only available for people that have sufficient assets. So people that have a low income basically never have a chance to buy. They don’t choose to rent. Their only alternative is living in the street.

Rents in Berlin have been rising substantially faster than wages for the last decade or so, turning this into a vicious circle that even the middle class cannot escape from.

No one is obligated to rent a property from someone else.

That's a pretty weird statement to make.

Do you really believe that everyone (or even a majority) of people who currently rent are in a position to buy a place to live if they wanted to?

One of the key benefits of renting, that I outlined in my comment above, is that people can typically rent properties that they could not afford to buy. So yes I agree that people could not necessarily afford to buy the same quality and location of property that they might rent. This is a benefit.

Cities have high property prices because they are extremely desirable. Lots of people would like to live there, but there is limited land, and not everyone can afford to live there. There must be a way of determining who has the right to occupy the scarce resource that is land, and the market is the solution to that problem in most countries.

Although not everyone might be able to afford to buy property in the most desirable cities on earth, such as Berlin, most people can certainly afford to buy property somewhere else. For example, a house that costs $1 million in San Francisco might cost $20k-$50k in Detroit. The further you move away from cities, the cheaper property gets.

I think it is reasonable that not everyone can afford to buy property in literally the most desirable, high-demand places in the world, like Berlin or London. People can still afford to buy property elsewhere.

> Cities have high property prices because they are extremely desirable.

There is scarcity which mean those selling can reduce the set of candidates by pumping up the prices. Its a simple mechanic, not a very sophisticated approach...

> There must be a way of determining who has the right to occupy the scarce resource..

yes! exactly! We haven't attempted to examine the question let alone attempt to answer it.

Lets say we have:

1) renters serving small numbers of customers.

2) renters serving large numbers of people.

3) renters rarely serving the same customers.

4) renters regularly serving the same customers.

Lets say (for sake of simplicity) people spend half their income on rent, lets say we can infinitely increase rent as the bill is (inevitably) forwarded to the customer they serve (everything involving labor becomes more expensive) and lets assume perfect scaling.

Then you can (and we do) have a city where wages are low and everything ("produced" locally) is cheap OR you can have a city where everything ("produced" locally) is very expensive and wages are high.

You somewhat increase productivity by forcing out people who can only do manual labor but it doesn't scale nicely. Eventually the buildings only serve as investment vehicles rather than nurturing the cities productivity.

We should wonder where the money goes really. I have a mental picture where eggs are cheap but if you want a fried egg with a slice of bread it is going to cost you 100 times the price of an egg because the fried egg is mostly made up out of rent.

I think it would make much more sense to have government do the wealth extraction and to configure rent to have the proverbial eggs fried cheaply.

Cities not just import stuff produced elsewhere (because they cant do it themselves) but they also export a lot of valuable services. Those would be a lot more attractive if they didn't scale with rent prices 1:1.

I'm not claiming this is the holy grail, its a rather raw train of thought. It seems to me to have as much economic activity as possible one could force the price of the raw resources down by a whole lot. Forcing people to fry the egg at home doesn't make much economic sense, we can have professionals do it for you at scale.

It could be interesting to run the numbers on room service vs having your own kitchen? Why do we need a million kitchens in our city? They are just sitting there taking up space not being used? It seems as bad as having the empty buildings increasing their own value by making the resource more scarce.

One more thought:

Do we want university graduates or do we want land lords? Why would we want land lords to enrich themselves with money the students don't really have? The student automatically becomes an expensive employee. Education turns into a scarce resource. If it was a game (and it is) the "let the market figure it out" approach is easily defeated.

> Can you clarify what problem you are trying to solve with this proposal?

Say we live in a town where we make all the decisions and our word is law. Our imaginary town needs 2 garbage men, one to pick up the bags, one to drive the truck. We need a truck, fuel, some place to dump, our garbage men need some cloths, a place to sleep and they need to eat.

We take some city land, build 2 house and a garage.

With them serving tens of thousands of customers we can both pay them a nice salary and make the service cheap.

Now we can add a 3rd person who does nothing and pay him a huge sum for his services. We can make fancy documents dressed up with powerful geometry and invent some fancy title for this 3rd person. Say we call them Lords.

With tens of thousands of customers it seems like it doesn't matter. They can pay an extra 100 bucks annually and we could easily finance the 3rd or perhaps a 4th person who also doesn't work. They could live in great wealth without anyone getting upset over it. We could lower the salaries from the first 2 and make room to add a 5th.

Then one day the plumbing starts to leak. It might be portrayed as if the Lords repair the plumbing but the reality is that it requires a plumber.

What I'm trying to say is that however complex we make the bureaucracy, the way stuff works hardly changes. At least not until the bureaucracy becomes so important than there is no more room for the work.

I think that problem can be solved long before.

> No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy. Why stop two consenting people from entering into rental agreements, both of whom believe it's in their interest?

In the existing formula our 2 garbage men are obligated to rent a property. The citizens will have to pay whatever the greedy unproductive landlords want them to pay.

That people can afford this only makes the problem worse.

It's consent only if the other voluntarily agrees. Individually they could chose not to be garbage men but that doesn't mean we no longer need garbage men.

Sure, we can have a thousand applicants and the winning one could be someone willing to drive 2 hours to get to work.

On a personal level that might seem like a reasonable way of doing things, as a town or city trying to organize it self its just poorly done. The citizens pay more than it costs and they are not getting anything for it.

We've sacrificed efficiency for exploitation. Or we've collectively done a half ass job organizing our shit and now we have to pay for it.

>Some people prefer to rent: they don't want to be obligated to live somewhere for 10 to 30 years. They prefer to be free of commitments and loans.

There is never any obligation to live some place. That would be inefficient. If rent contracts are replaced by lease buy contracts you don't need credit. You can pay rent 12 months then leave. The land lord would be obligated to buy back your share of the house or he has to sell it.

> Landlords also provide useful services to their tenants: they are responsible for all upkeep associated with the property.

I don't want their services because they are madly overpriced. I want the actual market to do these things.

> Property owners are forced to tie up their assets in the real estate.

no no no, they chose to do this because it makes a good investment. We can regulate it to be highly undesirable to own property which will drown out everyone except those who really need it.

> Lastly, landlords assume risk. If they can't find a tenant for their property, then it sits idle and they take a loss.

This would be the desirable mechanism. Sadly there is so much demand they would have to ask absurd amounts of rent to be able to not find anyone.

> When you own property, you can lose a significant amount of money if the property depreciates, as happened during the last recession.

This can only happen if the market value grows beyond the new value. Don't feel sorry for investors. We are currently forcing people out of their home to satisfy all that greedy exploitation. Investors only risk losing part of their investment. Its not like they are out on the street like tenants during the great recession.

> When you're renting, your risk is capped - you owe the rent but that's it.

I'm perhaps a lot older than you. I've seen many cases where people died and the relatives had to pay rent, clean out the house and return it into the claimed original state in less than 30 days OR pay some truly insane amount of money.

Say the previous owner build a garage, do you want it? Say they moved some walls around, put in a fire place and got a fancy kitchen? Say there are 20 trees in the back yard?

Mum died, you get 30 days. Don't forget to dig out the swimming pool as well.

Greedy unproductive cruel dictators they are AND they own you. Its a much to attractive scheme, it should be heavily discouraged in favor of economic activity, efficiency and quality of life.

I've paid the construction cost of my house 3 times now but every year I have to work more hours per month to live there???

Maintenance involved 1 phone call every 2 years and roughly 0.005% of the value of the place.

Almost every house on the block has the same owner. A decade ago we were allowed to buy it. Now they only sell houses to investors with the tenants still in them. The market value is about 7 times the construction cost.

They take 10 times the value of the house and not do any work.

If rather than me paying them they paid me the rent they would still be making crazy money without lifting a finger.

I work, other people have to pay for my work. Half of their money goes towars lazy greedy unproductive dictators. 1/3 of their money went to lazy greedy unproductive dictators too.

Then add taxes and they have to work 8 hours to get 1 hour of my labor.

And that my friend is ruining economic activity. Cut them all out and you will have an explosion of enterprise. Let the ponzi people take a risk and invest in that.

I didn't start pondering what is wrong until I see people having to pay rent for flooded houses.

Without risk it is not investment, it's pure exploitation and we are forcing people into it.

And who would build new rental properties under those conditions?

Under those conditions I think only the state begrudgingly would build large blocks of cookie cutter but pragmatic flats. Something ala eastern block country estate housing.

I don’t think we want that. Although some do want that. S better alternative is Tokyo or Singapore (though they had their state built flats too —which inspired state built flats in Brazil.)

They wouldn't, and that's the point. They would build housing for purchase and make their profit on the sale. Pretty simple.

That sounds absolutely awful for anyone who wants to rent.

If you tax rent, landlords will pass the tax on to renters. All you are doing is making renting more unaffordable.

But buying will be cheaper than renting, so it seems just fine that rents would go up.

A lot of people cannot afford to buy at any price point.

yes, to the point that [say] 10% of the rentals are empty.

I think most people with an understanding of economics would agree that more supply is needed. The problem is, zoning laws are made by the cities themselves, which means they are ultimately made by the people who already live there. People who already live there don't want their neighborhoods bulldozed for luxury high rises, which is what happens when zoning is abolished.

Then, there is the problem of the suburbs. A lot of people suggest moving to the suburbs and embracing a longer commute as the solution. The problem is, suburbs also control their own zoning laws, just like cities, and surprise - they also don't want their neighborhoods bulldozed for luxury apartments.

So the problem is essentially a power issue - who holds the power? Without the political power to make zoning changes, little new housing will be built. I don't see a solution here. So it seems that the local people embrace rent control as the best possible solution among alternatives. Viewed from that perspective, it's not so bad after all. The city's residents will feel the impacts, and if it's not working out, they will eventually repeal the law. Big deal.

I wish someone with a deeper understanding would go to Japan and study how they got this so right. Their zoning laws don't separate uses, only nuisance levels, so you often see residential in commercial areas and small shops in residential neighborhoods. It's amazingly effective at reducing how far you need to go to get places, and gives the whole city a much more organic feel. Plus, there is actually housing if there's demand for it.

Is it just Japanese cultural collectivism that made this work? How did they make this happen when we failed so badly? I have no idea.

It’s actually pretty simple: housing isn’t an investment vehicle like it is in many parts of the West. The social and historical reasons why this is so in Japan are complicated, but the overall circumstances are not.

You can either have affordable housing that’s not an appreciating asset or let finance/real estate Capital run roughshod over everything in speculative flurries, leading to the insane state of affairs in many western cities today. You can’t have both.

you can have both as long as productivity is growing, increasing labor's bargaining power and wages

unfortunately productivity is pretty stagnant across developed economies, including japan

if capital and business owners have no need for new/enhanced labor as is the case in many developed economies where offshoring/new hire cycling is rampant, then a housing affordability crisis definitely builds up, unless:

(1) the municipal/federal government steps in to regulate rent as it has done in Berlin

(2) there is a good architectural/geological/tax incentive that prevents NIMBYISM

(3) cultural/work factors allow the younger gen to live at home/work remotely

Wait, housing is socialized in Japan? Or is there some kind of non-socialized-but-non-privatized ownership situation? Do you have any further reading on this?

I read today that Fortress Investments purchased over 100,000 affordable units from the Japanese government for 60bn JPY in 2017 and plans to spend about as much on renovation. [1] Apparently firms like this usually expect an 18% return on these kinds of investments.

[1] https://www.wsj.com/articles/fortress-becomes-japans-biggest...

Yes and if all of its housing tilts this way, Japan too will spiral into unaffordability. But most families still live in single family homes that depreciate in value over time.

There's definitely a cultural element but it's also due to how buildings are used in japan. Black mold makes it where you really don't want to deal with a structure over 40 years old so there's always things being destroyed and new structures being built rather than old structures being renovated; neighborhoods are in a constant turnover and buildings are disposable. All of urban Tokyo was also destroyed during WWII and had to be rebuilt in a new way.

In the U.S. you might have some neighborhoods that have been largely the same for the past 50-100 years. Since there's no absolute need to replace housing stock unless disaster, people are much more emotionally invested in the existing layouts of their neighborhoods, and advocate against their own economic interests by voting down new developments or zoning changes.

I actually thought of both of these and discounted both. Here's why.

Post-WW2 buildings in Japan were crap so I can see why they'd replace those. But I think recent buildings are a lot more long-term. My sense is that they replaced because of the post-WW2 cheap building boom, not because of the climate/mold. It's no warmer or wetter than many places in America, and northern Japan is quite dry and chilly.

For the "never bombed America" argument, I'd just point to Europe, which was bombed. Or to new American cities built 1950 onwards, which suffer the same problems. I'd also point to Kyoto, which wasn't destroyed in WW2, but is still functional in terms of real estate AFAIK (though I'd love to hear otherwise).

Japan overall or Tokio specifically? Because Tokio would be a bad example as it’s super dense and I think that is exactly what residents try to prevent

This is spot-on. Completely agree. Tokyo is an incredibly comfortable, quiet city. Preparing for a three-week trip, I expected it to be like New York — crowded, expensive, uncomfortable — but it completely blew my mind. I had never thought that the constellation of density, quiet, reasonable rent, and a first-class city were collectively possible.

There are a lot of factors at play here:

1.) Supply is inelastic because construction work and building approvals are limited by current capacity. It is not feasible to expect the market to react as quickly as 600,000 new inhabitants over 10 years required.

2.) A lot of policy is still considering this to be a fad before cities become less popular again. Berlin's plans had for instance foreseen falling demand for schools due to demographic change and now rising birthrates (good economic situation) and influx of young people into cities are causing a trend change (for how long?).

3.) Current ECB rates are causing a housing bubble in Germany where many people are buying property for the first time. Because these properties are mostly rented when purchased but renters can't be terminated in Germany, the only way to evict is by raising rent until renters give up. Putting a rent freeze into place makes sense to prevent this and the rampant luxury renovations which don't create more supply.

4.) Berlin at its peak (1944) had still more than half a million more people and is surrounded by mostly empty countryside. It could easily grow to 10m as Paris or London.

> a fad before cities become less popular again

The only way this happens is if cities like Berlin putting rent freezes prevent construction that would increase capacity and lower prices to allow people to live in cities. There will be no new economic growth where people are spread thin - all future productivity will only emerge where people are. Any country trying to do anything but centralize their human capital in cities will find themselves at economic disadvantage going forward.

Or technology (self driving cars, remote work) and social change (universal basic income) would not require you to live in a city to work there or work at all that productively.

The point is more than density is an optimization of the marginal cost of maintaining a person. Manufacturing all the autos, maintaining all the roads for them to travel on, and providing supply lines across vast areas of low density are immense ongoing expenses that are hugely reduced when people are centralized in urban areas. As we move towards remote work it should lead to density increases, not the other way around - living denser means more access to more recreation and services, should mean cheaper goods and infrastructure, and can stymie the isolation problem brewing with remote workers across the industrialized world.

Regarding 1: Germany's economy is doing well compared to the surrounding countries, so they're attracting many foreigners, especially in Berlin. These foreigners need a place to live, which is one big driver of rent increases.

Regarding 3: landlords are successfully invoking the "right of own use" to evict tenants. They are basically claiming that they need the apartment for themselves, a relative, etc. [1] Furthermore, thanks a relatively recent law, the landlord can't raise the rent for older buildings indefinitely - there's a cap. New buildings are exempt. For those rents start high and there's a standard ~2.5% increase per year.

[1] Article in German: https://www.spiegel.de/wirtschaft/soziales/mietwohnungen-eig...

> so they're attracting many foreigners, especially in Berlin.

Which is very ironic because Berlin is one of the least prosperous cities in the federation.

Ironically one of the factors attracting foreigners to Berlin is the cheaper cost of living.

> Berlin at its peak (1944) had still more than half a million more people.

Yes, with 2 - 3 times more flats per every floor in a building. And with whole multi-generational families living in every one of them. Don't forget sharing one bathroom between all this families and sometimes toilets just being wooden huts outside.

Try visiting Mitte Museum in Gesundbrunnen, you'd see how miserable pre-war housing was, yes even in the very centre. The area around Ackerstr. was much more dangerous than Alex or Kotti is today.

Sounds like Britain. Today.

Would you please stop posting unsubstantive comments to HN? We ban accounts that keep doing this, and have already had to ask you more than once.

https://news.ycombinator.com/newsguidelines.html

The notion that Kotti or Alex are dangerous by any coherent metric can only be understood as satirical.

> 3.) Current ECB rates are causing a housing bubble

People keep saying stuff like this but this is a economic theory with very little actual support in any evidence or even in most economic theory of how montary policy works.

Symptom: rents are too high

Cause: insufficient housing supply

Solution: disincentivize new construction?

Nope. New buildings are exempt.

So living in new buildings becomes undesirable even further because they are more expensive to live in than the rest of the city!

No, new buildings are desirable because they're new and will always find buyers, especially if built in a nice neighborhood.

Let's just thing this through:

I have the option to buy a rental property in Berlin, I can either buy an old rental property and not be allowed to increase rents for 5 years. Or I can buy a new build rental property (which already sell for above market value in most places), and can charge more rent but I will be less able to find renters as they are looking to lock in 5 years worth of zero rent increase.

I really don't get how either situation encourages me to become a landlord.

Berlin doesn't need landlords. It needs homes for people.

This.

Cities don't want or need more landlords. It needs more landOWNER residents.

What’s so good about owning? Renting is way better, if it’s affordable:

- I can move out when my life circumstances change.

- I can move out when the district changes.

- I don’t need to take a credit just for living somewhere.

- I don’t need to worry about people renting my apartments.

- I don’t need to worry about maintenance.

If you have the money to buy fine, but for most people renting is way better.

It's a completely separate argument than what I was responding to.

I personally agree with you, but thats my specific lifestyle, and I put my money into other investments. But generally, owning a house is a good place to park your assets if you live a "typical" life.

One of the biggest reasons I want more landOWNER residents? So that my neighbours actually care what's happening in the neighborhood+condo, and do something about.

I'm renting from a Chinese investor. He doesn't speak English and doesn't have a clue what's going on around here, and doesn't care to get involved with helping things run better.

I can communicate my issues with the real estate agent who handles the unit for him, but he's just going to shoot off a short email and move on with his day.

Over 50% of this building is this way. The board of directors has a huge accountability issue because of this, and residents and owners are suffering for it.

If you rent, you care what happens locally, but you have no say.

Can't you (as a hypothetical landlord) simply ask the same rent for the new housing as you'd ask without this measure? Then it should be about as easy as it is now to find renters (as this measure does not affect supply), and just as attractive to become a landlord as it is now.

(Granted, demand for existing housing should increase if they are cheaper, but presumably supply will decrease as well as fewer people living there will move out - so I guess it shouldn't affect the pricing of new housing much?)

I doubt that. In old cities like Berlin the best places are in the center because everything is there and there is good public transport access. And new houses are probably built somewhere in suburbs where there is no good transport, no subway, no train stations, nothing except for houses.

have you ever been to berlin? plenty of new construction in central areas. either by razzing older, lower-rise, buildings or by filling in unbuilt or blighted areas (fewer of those as time goes on but there were vast areas where the walls & no-mans zones used to occupy).

As others have said, a lot of new construction is hotels, shopping centers, and office space.

Berlin is a weird city isn’t it; when I was there Mitte really wasn’t great because of the wall and there being effectively a West and East German centre to the city or rather it felt like every region had its own charm say.

If low rent-controlled prices leads to increased demand, then new buildings may become more desirable to build because their rent prices could be even higher than they otherwise would be.

If there is more demand than supply, no.

No because the developer will just charge more for the new properties and old property prices will be worth less.

Would you use your savings to build property in a city with policies like this? How long will new property be exempt? 5 years? What then? Nearly no one will build anything anymore.

I would absolutely consider building in a city that has so much demand and that is so deperate to slow down the development of the real estate market.

This is essentially a tax. People still buy and sell things that have taxes levied on them. Yes, too big a tax could spell very real trouble (I've seen it happen in my city), but as long as rents are allowed to rise with inflation, construction should remain profitable.

... for now.

But there's a funny thing about investors: They look at what governments have done in the past to judge the risk of things happening in the future. Set a precedent that you'll meddle in the market for political reasons, and every potential real estate investor will be worried that you'll do it again in the future -- even if you're not doing it to them yet.

This would only be true if rent wasn't already (relatively) way above the cost of new construction and if the freeze applied to new buildings too.

Why aren't you asking why cost of new construction is this inflated?

Why aren't we trying to fix the supply problems, instead of trying to... what are we trying? I don't understand the whole ideology that sees any reasoning that could lead to this.

Land values rise to make the margins developers work within very small. Land is a problem everywhere and someone owns it and will always try to extract the best price if you have planning permission for it.

So maybe capping land prices and forcing sales for desirable schemes would work better. It will of course never happen as ownership is fundamental to our thinking in the west. I actually find the idea of the government forcing me to sell land I own at below market value quite offensive. I understand that is irrational.

Maybe this problem is quite complicated?

The problem isn't developers at all - they make only a small margin.

The people who are abusing the system are equity investors who demand a return on their investment within as little as 2-3 years, leading to unrealistically high rents. All rent control is doing in this case is forcing investors to take a longer period of return.

Did nobody think that to invest, you need to have liquidity?

It's called LIQUID for a reason. If another place has better investment opportunities, the investment will simply cease. Why would anyone take their LIQUID assets and put it into real estate (in german it's called IMMOBILIEN, meaning immovables to make it clear) in a place that actively discourages return on invest?

In some cities that would absolutely be an issue. However in this specific case I don't believe Berlin will ever lack for real estate investment. In other popular cities we've just seen the type of investor change, from opportunistic to activist.

I'm curious about this, which cities with those be?

If you flush the market with supply, you get the same result. You also get the side benefit of more poor people have access to housing. The rent control model means a small portion of the poor wins the artificially low rent lottery.

We should consider a 75% capital gains rate on land value increases. After all, the owner typically had little effect on their own land value. A big effect comes from their neighbors building shops and offices and the biggest effect comes from the city building roads and transit and other infrastructure. Land "investment" is the least productive form of investment. If you built a building, then yes, profit from that, but benefits from increases in land value should go to the city.

The georgist approach.

I was pondering a high annual ground tax instead of a capital gains tax

Otherwise known as "property tax".

Something neat I've noticed locally is that condos with high property management fees have proportionally lower selling prices.

If all 2 bedroom units in an area/city are $3000/month and one building had property management fees of $1000 instead of $500, the unit's value is $500/month lower (approx. $100,000 selling price).

I'm not sure how that would be implemented on a city scale though.

For density: If you drastically raise property taxes to be proportional to square footage instead of appraised value, you instantly incentivize higher density building. If you're paying $1000 tax per square foot of ground floor, you can spread that over a single floor, or 40 floors.

Was that your thought?

Yes. But The tax needs to be high enough to capture most of the value not created by the landlord. As I am no property owner I am not too deep into this, but right now I think we are far from that.

Property tax is just now being redone in Germany. Unfortunately it seems that it might end up depending on the square meters of the house, not the underlying property.

The new law about the property tax links the tax amount to the value of the area. If done right, this forces house owners to rebuild their property and adjust the density if they want to remain profitable.

This accelerates gentrification I am not sure whether this is desirable.

There can be many causes to this problem, not just an apparent lack of supply. You could just as well say 'too much demand' is 'the problem'.

Aside from regular market issues, there could be a number of external factors (i.e. non-berliner ownership) that might be exacerbating the problem.

The same argument is happening in Seattle now, too. It seems absurd.

It might be not so simple. The prices are high in some places (like city center or places with good transportation access) because everyone wants to live there. You can build new houses in other places with poor transportation, but nobody will want to live there.

> disincentivize new construction?

Oh but half the city is under construction work right now, they're building shopping centers, offices and hotels (I can count at least 6 10+ storey buildings being constructed in a 600m radius from my place, only one is for flats)

Investors want to max out how much money they make, tourists bring way more money than the general population, especially in Berlin

So tax the shopping center, offices and hotels more to balance them out.

The shopping centers, offices, and hotels have political clout and organized professional influence on the government.

Average joes, especially those who want to live in the city but cannot afford it, do not get a seat at the table.

Looks like the average joes have more clout than the residential landlords given the 5-year rent freeze.

Yeah, it sounds like shopping centers, offices, and hotels are being built because they will be profitable, since there's no artificial limits on their profits.

Housing isn't profitable, so it's not being built. And more and longer rent freezes will worsen the problem.

The developers are being very rational here in what they're choosing to build.

Rent control does not disincentivize new construction.

Yes, this is how Berlin government operates, more or less.

The same logic applies to planning new underground lines and keeping the city airport functional.

Don't expect rational decisions from this city.

The truism of supply and demand seems to be very popular in this topic. The devil is in the details behind the supply and demand and what is influencing both.

In Berlin there's many cases of people being pushed out of their homes because of rent increases, people having to do apartment tours with 50+ other people and having spill all details about their private lives to have a chance at being chosen, etc.

The situation's crappy already. Even if the current tenants will be protected, that's already a small victory.

The German construction industry doesn't have any spare capacity as is.

High prices are exactly how the free market attracts additional resources to solve capacity problems.

Legislative efforts to limit prices pretty much guarantees that additional capacity will not be forthcoming and that shortages and high prices will continue.

That's how you get an overbuilt construction industry and (even more) unemployed construction workers during the next recession. The "free" market is adequate for allocating resources to consumer goods but not for allocating them to entire industries.

I gather you are asserting that real estate developers are incapable of determining when they are too late to the party and are constructing extra space that will never be occupied.

Presumably you also believe that government bureaucrats are somehow better able to ascertain exactly when to stop issuing building permits so as to avoid "overbuilt" construction. And of course they will know when to resume issuing building permits also to ensure there are no shortages.

How is it that these government bureaucrats are better able to predict demand and arrange for supply than market mechanisms and the free economic choices of individuals?

You are making an argument for a planned economy over a free market, for limiting the freedom of individuals to invest as they see fit with their own resources in favor of giving power to government employees to block or to subsidize their favored economic activity.

The historical track record for central planning is overwhelmingly negative. I don't understand why people continue to advocate for it.

> Presumably you also believe that government bureaucrats are somehow better able to ascertain exactly when to stop issuing building permits so as to avoid "overbuilt" construction.

Strawman. That is not the question here.

You claimed that the free market was incapable of allocating the resources correctly for an "industry".

And now you are suggesting that my assumption that you were implying that the government should do the allocating is also incorrect.

So what is your alternative suggestion?

> And now you are suggesting that my assumption that you were implying that the government should do the allocating is also incorrect.

Wrong. Please read what I write instead of "presuming" what I might think.

At best you'll produce consumer surplus for lucky renters, and you'll produce sad outsiders who'd be willing to to pay even more but can't get in. Everyone knows this is an issue with insufficient supply (of housing or of nice alternative places to live) but it is popular to put a ban on symptoms.

Rather than think of it as insufficient supply, why not think of it as excessive demand? If there is a trend across the developed world of moving into city cores and working high-paying jobs, then it seems that demand is more at fault. These are very old cities with entrenched interests, do they have the political quickness to respond to these demand trends?

Yeah, not everyone has to live in Berlin. Better that the current citizens have reasonable living conditions than everyone paying through their nose.

Everyone knows about supply and demand, few know what the situation's like in Berlin or even care to find out before supplying us with economic platitudes for which there is little if any demand at all.

Better that the current citizens have reasonable living conditions...

What makes current citizens more deserving than the people who want to live in Berlin but won't be able to due to policies which reduce the supply of housing?

Assuming they have a home in Berlin, the fact that they already live there makes them deserving. A home is unlike any other material good and the basis of securing a livelihood, it should not be allowed to exploit tenants for profit.

AirBnB'ers and other speculators are of course not deserving at all.

People who own and live in their home in Berlin aren't affected by a rent freeze though. It is only renters, who by definition do not own where they live.

I used "home" in the metaphorical sense in my former comment. A roof over one's head, place where one lives, etc. One of the pillars of our lives, even in times such as these, where people move around much more.

While rent may freeze, what are the unintended consequences?

- Will enough of the "right people" be able to move in to fulfill the right jobs? Keeping a barber seems great until you realize that there aren't enough doctors.

- Will "rent" be shifted to other, less trackable metrics? Will there be large application fees to apply? Does Berlin have something similar to condo associations or HOAs that will increase?

There are consequences to every action.. are the first order ones acceptable here?

I think the main reason why this makes me so angry is because it's Berlin, again, doing something fiscally irresponsible that the rest of the country is going to have to finance in the long run.

How I imagine it to go down would be like this:

Today the politicians pat themselves on the back for their progressive stance on this topic.

In year 2 of the rent freeze most of the property investment will have seized, new construction is going to be mainly be occuring by entities that are forced to construct in this market, which are mostly government backed.

In year 3 the pressure on the city council will be so high that some emergency funding will be requested by the city to support the government backed property developers (degewo, GESOBAU, GEWOBAG, HOWOGE, WOGEHE, WBM) in their quest to buy expensive property from "evil" speculators to build more housing, as obviously the private markets have failed to do so.

In year 5 after two years of campaigning the funding is granted by a then black/green coalition in the Bundestag.

They already receive $4.4bn/year through the Länderfinanzausgleich (mostly from bavaria) to finance their irresponsible policies. I guess it will just be increased, no need for black/green coalition to add anything.

That's a bargain when you remember that Siemens moved its headquarter from Berlin to Bavaria after the war [1].

[1] https://en.wikipedia.org/wiki/Siemens

> I think the main reason why this makes me so angry is because it's Berlin, again, doing something fiscally irresponsible that the rest of the country is going to have to finance in the long run.

This is perfectly stated. Not looking forward to possible SPD+Grüne+Linke coalition in Bundestag.

What do you call the chicanery that companies like Vonovia are doing except evil speculation?

Yes, heavy demand with slower increasing supply will result in higher prices, but we're talking about homes here, not iPhones. People can't afford a home any more, it's inhuman to just let them be bled dry or get kicked out in the name of real-estate profit.

Your critique's puzzling especially because this law only applies to existing buildings

>What do you call the chicanery that companies like Vonovia are doing except evil speculation?

What these companies are doing is despicable, but how do you imagine this rent-freeze will change their behavior? They will go looking for their margins via other means if the market is the way it is right now.

>Your critique's puzzling especially because this law only applies to existing buildings

Do you really think that people will Invest in a real estate market that has legislature that is this investor hostile and face the risk of being outright disowned, as also has been proposed in the run-up to this?

I wouldn't touch the Berlin real estate market with a ten-foot pole after this.

1. It will take away one of the ways they abuse people. Who knows, if they keep it up, maybe they'll be expropriated next :)

2. Investors touching the Berlin real estate market right now are anyways demanding exorbitant rates just because they can. Normally, this would at some point reach an equilibrium, but so far it's going up and up with no end in sight, pricing out most people.

And I bet not all of them will scurry away. Any economic measure will not have a perfect effect, there will always be those that break ranks.

So you hope for expropriation and irrationally behaving financial investors.

I wanted to say I have a bridge to sell to you, but you already got the Airport... it just hurts that I'm paying for the punchline.

I'm not hoping for anything, but if a bad actor is playing with people's lives, I also don't have a problem that they get punished for it.

Now the only issue with expropriation would be the panic it cause in the markets, because otherwise who cares whether residential property company #201f exists or not. Setting some rules around renting, like the government has been and is doing, to prevent abuse and speculation is more palatable, but still has too many people running around screaming, based on a simplistic presentation of supply and demand without keeping into account that there are other factors that would and should trump the raw economic aspects.

It's not like the government has just instituted rent control and that's it. It's a temporary measure, restricted to existing stock. They will try to build more.

In the end it's not clear at all that leaving the situation spiral even more out of control would result in a better outcome than even just rent controls without other measures. Why is it so hard to get an apartment in Berlin that people resort to bribing the landlords? Why does one have to "compete" against dozens of other people, with zero ability to negotiate and having to sacrifice their financial privacy?

Last I read about it these companies had record profits and now you and others are complaining that they won't build any more because they can't get profits? How's that work, mate?

> Why is it so hard to get an apartment in Berlin that people resort to bribing the landlords? Why does one have to "compete" against dozens of other people, with zero ability to negotiate and having to sacrifice their financial privacy?

Low supply. You are not fixing that with a rent-freeze, you are making it worse.

> Last I read about it these companies had record profits and now you and others are complaining that they won't build any more because they can't get profits? How's that work, mate?

These companies, especially Vonovia, will continue to make a profit for their shareholders, even if they take a hit because their assets in Berlin devaluate. They just will not invest further in Berlin, won't build/buy&renovate housing.

If I were a shareholder in Vonovia i'd be pretty concerned of them taking such a risk, I wouldn't want them to invest in Venezuela either.

Yeah that's what I was hinting at (one has to read the entire paragraph): rent control or no rent control, the situation already sucks both for existing tenants and people that are looking for new apartments. Might as well protect existing tenants, since new tenants are screwed anyway.

the only scalable solution is to reduce demand, not increase supply. cities are already getting pretty saturated, and building more houses isn't going to solve a thing.

what is really needed is very fast public transportation from outside cities to the cities themselves, and incentives for workplaces to split into sub-branches in other nearby locations instead of endlessly expanding within the same city.

most people would prefer living outside the city for cheaper and higher quality of housing, the force pulling them back towards the city is the transportation distance to work. the force pulling workplaces into the cities is that they want to minimize transportation time for potential employees (unless the workplace has a location tied to the city), while they still need to cluster employees who have to work together.

so everything is clustered, and there's nothing to do about it.

only way that this can end, is if you reduce the force pulling everything together - by reducing transportation distance - while in the same time, you need to introduce some incentives for workplaces to split to sub branches.

As someone who rides the S-Bahn for 30 minutes, having an express S-Bahn that takes me straight to the center would be really nice. But there are only 2 S-Bahn tracks most of the time :/

Good luck finding a flat if you are moving to Berlin ...

No problem: Many people sublet their rent-controlled or outright government subsidized apartments for three times the official rent.

Finding a real apartment where you cannot be kicked out any moment is hard though. The best way in Berlin to find a decent place is to be low-income for several years, get on a waiting list and then finally get one of the luxurious subsidized places.

No chance otherwise.

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

"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial."

"So now you know why economists are useless: when they actually do understand something, people don't want to hear about it."

If affordable housing is an issue, then perhaps the government should provide it for its citizens, like building huge high-rises in Berlin.

I used to rent in an expensive city but bought a cheap house in the suburbs (thankfully I work remotely). Everything is cheaper out here, from gas to utilities to food. But I did experience classism from my friends and family: there is status living in a world-class city. And having wealth or a high-paying job in the city is part of this status. But many people want the status without having to pay the $$$.

Last thing I heard, high buildings are mostly infeasible in Berlin due to the unstable underground. You can't build New York everywhere...

I doubt that high buildings help, no matter how many people you square per cubic meter, in big cities it will never be enough to allow affordable living...

Yes but we can at least grow the city up to the 6th floor. There's so many building that barely reach the 4th.

Japan and Korea have managed to build some of the densest cities in the world on active fault lines. For a first world world power economy like Germany reinforcing prime real estate in their capital in the 21st century is not an infeasible economic obstacle.

> But many people want the status without having to pay the $$$

It's not just about the status. Every city needs people who do lower paying jobs. Someone has to clean those office buildings, someone has to take care of sick people at hospitals, someone has to drive taxis, buses, ... By not supplying those people with affordable housing within the city they're lives only become worse (more money and time spent commuting, less time spent with family and friends).

> Every city needs people who do lower paying jobs. Someone has to clean those office buildings, someone has to take care of sick people at hospitals, someone has to drive taxis, buses, ... By not supplying those people with affordable housing within the city they're lives only become worse (more money and time spent commuting, less time spent with family and friends).

They can live in the suburbs. Nobody has a special right to live in a specific place. They can commute like everybody else.

The suburbs (literally "bacon belt", wealthy exurbs) are even more expensive (after rapidly getting cheaper after 40-50km out from the city, but 2 hour commutes one way are very hard to sell at German salaries). Plus there's insufficient transport for getting the masses into the city already. Moving people more outwards won't work because these issues may get addressed after 10s of years.

This is just literally privatizing the cost of reproducing the city onto its lowest paid workers, i.e., entirely regressive. Why should those guaranteeing the very basic functioning of a place (janitors, firefighters, nurses, etc) bear not only the burden of lower wages, but now also terrible commutes? There’s no sane logic behind this kind of sentiment besides “might makes right,” which is fueling the rise of “eat the rich” populism.

Then it should be skilled, talented workers who should live in a place without public transport, buy expensive cars and gasoline and spend hours in traffic jams?

No. Cities should be invested in and planned to make themselves affordable and accommodating to all of the labor they need to exist, instead of “skilled, talented workers” shoving off all of the misery onto lower wage workers just because they can get away with it. It’s not zero sum. Look at cities in developed countries like Japan, Austria, Singapore, or the less Capitalist parts of Europe.

< less capitalist parts of Europe.

If you want socialist paradise see Cuba, Venezuela and the rest of Latin America. Come live here and you’ll see how well it works. Government doesn’t have a special power with future vision, nobody does. Let people decide their life, where to live. Move to other places if you want cheap living costs.

Nonsense. Japan is doing a good job at expending housing because they actually have a capitalistic approch to expention of houses in large cities. Its easy and cheap to build more buildings. The exact thing all of these socialist style regulations depress and systematically restrict.

And their is ZERO evidence that 'less capitalistc' parts of Europe do a better job. For the most part those parts are cheaper because nobody wants to live their and the population moves to the more capitalistic parts and that's why prices are going up there.

The pay for "lower paying jobs" will rise, assuming the city actually needs them.

Right, except they don't. It's higher than rural areas, but that doesn't mean it's in line with the general cost of living in the area.

I promise you, if you go to any major world city there are people living there who are poor and barely scraping by.

That is the trade-off they are making in exchange for things such as access to more employers. At some point though, they will demand more money or move out, assuming their quality of life relative to other places they can live drops to a sufficiently low level.

There are people who are poor and scraping by everywhere, not just cities. Low paying jobs are low paying because the demand is not high enough relative to the supply.

Also this cute "demand more more or move out" idea isn't even close to reality. You just said there's poor people everywhere. Why move out of a city to be poor when you're just going to be poor somewhere else? To be away from what support network you might have? Because you feel like incurring all the costs associated with moving?

Also, your original post implied that the city doesn't "need" these jobs. People need janitors and food service workers for their companies. Why these people aren't paid wages where they can afford to exist is a whole rats nest of economic theory that we don't really need to get into.

I'm just pointing out, that the idea that a single individual will be able to demand more money if their job is "important" runs contrary to what we've seen historically.

>Why these people aren't paid wages where they can afford to exist is a whole rats nest of economic theory that we don't really need to get into.

It's not a rat's nest of economic theory. People are paid what it costs to replace them, aka opportunity cost. Obviously the very existence of businesses and workers means someone is willing to work for those wages, which means they can afford to exist...since they exist. Whether or not it's a quality of life worth having is a political problem that needs political solution (i.e. basic income).

Based on the experiences of my businesses and people I know who have businesses in cities experiencing rising rent, wages are going up significantly for blue collar work, but at the end of the day, there will always be someone at the lowest end of the pay scale, and that will be the person who is doing work that many others are willing and able to do, which is usually food service/janitorial/security/etc.

But there is limited amount of apartments in good places like city center. Are you suggesting they should be for people with low salary and talented people with good pay should live in a suburb without public transportation and spend hours in traffic jams? And tourists won't be happy with this too.

> Government should provide it for its citizens

And how do you expect government to pay for that? How do you decide who lives in these houses? It's not that easy. Government isn't a magic entity.

One of the biggest costs of new rental construction is financing costs (on a 30 year loan it's often half of the cost). Given that it's cheaper for the government to borrow money than the private sector you can have the government simply build market rate housing, but wouldn't need to charge as much in rent.

In this context, the government can essentially be a magic entity.

So you'll force tax payers to pay for it? Government doesn't have free money. Why should people be forced to pay for the construction of such housing?

Tax payers wouldn't have to pay for anything, the only impact would be potentially on credit ratings of the government and possibly also certain interest rates in a minimal way. You can create market rate housing with government subsidized loans that don't come from tax coffers. Hell, the US federal reserve is technically the backer of hundreds of billions worth of mortgages.

We know how the mortgage crisis went. Government isn’t a magical solution.

Government bonds. The affordable rent would go towards paying off those bonds. Tenants would be selected by income level and lottery. If cities can build huge stadiums, they can build huge housing complexes.

The problem is they shouldn't be building stadiums either. You expect a lottery? So random luck will be the way to go.

There are a lot of avenues for taxes, but right now the most ethical tax any western nation could implement is a carbon tax.

Using a carbon tax to guarantee housing to citizens regardless of means, with development planned according to present and forecasted demand, could be this centuries guarantee of clean water or electricity.

Through a high tax on the unimproved value of the land:

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

That will only push prices even higher. The cost will be pushed to the consumer, like every tax.

That's actually very difficult to do with a tax on the unimproved value of land. The LVT has very interesting properties. In theory, it should drive the cost of land down to zero, eliminate speculation in land, and encourage denser development.

> But I did experience classism from my friends and family: there is status living in a world-class city.

Can you go more into depth on that because I've never seen that and some of my extended family lives in small cities/farms in the midwest. If anything, they laugh because I pay $300 a month for parking. Then again, maybe chicago/seattle/san francisco aren't status bearing world class cities.

Many people treat their city as the center of the world. NYC is infamous for this. "Flyover states" is a common pejorative classist term. Every tech company sets up offices in large cities not just for the talent, but because people want to live in the city, not in the "boonies" or "in the sticks" with a bunch of "townies."

That's one of the things being done. Problem is that for a while they didn't (that's what happens when you get people who think the market magically fixes things in power) and building new ones takes time. To get that time a stop gap measure was needed, hence freezing prices for five years for existing houses, no price freeze on new houses.

The "market" would like to fix it. But it is not allowed to. Because, well, politics or: "people in power" :-)

> If affordable housing is an issue, then perhaps the government should provide it for its citizens

We already pay very high taxes in Berlin and not really getting much back from it (police, firefighters, cleaning services, public transit, even government offices are heavily underfunded). This idea would only make the taxes higher or take away much needed money from other areas.

What about issuing bonds and using rent to pay off the bonds?

I will eagerly wait to see how this unfolds. Count me in the skeptical camp though.

From an outside perspective it looks like the Overton window in Berlin is skewed heavily because of the runaway prices. I remember just last month the huge protests against Deutsche Wohnen and people demanding the nationalization of apartments. It’s no stranger in New York City that the most inattentive landlord that had the hardest time getting things done is NYCHA, the city agency. I’m skeptical of this solution, but the alternative was scarier.

At the same time german tax office will give you trouble if you don't make enough profit as a landlord.

Source? Btw, landlords will be able to apply for excemptions, if it is necessary.

Here is an article about such a case from Munich (in German): https://www.deutschlandfunk.de/zu-nett-fuer-muenchen-der-ver...

I just listened to a very relevant Freakonomics podcast, "Why Rent Control Doesn’t Work (Ep. 373)". http://freakonomics.com/podcast/rent-control/

Very curious about this scenario - what about people who have a rent contract with "Staffelmiete" (meaning rent goes up by a "small" amount each year)? Does it mean this annual increase is now seen as invalid?

Rent control is almost always a disaster. It benefits current residents at the detriment to everyone else. Look no farther than SF or NYC. I have a friend in NYC paying 2000 a month to be a roommate to a guy paying 1500 for the whole place. Yeah he's paying more than this guy's whole rent, because the apartment is rent controlled.

Agree with you about rent control, but I'm assuming that the "guy" must be breaking the law. If people in rent controlled apartments are free to sublet at market rates, that seems like a huge loop hole easily exploited.

Regulations like this tend to create incentives for corrupt practices of all kind.

They're not allowed but it's so hard to evict people from rent controlled units in NYC, and so lucrative to rent out your place, that it's extremely common. Maybe more than 50% of units. A lot of times you rent to a friend or relative so they don't rat you out. It effectively turns rent control into a $1000+ a month untaxed subsidy. I'm sure there's plenty of people that rent out more desirable rent controlled units and don't have to work a day in their lives.

Seems like only going to create a black market, or funnel the rent in other ways.

Probably not worse than the one that already exists. There are a lot of people illegally subletting their apartments for 2-3x their original rent.

Well, at the very least, will be an interesting economic experiment.

This has been tried before in a number of different flavors. Most leave people worse off.

https://www.bloomberg.com/opinion/articles/2018-01-18/yup-re...

Thanks, I hadn't realised that obviously existing landlords might stop renting out a place, which would reduce supply of housing - that could be problematic.

It also mentions that apartments got transformed into condos. This might be a problem with my not being a native speaker, but: if one apartment is turned into multiple condos, isn't it able to house more people? (Though being "new" housing, I suppose they'd then be able to ask higher rents again?)

Yes, it can house more people, but you can also demand a lot more for the same area in smaller units, so rent per square metre goes up.

Since there's already some effort to confiscate property that's been empty for too long, I doubt too many landladies in Berlin will dare to go that route.

I could be wrong.

Relevant article: https://www.reuters.com/article/us-germany-housing/berlin-ac...

I'm a bit confused, this article seems to only look in depth at rent control in San Francisco? San Francisco and any city in California is a major anomaly compared to other cities in the world. For example, rent control in Montreal works fairly well for renters and has kept the city affordable for the middle class while residential construction still booms.

Housing in Montreal is cheap compared to the rest of Canada. Rent control "worked" because there was little upward pressure on rents there.

Isn't this similar to rent control in the states already, or other incentives that disincentive moving (ex, locking in property tax amount at time of buying)?

Does this mean that five years of natural price increases will just happen all at once when five years have passed?

If supply stayed exactly the same as it is today, sure. I would imagine 5 years gives them some room to allow for more construction to increase supply by the time the ban expires.

I'd imagine that they hope the five years is enough time to sufficiently increase the supply such that prices can't rise that much.

And unnatural homelessness surge will just happen over night in 5 years.

Price increases in housing are limited in Germany and have been for a _long_ time (and tightened up in the last couple years). This specific Berlin regulation is on top of that.

I received a rent increase today, with an apologetic letter that the government is forcing their hands. I suppose I could technically turn it down, but since I have always been on good terms with the landlord, I a not yet sure that I will. I sympathize with his cause.

Other than that, there are also restrictions in place for how much rent may be increased, so I doubt they would be able to make up for the 5 years.

People are bringing in the supply-demand curve from their school economy classes. The problem is it doesn't work that way with housing. There is zero incentive to build affordable housing when you can build a luxury house. On the contrary, landlords in Berlin "renovate" all the time, to make normal apartments into luxury ones.

So without regulation, the supply for affordable housing is diminishing. To increase the supply and reduce the prices, one needs regulation. Without all efforts to reduce prices by giving landlords the opportunity to build more affordable houses will be wasted. They don't want this opportunity, they need as much money from each square meter as they can get.

I am all for building more where there is space, it just needs to come with some regulation. That is, a certain quota of social housing in each building, prohibit meaningless renovations, make it less attractive to use property as an investment.

Rent freeze does some of this. It lets people stay in their house, preventing further gentrifying districts (which would lead to further rise in prices in a kind of a positive feedback loop). And what is important, it makes property in Berlin much less attractive of an investment, because nobody knows what else to expect from the senate (even expropriations are discussed).

I don't expect it to solve the problem completely, but it will definitely slow down its progression.

Luxury housing, too, does create supply. Prohibiting the construction of luxury apartments will just end with rich people paying luxury money for standard apartments thus raising prices and people with less financial means will be priced out.

Or will just move to a city that is willing to provide them living conditions they want (Munich, Hamburg, whatever).

Also when we consider new houses, luxury house creates less supply than a normal one by having fewer apartments.

More details on the German Wikipedia article (it can be translated): https://de.wikipedia.org/wiki/Mietpreisbindung#Mietpreisbrem...

Interestingly, legislation like this was in effect from 1945-1988 in West-Berlin.

Interesting, this legislation actually was invented by the Nazis:

"On October 17, 1936, the National Socialists imposed a rent freeze and further rent authorities were established. After the end of National Socialist rule, this regulation initially continued to apply in both parts of Germany, which is why home ownership was often considered "unprofitable" as early as the 1950s, as the costs for maintenance, repairs and administration continued to rise every year.

Translated with www.DeepL.com/Translator"

The only way to actually solve living prices is increase in living space. Its as simply as that. Literally nothing else has worked, and the cheapest cities to live in are those that build a lot of new apparment buildings. Everything else is political snake oil that usually makes the problem worse not better. This is the most basic economics that has been shown over and over again for 100+ years.

If you want to do something useful. Do infrastructure building and make more of the surounding area accessable for large scale building programs.

Make regulations for building easier to handle when building new houses. Meaning allow to build higher and so on. I bet there are 100s of unnessary regulations that have accumelated over the last 50 years.

Isn't it amazing how short politicians' memories are?

It's been only 30 years since the GDR (German "Democratic" Republic, aka East Germany) collapsed. In the GDR, all rent was regulated to a "fair" level. The result was a universal scarcity of housing, and existing houses were decaying, because nobody would invest any amount of money into maintenance. The best housing available in the 1980s were those ugly and uncomfortable apartment buildings made from mass produced concrete slabs, which everyone just remembers as socialist architecture. And "available" meant you had to wait for many years. Still, the alternative was to live in a house built in 1910-1930 and not maintained since 1950.

There is no place in the world that could document this failed policy better than Berlin: the contrast between East Berlin (ugly ruins) and West Berlin (nice houses) is striking, even today. But the Berlin senate decides to go with socialist thinking again. However, that was to be expected after the Berliners voted the old Socialist Unified Party (renamed twice, but otherwise unchanged) into the senate.

This means that who gets a place to live and who doesn't will be decided by factors other than willingness or ability to pay. I imagine renter selection will come down to criteria that are no better and possibly borderline discriminatory -- how do you choose which renter to go with when you have 100 to choose from all paying the same? Should we make regulation for renter selection also?

This will prevent the referendum to expropriate major german housing companies to gain traction. So in this way this could actually be considered as a pro-market law when considering the political alternatives.

I'm so ashamed of german politics of late. We're becoming the country where Homeopathy is GAINING popularity, where policy is increasingly symbolic in the good case, outright ideological in the worst case.

It's really at the point where I don't want my kids growing up here anymore, problem is, where else?

> Homeopathy is GAINING popularity

Citation please.

[1] https://www.spiegel.de/gesundheit/diagnose/homoeopathie-in-d... [2] https://www.bah-bonn.de/bah/?type=565&file=redakteur_filesys...

Sorry for the german sources.

Thanks and yikes! I am positive that the growing critique will lead to an improvement on that front though.

> We're becoming the country where Homeopathy is GAINING popularity

In France there's homeopathy propaganda in pharmacies, it's big business here... And we have anti-vaxers gaining popularity, of all things. There's been a big wave of obscurantism regarding vaccines, nuclear, OGM, radio waves...

Don't go to Eastern Europe, absolutely nothing but wastelands there, no houses, no land, no services. Just don't go. Hehehe

I think the only solution to high rents and home prices is to build more and more supply. But strangely there is opposition to this from both sides of the political spectrum. Left opposes it in the name of “preserving neighborhoods”, conservative wealthy home owners dont want new inventory to reduce their real estate valuations, and developers oppose it because it will eat into their profits.

Agreed except for last part. Devs want to build homes, as that's what they do.

Nah. Build too much and your margin gets slimmer and slimmer. Build less and get same profit with less work while keeping the market hungry for the future.

> Build too much…

Thankfully, that's not a problem anywhere in places with skyrocketing rents.

It actually is, otherwise you would have seen Manhattan skyline reach the end of earth but it does not. Premium condos demand such high prices that developers dont have incentive to over supply the market.

The housing shortage is real, discussion of niche exceptions is not a great use of time.

The problem is that there's no economic incentive to solve that shortage. Numbers just don't add up.

Existing city residents wouldn't be that happy if their municipality started building shitload of public buildings using their tax money. Those money would be redirected from other issues that are important to current inhabitants, their real estate value would plummet and they get much densier city that comes with all the associated problems. On top of that, cheap rents would make the city more interesting for more people. So rents would start raising again and we're at step #1... But with more crowded public services.

Doesn't need to be public investment, there are incentives for some but not others, and yes the situation is complicated.

The left has no issue with building more supply. The issue they tend to have is when housing is commodified - the new units being built are for maximizing private profit, not number of people housed. (The former tends to lead to the breakup of established communities as they get priced out of their longtime homes). Lefties I know are incredibly excited about the prospect of massive construction projects to build more public and social housing.

Why does the national government allow the city of Berlin to implement such short sighted and destructive policies? There should be some guidelines set by the national government about what you can and can't do in terms of housing supply.

Because Germany is a federal republic. There's stuff the federal government just has nothing to say about.

I mean, in case of Berlin, they could help by moving back to Bonn. Lots of real estate, both office and residential, would free up immediately.

There is fresh federal legislation on this subject: Mietrechtsanpassungsgesetz (MietAnpG). Here is an overview: https://www.etl-rechtsanwaelte.de/aktuelles/mietrechtsanpass...

Contract law (as changed by MietAnpG) is part of the BGB ("civil code"), which is federal law, while the rent cap is built on top of housing law ("Wohnungsrecht"), which is - mostly - state law (e.g. https://www.morgenpost.de/berlin/article226212113/Mietendeck...).

The states are rather peculiar about the federal government trying to infringe on their right to set laws, so even if most other states agree that the rent cap is a bad idea (not a given), it's uncertain that they would support anything that uses federal powers (in the Bundesrat, which would be hard to avoid) to stop it in Berlin.

Can they use Airbnb and the likes to bypass this?

Berlin will be the Lisbon of the 90ies. Well deserved

What happened to Lisbon in the 90s?

Translated from the German Wikipedia article:

In 1947, António de Oliveira Salazar initiated a rent freeze for Lisbon and Porto, which remained in force for over 40 years and ensured that for some old-style apartments in the late 1980s, <5 euros/month had to be paid. After the freeze, rent increases remained limited to inflation until 2006, so that rents remained very low. Many homeowners let their old apartments become derelict because the money was missing for renovations. Sanitary facilities with shower and toilet were missing in many buildings. In the center of Lisbon, about 20 houses per year collapsed at the end of the 1990s due to poor condition.

This seems like it could be dangerous as it creates incentives for slumlords. If the landlords need to raise rent but they can't, then the only way for them to turn a profit is to cut their expenses.

Or just sell up and find a more respectable way of making money, increasing supply in the buyer occupier market, lowering prices.

Which is illegal in Germany.

As a person born and raised in Soviet Union, I strongly believe that whoever thinks that a proper economic response to raising prices is literally to order them to stop raising, is a lunatic.

Genuinely curious: what do you think would be a better response?

Raising prices = Demand > Supply. You can either try to curb the demand (by e.g. creating incentives for companies to build offices elsewhere, move government bureaucracy somewhere else, etc.) or improve the supply by facilitating new construction, which in most places on earth is limited by, again, local government restrictions.

edits: grammar

What's wrong with legally limiting artificial price hikes to prevent people from abusing Demand > Supply for the sake of their greed?

[Edit] To clarify, they seem to be "artificial" price hikes because they don't in any way necessary to cover costs. People realize they can charge more and get more money, so they simply do. That's inherently avaricious and unethical. Sure, maybe prices work themselves out, so that price goes down when supply goes up, but this seems to only be because suppliers can no longer get away with a higher price, because their competition is now selling it at a lower price. So I think it's far more ethical for a government to limit those kind of price hikes, which mainly just hurt the consumer, than to allow these abuses to continue in the name of "freedom".

What's "artificial" about the price increases?

So basically creating an artificial demand stop is the solution to creating the "artificial" price increase?

The simplistic version of demand based economics do not take into account speculators who buy rental properties and do not rent them out to reduce supply and to help increase the price of the properties they are flipping.

Doesn't change that both are artificial.

Are you asking in the short term or the long term?

Paul Krugman tries to help you understand:

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

Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply.

Make other places more attractive or increase the supply available in this location.

> Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply.

Greed is bad in this situation because you can make more money of luxury apartments than those suitable for people who are somewhere between the poverty line and upper middle class. Hence new apartments in major cities tend to be more and more expensive to satisfy the demand of wealthier people. Greed is also bad when existing apartments are made much more expensive, thereby forcing senior citizens who have been living there for decades and who are barely able to afford the rent to basically leave town, family and friends.

Upper middle class are usually not homeless, right now they occupy some pool of apartments in cities anyway. By building more luxury apartments you encourage them to move, thus leaving their old apartment behind, either by putting it on sale, or renting it out.

Think of this like a domino effect: those earning $10M per year buy luxury residence, leaving their old house for those earning $1M, who in turn leave their own houses to those earning $500K, who leave their apartments for those earning $200k, and so on, and so on.

In the end everybody benefits from new housing being built, even if it's only luxury housing.

Also, increasing supply keeps prices down, thus decreasing profitability of buying houses as investment, causing larger share of apartments to be bought by people who actually plan to live in them.

EDIT: yes, this effect might not work as described if is limited to just one city, because there might be a lot of people wanting to move from elswhere. Or more precisely: it will work, eventually, but it would require much more housing to be built to meet the demand.

I don't think they're going to move that easily. Rent has been going so much it is eating a larger income share than before for many of them too.

So what that leaves you with is disproportionate increase of demand and prices for smaller cheaper units.

Yes, this fits closer to reality. Most people want to spend as little as possible on rent for a situation that matches their needs. Just because fancier apartments become available at higher prices doesn't mean people will move into them from a cheaper place just because they can technically afford it. Plenty of people rent apartments below their "I can afford this" level in order to use that money elsewhere or save up for a future house.

Building luxury housing doesn't push prices lower on the bottom half of the housing spectrum, it just makes the top end higher. "Trickle down" housing takes way too long to be realized, while subsidized housing has a much stronger and immediate impact[0]

[0]https://www.urbandisplacement.org/sites/default/files/images...

> Think of this like a domino effect: those earning $10M per year buy luxury residence, leaving their old house for those earning $1M, who in turn leave their own houses to those earning $500K, who leave their apartments for those earning $200k, and so on, and so on.

This assumes that a) rents don't increase for the new residents (which is false) and b) people only move within a city and there's no high demand from people outside to move into the city (which is false too).

The market works this out "automatically" when supply is greater than demand. If there are too many dwelling units then landlords will compete with eachother for tenants by lowering prices relative to eachother.

In the meantime while we wait for this to happen, people will keep getting evicted due to rising rent. How long do we wait? When can we expect results?

You are using emotionally charged words ("artificial", "abuse", "greed"), which makes a bit hard to have a constructive argument, but let me try :).

One way to think about prices is as a signal. When greedy landlords raise prices, they send two signals: (1) To other landlords and wanna-be-landlords, saying it's an attractive market which would justify new construction or cleaning up your spare bedroom and putting it on the market, both increasing supply, and (2) to current and future renters, making it more economical for them to move elsewhere and thus save on their rent, thus reducing demand.

remember, gentrification is typically used as a pejorative

good point in that it undermines constructive argument

I just edited the comment to clarify what I meant by those words. And they should be used because they are accurate in this context. Although I did convert "greed" to "avarice" in my clarification since I think it's more accurate here.

Doesn't that discourage people from building more housing, which is what would actually bring the price down?

You're assuming the high prices are a result of high demand. Speculators and other bad actors are also driving up prices.

Speculators drive up prices by buying. They are "demand" as well.

Speculators are "fake demand".

I would imagine, but obviously can't speak for the parent poster, that if you suggested limiting speculation they could agree on a sensible implementation of that policy.

I have not met anybody so far who thinks wealthy foreigners should be able to use real estate to launder money, store value, hide wealth, or otherwise not use real estate for what it is meant for, that is to say as places for people to live, play, or work.

Since all that does happen, what relevance is it to say you haven't met anyone who supports it? Do you consider yourself the kind of person who should have met such people? Do you move in those circles? Do you meet a disproportionately large amount of people, or people at high levels who influence policy?

The thing is, that there is no real "pure" speculation without the demand.

In Berlin only 1.7% of housing is empty, of which 41% is because of ongoing modernisation, 31% because of renter currently changing and 12% because of mold or other damages.

So only approx. 0.27% of housing is empty in hope of higher prices or because of other reasons. [1]

The demand is real. No living space is created by this policy. Much will not be build because of it.

[1] https://www.morgenpost.de/berlin/article214572349/Nur-1-7-Pr...

How on earth is rent control supposed to help with that? If anything, rent control makes being a landlord less appealing relative to selling to a Russian oligarch.

Price is where supply meets demand. So prices moving up means either:

1. Demand is increasing faster than supply can keep up

2. Supply is shrinking faster than demand falls

For housing in large cities, it's usually (1) above.

Easy money policies stoke artificial demand by making money cheaper (lower interest rates). That makes speculation in housing easier than it otherwise should be. Don't blame "speculators." They are simply responding to conditions created by central banks and the fiat money system.

But how well has this worked in comparable cities like London or Paris where only wealthy people can afford to live?

And only really wealthy people can afford to stay in a 5-star luxury hotel. The underlying mechanisms are the same: when demand for a resource is greater than supply, you can either artificially limited the demand by some controlling body, or let the market bring them into equilibrium through pricing signals.

By electing a socialist government the people of Berlin have indicated that they don't want their city to become a five star hotel. Simply letting the market take control is therefore not an option.

I understand it worked in Vancouver where it was tried. I've not heard news that London or Paris has tried.

The problem is that market reaction can be too slow. In such case introducing new rules can be good as they destabilize the slow status quo and makes things to move in the desired direction quicker. Berlin government hopes that by restricting rent in older buildings it will push the market to build quicker.

When things go bad government should intervene to protect people. These steps are always going to be extraordinary, because the situation is extraordinary, but it is the very role of government to apply necessary fixes without false pride for any economic or governmental models.

Of course, questions as to how one ended up in a bad situation have to be asked. Underlying issues should be fixed.

But when things get out of hand, when extraordinary action is deemed necessary to adjust for an untenable situation, it is not only right but paramount to take action.

As is with all issues, people will disagree with any specific course of action. By all means, vote to that effect.

> But when things get out of hand, when extraordinary action is deemed necessary to adjust for an untenable situation, it is not only right but paramount to take them.

That rationale is also how wars get started.

Not that I disagree with you, per se: lethal "cures" and excessive pollution were killing people in the early 20th century in the US and government intervention was required. But the Korean and Vietnam wars were also the result of people thinking that the spread of communism was also untenable.

Nope. Just like physics is exactly not how an atom bomb got dropped -- in an extremely important distinction between physics and atom bomb dropping -- there is a very important distinction between government intervention and going to war.

In a complicated world things will correlate. I hope this neither makes a generalised case against physics nor government intervention.

How do you know that these supply building and incentive programs are not part of the plan? Such programs take years to materialize and show impact. I would imagine that's why they voted on a 5-year freeze.

> Raising prices = Demand > Supply

That’s a simplistic view of the problem (simplistic as in introductory-economics-textbook-simplistic), and you have no idea what you’re talking about. Demand is obviously a factor (duh), but the main reason for the terrible, pathologic inflation of the real estate prices in Berlin is called speculation, together with government incompetence and, in some cases, blatant corruption. This rent cap is an emergency measure meant to stop evictions and give people around here a break. Of course it’s not going to solve the problem in the long run. No one is expecting that.

Can you elaborate on what you define as speculation and how it increases prices?

Hmm, this description made me wonder: wouldn't this measure reduce demand from investors looking to buy houses to rent out? In other words: if the bottleneck for new housing isn't that nobody's buying them, then this would at least lower the prices for people looking to buy a house to live in?

So we just need to magically create more housing and make it cheaper, or magically prevent people from wanting to live there.

I'm not aware of either of these things happening in any modern city. (well, the latter happens whenever the local economy tanks)

Address the issues that are limiting the supply.

I am not the OP, but based on the point of view perhaps the OP would say: encourage more housing development to lower prices?

Wouldn't this do that indirectly? If you can't buy up existing housing stock and increase rents to gain revenue, you have to build new units if you want to charge higher rent.

If the market isn't the most efficient way to allocate resources, even allocating them centrally according to clear rules makes more sense than just commanding prices to stop rising, as if a price is merely an arbitrary number dreamed up by a seller instead of a description of a market reality that the economy will contort itself to move towards.

Taxing vacancy

Vacancy is extremely low in Berlin

True actually, after some quick research. There is only roughly 18000 empty apartments.

Build more housing, ensure that it can't be bought by speculators, incentivize renters to buy the property they are in.

If there is a 'market abberation' find it, and deal with it.

For example, if tons of foreigners are buying homes, this might be a problem. Regulate it.

If tons of people are buying 2-3 homes and renting, thereby driving a wedge between home-owners/non-home-owners, regulate that.

If the issue is low interest rates, which are necessary for the regular economy, consider building in housing prices into the inflationary index, because it's a real thing that people have to pay for. This might affect how rate are set. That said, it's ECB and not really Germany anymore. FYI this should hint at the incredibly serious problems of Euro-area countries losing monetary policy by joining the Eurozone ...

If it's really just supply/demand build more homes.

It could be a function of older, crappier areas finally getting caught up in the modern world, in which case this might be an existential change that Berlin will have to deal with. The 'downtown' spots will eventually be paid for by people with decent jobs. Some pretty harsh and weird rules would have to be put in place to stop this.

Zone some areas for affordable housing.

My bet is the answer is mostly to build, but also that it's a 'neighbourhood' issue i.e. Kreuzebeurg (sorry, forget the spelling) is becoming gentrified and that's going to be a tough nut to alter.

another interesting area: regulations on building which drive the costs upward.

case in point: Los Angeles requires that new construction include parking for a certain number of cars per housing unit. usually this means placing the new building on top of a subterranean parking structure, which costs a lot more than a building on a normal foundation.

and new construction must also include a certain amount of outdoor space per unit which also reduces the number of units which can be built into a given lot.

all of this overhead is passed along to new tenants/buyers.

I was at a city council meeting for my specific city and that requirement for parking spaces per unit does not fully support all tenants. So street parking goes way up on a traditionally quiet street. It happening more and more as they start erecting these new "luxury" apartments.

No need to reinvent the wheel: https://en.wikipedia.org/wiki/Public_housing_in_Hong_Kong

I think there could be a better way to regulate how rents are determined, for example:

One symptom is that current tenants are subject to arbitrarily high rent increases, masquaraded as "market rate"

But when they finally evict, the landlord has to actually change the rent to something different until someone bites. Often times it is much lower or has some other concession.

If there were some way to regulate this behavior without easy ways to get around it, it could alleviate some pressure.

> Often times it is much lower or has some other concession.

No, it's going to become higher than a rent increase would allow (those have a limit by law, new contracts don't (yet)), that's the problem.

As long as you stay put you're mostly fine but if you have to move.. urgh.

> No, it's going to become higher than a rent increase would allow (those have a limit by law, new contracts don't (yet)), that's the problem.

Yes I get that

But there are ALSO circumstances where a landlord TRIES to have a much higher increase as new contracts don't have a limit, but they go way above what actual participants in the market would bite at.

There are also circumstances where EXISTING tenants don't have a limit on increases

This observation is not just about Berlin.

New, affordable, extremely good schools in open fields.

Modernize public transit to better connect the outer quarters. Build new apartments on these outer areas.

Government intervention always work! ;) I am surprised these measured tried again when we know already the outcome. This is the definition of insanity.

On a city level socialist policies are OK and can be even good. This is similar how communism works on a family level. In Soviet Union the problems came from central planning for the whole country with essentially no feedback loops for bureaucrats and party bosses in charge.

As a person living in New York who thinks rent stabilization has been largely more successful than not at achieving its goals, I disagree.

The data disagrees with you, it has caused shortages. Especially pre-90s.

Since I was downvoted for stating things that are factually observed:

https://web.stanford.edu/~diamondr/DMQ.pdf

https://www.bloomberg.com/opinion/articles/2018-01-18/yup-re...

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

https://www.economist.com/the-economist-explains/2015/08/30/...

http://iea.org.uk/sites/default/files/publications/files/Ver...

The goal of rent stabilization is to make neighborhoods more stable. The concept is right there in the name, and that's exactly what it does. It's not built to stop shortages, or to increase the availability of apartments for people moving to the city.

> The goal of rent stabilization is to make neighborhoods more stable. The concept is right there in the name, and that's exactly what it does.

No, it's not. Rent stabilization is, purportedly, about ensuring that poor or low-income residents specifically aren't pushed out of neighborhoods or New York City entirely due to gentrification and rising rents.

In terms of making housing affordable for those people, rent stabilization is incredibly ineffective.

That's really not actually why these laws have been created.

Their intent has always been to protect existing residents.

Not poor or low income, necessarily, in fact for the most part the original idea was to protect the middle class, not so much the poor. Which should be unsurprising if you have any basic concept of who wields political power in cities.

The key distinction is between people who are already there and people who aren't. Your assumption is a very common one but it's a misconception, and the difference is pretty crucial. It's not that hard to figure out: having massive rent increases possible upon vacancy, as well as almost no means testing (only in one special case) are two of the several obvious tells.

> That's really not actually why these laws have been created. Their intent has always been to protect existing residents.

I'm well aware of the history of rent regulation in New York City, and this is flat-out incorrect.

> Not poor or low income, necessarily, in fact for the most part the original idea was to protect the middle class, not so much the poor. Which should be unsurprising if you have any basic concept of who wields political power in cities.

Rent stabilization, in its current form, is a handout to the upper-middle class, couched in rhetoric about helping the "poor" and "working class".

> It's not that hard to figure out: having massive rent increases possible upon vacancy, as well as almost no means testing (only in one special case) are two of the several obvious tells.

This is... not how the rent stabilization law in New York City works.

The problem with these types of price controls is that it’s inherently unfair. If you’re on the inside and lucky enough to get a rent controlled apartment, you win. Everyone else loses.

That's correct.

Or said another way, if you have strong ties to the city and/or are a longtime resident of the neighborhood you win, if you don't you lose.

> Or said another way, if you have strong ties to the city and/or are a longtime resident of the neighborhood you win, if you don't you lose.

This has literally nothing to do with who ends up in a rent stabilized apartment.

In fact, new residents are more likely to end up in rent stabilized apartments than existing residents, so rent stabilization has the exact opposite effect of what you're describing it does.

> new residents are more likely to end up in rent stabilized apartments than existing residents

Citation needed on that one.

So cities should be walled off gardens that don’t let new people fair access the opportunities to be had within?

I would also note that it promotes illegal behavior as people who are lucky enough will often illegally sublet the home at the market price.

All laws that prevent people from doing something they want to do promote illegal behavior by this definition.

Yes this is an inherent flaw in laws. They benefit those who get away with breaking them.

People who disagree with rent control largely disagree with the goals, which is to keep existing residents where they are.

It’s effective at that until landlords abuse the loopholes, which you have to keep closing through legislative whack-a-mole.

> People who disagree with rent control largely disagree with the goals

This is absolutely false. They just understand, by economics, and history, that it has failed. The best way to decrease rents is to make housing more affordable through supply. Unfortunately it sometimes takes time for supply to catch-up and you get price surges...but you also have special interests, especially in the US (aka real estate firms) that lobby zoning boards to limit development and drive up prices for their own benefit.

This is not even a partisan issue, economists on both ends of the spectrum are in near complete agreement that rent controls are damaging.

> rent controls are damaging

To whom?

Rent controls redistribute the value capture from gentrifying neighborhoods away from landlords and towards longtime residents. That's what they're intended to do, and they do that.

Anecdotally, I know multiple people that have turned down better paying (and arguably better for society) jobs because they would have to move but don't want to give up on their current rent-controlled apartment.

What seems to always end up happening is that new residents subsidize the rent controlled ones, which creates this weird lock-in dynamic because people can't afford to move into equivalent housing literally next door. Rent control also gives landlords an incentive to encourage older residents to move. Sometimes they do this with big payouts to people that are willing to leave (I know someone that got offered $10k to leave his current place, but I've heard of payments as high as $50k). Less scrupulous landlords try to accomplish the same thing by letting the living conditions deteriorate to the bare minimum level that code enforcement will tolerate (or lower than the bare minimum, because they know that certain groups of people such as undocumented immigrants are reluctant to contact the authorities).

> What seems to always end up happening is that new residents subsidize the rent controlled ones

Not really.

It's landlords that subsidize rent controlled tenants.

The system is redistributive. The value that would have gone to landlords in an increasing rent environment goes to the tenant instead.

Theoretically it can distort the market, provide disincentives to building housing, etc etc. But those are second order effects, and situational, and often very arguable.

In economics terms the subsidy flows from property owner to tenant.

> It's landlords that subsidize rent controlled tenants.

Are there any studies showing the extent to which that is true? I would be curious to see what fraction of the rent control is paid for by landlords vs new tenants. My intuition would be that rent control reduces the supply of market-value housing, which would lead to prices increasing even more (even before you take into account a landlord wanting to compensate for the money they're not making from rent controlled apartments).

> Are there any studies showing the extent to which that is true?

There are actually plenty of studies that show that it's not true. Some of them are linked elsewhere in this thread. Your intuition is, in fact, correct and supported by a vast body of empirical research.

This is one of the least-controversial topics among economists. It's very difficult to find a topic on which there's more academic consensus than rent control and its effects. But people dig their heels in and refuse to acknowledge it, even when there's copious research behind it.

As Paul Krugman put it, "So now you know why [people say] economists are useless: when they actually do understand something, people don't want to hear about it."

I have a degree in economics, I'm aware of the concepts being discussed.

Consensus changes. Right now many neoliberal market-fundamentalist theories are not holding up well in the context of history.

Several things that are taken as gospel by economists, such as free trade is always good, or that low unemployment is too dangerous because it causes inflation, appear now in retrospect to have caused a lot of misery for the middle and lower classes.

> I have a degree in economics,

So do I.

> Consensus changes.

Sometimes, it does. In this case, it hasn't. The consensus on this topic is strong.

People in rent-control and rent-stabilized apartments are staying in their homes, which is the intended effect of the policy.

The fact that it hurts people who might want to move into the neighborhood, or from a rent-control/rent-stabilized apartment to a different one in the same neighborhood or the same building, is not really a goal that rent control is targeting.

Does it work at housing everyone? No, which is why we say it hurts the macro goal of providing affordable housing for all. Does it work at locking people into the apartments that they have, at prices they can afford, so that they won't be forced to move? Yes. Rent control has never really pretended to be anything else.

> People who disagree with rent control largely disagree with the goals, which is to keep existing residents where they are.

You could also phrase that as making it hard for people to move in, making it hard for young families to stay in their neighborhood when their housing needs increase, making it hard for older people to downsize. It's really benefitting the residents who are lucky enough to already be in an apartment of the size they need, at the cost of everybody else.

I'm not disputing that those things happen, but those are second-order effects which nobody advocating really cares about at the time of creation of regulation, they're certainly not maliciously advocating for any of that (at least the latter two points).

It's achieved its goals of letting/forcing people to stay in their apts.

It has utterly failed in actually dealing with housing

Except it doesn't work, and has been proven to not actually work.

I read some version of this sentence every time the topic comes up.

Like it's just "proven" not to work, as if there's some kind of objective science that exists independently of values and assumptions.

Rent stabilization is intended to keep permanent residents of the apartments in question from being forced to move by rent increases. It does exactly that thing.

HN readers downvotes don't disregard facts and you should retract your downvotes immediately. Reminder: the downvote button isn't there because you disagree with facts and you need to leave your emotions at the door. There's multiple sources linked in this thread proving this.

https://web.stanford.edu/~diamondr/DMQ.pdf

https://www.economist.com/the-economist-explains/2015/08/30/...

and plenty more throughout.

Of course residents love rent stabilization. They like it for the same reason the rich enjoy greater returns on wealth. Rent control makes housing disproportionately cheap for those currently living in the city and disproportionately expensive or unavailable for those seeking to move in or youth seeking to move to their own place. In effect, it's a tax on the young and the migrant to subsidize the older, richer, and more entrenched.

> In effect, it's a tax on the young and the migrant to subsidize the older, richer, and more entrenched.

That's not correct. It's a redistribution from landlords to tenants.

It's at least possible that there are also dynamic effects on the larger market, of course, but it's intentionally misleading to act like the "tax" is on people that aren't a party to the transaction. The cost/money that would have been captured by the landlord is instead captured by the tenant. The core of the mechanic is pretty straightforward.

Hmm... I count not being able to afford a unit in the city you want to live in, and thus either having to commute (inconvenient) or find work in another city (opportunity cost), to be a kind of tax. Taxation is not just monetary.

The landlords are taxed; you're not wrong. But they're not the ones most hurt by these policies.

The same thing will happen there as has happened in California. Landlords exit the market, developers stop building new housing, and ten years later you have a housing crisis twice as bad as the current one.

Rent control doesn't apply to new construction in California.

Requiring a portion of builds be below market rate is an equivalent disincentive from builders perspective.

Interesting point. It would only apply to the 15%-25% of below-market-rate units, so yes it would reduce supply, but not as much as making the entire building rent controlled (or below market rate).

Building is quite a risky proposition, mostly due to the large investments required, the time to recoup them, and the uncertainty of the costs. Delays and unforeseen issues quite often turn a construction into a money-losing venture. Once those risks are factored in, despite the large return on successful investments, the profits aren't great. So, it doesn't take much to make a proposition unattractive.

Luxury apartments tend to be more attractive to builders not simply because they can make more money, but because the increased profit result in lower risk.

I wasn't aware the Soviet Union allowed rich investors to buy up chunks of the housing supply and rent them out as hotels without a business license, while also bypassing the numerous regulations that hotels have to abide by.

If you’re talking about Airbnb, as far as I know what you’re describing is not allowed in Berlin.

The ban was lifted in May 2018: https://www.citylab.com/life/2018/03/berlin-airbnb-vacation-...

Interesting, thank you for the information. Though, from your link:

> It nonetheless imposes some pretty firm conditions on vacation rentals and makes the penalties for ignoring them far more stringent. All landlords seeking to rent out their home will only be allowed to do so if they get a general permit from their borough, even if they intend only to rent their property out for occasional short stays. While landlords applying for a permit at their primary residency will likely be approved, second home owners may face a more rigorous process. Landlords who leave an apartment untenanted, meanwhile, will need a special permit from the borough to do so after three months of vacancy without having a permanent tenant registered, cutting the current vacancy grace period in half. Most strikingly, the maximum penalty for breaking the rules has been multiplied by five, to a potential fine of €500,000 ($617,000).

No, they just declared housing to be affordable (in the $20/month ballpark region) and people had to apply 10 years in advance to move to a larger apartment. This is my parent's experience in east Germany, should be similar to Soviet Union.

It was! Also, in early 1990s we had food shortages and long lines in stores for basically everything (in Moscow! things were much worse in the regions), which was a direct result of the government controlling the economy for many years through directives and completely ignoring the basic laws of economy.

Sadly, the examples of economies of Soviet Union, and Cuba, and Venezuela, and North Korea etc. are somehow not sufficient enough for people to realize the danger of such control.

Exactly, it was really good if you happened to live in an appropriate apartment already, but was an absolute nightmare if you wanted to move. The same will happen (to a much lesser extent) in Berlin now.

The curios thing about these anecdotes is that as dysfunctional as somewhere like the Soviet Union was, getting a affordable apartment in only 10 years would be a great deal for many today. In many metro areas property values have increased more the savings from the median income, meaning that the application, or aspiration, of the majority of people is going in reverse.

It would be a shame to have to pass on any job that required relocation for 10 years.

The apartment was subsidized, but not free. Unless you were a part of Nomenklatura (the ruling class government officials), you could probably hope for a 40 sq.m (430 feet) apartment somewhere in Khruschyovka (a poorly built 5 floors block housing) at the outskirts of your city. After 15 years of hard work.

Perhaps it is better than nothing, however, living in Soviet Union's surrealistic "economy" was not worth that.

Prices are rising because that is what people are willing to pay. You can in fact get very cheap housing in Germany, outside of the big cities.

> getting a affordable apartment in only 10 years would be a great deal for many today

I agree, but the same applied for buying a car and other rare goods as well. The whole system was unsustainable. The almost comical dysfunction of it is probably hard to believe if you didn't experience it first hand. 10 years after the wall came down my dad came into the kitchen announcing that today we could have picked up our first car, which was one of those [1], in the late 90s.

[1]: https://i.ytimg.com/vi/No1-4GsQa-g/maxresdefault.jpg

That is what is curious. Something comically dysfunctional should be be absurd and outlandish but isn't. Saving 15 years for down payment so you can have some sort of cost control and housing stability in a modest apartment outside of a city is the reality, or even unattainable, for many people without assets today.

> In many metro areas property values have increased more the savings from the median income, meaning that the application, or aspiration, of the majority of people is going in reverse.

That's because a lot of people want to live in cities like Berlin. But don't worry, the Soviet Union had a solution for that, too!

You would get assigned a job by the central committee, based on grades, people you know, who you're married to, things like that. So a lot of people would get assigned to very undesirable places, such as villages or very small cities, thus solving the problem of too many people in large metros. Do you think that's an acceptable tradeoff?

Even if it was sooooo what? people are able to leverage the property and earn more money on it, because it's worth more because somebody is going to pay it. Of course they are going to do that one way or another despite regulation. And they should they are creating more for the economy. If you can't afford to live/work somewhere that's life ? Why on Earth should somebody else subsidize your costs to live there.

That being said I'm sure there are some anti competitive laws/regulations creating problems but the solution is not more bad regulations.

That logic leads to monopolies or oligarchies or corporations/rich people "owning" the democracy. Those with resources can easily stop those without resources from ever competing with them in a free market, unless there are regulations.

If that is the problem, could it be that regulating that would be a better solution?

Well, if that’s the issue, as a non German who doesn’t understand the situation or surrounding political environment very well, wouldn’t a much better solution then be to crack down on illegal hotel businesses?

Seems like this law is only going to make things worse: the rent freeze will make renting even less appealing to owners, only increasing their desire to run their property as a hotel. No?

Rent seeking behaviour causes prices to rise making the market inaccessible to homebuyers. Making property less attractive as an investment should help curb this tendency.

People being willing to pay high prices to live in Berlin is what causes prices to rise. It has been a popular place to live in for a while.

Rent freeze will limit available housing and lower the quality of it.

Sure that argument makes some sense, but my comment was in response to the claim that the main issue is illegal hotel businesses. If that is the case, If don't see how this law can't make that problem worse.

If it is attractive to investors to run illegal hotels now, it will only become more attractive to do so once they are unable to raise rents on normal tenants.

> crack down on illegal hotel businesses?

They have already done it and recovered less than 3000 flats. Again, illegal hotels are not a real problem in this city.

This is not a real problem in Berlin, not at any scale that it matters.

Berlin receives 30.000+ new people every year and builds only ~1/3 of the necessary flats. It just cannot work this way.

It's like we never learn https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...

https://www.theguardian.com/world/2015/aug/19/why-stockholm-...

That Stockholm article is deceptive at best. The Stockholm housing market suffers above all else from lack of regulation of mortgages. The rental market simply can't compete with a 100 year double mortgage without default. The result being Sweden having among the highest amount of household debt of the OECD countries. Of course the head of the landlord lobby organization wants their members to be able to charge higher rents despite few rentals being built today when they are able to charge three times the rent of older rent controlled units. As most people simple can't afford them.

To be fair, this isn't their first or only response. They're building housing as fast as possible. Within a 5 minute walk from my apartment in the last year there has been 5 brand new housing towers built.

They've also introduced laws to stop people from buying up apartments to rent out via Airbnb.

Considering even with the law that limits how much they can raise their prices, they're just doing unneeded renovations to get around that law and increase the rent 40%.

This law in combination with the housing construction going on throughout the city and the Airbnb law I think it's the right direction.

People buying apartments to rent out via Airbnb is not inherently a bad thing - it just indicates there is existing unsatisfied demand for short term rentals, which cannot be fulfilled by hotel industry. And guess what - hotel industry is another example of an industry heavily regulated by government (zoning laws, construction permits etc.). So the Airbnb problem most likely has the same underlying root cause.

No it is an indication that people are cheap and a person who bought a apartment as an investment now makes 30-60€ a night vs about 600 a month. There is a reason hotels are expensive. Airbnb does the same as uber. They start a business with either exploits a loophole or is illegal. Btw. at least in austria, if you want to rent your apartment on such a plattform you have to clear it with everyone who lives in that house. Of course nobody does that and of course the plattforms don't verify that, because they are "just a connecting plattform, we don't give any warranty but of course we get millions of of this"

> if you want to rent your apartment on such a plattform you have to clear it with everyone who lives in that house.

I love this idea. My friend currently lives in a building in Brooklyn where a person rents out rooms in his apartment on AirBnB and it's been nothing but an annoyance since day one. I'm glad NYC has put some restrictions on AirBnB .

Chiming in as an NYC resident:

I'm _extremely_ grateful that my current lease, as well as the upcoming one that I hope to sign if my application is approved, explicitly spells out the penalties for renting out apartments on Airbnb as a fee equivalent to 2 months rent immediately applied to the tenant.

It's been a massive improvement to not have to deal with the externalities that come from sharing a building with Airbnb guests.

Yes, there's a big difference between someone who rents out their apartment using Airbnb because they're away half the year, or has a spare room that they rent out, and someone who buys an entire building of 20 apartments and turns it into a hotel in all but name, skirting around all the consumer protections and regulations that have been put into place around hotels.

You can argue that the regulation of hotel-style Airbnb use is too lenient, or the regulation on real hotels is too onerous, but I don't know of any good argument that they should be treated differently.

Sorting this out would either lead to reduced demand for apartments to use with Airbnb as it becomes less attractive to large-scale landlords, or lead to greater demand of land for hotel usage.

> ...turns it into a hotel in all but name, skirting around all the consumer protections and regulations that have been put into place around hotels.

Then the protections and regulations need to be adjusted to apply to businesses that operate like hotels, regardless of what they're called.

There's fundamentally no reason such a hotel shouldn't be able to list their rooms on Airbnb - as long as customers aren't deceived, and the law is complied with.

> there is existing unsatisfied demand for short term rentals

This may be all well and true, but cities have no obligation to accommodate such demand. For residents, short-term visitors are annoying, since they rarely stay long enough for their behavior to warrant more than a warning from the police, they have no interest in maintaining the neighborhood during their stay, and their economic power is mostly used on things that local residents have no interest in or actively dislike.

You could "solve" this problem by providing more short-term rentals, but unlike housing I find it hard to believe that city residents actually want it resolved that way.

AirBnB allows housing stock that would otherwise be inhabited by long-term residents to be reappropriated for tourism and business travelers. That puts local residents in direct competition with tourists/businesspeople for housing, and predictably increases the price of housing for long-term residents.

By regulating the hotel industry and restricting the supply of short-term housing, local governments favor long-term residents over visitors. AirBnB is great for travelers, but long-term residents pay the price.

> it just indicates there is existing unsatisfied demand for short term rentals

Yes, but allowing the market to satisfy that demand is not necessarily a good idea. This isn't a case where the unrestrained market will solve all problems. It will solve a problem for travelers, but create problems for long-term residents.

They are not building as fast as possible. They actively drive investors away. Before this rent freeze, they discussed expropriate big investors.

Is there any data on AirBnB affecting the prices?

The city probably simply got more popular, which leads to rising prices.

> They're building housing as fast as possible.

That's not true at all. The number of building permits granted has actually dropped and when new developments are granted, the number of apartments build will always be negotiated down from the original proposal.

It's insane. The dense Gründerzeit quarters are the ones that are most popular, yet we are unable to build anything alike.

> That's not true at all. The number of building permits granted has actually dropped

Ok. But the real statistic to disprove the statement is the percentage of building permits granted based on building permit applications. Has that dropped? Or is that still rather high? Also, I think you're not mentioning the fact that major parts of Berlin are against gentrification so while the local government want something, the people don't, because that gentrification allowed them to bypass the rent rise law.

Realistically, to say they aren't building a ton of new housing at a rather fast rate would be a lie. As fast as possible, maybe hyperbolic but that is all.

Anyone who looks at regulations like this and sees the Soviet Union is themselves a lunatic. This is not a planned economy, and people do not need to profit from housing to build it, and housing should be a human right.

If you take the monetary incentive of profit away, what other motivator exists for people to take huge financial risks and expend vast amounts of money to purchase land and construct houses and other living structures?

I guess you do have the right to wander into the forest and build yourself a fortress out of pine cones and moss, but if you want to live in a modern house with modern amenities, there's going to be a profit incentive behind it. It's basic economics.

> I guess you do have the right to wander into the forest and build yourself a fortress out of pine cones and moss..

Is there anywhere where this would be legal? Certainly not in Germany.

OK, then look at NYC in the 1970's. Severe rent control resulted in crumbling buildings. Price controls are bad policy.

NYC is in america which has a complete different economic Idea. While Germany was and sometimes still is a social market economy America is a full blown free markt, of course just slapping a rent control and nothing else is a bad idea

America is a full blown free markt

NYC? No, it's not a full blown free market by the very fact they have rent control.

> people do not need to profit from housing to build it

Yes, I'm sure that you volunteer your services to build new housing all the time.

Not just your services, you also have to take out a 7 figure loan to invest in the project.

Many of us actually volunteer our services for social good all the time (not construction in my case, but people do that too). This should be celebrated and even expected from people, not met with incredulity and snark.

And please do not twist the words of OP. The whole point of a democratic government / social contract (at least on paper) is to have a communal entity deal with this stuff when there are not enough volunteers.

> people do not need to profit from housing to build it

People do need to profit from something to do it in a capitalist society.

Housing is not a market that should be governed by capitalism. I honestly don't care if the ultra-rich trade 30 million dollar homes and speculate on their value, but the fact that homelessness is even a problem in the first world is a travesty.

Our children will look back upon a time when there were 6 (SIX!) empty homes for every homeless person in the United States and weep. Obviously those homes aren't all where the homeless people are, but that's another problem itself: Why on earth are developers building homes in the middle of nowhere, why are they building luxury condos, and who the hell is buying them?

As I understand it, homelessness has more complex causes than simply not having access to affordable housing.

Sure, but the majority of it comes down to "money": https://i.imgur.com/aUvpH0S.png

The fact that we can't solve homelessness "just" by giving everyone easy access to affordable housing isn't an argument against affordable housing. It's an argument for better mental health services and a wider safety net.

The count in that graph also includes people living in temporary, public shelters. In my opinion, that makes it slightly less useful when attempting to determine the cause of people on the streets, which is what most people refer to as homelessness. It does seem silly to me to include those living in currently available public housing as 'homeless'. It's perfectly possible that most of those who lost jobs are currently housed in existing public options, and the majority of those on the streets are there due to addiction. Unfortunately, I couldn't find a breakdown of self-reported reasons for homelessness once those already sheltered were removed.

Source: http://allhomekc.org/wp-content/uploads/2019/05/2019-Report_..., Methodology Section, point 3, saying they include those living in shelters.

Homelessness is a problem of addiction and mental illness. Cheap highly regulated housing in the middle of expensive cities don't fix that.

Social workers and detox programs help, but there is no easy fix (other than "finance their life") for people who can't kick a drug habit, or are mentally incapable of holding down a job.

> Homelessness is a problem of addiction and mental illness.

Have you never spent time with homeless people? You are delusional.

I spend time with them every day. Hello from Seattle!

As opposed to what? Where in the world -- at any point in human history -- have people spontaneously made houses without any benefit to themselves?

Nice idea. Can I have a free apartment in the centre of Moscow within 5 minutes walk from subway then?

What I want to say is that houses are different and there are places where everybody wants to live and where nobody wants, and that is why the housing prices can be so high. Maybe instead of asking for a fixed rent people should consider a cheaper place to live? Everybody cannot live within 5 minutes from a subway station.

The answer is just a google away! I’m guessing you know nothing about social housing based on this comment.

> This is not a planned economy, and people do not need to profit from housing to build it

Can you explain? Even if I were to build my own house, I would myself profit because the enjoyment I got out of the new house would be greater than the enjoyment I'd have had without it, thus my 'profit' is the cost of the enjoyment of my new shelter.

That's true for, say, bread. Or really any fungible good where labor makes up most of the price of the product. If you artificially suppress those prices, there isn't enough money to pay the farmers and bakers, and no bread will be made.

This freeze actually exempts new construction, so the whole problem is mood. But it's still interesting to think it through, and the result is different than simple economics may make you think:

Housing is different than bread, or cars, or mobile phones. It doesn't actually cost meaningfully more to build a new house in the middle of Berlin than to do so in some empty village in the countryside: the costs of material are the same, and for the most part so is labor.

The only difference is the cost of land.

The effect, according to the basic supply/demand scheme of economics you are invoking should be to depress land value, with no effect on the amount of housing units being built. That's true as long as the rent it is possible to charge is high enough to cover the costs of construction. One can take a guess at the actual value by looking for the cheapest rents in newly constructed housing, which for Germany is about half of Berlin's average. In the limit, land value would tend toward zero, although that's rather theoretical because at some point owners just wouldn't care about selling.

This hints at some additional factors that may have minor impact: maybe there is an expectation that land value will rise again after those five years, and the actual discount in the market is therefore smaller, etc. But even then, it's only land value that would be affected.

Location location location.

You seem to be asserting that the land value is arbitrary simply because it's located in a different area. The value is higher because the land is a lot more useful/productive / accessible/developed. You can't just wipe all that value away.

But you can arbitrarily depress it. Its value is the sum of all positive aspects (such as good infrastructure, nice views at a river) and all negative aspects (such as air pollution, noise). Implementing a restriction on rents adds a huge negative aspect that however is only negative for those interested in investing for appreciation, not at all for those who eventually live in that place. This should indeed depress the lands' value, just like it would happen if an airport opened up right next to it, but without all that noise. But as long as land costs plus construction costs are still lower than whatever you can get in return via rents, investors should still be inclined to invest in new buildings, they should just not be willing to pay too much for the land, because there's this big negative aspect connected to it.

> This freeze actually exempts new construction, so the whole problem is mood.

_This_ freeze excepts new construction, but it exposes the risk of a future freeze. Now, being a landlord in Berlin means being prepared for a rent freeze being applied in the future. That must be taken into account for projections of future income, and will either reduce your projected profit, or require raising rents on new construction to keep your projected profit.

The cost of a housing unit will be (land value + construction cost) / density. The idea is that you can simultaneously increase land value and decrease housing cost by increasing density.

Soviet and planed economy truly sucked, so an anarchy style laissez fair market is the only other viable option?

Why do something equally retarded in the other direction?

Reasonable regulation is the only way we can hope to achieve a decent balance in a social democracy.

Something that arguably works pretty well here in parts of the west.

These kind of moves are band-aids that don't provide a viable long term solution. But sometimes the hospital is really far away and using a band-aid allows you to temporarily protect yourself from excessive blood loss or infection while you wait to get proper medical attention.

Why, how do you do it in Soviet Union ?

Has everyone forgotten about the price freezes in the US? This is hardly a socialist tactic.

As a person living in austria, I strongly believe that goverment build housing and strong regulation of pricing and the market is the only way to keep housing affordable for all people and not make it a speculation object like in germany/berlin.

Did you know that in the late 90 the housing was good and affordable?

And that a big chunk was owned by the city or state?

That these things were then sold for pennies, to companies who only want to exploit people?

Did you know that after there were laws passed against raising the rent exorbitant, many companies cheated?

They raised the cost that you have to pay for the house services which are included, without doing that services or charging way to high

edit: fixed formatting

the exact same transition happened here in Sweden, and now the housing market is so fucked that it might take down the economy in the next recession.

What's wrong with the housing market in Sweden?

> Did you know that in the late 90 the housing was good and affordable?

Obviously, affordable is subjective. People in cities have demanded ever-expanding services. Better sanitation, better public transit, electricity, everything new has to be super safe, everything new has to have 16 handi-capable toilets per 1 handi-capable user, subsidized housing for the poor, free education, free higher education, free healthcare, higher taxes on businesses, higher regulation of existing businesses.

Some of those things are probably necessary. Some are probably really nice to have. Everything has a price. Rent control is a great way to make slums. There's no market incentive to make your placer any nicer than someone else's because you're competing for a set amount of $$. The good landlords will exit the business, and you'll only have slums.

But there are different houses. Typically the most expensive are those located in the center of a big city with good transportation access. Do such apartments need price regulation? Poor people could live somewhere further from center where the prices are more affordable. Otherwise you make those nicely located apartments unavailable for other people who are ready to pay more.

    goverment build housing

Berlin government is not building housing in meaningful quantities to keep up with demand. You can look at BER (the airport that was supposed to open in 2012) to get an appreciation for how dysfunctional Berlin's regional government is.

Berlin's NIMBY population is also to blame, they voted against developing former Tempelhof airport [1]. It would have been easy to erect dwellings for > 10k people there.

The rent-freeze is populist political action to cover up government inability, and redirect anger away from the root cause of the problem (Berlin's government) towards scapegoats. Freezing rent will not create a single new dwelling, indeed it will reduce incentives from building property.

[1] https://de.wikipedia.org/wiki/Volksentscheid_zum_Tempelhofer...

Never said they where just that it is the best solution. And I said I live in austria, where the goverment did exactly that very sucessfully.

My hope is that it's not a proper economic response, but short-term political firefighting.

That is, "something has to be done" while the capacity is being built, and it cannot be built fast enough.

Surely price control will result in various shortages, lines, increased corruption, etc. OTOH this may be, at least in the politicians' reasoning, not as bad as rapidly pricing out their constituencies out of the houses where they live. And if not directly their constituencies, this applies to all low-wage workers needed by the city economy; raising their wages abruptly would raise other prices abruptly, which may be politically undesirable.

So, as a temporary throttling measure this may be not so nonsensical, with emphasis on "temporary".

And as a person born in the west, ordering prices to stop raising is a useful and often necessary tool in the economic policy toolkit.

Capping rents isn't like capping bread prices or whatever - the money is just going to the land owners, there's no elasticity of supply and no marginal cost. Capping rents just means that instead of allocating the scarce housing to whoever can pay the most, and giving a bunch of free money to the rentiers, you allocate the scarce housing more or less randomly, and the renters in aggregate keep more of their money.

Why stop at price controls on housing? Why not just go bravely into the full-blown confiscation and redistribution of private property.

I’m afraid not everyone understands your sarcasm here :)

It's a running joke that the country and Berlin in particular is turning into GDR2.0. Which is why there's lots of dissent especially among the former East-Germans who feel reminded of something.

You have to start somewhere.

the West is being murdered by populists

Maybe so, but please don't post unsubstantive comments to Hacker News.

And in other news: “That can’t be graphite on the ground”

This is totally wrong!

The government should never intervene market!

Nope, because the market doesn’t care about you. It doesn’t care if you have a place to live, if you are healthy, if you are safe…

Not restricting "the market" at all leads to a worse life for humans.

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