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Comment by throw0101a | Hacker News Reader

> Unfortunately, rent control will have the opposite effect of what Oregon thinks, and only make housing scarcity worse.

I always found it odd that rent control always seems to be an all-or-nothing policy: either things are tamped down on, or it's a laissez faire system.

Does any locality have a "hybrid" approached. Something like:

* buildings 0-5 years old, allow up to 3x inflation rent increases

* buildings 5-10 years old, allow up to 2x inflation

* 10+ years old, allow only at inflation

This would (in theory?) encourage the construction of new rental units by allowing investors to recoup their costs sooner and counter the risk of any unforeseen expenses. But as the buildings get older, and costs (theoretically) become more predictable, stabilize prices for renters.

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> I always found it odd that rent control always seems to be an all-or-nothing policy: either things are tamped down on, or it's a laissez faire system.

It's not. Rent control argument on the internet looks like that because it's always a bunch of strawman arguments about political philosophy. In fact the Oregon laws in question have features exactly like what you're talking about.

What are some other jurisdictions that have this tiered approach?

Older buildings have all kinds of maintenance issues. Even if predictable, they're still an added expense, especially for major systems. Without allowing rental unit owners to pass those costs along to the renters, either the units will be taken off the rental market or they will be allowed to disintegrate over time until they're no longer habitable.

Yeah my la landlord just sat on my problems until my place was so bad it was unlivable then I lost my job and was forced into the street.

That assumes that the market is able to bear those costs. What do landlords do in stable markets where rents are flat or track inflation? Are all rentals dilapidated in those markets?

In most of Europe building maintenance costs are counted outside of rent. This makes it difficult to hunt and compare flats as those costs can greatly vary.

Combine it with laws that protect a decent standard for apartments and make it much harder to kick tenants out without a good reason.

I.e. enforce basic tenants' protection instead of worrying about what incentives landlords have. It shouldn't matter whether the landlord wants to take a unit off the market if the tenants aren't willing or can't move. Then it lies on the landlord to create an incentive for tenants to move out, for example by extracting less rent from uncontrolled units to make them more affordable.

Another good idea is for tenants to unionize and share the legal costs of e.g. questioning the legitimacy of a lease termination or challenging sub-standard living conditions.

You've literally just described LAs renters protections and tenants rights organisations in a nutshell...

Maybe, but the effect has to be considered together with the proposed "hybrid approach" to rent control. Los Angeles rent stability ordinance (which lately caps rent increases at 4% since this year) only affects apartments built before the 80s, and rents are on average up 6% since last year. Using a moving free market window and a lower cap may have a different effect.

Maintenance can be passed through to renters in California. The landlord just needs to ensure the maintenance is actually legitimate (i.e. they can't put in a gold toilet and charge for it), otherwise the rent board could rule the costs can't be passed through.

At least in SF, there is a cap on maintenance pass through, something like $60 per month.

If you’re maintaining a 100 year old building, it would be very easy for costs to exceed that cap.

Older buildings should sell for less, to compensate for this risk. If the mortgage payments eat up too much of the rental income then the owner overpaid, and should sell at a price that's more appropriate for the risk associated with the building.

Problem is that laws change even when homes don’t change ownership.

Your building might be worth$2M, then a rent control law is passed and suddenly it’s worth $1.5M.

How does this work? The $2m valuation would be based on income from current tenants, would it not? Most rent control laws, and especially not the one in Oregon, don't retroactively change rents charged to current tenants.

That is unless the $2m valuation is based on a speculative estimate of how much rents will go up in the near future?

A good example would be single family homes in SF. Currently no rent control. If the rent control laws were changed to include SFHs, you’d see a pretty drastic decrease in the value of them, since yes, currently they are valued based on expected future rent increases.

Most landlords just paint the walls and cross their fingers on an older place. You've seen these dingbats in LA? Deathtraps and most are not to code at all.

Out of curiosity, have you ever owned a building? I might suggest that your opinions might change once you have. Owning rental property isn’t a tidy math problem.

Newer buildings have more predictable costs, definitely not older buildings. It’s pretty much the opposite of what you said in the real world. Newer buildings can lease to higher quality tenants at higher rates with lower eviction/non-payment/damage risk. Older buildings can run the gamut. You can have an older building filled with stable senior citizens that runs perfectly for decades or you can have an older building filled with tenants who constantly break things, are late on rent, run meth labs, or simply trash a place and vacate in the middle of the night. You might have to evict someone and the process could take a year. Air conditioners fail randomly and expensively. Roof leaks develop and tenants might not even report it for months (yes, that sort of thing happens all the time. As a building gets older, the risks increase, but the rent you can charge decreases compared to a new building.

My suggestion is to actually ask people who have owned building exactly why they oppose rent control so fiercely and the answers aren’t going to be about greed but about increased financial risk.

If we can agree that profit is essentially what we call "greed," any financial risk means deceased profits, in other words less opportunity for greed. I'm not a communist so I'm not against profit, but in Marxist theory this kind of profit is seen as the problem with capitalism.

You might want to re-read your Marx; one of his more famous and less controversial observations was that the rate of profit tends to decrease over time in a healthy market.

High rates of profit wasn't the problem, it was the negative effects that were theorised to occur when the rate of profits, inevitably, fell too low.

> Owning rental property isn’t a tidy math problem.

I'm not talking about owning, but about encouragement of building. If income is limited to CPI, regardless market characteristics, what incentive is there to take a risk and build?

A tiered system much like you describe is exactly what Oregon passed. New developments are largely unrestricted.

I can imagine this can have a domino effect. Older buildings require more maintenance. A landlord who plans poorly may find themselves squeezed at the bottom from deferred maintenance and from the top due to rent restrictions.

Those landlords should go out of business in a free market. Not properly accounting for maintenance costs is a business failure, not the tenant’s fault. If property prices are higher than rents that’s a market failure, not a cost to be passed onto tenants.

So a landlord should be subject to the free market, but tenants shouldn’t be? Tenants should be protected from rent increases, but property owners shouldn’t be protected against cost increases? That isn’t the free market.

One way to look at this is, land owners are generally wealthier than renters. According to the Federal Reserve Survey of Consumer Finances landowners are 44 times wealthier. It makes sense that the government protects people who are less able to deal with financial instability.

Yup it’s a combination of protecting those who are less powerful and I would argue a way to avoid perverse incentives. If a landlord can arbitrarily raise rent, they have no incentive to perform ongoing (inexpensive maintenance). They can wait until the problems become critical and much more expensive and then pass those costs onto the tenant. With rent control the landlord knows they have to control costs and has more incentive to perform the cheaper preventative maintenance.

It's a nice theory, but also a very well tested one. Just read an article on bloomberg about the policy being a wash in San Francisco, with some concerns that it may have had some other effects they weren't able to measure.

It's akin to the minimum wage; why are people so bent on capping prices? Why not work on the underlying problems instead, ie what's causing those prices?

It makes sense, but it is also a bad idea. If someone can't afford the cost of living, they should relocate to somewhere else where they can.

Western civilisation has had phenomenal results with the principle that when there isn't enough of something then the owner of that thing gets to decide who goes without. Housing is not so special that it deserves an exemption. Squeezing landlords is one of several ways to lock a housing shortage in for the long term. It has been established that letting people make big profits doing something is a great way to get more of the something - and that applies to renting out houses too. The only role for the government in making sure it is easy to build more houses and that everyone sticks to what they signed when it comes to contracts.

I agree, except that housing right now isn’t a free market precisely because of zoning rules that artificially limit what can be built and where. Until existing land owners lose the right to rig the market, markets should be rigged in favour of tenants who have less power.

Where it’s easy to build new housing supply I’m in favour of looser rent control or removing rent control because it’ll be redundant.

This would encourage tearing down old rental units in order to build new rental units in their place.

Are you saying that because you think it's a good thing or a bad thing? Seems to me like either (or both) of these could be the case.

In most situations it would be good for rich renters and bad for poor renters, for an older building with apartment sizes and amenities that are typical of older buildings to be replaced by a new building with apartment sizes and amenities that are typical of new buildings.

It would be bad for those poor renters who already had apartment. But good for those poor renters who are just entering the market and looking for a home.

Poor tenants are not renting new apartments. In general, you could say that new apartments are added to the overall stock so that's good for all renters. ITT however we're specifically talking about the kind of apartments that are rented by the poor being replaced on the same site by the kind of apartments that are rented by wealthier tenants. That is actually good for one group and bad for another group.

Widely anticipated wonderful new laws are usually chock-full of this kind of crap. Lobbyists don't try to step in front of oncoming political trains. They do successfully redirect those trains to their own purposes.

In California there are tough demolition protections in the highest demand cities. Proposed state-wide legislation (SB 50) designed to spur homebuilding will actually make it illegal to demolish any home where a no-fault eviction has occurred. So at least in California I'm not too concerned about this particular side-effect.

Ok? This sounds like a good thing to me.

Perhaps true, but it takes quite a bit of capital to demolish and rebuild? What would the ROI of doing that actually be?

How would you avoid only high-rent housing being built in place of any torn down units?

This seems like it would still be rent-inflationary in nature, you just end up with younger average housing stock.

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