Rent control will make housing shortages worse | Hacker News Reader

Rent control will make housing shortages worse

economist.com

55 pointsprostoalex31 comments

Discussed 4 days ago:

https://news.ycombinator.com/item?id=21022491

I'm not sure I understand these kind of articles. There's two harsh truth for me:

* It would be crazy not to rent a rent-controlled place in a market like SF. This is what everybody tries to do here, and honestly I would probably not have moved here if I couldn't have found a place without rent-control. It is just too risky (your rent can pretty much double in a week, forcing you to move out).

* SF's real housing problem is that there's a lack of housing. This has nothing to do with rent control, and focusing the story on rent control is like ignoring the bigger elephant in the room. It's a malicious distraction tactic. Check the numbers, the population of SF has remained extremely stabled since the 90s[1], the reason is that there's no more space for people to live.

Ask yourself this question, who would be the biggest benefactors from removing rent control?

[1]: https://www.google.com/search?q=sf+population&oq=sf+populati...

To your points:

1) People not moving to markets like SF because rent is too high and telling employers that is exactly what should happen! This forces employers to either lobby for more housing (a good thing) or open offices in reasonable cost of living locations (also a good thing) instead of continuing the status quo bubble. Rent control is a market distorting force in this case.

2) Rent control directly leads to fewer new housing units because there is a disincentive to create housing that's going to rent for below-market. If you want more housing, you should be opposed to rent control. I say this as someone who benefits greatly from rent control and still wants to see it die.

3) The population of SF has not remained extremely stable since the 90s. Look at [1]. There were 140,000 fewer people in the 90s than there are today (a 20% increase)! Also your reasoning that "there's no more space for people to live" is demonstrably false. Go visit Tokyo and then tell me there's no space for more people in SF. There's no more space because zoning laws and height restrictions in the city are absolutely ridiculous and serve NIMBY interests.

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

Edit: since someone is no doubt going to ask, here's a good summary of the economic literature on the topic. It covers a variety of effects related to rent control: https://econjwatch.org/File+download/238/2009-01-jenkins-rea...

With respect to point (2), the argument doesn’t really work for SF; rent control only applies to units built before 1979. New developments can raise the rent as much as they want.

You could argue the threat of possibly having rent control discourages new building, but it’s a much weaker argument.

Your points in (3) I think are much, much more relevant to the SF housing crisis than rent control.

1) not going to happen. In my case, I wanted a job that only existed here. I can either pass on it, or accept it.

2) this is not true. Rent control does not apply to new buildings (unfortunately)

3) 100k in 20 years is NOTHING. The population of SF is still relatively small. And this is exactly my point, they can build more housing, they just don’t want to.

Exactly. Rent controls simply redistribute the spoils of an inefficient market from rentier to renter. New York's strictest rent controls occurred during the period of fastest house building (post war). Note that they're not presenting data like this because the data is inconvenient to their theory.

If the Economist were serious about encouraging property development (they're not) they'd encourage making land a tax liability rather than an asset, so that inefficiently used land (e.g bungalows in sf) would be voluntarily yielded for more productive use.

The Economist has always taken the side of rentiers though, and probably always will.

Gosh, I can't imagine why limiting the amount one can charge for housing would be in any way related to the lack of housing that you say is the real problem.

it depends if the rent control limits are reasonable to the landlord and if property still makes a good/better investment that other investment sources. If the answer to these questions is still yes then it's not going to make that much of a difference.

The main hurdle to housing in California is the planning, permitting and review process along with often absurd rules that can add years to to the development timeline for a project and add millions of dollars to the costs. These could be massively streamlined (parking minimums removed, height limits relaxed and guidelines that if met would allow for rapid project approval etc.)

If we build a system were development projects were able to be completed for $200k per unit then maybe we might start seeing affordable rents...

Isn't a huge part of the housing shortage in SF due to the zoning policies that prevent builders from building more than 2-3 stories in something like 80% of the city?

I don't get what's so hard to understand. Building housing costs a lot of upfront time and money investment. If the person making that investment can't expect to reasonably make a profit, then there is no incentive to build.

And the argument that luxury housing prices out lower income people from housing is like saying luxury cars price out lower income people from cars.

> And the argument that luxury housing prices out lower income people from housing is like saying luxury cars price out lower income people from cars.

No, it's not, since the resources needed for housing (land) are heavily limited, while the resources needed for cars are not.

Of course the resources needed for cars are limited, that's why they aren't free.

Housing on the other hand actually isn't as constrained by land requirements, since you can just build up (provided you're allowed to do so).

Rent control doesn’t apply to new buildings.

Sure it will. In Denmark we actually have a split because of this. Buildings built before 199x have rent control, all new buildings can have “free” rent set. If you believe you are subject to an unfair rent, you can go before a comittee that can reduce or enforce it. A landlord can also get the rent preapproved by the same comittee, to avoid any risk. Any rent contract has to follow a certain format, and rent increases have to be listed in advance, such as “the rent for 2019 is x, and will increase each year in january by 3%”.

I'm no expert, but I do know that in Indianapolis we've had many housing developments in the downtown area that have a requirement for a certain percentage of units to be rented below market rate.

You have to apply to rent those units, and you must meet the income requirements, in that you can't make above a certain threshold if income. (Not sure what other factors are taken into consideration.)

To me, this seems like somewhat of middle ground between being 100% market-driven vs. full-on rent control.

They do this in New York too, I'm not sure of the scale or laws around it, but for new development I think they need a certain percentage of units as income restricted.

The purpose of rent control is to keep existing tenants from getting priced out of their homes with annual rent increases, not to make housing affordable for new tenants.

It's the same in desirable European cities with rent control like Berlin and Vienna.

You read about people renting huge apartments there in the city center for decades paying something around 600/month while if you'd want to move in now into a similar sized apartment in a similar area you'd be paying a lot, LOT more.

Rent control makes it affordable for people that have been living there long term but makes it more expensive for the ones trying to move in now.

Protectionism in other words?

Who is posting these articles? Landlords? Rent is the most exploitative arrangement in the economy. There is a landed class, an aspiring class, and a class that is purely exploited. Everyone needs a place to live and it should be provided for free or at cost. The market is destructive and benefits the few at the expense of the many.

When land is provided for free or at cost, at a certain point some users engage in anti-social behavior that makes life hell for the other users.

This is something that the current system claims to fix by making the price so high that only "civilized" people are able to rent. But rich people can be anti-social too, it's just rarer.

The real issue is that land within commutable distance to good jobs is scarce.

Would you care to explain? I’m a renter and I find it be a great arrangement. I have no interest in owning the property that I reside in. I can move anytime I want, I don’t have to fix anything and I can park my money in things that return far more than a house.

Renting works well for highly-paid professionals who aren't committed to living in the area for the long haul and have plenty of money left over after paying their landlord. That's a very niche subset of people who rent. The more common scenario is people spend 1/2 to 2/3 of their take-home pay on rent to avoid a hellish commute, living with roommates in a poorly-managed building where the owners drag their feet fixing anything. These people don't have money to "park" in things that return far more than a house.

>an aspiring class

That's you and me. It doesn't necessarily mean aspiring to own one day. It just means that we're capable of accumulating wealth while renting.

Agree. Landlords take a huge cut of the wealth flowing through large cities like SF. They are purely parasitic. Real housing reform looks like Berlin, where the people are trying to get a referendum to expropriate housing from big landlords[0].

Treating housing as an investment is completely at odds with the ideal of housing being affordable.

[0] https://www.economist.com/europe/2019/04/11/a-referendum-to-...

Rents in France are actually fairly reasonable due to rent control. Prices to buy are high and it doesn’t really make real estate an attractive investment.

totally agree, the biggest benefactors of removing rent control are landlords.

I know too many software engineers with $200k salaries living in $2000/Mo rent controlled apartments in San Francisco. They are the last people needing any help with their rent. Sometimes they have extra room they Airbnb which reduces their rent even further

Yes, rent control doesn't magically solve the problem by itself. But it shores up the defenses of less-advantaged renters. Of course some opportunistic high earners will insert themselves into this system. There should be something in place alongside rent control to minimize that.

I'm a free-market kind of person. But I think that the problem with politicians' / planners' tinkering here is that it's inherently gimped/broken. Tinkering and tweaking the rules/details of society only kinda works if you're able to do it a lot so you can constantly "respond" and stay ahead of the changes and responses in the market. Whether as byproducts of the regulations, or in opposition to them.

The market and the people that form part of it will always respond, and modest tinkering will always fall short because (from my perspective) it seems downright impossible to make version 2.0 after implementing version 1.0 of the tweaks. At best, you get 1.1 or 1.2, and after that a perpetual 1.x.xxxxx set of patches that are only tiny changes in order to appease special interest groups.

And the reason (I would posit) is that the rules/system of government we seem to have in place make this sort of stuff next to impossible. Whether it's from special interest groups, meddling activist judges, flip-flopping politicians, lobbying, partisan voting, corporate meddling, lack of real public buy-in and participation, lack of referendums, anything. It's gimped so we get the crappy part of the constant "tweaking" and "optimizing" by politicians, all while having to do PR for their changes/ideas and a public that is almost exactly divided on the issues.

And it seems pretty obvious to me that the rules now are (as much as they claim be pro-social justice), are only in the interests of property owners.

And it's not like rent control is the only way for there to be affordable housing. It's just a way that pretends to look out for lower income people, while actually benefiting entrenched property owners in a really perverse way.

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