How can that be, exactly? If it's "extensively regulated", then why is it so expensive? Can you point to a relationship between capping the price and inflating it? They seem to be inversely related.
In Stockholm, decades of rent regulation has created a massive undersupply of housing. That means there is a 9-year wait list for apartments. The way rent regulation usually works is it caps rent increases for a given tenant. Tenants thus never leave their apartments, so the prices for the few openings (and newly built apartments) is astronomical.
> Another legacy of Sweden's post-war efforts to develop a more equal society — known as "Folkhemmet" or "the people's home" — is rent regulation, which applies to both municipal and privately owned properties. While millions of Swedes have benefited from the highly affordable rent levels set since the 1960s, the caps have had a damaging effect on the provision of new housing.
> Historically, the low returns from rents for private landlords have made the investment case for building new rental properties difficult to justify, the Swedish bank analyst said.
> The love for rent-capped municipal properties among the Swedish people is strong. Almost 500,000 people were on Stockholm's waiting list for public housing, according to figures released in 2015, double the number from seven years prior. In 2014, the average waiting time to get an apartment in Stockholm was 9 years. Once a person is given an apartment, they often stay there for life. "People are sitting in 300 square-meter apartments because they are so cheap that they can't leave them," said Pelles.
The government made sure that there was enough supply of apartments. This was removed 30 years ago or so. The "Market" took over instead.
In the US, cities frequently have "zoning requirements" so it's very difficult to get a new high-density structure built in a neighborhood of 1-floor single family homes. Also, NIMBY groups usually have a veto vote of sorts, which makes it more expensive for a real estate developer to come into a pre-existing neighborhood and make more units (because it's a gamble and usually they have to spend more to acquiesce to the NIMBY if they are able to build at all).
Even when there is a rental price cap, that tends to only work in the short term and exacerbates supply/demand problems long term. San Francisco, for example, implemented a rent control system in ~1980. Since then, only 40% of rental units are eligible for rent control and lots of potential rentals stay off the rental market. There are loopholes which allow conversion of a rent-controlled unit to a market-priced rental and no new built units are rent controlled, so there is a bifurcation of the market. Rent controlled units are very affordable, but increasingly scarce. Market priced units are growing (slowly) in numbers, but cost 2x - 5x what a comparable rent-controlled unit does.
True, there are real supply issues in some very hot markets, but few markets are like San Francisco.
So--why do you say that the price cap is what exacerbates the supply/demand problems long term, when you clearly understand the issue is that there are loopholes being utilized to reclassify units to get the back to market price? Those loop holes aren't accidents--the NIMBY groups put them there intentionally. But they aren't just NIMBY--they are also private investors who do not even live there.
I'm all for building additional housing to meet demand in general. However, it does need to be done carefully. By that I mean, upgrading train stations, roads, grocery options, etc. in order to deal with the increase in population. You can't just add 15,000 people to a neighborhood and not add parking or public transit capacity.
That's exactly why suburbs in Silicon Valley are stressing the large cities and the cities are suing each other to ensure they alleviate traffic congestion as they grow the residential units.
Those who live in the burbs and commute into the cities don't want city dwellers to be able to make the reverse commute to come to their neighborhoods. In the 1960s, the Bay Area Rapid Transit (a light rail system) was designed to be a loop between San Francisco, Oakland and the South Bay. The NIMBYs rejected plans to close the loop in the South Bay, so it became much less valuable at reducing street traffic as it otherwise could have.
As if there isn't enough money in San Francisco to build roads and trains! The city governments certainly don't have it, but it's there.
I'll admit that the assumptions I make about rent control assume that the policy is far from well crafted and probably assume that it gets worse over time because US policy makers tend to get worse at upkeeping existing systems the longer they last.
These assumptions probably shouldn't be attributed to a perfect rent control policy.
I knew people who moved from Stockholm to Berlin and kept on paying their rent in Stockholm, just so they don't lose their apartment. That's how hard it is to get one.
Berlin also had a rent cap, so instead of competing on price, you had to compete on intangibles like: letters of recommendation from previous landlords, proof of income and good conduct, having a high-profile job, nationality, etc.
Since supply is low, demand is sky-high and prices are capped, you had 30-40 people applying for the same apartment. Add the fact that once a landlord takes you in, there is almost no way that they can kick you out and you will end up with a very complicated and long vetting process that doesn't exactly favor the working class folks.
Also, you can end up with other costly requirements like: the landlord will only choose a tenant who buys all the furniture in the house. That's one example of an unregulated cost increase that is not affected by the rent cap.
However, it doesn't justify the runaway inflation of the entire housing market. Also, I'd point out that generally speaking, the population of an area will be limited by the jobs available in that area, so there is an external limit on the demand for housing to at least some extent. There are jobs and money to be made in development of additional housing to meet the demand. Supply issues are not insurmountable, and should be addressed as such.
I'll also note that in the USA, all of the "intangibles" you listed are already typically collected by the landlord along with the leasing application itself. This isn't a result of rent caps, just high demand and standard tenant screening practices.
To solve problems, you may actually have to try. Obstacles don't justify problems, they just need to be addressed.