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Comment by vkou | Hacker News Reader

Kicking people out of their homes doesn't solve the supply problem, because it doesn't create new housing. It just shuffles around who lives in existing houses.

If you have a housing problem, and you want to solve it, you need to do two things.

1. Not kick people out of housing that they have. (Because it is incredibly disruptive to people's lives.)

2. Build new housing, until demand is met.

Rent control accomplishes #1, proper city planning accomplishes #2. If you're not doing #2, complaining about #1 isn't going to solve the problem.

If you are doing #2, then #1 isn't a problem.

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You can't do #2 without doing #1 - most in-demand land is already occupied and unused land is typically not worth developing (or doing so would cause environmental harm).

In an all-owner-occupant suburb, this isn't so much of a problem: you're literally paying people lots of money to accept the disruption of having to move. However, in almost every other kind of housing arrangement, ownership over the building is separate from occupancy, and it's not the occupant's choice to make regarding increasing the housing supply. This is the left-NIMBY trap: any action to increase housing units necessarily displaces the most marginalized parts of society. If your pro-development policy doesn't include a plan to house people who are being displaced without increasing their expenses, then you're likely to make people start protesting the new buildings that need to be built in order to accommodate demand and actually cap rent growth.

Other than that, yes. Make housing printer go brrr.

This is one of the most reasoned explanations of the key problem where development meets rent control that I've ever read. If you turned it into a longer piece that explored the monetary and non-monetary incentives on all sides I would send it to everyone thinking about this issue. If I can help please let me know.

> you can't do #2 without doing #1

Of course you can. The law can be that normally rent control applies, but if you are building a new building, that doubles the amount of housing supply on the land, you can kick out the existing residents if you pay them a large payout.

This would allow new housing to built in the obvious places where it should be, and the obvious cases where a huge amount of new housing is planned to be built.

I'd actually totally love to see this proposed in more left-leaning city councils. This is sort of the idea I've had in my head for how to short-circuit the left-NIMBY trap, but I have no idea how good or bad it would actually be at moving the needle in favor of growth.

Part of the problem I could see right off the bat would be the fact that owners and occupants are inherently antagonized to one another; as in, the more money you require to be given as a displacement subsidy; the less is available to actually incentivize land development. Of course, in places like SF the market rate for housing is so hilariously high that there might actually be enough money for both parties, at least for a little while.

Another idea might be to require that the developer first offer to rent a unit in the new building to all the old tenants, at their old rent, if they want to move back after construction is complete. A side-effect is that this doesn't encourage the developer to build something nicer than what was already there. But in some cases that might actually be a good thing.

But yeah, these sorts of things generally reduce the amount of money available to do the new development in the first place. But maybe that's ok too?

This is the bulldoze the Mission and replace it with at least midrises plan. But it will be fine. For tech people.

The major flaw in your argument is that you can't do #2 with rent control in the picture. From the economist[0]:

> Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Even maintaining existing properties is discouraged because landlords see no return for their investment. Renters stay put in crumbling properties because controls often reset when tenants change. Who occupies housing ends up bearing little relation to who can make best use of it (ie, workers well-suited to local job opportunities). The mismatch reduces economy-wide productivity. The longer a tenant stays put, the bigger the disparity between the market rent and his payments, sharpening the incentive not to move.

[0] https://www.economist.com/leaders/2019/09/19/rent-control-wi...

Well, it depends on how rent control is implemented. In California, units built after February 1995 cannot be placed under rent control[0] (and in SF, it's June 1979[1]). A new development will never be under rent control (unless the law changes; two ballot measures to make some changes have failed in the past few years), so building new homes can still be immensely profitable.

In SF the reason it's not quite as profitable is because of the byzantine planning process and the inevitable lawsuits a developer has to win before even breaking ground. This is part of the reason why nearly all new SF housing construction is fairly high-end and expensive to buy/rent.

[0] https://en.wikipedia.org/wiki/Costa%E2%80%93Hawkins_Rental_H...

[1] https://sftu.org/rent-control/

Germany is one of the counties that tries to avoid getting themselves into situations where a violent revolution is the best path forward for most young people. I'm sure they'll figure this one out.

Rent control tends to be adopted with the fairly explicit goal of prioritizing affordability for existing tenants in their current residences over either encouraging maintenance/updates or improving housing supply for people who aren't current tenants, so I don't think it's at all a policy that doesn't work.

A policy whose purposes are at odds with other, arguably more important, policy goals, sure, and possibly even with other more important, if less inmediate, interests of current tenants.

But saying it “doesn’t work” bases on it not encouraging things it is not meant to encourage is...not really useful.

Your technical analysis is correct as usual, but I agree with sologoub's comment[0], "That’s not success, that’s picking winners and losers."

[0] https://news.ycombinator.com/item?id=26316547

Markets pick winners and losers all the time. It's just that winners in market housing situations are always the people with the most money.

It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'. Both are fundamentally unfair. Life, in general, isn't fair.

Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.

>Markets pick winners and losers all the time. Markets pick winners and losers all the time.

This isn't true. If people are paying enough for the developer to build additional housing then everyone will win in the end.

>It's just that winners in market housing situations are always the people with the most money.

That is the price you have to pay for allocating resources in the most productive way possible and ensuring that everyone wins in the end. It's a small price compared to the benefits.

>It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'.

As I said, it's the path to everyone winning. If you fail to allocate resources efficiently then you will just get a lot of losers and some special interests who are not losing.

>Both are fundamentally unfair. Life, in general, isn't fair.

The difference is that one of them will stay unfair forever, while the other would have the potential to get fairer, year by year.

>Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.

They will have to move one day, since there isn't enough room for everyone and when they do, they leave for good with no second chance.

> It's difficult to make an argument that it's a more virtuous way to select winners

That's because it's a strawman that you've constructed. Real debates involve consideration of the needs of people who can't find housing in heavily-regulated areas. Existing tenants aren't the only people worth considering. They just happen to be the people with the votes and the political power, so it's no surprise that local government focuses on their needs at the expense of everyone else.

You're conflating rent control (which impacts long-term tenant-landlord relations - which are largely a zero-sum game that does not create any new housing units on the market) with zoning and building and lending regulation, and tax rates, and returns on investments in real estate and stock markets and debt (which impacts construction of new housing.)

The entire purpose of this subthread is to tease the two apart. Rent control is a solution for the here and now. Building new housing stock is a solution for the future.

The two are largely orthogonal, and the causal relationship between rent control and construction of new housing stock is incredibly weak. There are a million factors that have a far bigger influence on the latter, compared to rent control. If you want to encourage development, relax zoning, cut the red tape for construction, stop letting NIMBY groups veto projects, raise property taxes, and actually start non-rent controlled property at market values.

If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors.

You have a wrong impression of who most local governments focus on. They don't focus on the needs of the tenants - they focus on the needs of landlords (mostly concerned with keeping rents high by preventing any new construction) and property developers (mostly concerned with getting concessions and hand-outs from their municipalities.) Most city councils are squarely in the pocketbook of the latter. Both of those groups have a lot more money to spend on influencing campaigns and elections, compared to unorganized groups of tenants.

Rent control is a mechanism to ensure that zoning can stay the same and construction is discouraged as much as possible.

>If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors.

Yes and as long as politicians don't get the dumb idea of reinstating rent control they would be forced to listen to all those angry voices instead of just giving them rent control to make them shut up. Rent control is a tool to reduce accountability. It's mostly abused to sweep problems under the rug.

Good points.

That's the problem. People absolutely love dysfunctional systems. They love it when the machine is broken. They get to complain and then they get their preferential treatment.

> With rents capped, building new homes becomes less profitable.

At least in Berlin, the rent control doesn't apply to newly built apartments (leading to the "split" market the title refers to), so this argument shouldn't apply.

No, this is not the reasoning that helps your argument at all.

It's false to claim you need to kick people out of homes in order to have new developments. Though the notion of 'lack of investment in capped rentals' may be true, that has nothing to do with new housing.

The entirety of Ontario and Quebec (and I'm going to bet most of the rest of Canada) has a form of rent control, in that at least there are caps on the amount of rental increase.

Would that explain why a lot of new constructions are condos and not rental units?

New builds are outside the scope of rent control, so I'm not sure it's a relevant factor in Berlin.

I think a lot of this discussion may be around gentrification as much as anything.

Some nice neighbourhoods in Berlin were on the E. Side and they were kind of run down, but over the last couple of decades the hipsters moved in, now the professionals.

I meant, for Ontario and Quebec. I don't know how much new rental units are added every year as compared to condos.

I don't know the ratio, but it would be hard to determine anything from that because rules are broad and have been in place for some time.

What I do know is that construction is vast and booming. Driving through Toronto over the last 20 years it seems there's a ton of new buildings every time I am there.

There's entire area of Montreal that has gone vertical over the last few years (formerly industrial area).

That said, there is a lot of immigration to Canada.

I don't think it's about housing supply. People want to live in the city and in desirable suburbs. These suburbs have existing tenants who could not afford the market rate of rent today. Gentrification basically.

The question is how much should existing tenants be entitled to their apartments just because they lived there for a long time, balanced against the impact on investment in new real-estate because of lack of incentives due to earning caps.

Even if you put all of your efforts into #2, it will take years from the decision to ramp up the planning and construction efforts until enough houses are actually built to have a noticeable impact on the market. And you still have to do something about the situation in the meantime. That's why the rent freeze in Berlin is limited to 5 years.

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