Rent control isn’t working in Sweden
bbc.com
bbc.com
I wonder what metric they use for "not working".
It's not like a lack of rent control is creating vast new supplies of housing here in London and as far as Im aware the fastest period of homebuilding in NYC was in the 50-60s when rent control was at its strictest (https://cbcny.org/sites/default/files/media/image-caption/Ho... ).
They started to remove rent control in the early 50s due to a housing shortage. So by your argument removing rent control helps increase supply.
The main issue is that the government doesn't build enough. There are just nowhere near enough first-hand contracts, like not even the same order of magnitude.
They've effectively abolished the system by just never building any, much like council housing in the UK.
Your article says that it shifted from federal to state control in the 1950s, not that it was removed.
Realistically they werent properly weakened until the 1970s.
I mean, OP literally did that, erroneously implying that rent control increases supply by using a historically incorrect example from 50s NYC.
This is why people get so annoyed with many proponents of rent control, they don't stop mid way as you do but keep going and implying it solves all housing problems.
False. OP (me) was implying that it didnt meaningfully restrict supply.
I suspect a longitudnal study would find the two variables to be tenuously related at best.
>This is why people get so annoyed with many proponents of rent control
Because they make wrong inferences?
The OP said "fastest period of homebuilding" with fastest being in italics. I don't see how that can be read as anything except saying rent control increases supply.
One could make the argument that it helped increase supply but that wasnt my intention.
Providing housing security to existing residents through rent stabilization is a moral imperative. Homeowners such as myself have access to it through mortgages. Renters should have the same.
Beyond that, of course we need to build a ton of new housing. That can either be done by the state directly, or by loosening zoning regulations, or by some other means.
To build a ton of new housing, you need investors willing to do so. If you have a million dollars, would you invest to build in a rent control city, or in a city where you can raise the rent as you wish? Most people would choose option 2, thus creating shortages in rent control cities, which in turn make the housing more expensive than it would be if the rents would be free-market.
There are things in life we treat as core moral values even if they cause issues with incentives. For example, people should not go to prison for not paying their debts, even though it runs against incentives. Rent stabilization should be one of them as well. The rest of society should adjust.
Try to not pay your taxes and you end up in prison in all the countries I know about.
Anyway, I feel like your argument works against you, actually. I think a core moral value is to allow anyone to move into the city if they wish so. With rent control, you limit the privilege to live in a city mostly to those born there. This is worse than the unfair advantage you have when raised in a wealthy family. At least anyone can study and make a good life later on, but rent control doesn't allow for much movement altogether. If you're born outside the city - bad luck.
The same rent control alternative applies too. You can move to the outskirts of the city that are less desirable locations.
In fact, they did build housing. Luxury housing that doesn’t solve the problem at all. Student apartments that are so expensive to live in, you have to work a job while studying.
They seem to be building as much housing in London as it's possible to do so - new blocks of flat flying up all the time.
However what's needed is sometimes entirely disconnected from the past trend. Ask a lot of people in San Francisco, and they will say that there's been a huge amount of building of new apartments, even though they are nowhere close to matching the 2% growth rate of US population, much less the much higher growth rate that a thriving urban area needs to match the trend of people moving from rural areas to urban areas, or to match an increased preference for urban life over suburban life.
It’s everyone else who suffers the most. Usually they have no choice but to move somewhere else or stay at home with parents, so you can’t get an accurate picture by looking at aggregate household statistics. Unless you’re deliberately trying to ignore everyone excluded by these policies.
Rent control is one of those policies that sounds great as long as you ignore second-order effects and pretend the population and economy never change. In practice it just creates a different system of haves and have-nots while removing any chance for the market to compensate.
A lot like London without rent control then, but if rent control were implemented it would be the primary culprit for what's happening anyway?
Color me skeptical.
Seems to me it's the landlords that really "suffer". E.g. the SF landlords that paid a tenant hundreds of thousands to get them out ( https://apnews.com/article/lifestyle-business-san-francisco-... ). Rent control just decides whether the "spoils" of restricted supply go to landlords with the most capital or the renters who lived in the city the longest.
Hacker news cries bitterly about nimbyism (especially in SF) that restricts development to keep up property values and rents. Whom do they think is most incentivized to do that? Redirect those spoils to leveraged landlords and find out.
https://web.stanford.edu/~diamondr/DMQ.pdf
In terms of London, there is also the problem of building restrictions. I don't think we're going to see tall residential towers popping up in say, Mayfair, anytime soon. I understand that this kind of change would completely transform the character of London. But the price of not wanting change is sky high rents.
If you want a £500,000 studio flat 30 minutes away from central london by tube there is a massive amount of supply. If however, you can afford said property, you probably dont want to jam your wife and 2 kids into it.
Turnover in SF is actually quite robust. The vast majority of tenants don't stay in the same apartment for decades. This is especially true during boom periods. IOW, ebbs & flows in turnover actually tend to benefit landlords. But a small number do. The average turnover rate is ~20%, which means the average occupancy is ~5 years. For large buildings what matters is the average. The fewer the number of units (either in a building, or in your portfolio), the riskier things become.
The riskiest of all is a single-family home, whether you rent out an in-law or the whole house. In the face of rent control you're not only risking being stuck with the same person indefinitely, paying an increasingly below market rent, but you're locking up for an indefinite period what is probably your largest and most important asset. It's a potential financial nightmare, and one with realistic odds (e.g. maybe 1 in 10 instead 1 in 10000) of befalling you.
As the building grows larger, the more the risk is spread and you can rely on the average occupancy term. Moreover, the larger the building, the less likely one would want to tear it down to build something larger. IOW, the larger the building, the more closely your expected future investment returns approach non-rent control levels.
Rent control policies should be accompanied by policies that promote densification. All forms of rent control will tend to reduce supply to some extent (at least, that should be the a priori expectation), but rent control also provides important social benefits. IMO, those lines cross, but I would never expect the benefits to be greater than the costs in the context of single-family homes.
The 1994 law encompassed multi-unit buildings of 4 or less, which were previously excluded from rent control. An elderly neighbor of mine owns a classic 1960s-era 3-story, 2-unit apartment building. He lives in one unit and keeps the other vacant so that his children won't have any trouble refurbishing or selling the asset when he dies. This is a nearly identical scenario to someone living in a single-family home with an ADU. There are several such homes on my block, though I don't know the owners so don't know how many are kept unnecessarily vacant.
I’m not sure what you’re trying to suggest about hypothetical rent control in London, but it should be clear that London was geographically exhausted long ago and they’ve been debating architectural preservation and building height control ever since.
You can’t simply buy a property in London, knock it down, and build a 50-story skyscraper. Using it for your case study on rent control doesn’t make any sense.
> Seems to me it's the landlords that really "suffer".
This is the fantasy: Stick it to those evil developers and landlords, amirite?
The fallacy is assuming that you get the exact same apartment under rent control, but cheaper. You don’t.
The truth is that being a rent-controlled landlord is easy mode. You have very little competition, by law, and the waiting list to get into your apartment can be years or decades long. As a result, you don’t have to compete on anything. Who’s going to turn your apartment down when it’s their only shot at housing and no one’s building new construction to compete at artificially depressed prices?
Now you don’t have to worry about installing good appliances or even nice carpet. The air condition doesn’t work well? Too bad, as long as it meets regulations (if any) then that’s good enough. Why would you if your tenants aren’t choosing based on competition? The tenants suffer, too.
And you’re still ignoring all of the people locked out of the system by the ensuing decade-long wait lines, as is the case in this article.
I'm stating that the extreme lack of supply ascribed to rent control also exists in similar cities without rent control.
So maybe rent control's effect on supply is vastly overblown as you can see by looking at the large amount of house-building in NYC before 1974 in the graph above, which is when rent control laws started getting really watered down.
>It should be clear that London was geographically exhausted long ago
Thats kind of absurd. It only recently caught up to prewar population levels. Property prices skyrocketed way before that.
>The truth is that being a rent-controlled landlord is easy mode.
If they like it so much why do they try to trick/bully tenants into leaving or offer large sums of money to tenants to leave if that fails?
>And you’re still ignoring all of the people locked out of the system by the ensuing decade-long wait
Give leveraged landlords market rent in restricted supply environments like SF and the FIRST thing they will try to do is to inhibit further development with NIMBYism that might bring down their rents and damage their investment.
Detractors of rent control tend to feign support for new residents but theyre perfectly happy for them to be priced out alongside the long term residents of the city.
More social housing fixes the underlying supply issue. Higher property taxes fixes the underlying supply issue. Wanting to kill rent control before or instead of fixing these things means being concerned with profit, not people.
Rent control is a band aid while that happens to keep long term (especially elderly/vulnerable) renters housed.
And landlords loathe it.
Just because rent control negatively affects supply doesn't mean bad supply is only caused by rent control.
I live in London too and I'm baffled by the lack of tall buildings in pretty central parts of the city. The real solution is more supply.
> Rent control is a band aid while that happens to keep long term (especially elderly/vulnerable) renters housed.
At the expense of people who don't currently live in London but could, such as immigrants or people from poorer parts of the country finding a good paying job here.
Kicking grandma out of her rented apartment and on to the street isn't going to suddenly mean that Romanian cleaners won't be living 7 to a house in zone 5.
This housing crisis was deliberately engineered in London as a result of the 1980s war between Thatcher and local government. Council housing was privatized as a result (& some of those gains were capitalized by existing residents through right-to-buy).
Councils were starved of tax funding through the UK's comically low council tax rates. This meant that not only was owning property a much better deal but also that councils lacked the funds to increase the supply of housing. Hence prices taking off like a rocket.
There's your supply issue. Rent control would be a drop in the bucket compared to that.
If she's retired, she can move somewhere cheaper so someone who actually needs to live there for their job can move in.
The rest of what you've written is completely unsubstantiated.
A landlord is to housing what a scalper is to tickets (or for the nerds, graphics cards). Only one of them leaves you fucking homeless.
OTOH that is extremely cruel. Older people, assuming they have lived there most of their life, are the hardest hit by having to change. All their lifelong friends are near, their trusted doctors are nearby, it's all they know.
Well, in cambridge, i got kicked out of 2 flats in6 years because they wanted to raise rents, each time, i had to move further out, get a smaller place and still had to pay more money each time, i wasn’t getting pay rise in line with this and i think that’s still the reality across much of the uk, house prices and rents are rising higher than wages.
I also noted across this time that younger people apparently like staying in more and the selfish gits are spending less money on other things and somehow that’s their failing.
I didn’t have my rent raised in ten years here, in fact, as interest rates went down, i would have been well within my rights to demand a decrease. Also, bars, restaurant and clubs seem much more vibrant here than when i was in the uk, as if younger people had a bit more disposable income that flows in the local economy
It would create problems for poor companies that will have to make room for more effective entrepreneurs. At the same time it would create new opportunities in areas normally not considered.
I just spent 5 days in London and was shocked at how many tall buildings there were that weren't there 20 years ago, and indeed how many are being constructed - not just in the centre and docklands, but in battersea and vauxhall too
How could social housing fix the issue? The underlying issue is too many obstructions to building new houses, which restrict supply. If commercially motivated developers cannot build enough houses due to bureaucracy and obstructions by NIMBY groups, then municipality would likely fail too.
I imagine the collective mind could greatly benefit if everyone had to spend a few (education focused) months in construction (and/or say farming etc) Its not boring if its just a short period. In construction you can learn the basics of a discipline (and make yourself useful) in just a few days.
But I agree it is the obstruction that prevents cheap housing. Its probably intentional (to some extend) simply to drive up prices.
It's clear that there are over 30,000 empty homes in London, while most flats built are way out of the range of ordinary families.
Many people are locked out of the system now, we have "affordable housing" that you need to earning about £80k to buy, the current system is utterly failing.
Who can afford to keep homes empty at such great expense, and for what purpose?
Sounds like a step is missing...
So? According to wikipedia london has anywhere between 10.0 million and 14.3 million people (depending on whether you're counting "urban" or "metro"). 30,000 empty homes translates to 80k people[1]. As egregious as that might sound, is a drop in the bucket relative to the overall population. The 30k number also fails to differentiate between long term emptiness (eg. billionaires hoarding houses) and short term emptiness (eg. units undergoing renovation, units looking for a new tenant). The latter is necessary for a functioning rental market, otherwise it's impossible for people to move into/around the city because all the housing units are locked up.
[1] https://www.statista.com/statistics/295548/average-household...
I'm totally against rent control, but London's rogue landlords and its very low quality housing are world famous and people coming from all over the world spend the first 6 month adapting to crazy stuff like carpet, old carpet, 10 year old carpet, fucking carpet, windowless toilets, wooden walls, decaying electrical systems, holes in the walls, carpet (I can't get my head around the idea of having carpet in a flat), etc... and carpet (unless they are in the top 5% of the income distribution and can afford to pay 2-3K£ per month in rent). Air conditioning and half-decent insulation are for the top 1%.
Said that, I don't think London's problem is lack of rent control, but rather it is lack of development of the rest of the country and the government artificially inflating the housing market.
Seattle so far has not imposed rent control, but they've done everything else they can to create benefits for renters at the expense of landlords.
And so the smaller landlords exit the business, and the larger ones raise rent to cover these new "free" goodies.
One of the freebies is the city will provide a free lawyer to any tenant with a dispute with the landlord, but the landlord gets to pay for his own lawyer.
With a firehose of money sloshing around, of course rents are going to rise. You can be damn sure that I'm going to outbid any of the locals for my apartment. Rent is barely a blip on my budget.
The housing inventory doesn't change, regardless of whether landlords are 'exiting'. Like any conscious class, they are just complaining because they, like the rest of us, want more money.
Which, in terms of the rental market, is the exact same thing as that person long-term renting the unit.
> Underperforming buildings also get razed by developers.
... And in this town, when that happens, they get replaced by buildings containing more units. You may have seen a few cranes here and there on the city skyline.
Rent control discourages building more units. The more you can make from rental, the more companies will invest in new construction projects.
Rent control can decrease efficiency of living situations. You can imagine an old woman living alone in a 3 bedroom unit with rent control because it would be more expensive for her to move to a smaller unit. Or someone who gets a new job far from their current rent-controlled apartment but won't move out because the rent is so much cheaper.
Actually, I would think the opposite. If capital-laden landlords aren't getting increased returns from their existing holdings, they would be incentivized to create more supply by funding new developments.
I think your logic is flawed here.
1. There's no reason why making landlords earn less money would make them want to invest in real estate more. If you have $1 million to invest, you'll try to choose the best investment available to you. It doesn't make a difference if your current property is doing well or badly.
2. If landlords make less money, they should have less capital.
3. Even assuming your premise was correct and landlords who make more money from their property want to invest in new properties less, it wouldn't matter. As long as building new units is a good investment, someone else would do it.
Yet the strictest rent controls went hand in hand with the fastest homebuilding spree in 1950s NYC.
It clearly didnt discourage that much. Maybe it didnt discourage it at all?
Or maybe it does a bit but is eclipsed by the effect of, say, NIMBY landlords inhibiting development, hellbent on staying above water on their eyewatering SF mortgage.
>Rent control can decrease efficiency of living situations. You can imagine an old woman living alone in a 3 bedroom unit with rent control because it would be more expensive for her to move to a smaller unit.
I can imagine. She could get priced out of the city entirely I suppose.
It seems to me that if the market rate is intent on 10x'ing her rent maybe it's the market that should be forced to adjust first, not her.
More home building. Higher property taxes. Rent control while the effects kick in.
Weakening them in 1974 if anything seemed to restrict supply.
SF has comically low density housing that is driven by homeowners lobbying to restrict development.
The difference between SF and Seattle is probably property taxes (higher in Seattle). It discourages land from being hoarded and used unproductively.
Then when rent controlled unit can be redeveloped, there's a desire to allocate various percentages to different income levels. This means that some units have less income for the same cost so it's hard to balance meaning fewer projects get off the ground.
Now there's even further issues about development as a right vs requiring a use permit...
So, there's a lot of contributors, but the political impact of the politics of rent control is significant.
[0] https://www.berkeleyside.org/2021/07/28/uc-berkeley-settleme...
and yet to keep up with demand we would've needed to more than 3x what we did, though from what I understand, the infrastructure to build more high density housing even faster just doesn't exist. Seattle was literally building housing as fast as it is possible for a US city to build housing.
If true that, in my opinion, points to a more significant problem in America.
Edit: I guess you mean taxes on land, not the houses. But even then, would this not encourage to build high-yield luxury condos instead of high-density cheap space?
Assuming a family of 4 would live there instead, she's effectively removing 3 people from the city. That can force other old women to move out of nearby homes that aren't rent controlled (since prices become higher than they'd be if more people could fit in existing housing), or it could prevent people from moving in. But either way, less people can live there. The policy isn't without harm.
> I can imagine. She could get priced out of the city entirely I suppose.
kind of an unlikely worst case. There's a gradient of prices as you move further from the city center, and this particular hypothetical woman is moving to a much smaller unit. I haven't heard of a city where the average market price unit was 10x the rent controlled price. It's probably 2x-3x at worst for an equivalent unit.
I think is overrated concern in general. Most popular cities aren't underdeveloped. Rather the problem is concentration of resource. Having less optimized areas are actually a good things as that means more areas are equivalent. Which is really what supply is in housing markets. It's when every one too young, old or poor have to move you get problems because now all the attractive things are in the same area. Which means the demand will be very high.
Also this is happening in the housing market in general but apparently it isn't a problem when it's wealthy people retiring in their forties because of the housing market itself.
> There's a gradient of prices as you move further from the city center, and this particular hypothetical woman is moving to a much smaller unit.
That is mostly true if you are moving voluntarily. Because if you couldn't find something beneficial you wouldn't move in the first place. It isn't as true when you are being forced to move. Often it isn't even about what you are moving to but what you are moving from. Once you can't live close to your family, acquaintances or familiar establishment it doesn't matter as much.
It's sort of curious how so many seem to agree that we are "losing our values" in society (or whatever) but then base everything on assets. If we want people to be able to live close to their grandchildren, know their friends from growing up, involve themselves in organization or otherwise make social connections it isn't going to be free.
> More bread baking. Higher bread taxes. Limit bread prices while the effects of all these magical new baking companies flocking to lower prices and higher taxes kick in.
Also, some will get cheap subsidised bread allotments, others won't get anything. And if you get an allotment of bread to feed 3 people but it's only you, there's no mechanism that redistributes the excess to those who need it most, despite massive scarcity.
And if you get a certain type of bread you like at a certain age, but your preferences change and it becomes bland, there's no mechanism for others who love your type of bread, to be incentivised to exchange your types.
e.g. my dad, who is in a rent-controlled apartment with 3 bedrooms in the capital city and has no mechanism or incentive to move out, despite not using the space, not wanting the space, and not wanting to live in such an in-demand area necessarily. Oh wait, I meant bread.
Rent control has 2nd order effects that can do a lot of harm. If rent-control was mixed with market based incentives and a limited time to the right to an apartment, it wouldn't be as bad. I'm not against rent-control per se, but as with all things, it must be balanced. Just adding more of it isn't a solution. And balancing existing rent-control rules with reasonable additional (market) incentives, would help.
For example, if cities allow an individual to live in a rent-controlled unit for 8 years, after which they must leave, that's better. The unit can then go to someone else, also rent-controlled. Instead, some people get a lifetime right, and others a lifetime waiting list. That's a fundamentally unfair use of public funds. It's not perfect (leaving a home has a chance of making it harder to stay connected to a local labour/social circle), but two people having each 8 years is clearly preferable to one having 16 and the other nothing.
Another example is if (such as in Germany I believe, if anyone can link an English source that'd be great) you have a system where your rent is controlled based on usage. e.g. suppose market rent is 1500 for a 3 bedroom, rent controlled it's 750 for a family of 3. The moment you live there alone it's no longer 750, but instead say 1000. That creates natural incentives to only renting a place that is necessary to fit your lifestyle. My dad for example would exchange his place with someone who lives with a family of 3 in a 1 or 2 bedroom home, because of this.
https://www.guernicamag.com/the-rise-and-fall-of-public-hous...
Though Berlin is going through interesting times with rent control at the moment.
Interesting times. It'll be fascinating to see this play out. Like a social experiment on rent control.
London permitting just will not allow builders to construct enough housing.
Perhaps for worthy reasons, or perhaps not, but regardless there's no question as to the source of London's housing shortage.
I’d be delighted to be proven wrong, but it seems unlikely.
For example, not everyone can afford San Francisco, but there is a lot of buildable land besides SF in California (the Central Valley, for instance). Everyone should be housed, but it’s likely it might not be their first choice.
People per square mile: San Francisco: 17,246.4 Brooklyn: 35,369.1 Manhattan: 69,467.5
Speaking of Manhattan:
https://www.nytimes.com/2021/07/01/nyregion/manhattan-vacant... (Office Vacancies Soar in New York, a Dire Sign for the City’s Recovery; Nearly 19 percent of all office space in Manhattan has no tenants — the highest on record — as companies shed leases and embrace remote work.)
https://www.bloomberg.com/news/articles/2020-12-05/even-befo... (Even Before Covid 2,600 People a Week Were Leaving New York City)
If demand ever reaches that high then the market will move to a new equilibrium.
Rent control would be one such measure. Other examples are loans with better-than-market terms for certain privileged buyers, publicly-built houses sold at lower than market rates and so on. The market reaching equilibrium for everyone and the local government saying "sorry, but screw you" to buyers is at least honest, if a little heartless from the voters who live there.
I suppose it's fair enough as long as other markets with decent job options are available elsewhere. If not, I would classify it as a failure of democracy if a significant portion of society has no better option than to pay most of their productive output towards rent. This probably varies a lot by location; San Francisco wouldn't be the first example I'd use. Maybe Oslo.
All cities need janitors, teachers, baristas, grocery clerks, garbage collectors, etc. in order to function, and those people have to live somewhere at least within a reasonable commuting distance to the city. You can't have all the garbage collectors move out to Bakersfield and have San Francisco _just_ be a citadel of software engineers, unless the software engineers haul their own garbage, or the garbage collectors in SF also get paid $100k+ per year.
The teachers, janitors, baristas, etc will move to the location that gives them a better quality of life. If they decide that's not San Francisco, they can move to a better city. If SF wants them back, SF can sweeten the deal for them.
I guess it's kinda sad that not everyone who wants to live in SF gets to, but I'm not sure how "closing the door" is any more fair.
Which (as I understand it) is kind of the topic of this whole sub-discussion: it is not easy to find a solution which will sweeten the deal for them (aka: make it economically feasible and attractive for low/middle income people to live and work in a city with a housing shortage and high housing costs). Rent control is one such proposed solution. It has its benefits and drawbacks, of course, as evidenced by all the debate about it here.
Then you either pay very high rates for basic labor or you push the government to build cheaper housing. It all fixes it self.
It makes no sense to reserve city space for single level buildings.
A media that is very "concerned" with housing shortages where rent control is concerned suddenly loses its concern and gets overly concerned with crime, delinquency, public debt, etc. when a solution that brings down property values is mooted.
Raising property taxes will also help as it will act as a disincentive to use land unproductively or as a store of value.
A more feasible option is to let private developers (who collectively have access to trillions in capital) to finance housing creation for rich/middle class people, and rely on government subsidies for low-income housing.
Obviously the solution is that you should've built two luxury towers. However, people watching the situation sometimes get the counterfactual wrong and conclude that if the luxury tower hadn't been built, none of the rich people would have moved to the area. They then conclude the best idea would be to build no new housing at all and do everything they can to make sure that is the case
https://www.bankofengland.co.uk/working-paper/2019/uk-house-...
The places where this is not true are all places that have seen significant population growth and have not permitted sufficient new construction. For example, in Jacksonville, FL, the median home costs $250k, which would leave a payment of ~29% of the median household income in Jacksonville using a 5% down payment. Similar math works in other cities where builders have been allowed to keep pace with population growth.
When people talk about how raising interest rates lowers the cost of housing what they really mean is that interest rates lower the value of income streams derived from monopolies and land is the biggest monopoly of them all. Monopolies basically can do perfect price discrimination, the more money you have, the more the monopolist can charge. Thus the obvious solution of giving people more money doesn't seem to work.
Raising interest rates is basically the opposite. What if we take everyone's money away? If people have less money the monopolists will charge lower prices. This didn't really solve the monopoly problem. After all, the monopoly allows perfect price discrimination. If the monopoly power is strong enough to get 30% of your salary it will always get 30% of your salary no matter how high it is. What really happened is that you now have less money to buy non monopoly goods.
Here are the practical implications: You can spend $1000 per month on your mortgage at 5% interest or -5% interest. The -5% interest house is significantly more expensive but the monthly payment is still the same. You still lose $1000 no matter what you do.
Taxing improvements to land makes it less likely that people will build or renovate, so all such taxes should be removed. Taxing land, however, disincentivizes landlords from holding land idle.
Regulations are also important.
If there is a mandatory minimum amount of parking that must be provided, then it becomes that much harder to build more units, even if you are near transit and most of your tenants don't need cars.
If there are height restrictions, restrictions on mixed-use development, restrictions on the number of units allowed, and so on then these will likewise cap the amount of supply.
The reason people support things like rent control is "I've lived here my whole life but I can't afford rent anymore because it keeps going up."
However, with respect to affordability, a key complaint across the board, LVT does indeed help by reducing the amount of speculative holding and removing tax penalties for improvements. Under LVT residents will be able to afford better accommodations for less money. Particularly if other onerous policies are removed such as rent control, building restrictions, parking mandates, taxes on demolition, and the like.
It's not perfect because it is basically a subsidy to owner occupants so it won't help suburbs become denser. However, it disconnects the impact of taxation on home owners and commercial developers/investors which means home owners will be more willing to tax developers. The one benefit is that large scale development will naturally consider denser housing because they want to optimize their tax burden.
There's an obvious solution here, it's just not one most people living in these areas wants to hear.
All these ill people have doctors around them, which also can clearly be linked. That in itself doesn't seem to be an argument.
(Note I'm not taking positions here, I don't know enough about the topic)
Portland does still have high rents, so it’s hard to point to this as a “success”, but I think it’s a good template for how you can encourage affordable units without putting the whole city under tight rent control.
For employment, for instance, much more useful analysis comes out of lifetime income analysis. We really ought not care how many people earn minimum wage... we ought to really care how their wage changes over time. Not even suggesting that there isn't merit to a minimum wage, but just that our discourse of it almost always omits the point you bring up about "everyone else who suffers." That's important to talk about.
Minimum wages reduce some of the exploitation that low quality employers will always engage in. If you travel to a state that has the lowest minimum wage for waitresses, you won’t find more waitstaff, lower prices or better quality. Just more misery. Any further erosion of worker rights in this gilded age is gross and unacceptable.
Get yourself a breakfast omelette plate in San Francisco and the same order in Jackson, MS. I can pretty much guarantee that the plate in Jackson will be less, possibly 50% less.
* I don’t claim it’s caused by the minimum wage difference, but it seems pretty strongly correlated.
For instance, I searched "Brunch" in Google Maps for Jackson and omelette plates are $10-16 at Google's top result[1].
Labor costs certainly impact prices, but restaurant pricing isn't totally formulaic outside of maybe "market price" fish dishes. Kenji Lopez Alt has written about this[2]:
Here's where one of the first intricacies in menu pricing arises: Menu prices have to make sense to the customer. Placing a $15 carrot entree and a $20 chicken dish next to a $40 mushroom dish and a $45 steak doesn't compute; the range is simply too big. Either the latter two dishes are far too expensive, or the first two are far too cheap. Which sceniaro seems true largely depends on the atmosphere of the restaurant and pricing at similar restaurants, but both cases can be disconcerting.
Because of this, most successful restaurant owners fudge the numbers a bit. "You're willing to lose money on some things because they're important to keep on the menu," says Maws.
Some of that may be on you, choosing to eat the expensive food.
My experience in Shanghai was that I could eat basically the same things I'd eat in America, and it would cost basically the same amount of money. Or I could eat local food for 5-10 times less than that.
But you know, if I go to 老外街 ("foreigner street") in Shanghai to eat at the Mexican restaurant there, it's not exactly a secret that I may be willing to pay more for food than a normal Chinese person. And they price accordingly.
Rents are probably considerably higher in NYC too, especially restricting to Manhattan.
In addition she is even more likely to make use of state services like food stamps and medicaid which in effect you and I help pay for even if we don't even live in that state let alone eat at that diner.
I don't think its cheaper its just subsidized by everyone.
(In practice, those places still have minimum wages - it's just that they're negotiated between employers and unions, and can vary across different industries and geographically where that makes sense.)
The real problem with min wage is that it's effectively a regressive tax, because it raises the cost of the cheapest produced goods/services - which, of course, tend to be disproportionally used by those who simply can't afford anything else. So you're taxing the poor to help the very poor! It is better compared to a free-for-all jungle, but it's much worse than e.g. UBI (funded by actual progressive taxes, on income, or better yet, on capital gains) without min wage.
You now have a segment of the population with enough work and another with too little. Those with work are scared of losing the job. Those without are desperately trying to compete in the labor market to get a new job.
As people in general are becoming poorer, we’re shifting towards either more rentals or less safe/sound construction practices. Tenants need rights beyond market forces to avoid a revolving door of 1 year leases, etc. Stability in communities is important for both families and the community at large.
That said, the unchecked development model where construction of actual homes is impossible, or where exclusionary construction is allowed (entire buildings of studio apartments, no family apartments, etc), you are correct, rent control just benefits incumbents.
With rent control, basically those who were there first get the housing, those who come later are out of luck.
Without rent control, those who are more wealthy can afford the housing, those who are poorer are out of luck.
If that was the only oversimplified way to see the effects of rent control, I'm sincerely not sure of what would sound better (or less worse) to me. I like when a city keeps its soul and doesn't slowly become a theme park for rich people (which is what I see in mine over the decades).
I prefer that. It's not just about wealth, but also about how much you want to live there. I know people who earn about as much as me and spend > 30% of their net income on rent because they want to live in a trendy area. I don't need to live there, so I was able to choose differently and pay ~12% of my net income.
Also: with wealth, there's at least some correlation with merit. With a lottery, there's none.
Secondly, why is the merit of high income more valuable than waiting in the line for longest time? None of them is a lottery in my opinion.
> Secondly, why is the merit of high income more valuable than waiting in the line for longest time?
Because it correlates with useful stuff being done for society. Not perfectly, of course, but somewhat. Waiting doesn't at all. And it's usually not about "waiting", it's often about being part of some group, having the luck of the draw, knowing someone in the office that assigns priorities, or "inheriting" the right to live in some (publicly owned) flat from your parents.
What happens then? Person A lives in a very desirable place, person B does not, and person B has to subsidize A's flat.
People invest internationally. This gives a strong bias for money to chase large metropolis because of agglomeration effects. So now "everyone" has to move to the city to work for the investor money. There are people who just want to get their fair share of the money. If you let someone live there that can't find a job that gets him investor money then he basically displaced a productive worker bee and made the entire economy worse off. Social mobility takes a massive hit as a result.
That worker bee could have earned enough to live in a newly constructed apartment. If he actually managed to get a rent controlled apartment then congratulation, you just subsidized one of the richer individuals.
Think about it this way, you want vulnerable people to afford their apartments. Why are you subsidizing every single apartment instead of subsidizing people in need? In fact, the subsidy is greater the more expensive the apartment is. You're subsidizing the rich.
And then they vote against any new construction "to keep the neighborhood's character intact" (remember in the 50's when certain groups of undesirables were excluded from certain neighborhoods?)
> Without rent control, those who are more wealthy can afford the housing, those who are poorer are out of luck.
That creates an incentive to build more.
Not sure what you think that has to do with rent control?
With rent control, that threat will not be taken seriously.
> Not sure what you think that has to do with rent control?
With rent control, the owner may not be able to afford to do any maintenance (let alone improvements) if the tenant has been there long enough that the landlord is losing money every month. But also, the tenant knows they have a deal they can't replicate anywhere else so they have an incentive to never move out, even if the place falls in disrepair.
Without rent control, the tenant is free to move out if conditions are not acceptable and the landlord can afford to maintain the place.
But, not every rent control city is the same of course, details matter. In some cities maintenance or improvements are allowed to reflect in rent, in some places they don't. So it depends.
The situations where rent control don't apply still suck. More rent control would cover those, no?
So let’s agree to avoid the buzzword.
What’s a more accurate - yet succinct - phrase to describe housing market controls that protect the least fortunate of us from being priced out of their homes and communities without disrupting the significant market forces which should - ideally - be promoting new housing construction?
(Also, ban unsustainable zoning regs, enact an unimproved land value tax, and only allow greenbelts in areas with full mixed-use developments without building height restrictions)
Meh, rent control has almost no effect on a market where there is enough housing. Ownership of housing has the exact same consequences as rent control, and is even more likely to have crazy NIMBYs preventing anyone from building new housing (looking at you the bay area).
You can't really look at country-wide population though. The population of e.g. Germany is pretty stable, but within Germany there's a lot of movement with people moving to the large cities. Rent is rising in those cities, while it's getting lower and lower the further you move from those cities.
Both could be politically minded, or something else
Actually, a market-allocated one is always a political allocation since it's got the idea that rich people deserve better housing than poor people asked into the market.
A lot of things happened in the 1950s. How am I supposed to untangle cause and effect? I'd more likely credit the return of American troops from the war, the baby boom, home loans as part of the GI Bill, and the economic power of a country still ramped up for wartime industrial output, but existing in a world in which every other industrial power had been reduced to rubble.
What you suggest would in fact probably lead to MORE segregation and MORE of the same issues.
Wages don’t magically rise because you abolish rent control, either. You would simply price out the less wealthy to live… in the shitty suburbs.
https://www.nytimes.com/2018/03/03/world/europe/sweden-crime...
Obviously you also have also suburbs with villas where richer people live and little crime. Sweden at this point is a highly segregated society.
All these crime-ridden suburbs are within 20-30ish minutes easy public transport to the city center.
Basically think these sorts of buildings: https://upload.wikimedia.org/wikipedia/commons/0/01/Hammarku...
rather than these sorts of buildings: https://upload.wikimedia.org/wikipedia/commons/thumb/3/37/Su...
> The median burden of rent payments for tenant households is highest in Finland, the Netherlands and Sweden (30%), Norway (29%), and Denmark and the United Kingdom (28%)
That said, it's not very different from its peers, so I doubt rent control is having a huge effect.
https://www.renthop.com/studies/nyc/building-age-and-rents-i...
The BBC have gone full union and need to knock any Scottish Government proposal.
That is the only reason this article is published. Don't read too much into it.
From a western European perspective, tax fraud is rampant in Greece. e.g. In Athens, around 400 swimming pools were reported for tax purposes. But satellite analysis shows almost 17,000 houses have swimming pools: https://boingboing.net/2010/05/04/satellite-photos-cat.html
1. It is universal
2. Rates are collectively negotiated between landlords and tenants
This is more like a renters union that there is a 9 year waitlist to join than typical rent control.
The impression I get is that Sweden has fewer people sharing flats and more affordable flat rents (adjusted for income) than most places in western Europe.
Buying an apartment is expensive, and problematic even for well payed young people. In central Stockholm prices are around 1000 USD / sq feet (≈10000 EUR / sq meter), and you need a 15% down payment. For a 400 square feet single room apartment that's a down payment of a full years post-tax salary. If you manage to save 20% of it, then it'll take you five years.
Until you can afford it, the best option is market-priced second hand contracts. Which work well enough, but are quite expensive and very insecure. The landlords often bought the apartments with the intention to live in them, so most contracts are semi-temporary.
First hand rent-controlled contracts are extremely hard to get and basically not an option. The queues are decades long. There's often a 2-300% difference between second-hand (market) rates and first hand contracts, so once someone gets such a contract, they'll never move out.
Of course the lower cost of rent-controlled apartments helps the inner-city be more diverse, allowing people with lower income living there. But there's also a large share of well-of people that have gotten their contracts via connections, or who have just been in the queue for a really long time.
I really hope that the rent-controls are abolished in my lifetime, but there's a vocal large public option for them, so I'm not too sure...
I also rent second-hand and it sucks, but I don't think things will improve just by abolishing the controls on first-hand contracts.
We just need to build far, far, far more. Especially with so much immigration.
You can definitely buy apartments from new blocks though, and then you're just paying the normal market price.
Second-hand contracts and commercial rentals also aren't covered by the rent controls, but I imagine the property developers can't rent them like that directly (only by selling them).
The new building can charge whatever they want, they just can't depend on large increases in rent later on after their initial pricing. This same assumption, no huge rise in rents later, is also applied by financiers.
Anything that reduces that value $X likely has a negative influence on marginal housing construction.
If I'm going to live in Stockholm (or any other large city really), I want to live in the city center. I want to walk or bike to the office, and have all the restaurants near by etc. It's very unlikely that the housing stock in the central parts of town will ever increase substantially.
I'm willing (and honestly lucky enough to be able) to pay the premium for living downtown, if market rates were imposed.
(There's an argument to be made about how abolished rent controls can increase interest by companies to build rental properties and get municipalities to issue building permits. Also that a non-negligible share of attractive rent-controlled housing is under-utilised, e.g people who don't live in them full-time but keep the contract because it's nice to have every once in a while).
But yes, we definitely need a lot more housing overall. Cheap and close/with good connections to places where people work.
I just hope they never abolish the restrictions on second hand contracts. That has completely destroyed London, Barcelona, etc. - where your landlord might just be some investor in Zurich or New York.
Also allowing for more remote work, so people can do more from smaller cities.
> I'm willing (and honestly lucky enough to be able) to pay the premium for living downtown, if market rates were imposed.
I think this basically points out the trade-off. Right now, difficulty living in the city center of Stockholm or a large city is somewhat more evenly distributed compared to typical European countries, it unusually effects even the rich. Under a more strictly market approach the difficulty would be eliminated for the rich and increased for others.
Whether that's a net win depends who you are, of course.
> It's very unlikely that the housing stock in the central parts of town will ever increase substantially.
So one way or another there are more people who want to live there than there is housing. How is it allocated? It can be allocated by a waiting list, in which you might have to wait 9 years. It can be allocated based on the market, in which those with more ability to pay get to live there. It can be allocated based on some combination of "personal network/nepotism" and "graft", in which leaseholders of rent-controlled apartments rent them out at profit to them, or at no profit to their family and those they know.
Based on the article, the current system of course is a combination of all of those. Adjusting the portion of each of them would benefit some people and disadvantage others, depending on how adjusted.
But overall, yes, I totally agree. It's an allocation problem of a finite resource, with different tradeoffs.
My favourite idea, if we are going to keep the rent-controls, is to use a lottery.
They're both kind of "everyone is equal, you don't get a leg up becuase of how much money you have or other status, everyone gets a chance for this limited in-demand resource" approaches, at least on their faces... the same portion of everyone interested actually gets a house either way... I'm confusing myself trying to think through the practical experienced implications of a lottery (which you can keep entering every year) vs multi-year-long waiting list. I mean, I guess obviously the lottery stops privilging those who expressed their desire longest ago/first! I'm not sure if this is good or what. I guess it would give younger people, or people who don't plan out their whole life in advance, a better chance?
1: I don't believe there's a moral value attached to being in the waiting list. Everything else equal (completley ignoring personal situations, current housing, income etc), everyone waiting "deserves" an apartment the same amount.
2: My view is that there's actually an inverse relationship between "deservedness" (taking personal situation in to account) and amount of time waiting, especially on decade timescales. People who have been waiting for 20 years are older, have had more time to potentially save money, are arguably more likely to have a resonable housing situation. Basically they are "point wealthy", they weren't forced to spend their queuing points on a bad apartment after 8 years, they are still collecting more points waiting for the nicer ones. And the fact that they can do that, to some extent, indicate that they are in a better situation.
(2b: It would eliminate the absurd situation when people live 30 years of their life in an expensive house, collecting queue points, and then sell the house and move into a rent controlled apartment.)
3: It would incentivise/allow a centralisation of the allocation system and increase mobility between cities.
Right now each city have one or a few different queues. People are generally not signed up to all queues across the country, because of hassle and cost (each queue is like 0-20 USD / year). So if I wanted to move to say Gothenburg, I would start from zero and be years away from an apartment.
Because of this, there is no interest from anyone to create a centralised queue. If everyone joined the central queue at birth, it would be meaningless!
But with a lottery based system, a central queue would be no problem. I could just select the cities I'm interested in at the moment, and have the same chance as everyone else. I could take a "bad" apartment, because I'm still in the lottery and might win a better one to upgrade,
Not to mention historical controls on building, rules about shading out other buildings, onerous permitting processes that take years, potential lawsuits, the annoyance of prostrating oneself before random bureaucrats begging for the ability to spend one's own money, etc. I think I'll just go YOLO into options futures instead, or throw my money in a global index fund.
Each of these rules is well intentioned, or at least has a well intentioned sounding justification. (Often, the main force behind them is a monopolist who specializes in navigating them, and doesn't want to have to compete on an even footing in an open market.) Altogether, however, the rules make a sticky web that causes entrepreneurs to throw up their hands and go elsewhere.
Rules about building is like dessert. A few desserts is a good idea. A meal constructed entirely of dessert is not so healthy, especially in the long run. Figure out how to make it easy to build, and people will build. And those folks need to be wooed, not with sweetheart deals out of the public purse, but with a clear, easy to navigate regulatory environment. If you make it easy to compete, there will be much competition.
Overwhelmingly, though, there's no competition in these kinds of jurisdictions because powerful interests LIKE it that way. Think of those folks who spent EUR 10K on a square meter of condo. Are they going to be happy at your proposed regulatory reform that promises to quadruple the rate of building? Of course not! You are directly attacking their asset, that they strived and scrimped and worked for for years! Are they going to come out and say that? Only rarely. They are going to talk about the character of the neighborhood, or the historical significance of whatever, or the environmental impact of a skyscraper in the downtown, or make overtly racist comments about who might move into these new buildings, or anything that will rally people to their cause to STOP THAT BUILDING!
According to https://www.macrotrends.net/countries/SWE/sweden/net-migrati... net immigration to Sweden has been consistently dropping since ~2010, and at 0.3368% of the population per year, that doesn't sound like it would move the needle on housing.
If you want something cheap there are plenty of cheap apartments available in the suburbs.
Sweden and a few other EU nations have their own Central Bank and can do distortions greater than the European Union Central Bank, while garnering even less publicity, let alone less local knowledge that these are strange actions.
The problem (based in my massive experience of reading one article) seems to be that there are a lot of rent-controlled apartments, but they end users aren't getting the benefit of that low rent controlled price. Instead some private citizens are getting to collect free profit for subletting.
If you make subletting a rent-controlled property illegal, then the people who are living in them are unaffected, and the people who aren't living in them will have to give up their rent-control contract freeing up the property for others.
If they are going to have a rent control law, then allowing the person to sublet that on for a profit then you basically dont have rent control at all (except for the lucky / honest minority).
You are almost there to why regulations, however well intentioned, rarely work to their expectations versus the alternatives :)
What doesnt work is what passes for regulation or legislation these days, written by some moron, that politicians attach to whatever bill or budget that is certain to pass. They barely reach the threshold of 'well intentioned' and would more charitably be described as vitue signaling or just spin.
You get to stand infront of the microphone and parrot off the 'This is a Win for the voters' but rarely has anyone read, understood or debated what is now a binding law or regulation, along with its unintended and at times intended consequences.
But inevitably, there exists a timeline where the regulation becomes antiquated and outdated. It no longer serves its purpose, and it actually becomes the very barrier to progress. And in my time being alive, I've rarely seen politicians act quickly to improve regulations to serve a current need. More often than not, they grandstand over the value of the regulation, and pass laws that increase the bureaucratic reach of the regulatory arm. They effectively become rubber stamping desks.
Rent-controlled apartments can be sublet legally with almost no markup. Bought apartments can be sublet legally to a market rate [0].
I'm guessing that the guy in the article is in a sublet owned apartment.
Regardless, sub-letting of rent-controlled apartments is very strictly controlled and is essentially "banned". But of course it's quite tricky/expensive to enforce.
(My, in Sweden very unpopular, opinion is that subletting is the last thing that gives young people some kind of chance to mobility. Especially those whose's parents can't buy them an apartment. If all forms of subletting were banned, I would have had no chance to live in Stockholm).
The reality is that Stockholm geographically challenged. The major pieces of available land is the city airport and areas of parkland. The city airport has been given a lease until 2040. The areas of parkland is a national park.
The housing market is one the most important markets in Sweden. Anything that significantly lowers the value of real estate will be political suicide. Meaning that in the current market there can't be any solution that actually delivers affordable housing.
There is also little will from the voters to accept measure that would stabilize the market long terms like removing the mortgage interest deduction, introduce an actual real estate tax or regulating lending similar to other countries.
All this means that it's very unlikely that there will ever be even a relatively affordable market in Stockholm. Which will end up being disastrous when the cost of rent is also among the biggest single cost in the knowledge economy. For companies you can argue that the increase in housing cost will be offset by the larger available workforce but you can't say the same for public services.
Past or future deregulation isn't going to solve this. On the contrary it is what prevents a correction. The natural thing to do when something becomes too expensive is look for alternatives. In the housing market this means moving somewhere else. But as companies can attract those good or privileged enough to Stockholm anyways they don't have to move. So the average person doesn't have much of a choice but to move there themselves. Which in turn makes Stockholm even more attractive.
The paradox is that most any improvement of the Stockholm housing market will there make the situation worse long term. So the solution has to be not to cater for this market but to improve the market somewhere else instead. Unfortunately this also unlikely.
A pet "dictator for one day" idea of mine is to simply move the capital to something like Linköping! Has an airport, enormous amounts of farm land that can just be built on etc, less than 2 hours away from Stockholm by train.
Make Stockholm like NYC and Linköping as DC. If all government headquarters (and related functions) were forced to move, it would certainly take hundreds of thousands of people with them (including family members etc).
Brasília but on Östgötaslätten :-).
https://www.fastighetsvarlden.se/notiser/flera-myndigheter-t...
You wouldn't have to move the government though just companies. This is a major part of creating the problem from the beginning. Because as you probably know many of the industrial companies where distributed to other locations like Linköping, Trollhättan, Karlskrona and so forth. As those companies and the industry general has shifted to no longer need things like manufacturing facilities everyone ends up in Stockholm. It's a paradox that when you can work from anywhere it also means everyone can work from the same place.
Of course if a larger company would move outside of Stockholm that places would soon face the same problem even quicker as it's smaller. But if it happened to many different places there might be a shoot. Unfortunately you would have the same issue that many people would have to undermine their immediate interest for it to happen. But at least it would be technically possible. Stockholm has probably gone so far that it is socially and technically impossible as the economic consequences of an effective solution might be unpredictable.
What percentage of the population owns the house they live in (or has a mortgage)?
Rather, voters choose between one option, thinly veiled as two chooses, set by monied interests and corralled by media barons.
39,8 % Single-family home
20,7 % Co-op apartment
= 60,5%
28,4 % Rental apartment
You're right that if it was the cheapest way of getting property then tenants probably wouldn't report. But if the whole thing is making property more expensive then I definitely would.
Recently on Reddit there were some screenshots of a ground-floor 'studio' flat that was entered through a window. It didn't have a door and was still quite expensive. That's illegal according to UK rules, and lots of people on Reddit happily reported it.
That gives the tenant an automatic incentive to report the person who sublet it to them.
If anything there’s lack of enforcement of existing regulation.
In Stockholm, it's completely the reverse. I think rent control and where poor people live has nothing in common. It's impossible to get an apartment in the Stockholm city centre if you want to rent it.
Especially when the cities lets immigrants cut the queue. Most wealthy people can afford the super expensive apartments and the medium wealthy can buy contracts illegally.
All you're doing with rent control is to give incentiment for people to hold on to their contracts no matter what, cheat the system or buy/sell contracts illegally. It is really widespread and landlords are making a lot of tax free money on it.
Even worse is the situation if you buy apartments, you cannot rent it out to whomever you want or for how long you want since you don't really own it. You only own a smaller piece in the economic foundation that owns all apartments and give you the right to live in it. They can require you to not rent it out or limit the timing to a couple of months increasing the instability of the second hand contracts. Also, if the economic foundation makes bad decisions and gets a bad economy they can be forced to sell the entire apartment complex and you'll loose the apartment to a presumably shitty price.
The only good way of owning your housing in Sweden is to actually own the entire property OR own one of the new types of "äganderätter" which are very few and far between.
If you think old people can get an apartment in Sweden, that is just laughable. Even in smaller cities the queues are like 10 years. You'll have to pay up
With the difference being that 19.5 EUR would give me a square meter in Helsinki tomorrow. 11.3 EUR doesn't give me anything in Stockholm for the next decade. ≈ 30 EUR give me a second hand semi-short term contract in Stockholm.
Six to seven years is nothing compared to Sweden where you can have queues about 20-30 years easily for the big cities. My GF have 12 years in the queue and she can get a decent apartment in the outskirts of Stockholm but that is about it.
There are special housing for elderly, which is a bit shorter in the queues but still very long.
So you really think there is no connection between housing politics and segregation?
> All you're doing with rent control is to give incentiment for people to hold on to their contracts no matter what, cheat the system or buy/sell contracts illegally
Holding on to a contract is not necessarily a bad thing, if you enjoy living in your apartment and it is priced according to its size (giving incitament to switch to a smaller one if you don't need a big one anymore). Of course people try to cheat the system, but it is illegal ... and tenants paying illegally high rents can take the contract owner to court and get all excess rent back.
> Even worse is the situation if you buy apartments, you cannot rent it out to whomever you want or for how long you want since you don't really own it.
This has nothing to do with rent control and depends on which BRF you live in. Considering the lack of interest for äganderätter I'm not sure if so many people are with you on this opinion.
That is not what I said.
> Of course people try to cheat the system, but it is illegal ... and tenants paying illegally high rents can take the contract owner to court and get all excess rent back.
Yeah but that never happens. All parties involved have interest in making it stay in the shadows. They don't pay illegally high rents, they pay normal rents but buy the contract to live there in the first place. A LOT of people is doing that, because the queues are impossible.
> This has nothing to do with rent control and depends on which BRF you live in. Considering the lack of interest for äganderätter I'm not sure if so many people are with you on this opinion.
The biggest reason why there is a lack of interest is because of loans. Builders take out massive loans on every new BRF, as much as they can which makes the new BRF sensitive for economic shifts.
Yes but basically all large BRFs have rules that say that you can only rent out your apartment for 6-12 months at a maximum time. They also need to vet the one your renting out to and can say no. If you have a bad relationship with the BRF, they can mess with you easily.
Norway does not, not sure about Finland, but Denmark definitely has a form of rent control. There are ceilings on rent that will be determined by appeal to a local rental board. There are exceptions however, anything built from 1992 and onwards, as well as some different rules for units that have undergone major renovations.
If I could dream, my ideal Stockholm area would be one where I (and other's like me) would be interested in living outside of the city center. Where the whole Swedish model of Soviet-style housing blocks along the subways didn't really happen, and instead that the city grew organically outwards. More like Aspudden and less like Solna centrum. Imagine if Vasastaden style of housing extended outwards!
But I also feel that the current system is very inefficient in alleviating the segregation. For starters, the most socially exposed people haven't been in Sweden long enough to even dream about a rent-controlled apartment (anywhere in Stockholm). Then we have all the people who have been standing in queues for decades, while living in a villa in Bromma, and now sells it to move into a large flat in the city center with a rent that is a third of "what it should be".
Finally, my opinion is that nothing good comes out of pretending that attractive locations aren't more expensive. They are! If we want to give low-income people the chance to live in expensive areas, we should do that directly. Perhaps by subsidising their rent or have the government owned property companies save X% of apartments to people who are less well off.
Pretending that market forces don't exist and forcing Swedes in their 20's to borrow hundreds of thousands from their parents, or moving every 12 months is not a good solution either.
Saving 20% of the post-tax salary will take you 30-something years to buy the apartment cash only.
Well, of course you want that if you have a large salary and can pay the rents other people can't. Why not support government lead building of housing according to need instead of just throwing out the poor as a "solution"?
. 1120 CAD/sqft
. median before tax household income (City of Vancouver) 72,585 CAD
. ~30pc tax -> ~51k after tax
. 400 sqft 1120= 448k. 15% = 62k for a 15pc downpayment for a 400sqft condo.
Summary: In Vancouver the median household* would not be able to save 15% of a down payment for a 400 sqft "home" if they spent NOTHING for a year. We'll ignore the fact that housing appreciated for many years here at more than 10%/y.
This is good for ppl like me b/c I own stuff and this situation forces ppl to work more for less money in jobs they hate. For folks starting out (incl new immigrants), it's terrible. The root cause is very high immigration. Sweden (and Canada) have very high rates which puts pressure on the low end of the job market and pushes up home prices.
The US has a much lower rate (0.5%/y) than Canada (1.1%/y), which is likely one reason why homes are still somewhat affordable there.
* Median pre-tax household income: $103k
* Post-Tax: $70k
* Median home price: $1.6M (~$1200 USD per sqft)
* 400 sqft: $480k (note: this is without the 20-30% premium you'd pay for smaller properties)
* 15% downpayment: $72k
Housing prices are broken all over the place...
[0] https://complyadvantage.com/knowledgebase/vancouver-money-la...
[1] https://www.canadaland.com/podcast/real-estate-3-terminal-ci...
Quite convenient actually, as every company had its own renting agent, and money was always guaranteed.
When the rent control ended, renting turned into horrible shit-show. The register of good and bad customers was illegal and you could not easily check their financial status. And maximum security money was limited to 3 months. After few bad experiences I stopped renting out and just sold my apartment(s).
If you want to use rent control as a means to ensure individuals of various levels of wealth intermingle… then there is a conversation to be had. But it completely fails to make housing more affordable overall.
Everything else is just nonsensical hand-waving people use in an attempt to justify why various schemes they favor are not working yet again.
So yes 2400 units is a start, but we need dozens more like it before we start to even come close to solving the shortage.
But not 50,000 new residents. Adding jobs doesn't necessarily mean more people, just more employed people.
Instead what happened is that new residents came to the city for high paying jobs and bid up the prices for local apartments. Basically a cruel game of musical chairs where low-income households were forced from their homes and into cheaper neighborhoods in the surrounding cities. (Those poor neighborhoods actually did grow in population faster than housing: people were forced to pack into overcrowded living conditions)
If you're curious about the numbers, over the last 40 years Cambridge added about one housing unit for every four new jobs
Rents go up, because price ceiling is removed. Idea is that in the future supply increases and you don't have to wear a suit when looking for a flat
They don't have to. We've had price ceilings in the US in many places for over 60+ years without ever experiencing a shortage. (In my hometown, for example, education is price-capped, electricity is price-capped, water + sewer are price-capped, natural gas is price-capped. No shortages since the 1950s).
You just have to require reasonable regulations on the industry, and strictly enforce those regulations. Heavy Regulations + Price Ceilings is the magic combo for success, more or less.
Whereas the politicians won't care that a large percentage of would-be new residents for their city can't get in and have to commute. In fact, it's a perverse incentive: the locals love the lower rent, and there is no one to vote out the politicians that like rent controls.
Agreed, but this is true of housing as well. Housing "has to" work, or you end up with a huge commuting and homeless population (and the state of being homeless is effectively a crime in the US).
> In fact, it's a perverse incentive: the locals love the lower rent, and there is no one to vote out the politicians that like rent controls.
It's not perverse, it's a good incentive. Locals love lower rent from rent control, so the commuters who don't have it should be incentivized to also vote for rent control, and it's a great idea that should continue to spread. In a ideal world, every rental unit in the nation would be under a strict rent control (just like how power/water/sewer/natgas often is).
Not to mention, designing metro areas to require long commutes basically amounts to climate arson
Housing is completely different for many reasons, primarily:
1. Housing isn't provided by a single entity, it's a market that a majority of people will participate in. All of the things you listed are one-to-many, not many-to-many.
2. Difference in quality for different price points. You either have electricity or you don't. You either have natural gas or you don't. This is obviously not the case with housing where there are limitless price points and differences in quality. Unless you're suggesting that the government build all homes, this won't work.
3. You want the effects of the market to drive development and settlement. Manipulating the prices of NG has little consequence outside of providing a steady supply to the users. Manipulating the prices of housing won't allow development to fulfill market demands in price point, location, etc...
Housing and land require further analysis due to inelastic supply of land, and huge restrictions on construction, both for political and safety reasons.
The biggest determinant of supply of housing is not the ability to charge more for it, but all the other challenges around building.
So it's not a "price control" as much as it is a control on rentierism, on existing rentiers taking unearned profits without working.
Here is an idea: Measure average rent per sqft. Put a 20% tax on rent above the average and use it to subsidize low income households. That way you tax wealthy tenants and subsidize poor tenants.
What there is is a lack of accommodation where people want to live.
Ultimately people need to be persuaded or given a good reason to live elsewhere.
And that is in addition to having the right supply curve in the first place. The potential shortage of supply created by a price ceiling may very well be irrelevant when supply decreases from other factors.
Yes, but "doesn't work" is a bit of a loaded term. Economists agree that rent control is not the most profitable way to price housing, but since the whole point of rent control is to prevent aggressive profit-seeking in housing, economists "agreeing it doesn't work" is intentionally the goal.
Rent controls job is not to make more housing (it has no control over that). Rent control's job is not to make housing cheaper (it has no control over that). Rent controls only job is to provide housing security for existing renters, and the vast majority of the time, it's successful at doing that.
If you also want cheaper housing overall, your supposed to pair rent control with a matching set of changes for non-rent-protected residents (like say, pair it with new construction of additional public-owned public-operated housing).
At a cost to everyone else.
It doesn't. There is no cost to anyone else, unless you believe all purchases of all products automatically hurt someone else (since every purchase you make technically reduces overall supply by the amount you purchased)
I don't think it's crazy to say that rent control helps those in it and hurts those that aren't in it. That's not the tenant's fault, but we can't pretend that rent control doesn't have an effect on the supply of rentable apartments.
Hard disagree, it's crazy to claim that rent control hurts affordability. Rent control does not "hurt" anyone not in it. The lack of humane regulation on housing is hurting those people, and rent control is just getting slandered in the cross fire. What most people interpret as "rent control causing" is in reality "the lack of enough rent control causing".
It's like looking at a car crash, and saying "see, seat belts didn't protect the non-wearers, those seat belts just selfishly protected only their own wearer, and even created more empty space for the non-belted to get extra physical damage. Seat belts hurt all those not belted, the policy itself of offering seatbelts 'causes' damage to others."
A better analogy would be a city bus. If I take 10% of the seats and allow people to reserve them for personal use indefinitely, that makes the rest of the bus more crowded. The act of renting those seats out limits the supply of other seats, making the rest of the bus more crowded. It doesn't "cause" damage to the riders in the 90% of the bus, but pretending this policy hasn't made things more crowded would make no sense.
But it doesn't. Rent control never takes away any supply. Even if rent control were fully abolished, that same person would still need the same amount of housing (presumably even in the same unit). From a "supply" perspective, it's literally a 1 to 1 -- no change in unit counts, up or down, in any way.
Rent control has no influence over "supply" (unless you are secretly hoping to force a lot of humans into homelessness or something). Rent control only determines how much a person is forced to pay to keep their own housing (housing already built, and that they already occupy) consistent.
> Your seatbelt analogy implies that anybody, at any time, can obtain rent control.
Correct, and that's absolutely true. Generally speaking, legislators could pass a law today to give everybody and anybody rent control (at either the municipal / county / state or federal level). It's literally just a pen stroke away.
There was a time when seatbelts weren't law, and it was harder to obtain them. We recognized how unequal of a situation that would make things, and thus mandated through regulations via law that all cars have them. (Just as right now, it's really unequal for some people to have rent control, but others don't).
Generally, every argument against Rent Control, is really an argument about how it sucks that they don't get rent control themselves. The problem is not rent control, the problem is a lack of enough rent control. If rent control was universal (applied to 100% of rental units) then most of the perceived problems with it would vanish overnight.
> If I take 10% of the seats and allow people to reserve them for personal use indefinitely
That's not an better analogy, it's a unfair one. Rent control does not give people the ability to reserve lots of housing units indefinitely, and rent control doesn't actually distribute or redistribute anything. It lets households pay for one (1) unit at real-world rates (which is exactly the same amount of housing they'd still need and use without any rent control, except that household would suddenly have to give a bunch of extra money away for literally no reason).
Why would I build a new apartment building if it was going to be rent-controlled? Why would I rent my units if they were going to be rent controlled? There's evidence that the availability of rentable spaces decreases in the presence of rent control. These policies have had an effect on supply.
If I can't afford a down payment, and I also can't get rent control (because of the length of the waitlist), it's much more difficult for me to find an apartment to rent even though the number of buildings is still the same.
>that same person would still need the same amount of housing (presumably even in the same unit).
Rent control can actually cause people to stay in a larger or smaller apartment than they actually need. If I have to give up rent control to move, why would I do that? I'm incentivized to stay in an apartment regardless of whether or not it's the right size. I could have needed that two bedroom flat when I was raising a family, but now that my family has left I don't need the space. However, rent control means that it's actually comparatively cheaper for me to stay in a large space.
>The problem is not rent control, the problem is a lack of enough rent control. If rent control was universal (applied to 100% of rental units) then most of the perceived problems with it would vanish overnight.
Price controls reduce the incentive to produce rentable units. It's the reason that price controls tend to result in shortages; why would I produce a price-controlled unit if I can't make a profit on it? Why would I continue renting a unit if there's a chance it gets rent controlled? Most studies I've seen have indicated that when rent control is implemented, the number of rentable units decreases.
I suppose the argument could be made that renting is itself a bad thing, and that converting all rentable apartments to units that can be purchased is a good thing. I could see that argument.
> Rent control does not give people the ability to reserve lots of housing units indefinitely, and rent control doesn't actually distribute or redistribute anything.
In practice, rent control functions much like my analogy. If I'm in a rent-controlled apartment, I'm unlikely to leave. Why would I, especially when my rent won't change significantly if I stay? I can't get a better deal elsewhere. It also means that the landlord is unlikely to want to rent that apartment again when I leave, because they're uninterested in getting rent-controlled.
But that is the problem: it makes housing so much more expensive. It definitely has a control over that.
I don't think that that's what economists are talking about when they say rent controls "don't work". I think the consensus is more specifically that it is not an effective way to increase the total supply of affordable housing. For example, see this survey [0] of notable economists where 2% agreed that:
>Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.
Reading through the economists' comments, the consensus seems to be: 1) helps incumbent renters by reducing pricing for them, 2) reduces total supply, 3) hurts non-rent-protected residents (mediated by 2).
Possibly the answer is still "doesn't matter, achieved 1)", but I don't think it's fair to characterize it as a magical policy lever that only hurts profiteering landlords.
An easy example is take something simple like 'give food to the hungry who can not afford it'. Sounds nice. Easy to do. Does not really seem to hurt anything. But that can have a inflationary effect on food prices if done too much and too rapidly. Thus creating more 'hungry' people who can not buy food, as maybe their wages are not keeping up. Then causing more money to be injected in to 'fix the issue' again causing inflation. Creating a cycle that can only be broken by hurting a lot of people. That is just one side effect. There are several others. Rent control is similar.
The trick is how do you 'fix' things without creating bad cycles? It is not as easy or handwavy as many make it.
A deep dive into rent control by a left leaning economist. Start from 21 min mark.
It's useful to know something doesn't work like a proponent would hope, but I don't think it's all that helpful if everything else the economists propose as an alternative, including the status quo, doesn't work either.
If the economists can't find a solution, perhaps it has to fall back to moral imperatives and which values to prioritise. Specifically, which is more important, letting people who have lived somewhere much of their lives stay there, or forcing them out into unfamiliar places with no connections so that new, wealthier people can take their place.
The answer is to build more to outpace demand but that's very difficult for so many reasons including zoning, factions opposed to growth, difficulty scaling supporting infrastructure and services, etc and we're left discussing bandaids to be applied on top of the crusty remains of hundreds of old bandaids covering up the festering wound, so to speak
For example, the Greek government cut welfare benefits only for the government to lose the next election and the new government to reinstate welfare. This is the "cut the wasteful spending" type of austerity, meaning it's the least bad form of austerity. If you were to cut healthcare, infrastructure or core industries you could easily end up worse off than without austerity. Guess what the Greeks did? They sold their most important assets (ports and ships) to China.
Really, the problem with debt is that the person holding onto the money that the debt created decided they want to wait it out and spend their money later. In essence, the problem is that the interest rate on the debt is too high. If that person were to spend all his money, the debt would be gone assuming effective taxation.
Meanwhile the IMF will tell literally every country in trouble to do austerity to qualify for support.
The only way to avoid it is a very tyrannical East German system where people rat on each other to, we’ll, gain something, maybe that coveted apartment…
It's hard to make sure either of this never ever happens, but it is definitely possible to make sure it's not happening as much as to become a social problem.
If a subletter voluntarily enters into an agreement with a lessee to pay above the rent control amount, who is the victim?
Is it not a victimless crime?
The victim is the person not able to rent on a first-come-first-serve basis instead of someone willing to pay more than is allowed.
That's indeed the only sensible thing I can think of. But it's a very odd thing to me (that a mutual, consensual agreement between two people is governed by the interests of third parties).
And also because "consensual agreements" rarely are. Typically one party has more power than the other and can force terms.
By definition, you only get truly consensual agreements when the balance of power is equal - which it very much isn't in rental markets with deliberately restricted stock.
For the group of aspiring startup founders HN community has a very high percentage of Marxists in it :)
https://www.quora.com/What-is-your-worst-landlord-story
Of course some tenants are terrible too, but those stories seem to be rarer.
Even if the "agreement" was "voluntary" for the parties who entered it, it can still affect third parties.
Would you be less hurt when there is nothing available?
All rent control does is favor "first-come-first-serve" instead of "who pays the most".
Perhaps there's a lesson to be learned from that.
More generally. Non reproducible assets/aka monopolies can extort more money out of people now that people have more money thanks to low interest rates. Notice how being rich doesn't make you rich because of abuse of monopoly power to do perfect price discrimination.
This has got to be satire, right?
There are a thousand things to do with a property and the government decides, hey guys, stop that 1 thing out of thousands. Then people will do all the thousand other things. The government then acts surprised that its incomplete policy has failed.
You can also just tax the land.
London is having a hard time because supply is less than demand.
Stockholm, NYC, Paris for the same reason.
It's really one of the largest things that seemingly every developed country is struggling with right now.
I don't personally believe Stockholm is more affected than any other European capital except perhaps Berlin, which somehow seems to stay affordable (likely because of supply).
Not Japan! Tokyo rents are surprisingly cheap relative to other major cities.
In Tokyo?
In other words, Japan lacks the regulatory environment (common in all these other countries) that depresses supply.
It's more akin to the council housing crisis in the UK.
Because it's not just about supply and demand, and attempting to frame it as such is seriously reductionistic.
Essentially you're at Why #1 here, and you have at least 4 more Why's before you even begin to scratch the surface of the root cause
I'm a big supporter of rent control. But I also think the problem here is supply and demand. I've never met a supply-and-demand skeptic that would do anything except deny its applicability. They could ever explain why themselves or point to somebody else's explanation. And I've met a fair number of such folks.
I'm left thinking that they just don't want to see new homes or new people. But if you have an explanation, I'm all ears.
But let's give it a shot!
There's no denying that there is a lack of supply in housing in some parts of Sweden, particularly in Stockholm, where there are very long queues to get a reasonably priced apartment to rent. There's no denying that rent controls are probably one contributing factor to why the supply is too low. But it's important to note that it's just one of many variables in this equation. So what other contributing factors are there?
Well, for one, acquiring permits is pretty damn hard in Sweden. It's a long process with a lot of NIMBYism, not entirely unlike what I've understood is the case in San Francisco.
There's also the issue of rental units being profitable on a far longer horizon, leading investors looking to make their money back quickly to look at the buyers market instead. Which leads us down the path of the very high prices in the buyers market. What's causing that? For one, very low interest rates in the housing loan market (about 1-2%), but also tax policy, giving lenders a tax deduction relative to their interests payments. Yes, you read that correctly - buying a home, ie being richer than average, comes with tax deductions.
In Sweden, paying off your home loan for a long time wasn't even required - you just continually paid the interest, and perhaps lent even more money against your home when the value increased.
There's also the fact that the public housing providers have more or less been dismantled in many cases, and sold off to what essentially amounts to slumlords, attempting to game the ever-living hell out of the rent control rules. The playbook is more or less:
- Buy old public housing
Then - Spend as little as possible on upkeep, be actively hostile to current tenants - When anything goes wrong inside the rental unit, refuse to do anything but a full-scale renovation
And
- When any tenant moves out, perform a full-scale renovation
And finally
- Legally raise the price, as the standard of the rental unit has increased, often increasing the price as much as 50%
I don't pretend to know the answer to this complex issue, nor do I pretend to entirely understanf every part of it. Nor do I claim that rent control is the right answer or the wrong. But one thing is for sure - reductive arguments claiming that rent control is the root cause is wrong on the basis that it does not begin to understand the issue even slightly.
Hopefully this begins to cover some of the nuance of the issue.
These are all very legitimate concerns. But at the heart of all this is still the supply problem, the lack of housing.
I also agree that blaming this on rent control is wrong. But the real problem is enacting rent control, then saying "that's enough, problem solved." Because at the core there is still the shortage problem, which makes al the other problems worse.
Has rent control "worked"? Both yea and no. It has worked at what it is meant to do, which is great. But it hasn't solved housing, as too many proponents say it will. Similarly, more housing alone won't solve everything, but it makes all these other problems much easier.
Of course, abolishing rent control doesn't get rid of mismanagement but rent control is generally used to justify mismanagement.
In a perfect world I would also like to see rent control removed, as there certainly are negative consequences from the policy, but removal without viable alternatives literally means that a sizeable chunk of poor people will be out on their asses, more or less. I cannot in good conscience support that.
>Only around 8% of Swedes live in households spending more than 40% of disposable income on housing, compared to 15% in the UK and almost 40% in Greece, according Eurostat data.
Something is keeping rent low in Sweden (relative to a few other European counties).
Weather.
So you can't really be an absentee landlord.
The rent controls apply to first-hand contracts (kinda like council housing in the UK). Which is basically non-existent for working people now.
The issue is there aren't enough first-hand contracts, or enough properties in general. But the rent controls as discussed only apply to first-hand contracts, which are the minority.
However those assumptions rarely hold in practice. In the US, to get a construction loan, you can't assume a big rise in rents in coming years. So the financial decision to build new housing is gated by an effective assumption of rent control by the financiers.
Removing rent control would convert the decades-long wait list into a decades-long struggle to make enough money to afford rent, would it not?
If you just look at the expense you'll miss the fact that people don't get enough groceries, or apartments.
https://www.lspace.org/fandom/songs/wouldnt-it-be-nice-if-ev...
(sung to the tune of "It's a Small World")
If we all were friendly
I'm sure you would agree
That the world would be a better place
For you and for me
And if everyone was kind
I'm sure no-one would mind
So let's all be nice
Chorus:
Wouldn't it be nice if everyone was nice?
Wouldn't it be nice if everyone was nice?
Wouldn't it be nice if everyone was nice?
Let's all be nice.
Being good to people
Is lots of fun
And it makes a difference
To everyone
And a smile is a frown
When it's turned upside down
So let's all be nice.
Repeat chorus ad nauseam.
Yes, we should all be nice to everyone. Except to people who are not nice. Those are the outgroup. We, the nice people, are nice, because we are not those not-nice people. You should avoid those not-nice people. Do not associate with them. Shun them. Exclude them from your life. Block them. Refuse them service. Take all possible actions to make sure not-nice people are excluded and removed. Make sure all the nice people knows who the not-nice people are, so that all the nice people can avoid the not-nice people. Learn the signs of not-nice people. The subtle flags and secret signals, the words they use. Learn to never use those words, lest someone mistake you for a not-nice person. Call out loudly every time you see or hear someone use those words, for they must surely be a not-nice person! The not-nice people are always trying to sneak their way into your life, so you must be on constant lookout for all suspicious flags and signals. Call out loudly every time you discover a not-nice person, so that every nice person can be alerted, and take proper action.
Remember, we must all do our part in being nice!
Property ownership should be restricted to resident citizens only, and rental to a government monopoly (like alcohol is here). We shouldn't pay 10x more just to serve as an investment vehicle for wealthy foreigners, AirBnB owners, etc.
What's your version of this definition?
You can get citizenship in Sweden in 5 years for example, so it isn't so extreme.
> The forces of supply and demand can be overridden, but then you have to enforce the rules
Enforceability is a key factor in whether a law will work. "Proper" use of rent control, like narcotic use, is very difficult to enforce without extremely authoritarian measures.
People are rationally responding to incentives that exist. It's hard to get a rent controlled apartment because there is more demand than supply. So people are incentivized to give them to family because otherwise it could take a decade to get them.
People in this case are responding to the need by renting out rent controlled apartments for a very large premium to people who under normal conditions may not be eligible to live there in the first place. Same thing here in NL, with in the larger cities a healthy dollop of AirBNB tossed in for some extra artificial shortage.
What is the wishful thinking in this case? I see it as a deliberate tradeoff: you accept a black market and massive queues, for the idea of people with any background or income living in the city. You could allocate by lottery or by queue time or by market rates. The last one balances supply and demand, but it doesn't allow a city that has non-rich people living in central locations.
So the question is: do we want to balance supply and demand if the cost is a gentrified city core? And that's the tradeoff.
It's easy to find examples of people who are thrilled that they were able to stay put, but what about all the people for whom that's a curse?
Controlled rents isn’t a bad solution to the economic problem of optimal supply or demand. It’s one of several possible compromises on the ideological scale between “housing is a right and not a commodity and a mixed income city is a goal in itself” vs. “housing is a product like any other and optimal markets solves the problem best”.
The reason Stockholm seems very close to the first despite having one of the world’s most liberal market economies elsewhere is because it’s not easy to change. It’s likely to change but it will take a long time. The right wing parties in Sweden (market liberals) have worked around the problem by ensuring the apartments are converted from rentable to condos instead, because removing the rent control entirely would be too difficult. There is also talk about allowing market rents for new production (it’s already allowed in a limited way).
And the houses that get built are lower quality.
When you align incentives and setup a Land Value Tax, not having enough housing in an area raises taxes. Suddenly people come out of the woodwork becoming YIMBYs to get those people housing so that their taxes drop.
If people still want aesthetic and other factors, they can have it. But it's going to cost them.
So just give poor people money. If somebody needs shoes you can buy them a pair of shoes. You don't have to set price caps on shoe sales. (Meanwhile, if you have laws that are artificially limiting the production of shoes, then you should probably get rid of those laws and let people make more shoes if they want to.)
In Sweden you can't usually privately rent out an apartment for more than 2 years, without returning to live in it for some time (or selling it). So this puts a lot of pressure on to buy a place to live in, as the rental market is a disaster of moving every year.
Sweden needs to build far, far more flats and houses. Like 10x current levels at a minimum. The population has increased by 20% in the last 20 years.
Why is Bitcoin so overvalued?
Once it becomes a "store of value" the price just goes crazy.
From the article:
> Despite its complex challenges, Sweden is in a better position on housing than many other EU countries.
> Only around 8% of Swedes live in households spending more than 40% of disposable income on housing, compared to 15% in the UK and almost 40% in Greece, according Eurostat data.
> Swedes are also less likely to live with their parents than any other young Europeans.
The situation is certainly not good in Sweden but there are no simple solutions. Otherwise it would be much better elsewhere.
Swedes may find other ways to cope that don't involve this particular mechanism.
How do you get an apartment in Stockholm as a young person? You ask your parents to take out a loan on their house to pay the downpayment, then you take a loan and buy an apartment. Luxurious and high standard apartments are built all the time in Stockholm! The new Barkarbystaden development in the northern municipality of Järfälla will have added 18000 apartments by 2030, the current population is 80000.
Sweden has no issue with building new places to live, as long as they're expensive and luxurious.
Miljonprogrammet wasn't a failure.
Rent control is usually a vote-winner, but vast majority of economists would also agree that it is a bad policy.
Residential housing should not be used as an investment vehicle. Period. Its primary purpose is to allow families to own and live in the house. Mandating that can eliminate the rich landlords/foreign investors buying houses just for investment, stabilize the demand and drive down the prices.
One way to mandate that could be progressive property tax based on how many properties you already own with a max cap on number of allowed residential properties one can own. This might decrease incentive to build new housing for developers, but can be solved by temporary tax breaks for building new housing.
Am I missing some second order effects?
I'm also curious whether decoupling housing from investing could be useful in stabilizing prices.
This would do nothing. Investment ownership of housing is tiny. It is the homeowners who push for policy to reduce construction of housing and boost prices.
Getting rid of zoning + Land value taxes are the answer.
Anytime you create a new law, you should, like good code, remove all of the hard-coded values within it. Ideally all laws should be pointfree[0]. Having a max value of owners can easily be routed around(I don't own this house, this company, that I happen to own, owns this house!), or setting some tax breaks for developers are both nasty hacks that wouldn't make it through code review. The Land Value Tax would.
Black market is when they are sub-letting illegally so you literally can't register your address - and is mainly an issue for people who want very temporary rentals, or very low rents.
But yeah, it is still a disaster.
There will always be a contingent that invents reasons why “this time” it will work. “We just haven’t done it right”. And they go on to fail once again.
I fail to see why removing rent control would lead to anything else than higher rents. If the housing companies can take a higher rent they will do it, and sure, perhaps build more apartments for a while. But from their perspective, wouldn't it be stupid to build cheap apartments for young swedes outside of the city center when that 1. would lead to less housing shortage (less demand in relation to supply) and 2. give less profit than fancy apartments closer the the city center.
In my opinion, the best way to solve the housing shortage is to build apartments, and if the apartments built by the private sector are too expensive for young people, the state has to either subsidize or build their own apartments.
[1] https://www.scb.se/hitta-statistik/statistik-efter-amne/boen...
[2] https://bostad.stockholm.se/Lista/?cookies=no&s=58.91071&n=5...
Something worth mentioning for example (which the article doesn't), is that between 2007 and 2014, around 26,000 rented apartments (hyresrätter) in Stockholm were sold by the municipality and turned into owned apartments (bostadsrätter). The percentage of owned apartments in Stockholm went from being 44% in 2006 to 55% in 2013 [1].
If you self-sabotage the existing rent control regulations by reducing the supply of rented apartments, then of course the waiting times will increase, which you can then use as an argument to try to abolish rent control.
[1] https://www.svd.se/ett-paradigmskifte-pa-stockholms-bostadsm...
Rent control always self-sabotages by reducing the incentive to build more and better housing.
They established that this is caused by rent control by fails throughout the article to even mention that rent control was _of course_ accompanied by large scale involvement by the government in providing housing. That was however abolished in favour of market based construction.
This of course has made the price of housing - those you actually take a mortgage for - to sky rocket and building of rental apartments to crash. That end result is not surprising.
But this isn't that rent controls has failed per se, it's that the construction has moved to the marked with rent controls still in place. The best solution for the average Swede would be to have the government involved in building housing again, rather than to throw out the poor through market rents.
However to enable a boom in private housing construction to fix the supply issue it also needs liberal land use regulation. Which is a measure so controversial nobody in Europe even considers it. Otherwise nothing can be built no matter the potential for profit. I personally wouldn't sell out Swedish egalitarianism for just a bunch of tech corporations. It would probably cause a lot of anger. So I wouldn't do one without the other.
The prices are high and there is a lot of demand. Moreover, the quality of the apartments is really, really low. Landlords ask for a lot of guarantees and finding a room in an apartment can take even multiple turns of interviews.
Of course, leaving nearby the city center is difficult and public transportation is lacking. It is really hell and I really wish rent control existed.
What happened in Stockholm, where I live, and other cities was that apartments owned by the municipality were sold to the tenants. The reason for this sale was ideological; the liberal politicians in charge thought it was "bad" for the municipality to own apartments and want to "privatize" the the housing market. This resulted in the tenants getting to purchase their apartments cheaply and those apartments later rose massively in value so the former tenants made huge profits by reselling them.
This naturally reduced the number of rental apartments and made the competition for them much stiffer. The people who couldn't afford to buy their own apartments had to compete with others in the same situation for the remaining rental apartments. Thus the rents for these apartments rose, but since they were rent controlled, they didn't rise as much as they "should have" (according to economists and landlords). Thus, a rental contract became an asset that could be resold for profit. This made it very hard to get hold of rental contracts since they are treated as assets that are always rising in value. If you have contract to an apartment in a nice neighborhood in Stockholm, you are never ever giving it up. If you don't live in the apartment you just rent it out second hand and you make a nice profit by gouging whoever is forced to rent it from you.
So "Mr Stark" is complaining about his high second hand rent. What he doesn't understand is that that is the rent he would have had to pay if there was no rent control. The landlord would rent out apartments to the highest bidder and the highest bid, 11 000 kr, happened to be his.
The problem is that more people want to live in city centers than there is space in city centers. So either you let landlords charge whatever they want, which quite obviously will lead to only rich people affording to live in city centers (and poor people in bad neighborhoods), or you distribute apartments according to some kind of queuing system, which quite obviously will lead to long waiting times. You can't solve this problem perfectly for everyone. Some people will not get to live in the most desirable areas and some people will have to live in the undesirable areas.
That's impossible if not initiated by someone actually interested in providing more apartments.
* urban planning and approval costs a lot * raw materials reached all time high * labor costs are very high even if we subcontract to Eastern Europe
You cant wish building more units into existence the same way you cant implement rent control.
Decentralization and not requiring people to work/live in areas with huge demand for housing is just the first step alleviate some of this pain.
You really can, though. Just remove building restrictions and new units will "magically" start appearing anywhere that market rent exceeds building costs.
While there could be an effect on construction, the area where there is a lack of supply is central Stockholm, which is also of course an area where you can't possible build any significant number of new houses because there simply isn't any land.
Market rents could be a very good idea in some smaller cities where there is a shortage of supply because rents are controlled at a too low level, but at the same time there is land available to build on. In central Stockholm, one could remove the queue over night if rents tripled - but it wouldn't create any supply and therefore not address the underlying problem.
My point was merely this: housing politics isn’t simply solving an economics/allocation/optimization problem. It’s also the sociological problem of creating a city.
I think typically "poor" people move in when the prices are just about affordable in the area. There they settle, have families, have their friends, support network, schools, jobs, community, etc. It all seems very reasonable.
And then the rents go up, and up, and up, and up... faster than income.
So they are forced to move away to a new place where they don't know anybody and have no connections.
They settle down in the new place. Children go to a new school. Community programs are scrapped in the old place and re-founded in the new place. Keep in touch with old friends by phone, but in-person friends have to be made anew. Do it all over again. Get really settled in. And then the rents in the new place go up, and up, and up, and up... faster than income again.
So they are forced to move again.
I think there's a fair moral argument for it being an injustice that "poor" people are not able to settle in any area except the most deprived areas where it's possible to project will stay deprived for decades to come.
There's always a substantial chance that wherever they land, if it's a reasonable place that they can afford, conditions will change, and they will be gradually squeezed until they are priced out and forced to reset their lives again somewhere else.
Being able to settle long-term in some reasonable place is arguably a significant moral imperative in the design of society. This is one of many possible metrics for evaluating what "works" or "doesn't work".
And almost everyone's income drops a lot when they become elderly. Stability of place is really important for the elderly. It's sad when they have to leave to a place where they have nobody.
And I don't believe that is impossible to build more housing in Stockholm. It has a population density of 400 people/km^2. To put that in perspective, Chicago (in the US) has a population density of 4000 people/km^2. And Chicago (outside of a central business district which is very dense) is not some dystopian megalopolis. It is mostly neighborhoods of single-family homes and small apartment buildings. Seoul, SK has a population density four times higher than that at ~16000 people/km^2. Paris is even denser at 20000 people/km^2.
https://www.google.com/maps/@59.8794892,18.8876507,3a,75y/da...
The confusion is probably because the “greater Stockholm” and “Stockholm metro area” were defined to be synonymous.
So greater stockholm isn’t even a city + suburbia, it’s downright rural for the most part (which is of course evident by the 400 number). Next to me is a 20sq km national park forest, for example.
The density in Stockholm city proper is 4-5000 per square km which is pretty typical. It’s simply surrounded by a massive area of very low density which is still called the metro area.
Also what areas are included in such density measures? Buildable land or also including e.g. water? if you consider the amount of area consisting of water in central Stockholm, the density per land square km must be quite high if it’s the overall density that is 4-5000/sq.km
Dramatically increasing the density in the city itself would require building tall buildings in what is currently (most likely) green space in the city. That’s not possible for the foreseeable future. There are a few highrises popping up on former industrial land in central locations, but it’s not going to make a big difference.
There is no problem building housing in the largely rural Stockholm metro area, but far from the city there isn’t much demand either.
I’m not saying there isn’t a lack of construction - but the areas where there is both demand and space aren’t as large as one might think just because the density overall is low.
I don't doubt for a second that building a lot more housing is not possible for the foreseeable future but like in most places that is a political problem and not some fundamental constraint. And rent controls don't "solve" the basic imbalance between people wanting to live in a place and there not being enough housing for all of them in any meaningful sense. You are still rationing one way or another. When there are fixed supply constraints then maybe that is a more just way to do it, but when the supply constraints are artificial then it just entrenches a bad equilibrium.
Would be interesting to compare it to the USA too.
The struggles people are having finding an affordable apartment in a desirable neighborhood in Sweden's biggest city's seems pretty familiar to struggles people go through in the USA. Which to the extent that's true means that Sweden's attempt to use very different political-economic mechanics to get out of that haven't worked as well as planned, but it doens't necessarily mean they are worse off. There might be different winners and losers and trade-offs between the different approaches, would be interesting to delve into it more than just "people still have a hard time finding affordable housing in Sweden's big cities", which at that general level seems a true statement almost everywhere.
Quebec and Ontario have province-wide forms of rent control (i.e. max rent increases etc.) and it works well enough.
'State Housing' is for poor people only.
State Allocated Housing for 'regular citizens' is probably a bad idea, you end up in a Soviet Style situation with valuable things allocated based on power or other infidelities, long waiting lists, lack of maintenance etc..
Also, 'housing' doesn't mean everyone gets to live posh. If you're 27 and are not earning a whole lot, well, what can you expect really? You get a flat in possibly a not so nice building, that's it.
I don't get why people would expect the state to provide for them in the 'poshest' part of Sweden. I wonder if we looked at prices in the more marginal areas, what those would be and if they are more affordable.
It has been working really well all these years.
> But until recently, getting a well-maintained, rent-controlled apartment straight after school is something some Swedes have just taken "for granted", argues Liza, a 37-year-old tech worker, who didn't want to share her last name. She moved to London from Stockholm last year, and believes Swedes complaining about housing shortages would do well to put their struggles in a wider context.
The content just contradicts the title.
That is, the supply is artificially low because oligarchs, off-shore billionaires, and others buy up the supply?
That is, London’s failure isn’t about free market pricing vs rent control; but about deficiencies in residence and ownership laws?
There were new stricter laws on black-market leases recently in Sweden, and if you pay too much for a normal lease, you can go to court and get a refund. My personal opinion is that the system works as well as you could expect (except for the most central parts of Stockholm maybe that the clickbait article seems to focus on).
Stockholm doesn't have the same setup as New York.
That said, the 20% YoY increase in property prices is insane.
How does anyone rationally expect that to turn unobtainium into obtainium?
I have 50 grams of unobtainium. 300 people want it. What to do? Lottery? One lucky winner who gets a great fifty cent deal, 299 losers.
No wait, screw that that; for 50 cents, it's not worth it. I'm not even putting that on the market unless they make that a law.
One of the few things Econ 101 is certain about is that price controls never work.
This cannot be said too many times. Price controls never work.
Not even if you really want them to.
The most basic lessons in economics cannot be taught too clearly:
Rents go up from $800 to $1600? Well, the local govt coughs up $600 to soften the blow.
Now that seems egregious right? The govt enriching these rentier landlords? Well yeah.
Why is it better? Because the govt will do anything to avoid such payments. I don’t know, things like building more housing?
It’s a great arrangement! Make the pain focused on the people who can actually do something about it.
The other and easier option is "we won't do it anymore lol" (assuming the government wants to get it implemented in the first place).
At the top are the laws of physics - nothing can beat them.
But below those are economics and human nature.
And only at the bottom are law, politics and whims/fiats of human imagination and wishful thinking, in that order. The final lowest level: the mad ravings of the individual in his/her own mind which are most powerless in the big picture and long term.
>Only around 8% of Swedes live in households spending more than 40% of disposable income on housing, compared to 15% in the UK and almost 40% in Greece, according Eurostat data.
Hold on, how can they say uk is 15percent, I had banker friends who escaped London because of the housing prices.
Sure, Leeds and other regions are cheaper, but the economy is rather limited there.
Source, used to live in London and other parts of the UK.
https://caselaw.findlaw.com/ca-court-of-appeal/1771430.html
(how hyper-liberal Berkeley, CA balanced the need to maintain properties vs stabilize rents)
Is this a legal limitation or a cultural tendency?
A landlord will need a single legal person to be responsible for the paying of the rent, and own the lease. Most individuals will not have anything close to the sort of documented income or credit history to make any sensible landlord agree to the lease. “My friends will totally chip in to pay the rent!” is just not going to work.
Here is Richmond, BC, Canada:
You have to understand that Swedish salaries are far, far lower than US salaries.
Like a top-end senior engineer would get $100k here.
An rental appartmeny which has social regulated prices takes years of queing to get.
Getting an rental appartment in Sweden is a bit like getting a food item in a previoys socialist state. You have to queue due to price regulation.
Price controls in an economy usually does not work that well.