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Comment by mcv | Hacker News Reader

> Part of the problem is government regulation.

And not just too much regulation, but the wrong kind of regulation, and a lack of regulation in areas that need it.

Someone in the article was forced out of her home because her landlord suddenly raised her rent by $500. That shouldn't be legal. Corporations buying up homes in order to drive up prices shouldn't be allowed. Lots of things are allowed that shouldn't be.

And yes, restrictions on building the kind of houses that people really need are also a problem. It's not a case of too much or too little regulation, but the wrong kind.

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> Someone in the article was forced out of her home because her landlord suddenly raised her rent by $500. That shouldn't be legal.

Rent gets raised by $500 because someone else would actually pay that much. Rent control is the ultimate "I got mine" - it rewards people who got in early while making it impossible for anyone else to have housing. The reason rent could go up that much is because supply is so artificially constrained.

> Rent gets raised by $500 because someone else would actually pay that much.

In many cases, rent gets raised by $500 for the unit to be vacant so the landlord can claim to have $500 more in revenue per month (and get loans on that).

In some parts of the country - you have >50% of units in large population centers owned and/or operated by just a few companies.

Like KSA reducing oil supply by 10% to increase prices 5% - sometimes strange things make sense when you have a cartel.

In SF, I had many friends have their rent raised by 10% - move out - the unit sit vacant for 6 months, and then the price reduced back to what it was and still be vacant.

I wouldn't assume any time landlords are raising prices - it's because they had a bidding war on the unit and someone's paying more.

Those are different from the places where the vacancy rates are low, people have trouble finding vacant apartments at any price, and the rent increases are limited. It was a nightmare finding a place to rent in Lausanne. The rents were affordable compared to my salary, but the competition for units was fierce. Since bidding wars weren’t allowed, landlords would use other criteria to select tenants (being a foreigner was a negative).

Supply and demand go together. To talk about one and not the other is simply wrong. If demand was constant or only slightly increasing we wouldn’t have a shortage.

The shortage is more demand driven than people want to acknowledge and so we can’t even begin to solve the problem since it’s not accurately defined. It’s a demand issue, so the solution has become price increases. There will never be enough houses in Malibu to meet the world’s demand and have those houses also be affordable. If we let millions of new demanders into the market each year, prices have to rise because you can’t fit the worlds population in Malibu.

> It’s a demand issue, so the solution has become price increases

That’s more of a capitalist solution than a real solution. Instead of building additional housing we just move the access from millions via price increases.

We can resolve it by creating more supply, we already do by way of copious amounts of cheap plastic home goods that flood the purchasing landscape.

> The reason rent could go up that much is because supply is so artificially constrained.

Or naturally constrained, it doesn't have to be artificially constrained.

I am open-minded on rent control. I agree with your sentiment here, but it seems like the trade off for not having rent control then becomes as a society we have to be willing to accept people becoming homeless because of changes in rent prices like this.

Extreme increases in rent are extortion. It's abusing vendor lock-in. Moving costs a lot of time and money, so people will feel forced to pay more for a house than they would have paid if they were looking. The landlord is abusing their position of power.

In plenty of countries, you can fight rent increases if you feel they're not justified.

> Rent control is the ultimate "I got mine" - it rewards people who got in early while making it impossible for anyone else to have housing

As opposed to someone willing to sacrifice their health by working multiple jobs to live in a such a place.

Rent control works, the problem is we don’t build enough homes to resolve the “not enough” problem. The construction industry is working skeleton crews currently due to the 2008 recession where thousands lost their jobs and never came back.

Then you have the issue with exorbitant property values in metro-like cities which prevent nonprofits and local governments from sitting at the bargaining table. Building outside of the city has its own unique issues.

Arguing that rent control doesn’t work is pretty disingenuous.

> Rent control is the ultimate "I got mine" - it rewards people who got in early while making it impossible for anyone else to have housing.

Where the fuck is the priced out person supposed to go? They need to uproot their life because a wealthier person came along?

You don't have some special right to keep living in the same neighborhood just because you were there first

You don't have some special right to upend someone else's life because you were somewhere second. You'd be singing quite a different tune if someone decided to kick you out of your house simply because they have more money and decided they wanted your plot.

An apartment you rent is not "your" house. If you get used to eating some species of shellfish, and the market price for it suddenly triples, society is not obliged to subsidize you continuing to eating it for the rest of your life.

> Rent gets raised by $500 because someone else would actually pay that much.

doesn't make it right! the free market is inherently unequal.

You didn't answer why that should be legal. We all know how free market dynamics work.

> her landlord suddenly raised her rent by $500. That shouldn't be legal.

GP: "Government regulation is preventing the construction of more housing"

You: "So true. For example, we need more regulation that make housing a legally encumbered asset with uniquely constrained and inflexible financial properties"

What is your thought process here? Do you think this kind of thing will encourage the provision of more houses? Do you have a sense for how making housing an exceptionally financially risky asset will influence whether or not investors are interested in building more housing, and how they have to perform initial pricing to offset rent-fixing and regulatory risk?

A lot of the problems would fix themselves if it was a lot harder for people to own a second home. Would make housing cheaper for one.

There's about 10 million "second homes" in the USA by some estimates, but that doesn't necessary say how they're actually used - some are vacation homes that are empty when not used (and are in locations that are effectively "worthless" except for vacationing) whereas others will be a technically owned second home but actually inhabited by a child or relative of the owner.

The mortgage interest lack-of-deduction for most (because of the increase in the standard deduction) also affects things. What we likely should be doing is making it easier to build second homes and "dump" them on the market even for a bit of a profit, so as to increase supply.

The logic here is that there are two different competing concerns—the use of housing as an investment (money in, money out) and the use of housing as a place to live. There’s a lot of legislation that shifts the balance one way or the other. Things like property tax caps and zoning regulations shift the balance towards house-as-investment, and things like rent increase caps shift it the other way.

If you don’t buy in to libertarian laissez-faire economics, which most people don’t, then this makes sense. (“Makes sense” is a much lower bar than “has the effect that we want it to have.”)

Exactly. I see houses primarily as a roof over your head, not as an investment. And I think the investment attitude has done a lot of harm to the housing market, leading to extortionate practices and artificial scarcity.

I wouldn't even complain if all houses halved in value, despite being a homeowner. That my home would be worth less is irrelevant, because I'm not selling it, and if I was, I'd have to buy a new house anyway. People who see houses as investment would hate it, of course.

Every physical good is a financial asset whether you like it or not. Ignoring this reality will not help achieve policy goals.

I agree that you are accurately describing the economically illiterate thought process, just not that it's correct.

Price controls are one of those interesting things where there's a phase transition from near-universal support to near-zero support at a certain knowledge level.

Treating everything as nothing more than a financial asset is way too reductive.

My point here is that housing is not only a financial asset, and should be treated as more than just a financial asset. Or if you want to take an economic approach here, you need to come up with a utility function that more accurately reflects what we care about—we think that two people who have housing is a better situation than one person who has two houses and one person who has none.

Thankfully we have a mechanism for working utility-theoretic optimization into economic calculations. The mechanism is called "prices". When you undermine this mechanism, you are not globally utility-maximising.

I think your argument is correct with the assumption that houses should be considered investment. I don't think they should, but realise that this statement is only articulated in principle rather than in practical and pragmatic terms. On the other hand, the practical and pragmatic treatment of houses as investment property has driven us to the precipice of one of the greatest potential societal crises at a broadly global scale. We have people literally slaving out to pay for a roof over their head. If the landlord's investment makes that ethically acceptable for them, I am afraid it's not for those who live this reality on the wrong side of the table. It always ends the same way, unavoidably. It will also impact the really productive parts of economy, when consumer base is shrinking because people just try to pay their rent, electricity and gas.

The amusingly sad thing is that they aren't even a great investment, all things considered, because over large enough areas and long enough times, they basically keep pace with inflation.

That has been obscured and hidden from the public consciousness, but it's there (and it basically has to be, as if it's not, eventually you get insanity where nobody can afford to live in anything - some say we're close to this but it cannot continue, just like population simply cannot literally increasing forever or eventually the entire mass of the Earth would be made of people.)

Too many landlords have been buying long and selling short, and losing money doing so but it's hidden by (sometimes) apparent appreciation - that train is rapidly decelerating and will be at the station soon, as the low interest rates have dried on up.

If building houses isn't profitable, then who would do it?

How profitable are roads?

People really do think there should be short-term bandaid solutions to these problems, and that somehow landlords will just absorb cost increases that they get hit with without passing them on somehow, or just exiting the market.

Ok, but without regulation, why should any investor be interested in building affordable housing, instead of just selling/renting for the exact same unaffordable prices we currently have?

More construction isn't the ebd goal, (except for developers and investors I guess), if anything, it's a means to an end. The end goal is affordable housing.

It shouldnt be allowed for people to raise rent on the property they own? Thats an absurd idea.

People have been complaining about not having the home they want in the location they want since the beginning of mankind.

The parent comment is complaining about the specific amount, $500, and indeed, raising the rent by a large amount (defined percentagewise) is illegal in many jurisdictions. So it seems difficult to come the idea that it is somehow absurd.

Price controls dont work. This is economics 101 and tested many times in the past and as of recent. All you're doing with artificially constraining price and other regulations is reducing supply in the long run. The issue bubbles and then eventually bursts.

However, the issue in congested areas is a matter of physics and people unwilling to relocate. Its not from renters simply fulfilling the pricing demand. I mean what exactly is the long term play in areas like this? Just keep stacking people on top of each other into infinity? Its obviously not realistic.

You have to define the problem too narrowly in order to say that price controls don’t work.

Rental increase caps are not something designed to make the overall housing prices more affordable. That’s just not the goal in the first place. The goal is to provide additional stability to renters. That additional stability will, of course, get priced in.

It's not the rent prices that are constraining the housing market, but the restrictions on building new houses. And in many parts of the US, the prohibition on building anything other than single-family detached homes.

It's not absurd because nobody is forcing that person to rent. Housing is a public resource, and contributing to that public resource shouldn't come without asterisks.

Cities need the non-owning class to function, and cities function better when the non-owning class has some degree of stability-- letting landlords juice their tenants for as much as possible is counterproductive to this.

But if it becomes unprofitable (for some value of profit) to rent, they will stop renting, unless you force them at gunpoint to continue renting even when it loses money.

Offer to sell it to the tenant then. That should be more common.

The tenant almost by definition can't afford (if they could afford to own where they rent, they'd likely own).

(Sadly, when you see "rent to own" on houses, they're almost always a scam preying on poor people. The trick is to get them to pay MORE than fair market rent for an "option" to buy that you know they'll never be able to execute on, or if they can, said execution is in your favor. If you care for more details, https://johntreed.com/products/sisgle is worth the price, as it details exactly WHEN an investor can make money buying these "lease options" and how they're usually unprofitable and almost scammy.)

It does naturally occur in some cases - long term tenant who is comfortable renting is offered the house "off market" when the landlord decides he's done and wants to retire from the hassle of property management and sometimes is even willing to take back a mortgage (a great way to convert a rental income stream to a financial interest scheme and remove the property maintenance factor).

If they don't want to sell, and don't want to rent, what are they going to do with it then?

They'll hold it (this is currently happening) or they'll eventually sell at market rates.

It's totally fine if they raise rent in step with inflation. It's the dramatic raise that's the problem; the tenant will have to choose between paying the extra cost of rent, or paying the extra cost of moving out, and they have no way to avoid that cost, through no fault of their own. Someone could be forced out of the home around which they have built their entire life.

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