Rent control effects: An almost complete review of the literature | Hacker News Reader

Rent control effects: An almost complete review of the literature

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22 pointsmhb46 comments

Price controls always make the problem worse directly or indirectly. But its perfect for politicians who don't care about that or don't bother to look at economic history.

Something too expensive? Just force the price to be lower. It's such a simple message that it will be one of those things every generation will 'rediscover' as the solution to everything.

It is relatively easy, if it is not attractive, because of the price, less people will offer, there will be less offer, less quality, even to the extrem of no offer at all. I’ve seen it over and over again. I have never seen a good result of price control politics. I please ask the down-voters to show me examples where it succeeded. There must be some example somewhere

The problem is the subjective definition of "succeeded", it's never going to succeed on all counts because the problem rent controls is dancing around is not enough supply, and so the solution it's offering is just to change who the winners and losers are in a way that is more acceptable to voters than the status quo. So by that measure they're a success in all the places where voters keep voting for them.

Rent control is especially insidious because it is almost enacted on a local level. That means the people benefitting are the ones who get to vote on it, and the people most hurt have no say. Basically the left wing version of exclusionary zoning.

To decrease rent, increase supply. This isn't complicated.

> To decrease rent, increase supply. This isn't complicated.

I wonder.

If it's that simple, do you have a theory for why it's not the go-to solution that gets implemented?

And, is it true that every solution requires increased supply? E.g., is migration, or changes in job location, not an option?

> If it's that simple, do you have a theory for why it's not the go-to solution that gets implemented?

Most of the voting population are homeowners who have a vested financial interest in the cost of housing always going up.

So anything that makes housing cheaper is politically difficult.

I'm actually willing to be more charitable than that. For many homeowners, less restricted zoning and construction would actually increase the value of the land by more than it would decrease the value of the dwelling (imagine converting a few single family homes into a multi-story apartment building, that's a _much_ more valuable use of the land). So, at least in some cases, it isn't entirely about their own personal enrichment. Lots of people do have honest desires to not see the "character" of the neighborhood change.

Now, I personally think that A) a static neighborhood is a slowly dying neighborhood and B) when almost every neighborhood acts this way the cumulative negative effects on society quickly become profound, but I can at least understand why, and can see the impulse as not an entirely selfish one. It's just naive and short sighted.

> For many homeowners, less restricted zoning and construction would actually increase the value of the land by more than it would decrease the value of the dwelling (imagine converting a few single family homes into a multi-story apartment building, that's a _much_ more valuable use of the land).

But a huge chunk of them don't think that way and they want to maintain the "character of the neighborhood." I've seen this first hand multiple times. My own grandparents once tried to argue with me against any sort of expansion because it would mean some people would be effected and have to change their lifestyle or pay for changes as a result of, for example, expanding city sewer services.

One issue is widespread opposition to new construction.

So in order for politicians to help one segment of society (renters) they risk upsetting another segment (communities who oppose new construction).

But right now there are two cities where an increase in supply has soften rents - Oakland and Toronto.

Because many people's largest investment in life is their home, in countries like the US and Canada where this issue is prevalent.

More supply can reduce the value of that asset, so people fight it, especially if they have financially planned for that asset to appreciate over time

I believe that the fight is more by developers than residents. It's a zoning outcome, after all, and most people, I suspect, don't keep on top of that being too busy with the lives

Maybe you are right. I live in the bay area and people here who lucked out buying a house in a normal time at a normal value have nothing to do but show up at all sorts of public hearings, meetings, etc. and shout down any kind of new development

Heh. I almost believe NIMBY was invented by a bay area resident...

As long as population continues to increase, if you want the same living conditions as your parents on similar economic terms supply will need to increase.

Some of the conclusions are weird, e.g. negative impact on new constructions:

> This could involve the construction of public housing or financial support for private investors engaged in social housing development. Consequently, the total number of completed dwellings can remain steady or even rise, potentially leading to a misinterpretation of rent control's impact as beneficial.

I'm not quite sure why this wouldn't count as beneficial. The place I live even has such a goal (30% non-profit landlords, renters usually become member of the non-profit when they rent).

They're not saying that "construction of public housing or financial support for private investors engaged in social housing development" is not beneficial.

They're saying that the "null hypothesis" of "mainstream chicago-school economics" would be:

1. The above laws would be beneficial to construction of low-income housing 2. rent control would be detrimental to construction of low-income housing

When some of the laws did both at once, it is hard to disentangle the effects, and the study is calling out that the confounding variable of the aforecited amendments to rent control laws is not well controlled for, calling into question the overall conclusions.

For those who just want a summary, the conclusion is... it's complicated. From the paper:

"Rent controls appear to be quite effective in terms of slowing the growth of rents paid for dwellings subject to control. However, this policy also leads to a wide range of adverse effects affecting the whole society."

So you get the first order effect you wanted "rent stays low in the area" but you get all kinds of adverse second order effects (higher rents outside controlled areas, poorer maintenance, lower new construction rates, etc.)

That's the reason it keeps being tried. The side effects are wide, disparate, and over long timelines so it's easy to obscure the net negatives to the public.

That plus "If construction rates decline that's the next generations problem. All I want is lower rent now". Which is an effective political gambit.

My mental model of rent control is that it's a policy of that favors those "that are already there" at the expense of "newcomers". A special case of this is favoring older generations vs. younger generations.

For instance, in Berlin I know people that have locked in a low rent on an old contract who chose to say in their rental despite owning real estate close by. So for them - who have been there for decades - rent is very affordable.

On the flipside, it's very common for dozens or close to a hundred people showing up for open houses when a new rental comes onto the market (still at the prescribed low rates!). Since landlords can freely choose between so many potential tenants they will pick high income, high stability tenants, making it very hard for younger or lower income folks to get into the rental market.

If the rent control is binding enough to deter maintenance it is questionable whether it is even good for those already there in the long run

> So you get the first order effect you wanted "rent stays low in the area"

It's not even clear that you get that. The conclusion only states that rent stays low for the dwellings subject to rent control, not for the area.

Three bigger issues I think is short time rentals; like Airbnb and the like, lowering the available housing for the rest of the population.

Regulation on the amount of holiday rentals would aliviate some of the pressure on the market.

Taxation on empty apartments, second house and higher as more properties a single entity can have.

Housing should be seeing as a social right and not as an investment. Law should reflect that

"rights" are burdens on others.

Why should I be forced to pay for someone else's house?

How would you force the tenent to maintain it?

How would you control them to maintain the peace? The homeless in my family are so because they are too dangerous to have in any of our homes, and apparently that's a fairly common theme. As a social "right", it must be available to all, not just those down on their luck, or whatever virtue is appreciated by the ruling class.

Of course, there may be some places where government housing projects worked splendidly and economically efficiently, but that is surely the exception.

Edit: You can find other negative consequences of government-built housing, but I will leave with

https://en.m.wikipedia.org/wiki/Grenfell_Tower_fire

and the chilling story near the beginning of _The Fifth Discipline_

Or we can just build enough housing to satisfy the tourists and the locals

The better option is to turn those renters into owners for both residential, commercial, and industrial.

Eliminate the rent seeking class as a set of buyers from the real estate pie and force developers through permitting to only sell — not lease their properties.

Those who disagree will always be some form of a landlord. Remember, landlords provide housing the same way scalpers provide tickets.

I think outlawing rental property is a fun and radical idea but it does of course ignore the practical reasons people seek to rent housing rather than own it. They might want temporary or shared housing, or prefer to outsource the responsibility and liability of homeownership.

All renting of housing should be well regulated and good housing policy must be comprehensive, covering both the supply and demand side of the equation.

I interpreted the idea as making people who must live in rent (but would like otherwise) able to buy. Of course there is need to rent, fir vacacions, or while moving temporally

We have short term rentals. Theyre called hotels and will still exist. Even crazier is the concept that there are hotels with kitchens in them where you can live in short term.

An adult woman in Southern California whose family built a rental unit business in the 1950s, declared about $840,000 personal income in one recent tax year.. no property sales, no other business interests.. taxes on that income were about $250,000, including California State taxes, leaving about $50,000 per month passive income, month after month, year after year.

Just curious how this will allow for short term stays of 1-2 years in an area for, say a visiting fellowship, a seasonal job, etc.

The problem is that homes are so expensive, average people cannot afford to even make enough payments on a home to meaningfully own it in 3-4-5 years. Maybe you're suggesting rent convert to partial equity in a home?

I've bought and sold homes in a year or 2 time frame many times even in 2nd or 3rd tier markets.

You have closing costs which each your deposit and then for the year your mortgage pays down the costs.

Those closing cost fees are the middle men fees entirely. They are there because home buying and selling is a comically antiquated process that can be fixed easily with a technical solution.

There's no reason home buying cannot have settlement periods of 5 days.

I suppose it never occurred to you that many people actively avoid owning a residence, preferring to rent even when they could easily afford to buy a residence with cash? In your world these people don't exist yet inexplicably I know several. Landlords are providing a service that many people literally want to pay for.

I have yet to ever meet these types of people. They clearly don't exist.

The fact that landlords think they provide a service is comical. You don't.

Homes can be bought and sold within a year very easily even in 2nd and 3rd tier markets. I know because I've done it. The fact that the settlement period for home buying/selling takes so long is a technical problem that can be easily fixed with NFTs and other technology.

You are a leach and provide 0 service.

Hi! I'm readthenotes. I preferred renting for ease of mobility and avoiding buying during a housing bubble.

In my area, there is significant financial friction in house transactions. It takes living in the house at least 2 years to soak those costs (having done it twice).

In one of those houses, I got another year with two 6 month rentals, both to people relocating who didn't want to be forced to buy immediately (I believe the first person wanted to save up money before buying his Permanent home and the other just wanted time to get used to the new city).

In my own rental situation, I thoroughly enjoyed the flexibility of a low friction end to my residence.

We will probably never meet in person, but I believe there are plenty like me.

Hello, I exist! I once bought a house when I would have preferred to rent, but there were no rentals available. Now I rent that house out to other people who are in a similar situation. There are many houses for sale in that area, but that's not always what people want.

Earlier in my life, I continued to rent for six or seven years after the first time I could have afforded to buy. I liked the flexibility.

But as a policy proposal, those people will be inconvenienced just like landlord. OP could consider such people exist but also consider rent-seeking such a negative element in the economy that he'd rather eliminate that choice even for people who want it. Much like title loans

When I got my first full-time job, my step-mom encouraged me to buy a condo near work. I resisted, and moved 3 times in the next 5 years at that job.

I moved about every 2 years during my 20s and 30s. Renting allowed that. Owning would have prohibited it.

There are many situations where renting is advantageous to owning.

I would really really, honestly know why the downvotes… Is a too simplistic view? If so, what is the enlightened view?

Not every country works the same, coming from a place with low home ownership (40%, mostly in countryside).

Some ideas of what can be different: - lower flexibility (non liquid and concentrated investment)

- many people will end up with majority of their savings in real estate instead of more productive part of the economy (companies, etc.)

- might discourage people from seeking opportunities elsewhere if there's a high cost of selling/buying houses

- in cities institutional owners (here a lot of buildings are owned by pension funds) can take a better care of multi family buildings (compared to a fragmented ownership where some owners might block even value preserving investment), it's also easier to mandate policies (e.g. better isolation, etc) for those institutional owners

Because there are landlords here who are seething at a radical concept.

guess -- "eliminate the rent seeking class" is directly threatening to the rent-seeking class members here, who directly downvote without discussion?

Precisely. They know they're leaches .

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