That new constructions are excluded from rent control.
Thing is I can't really find this in German media. Only British media seems to write gist of this new regulation, which seems quite odd.
[citation needed]
I think what you meant to say is that rent control is widely considered a failure by certain rich people who want to maximize their profit-seeking behavior without regard to societal cost, and economists of particular ideologies, who generally are unable prove their claims about real-world rent-control systems. Most other people like it, which is why it sticks around.
The people who complain about rent control in San Francisco, for example, have yet to provide evidence that it's doing anything but lowering prices here.
There's a lot of heat in this debate, but very little light.
The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go -- and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable. Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out -- what yesterday's article oddly described as ''free-market horror stories'' -- and constantly proliferating regulations designed to block those strategies? Predictable.
http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-...
But, of course: Paul Krugman. Rich dude maximizing profit-seeking behavior.
So this is a straw man. Most economists, when asked about rent control, default back to the one thing they know: price caps are bad. That's obvious. They don't agree to nearly the same extent when you ask them about the policies that actually exist. The more ideological economists then try to assert that all price manipulation is bad...usually without evidence of any sort.
Krugman's thinking is so sloppy here that it's a joke. He "didn't know anything" about SF housing until the day before he wrote the article, and it shows -- how can he plausibly claim that he knows that the rental bubble of the late 90s was due to rent control, when the region was the historic center of one of the largest economic bubbles of the 20th century?
He couldn't know, and didn't know. The tech bubble popped, the money went away, and the rental crisis ended. This one will end the same way. The high-order bit here is the tidal wave of new money, not the rent-controlled tenants that are drowning in the flood.
You told the commenter upthread that opposition to rent control was based on the desire of rich people to maximize profits from their real estate.
I simply responded by demonstrating that opposition to rent control is taught in economics textbooks as a basic illustration of the power of the law of supply and demand.
I'm not really following what San Francisco has done to repeal the law of supply and demand.
You posted a link that says that a whole bunch of polled economists don't like rent caps. That's unsurprising, but rent caps != rent control. I'm not aware of any city that has capped rents, because that would be stupid. San Francisco does not cap rents.
"I'm not really following what San Francisco has done to repeal the law of supply and demand."
The belief that rent control policies inflict more costs than benefits in the market for housing is notorious as one of the few conclusions of economics held across the ideological spectrum, from conservative to liberal, statist to libertarian, Keynsian to Hayekian. Paul Krugman thinks it doesn't work. Brad DeLong thinks it doesn't work. Dean Baker thinks it doesn't work. Tyler Cowen and Russ Robers think it doesn't work. Kenneth Rogoff thinks it doesn't work.
Counterexamples welcome. Can you find a prominent economist speaking out in favor of it, in any setting, in any real detail?
Here's a starting point for the other side, written by two Nobel-winners:
http://c457332.r32.cf2.rackcdn.com/pdf/books/Roofs_or_Ceilin...
Slightly later:
This paper is a great read, by the way; as close to a long-form Reddit comment as you could expect from something written in 1946 --- and about San Francisco, no less!
Friedman and Stigler take dead aim at the argument that a free market for housing somehow benefits the rich. The rich can already sidestep rent control: they simply purchase, instead of renting. Meanwhile, the perverse incentives of rent control coerce some people who would be better served by renting into buying, which then commits them to speculative investments in real estate, further exacerbating the problem.
"belief that rent control policies inflict more costs than benefits in the market for housing is notorious as one of the few conclusions of economics held across the ideological spectrum"
Define your terms. What does "inflict more costs than benefits" mean? What specific policies are we debating? Stop arguing a straw man ("rent control") by referring to the authority of "economists agree", and you'll realize that there is an easy, clear argument for the other side here: social stability.
The only thing that "economists agree" upon, is that price caps lead to shortages in efficient markets. That's it. They vehemently disagree when you start asking about policies that don't cap prices, but instead, aim to control the rate of increase in prices in order to reward long-term occupancy. Moreover, there are huge differences in circumstance that must be considered in order to have a productive debate: in a place like Houston, where land is cheap, the arguments for rent control are far weaker than in San Francisco, where Global Wealth has suddenly, spastically decided that this tiny, 47-square-mile city is where All the Monies belong, as of ~2010. (Great for Global Wealth, but bad for the people who lived here before the rich gained a new investment fetish!)
I'll make this easy for you: your argument is that "rent control" is bad because economists say it's bad, and #{STANDARD_FREE_MARKET_ARGUMENT_GOES_HERE}. Fine. Mine is that the real world is more complicated than economic theory, and that while "the free market" may be better at allocating wealth efficiently (that is, indeed, all the free market does), there's a higher value: the moral right of occupancy is worth some economic inefficiency. We should provide incentives for long-term tenancy, because such tenancy produces social stability that is better for all of us in the long run. I don't automatically value the free market because someone told me that it's good in econ 101 -- in this case, I hold another value paramount.
You began this subthread with the words "I think what you meant to say is that rent control is widely considered a failure by certain rich people...", concluding "there is more light than heat" in the debate.
I responded. No, I pointed out: rent control has been considered extensively by dispassionate economists, and, across the ideological spectrum, the conclusion has strongly tended to be that it's a bad idea.
I don't have anything more to contribute to the discussion than that; I wanted only to rebut the notion that opposition to rent control was a special pleading by the rich in favor of their own interests. The opposite is, I think, true.
You may of course yet be able to demonstrate that rent control in some form is a good idea. But you'll have to do it on the merits. I don't think the argument that opposition to rent control is a manipulative tool of the wealthy can survive the evidence.
The renting of property has always been on the uncomfortable border of rent-seeking behavior, and productive economic activity. It isn't really notable to phrase it the way that I did.
You speak of the tech bubble being an exacerbating factor, and you're not wrong, but imagine if SF managed to put all that money to good use by letting developers build new housing. Sure, it'll be full of techies, but the bubble will eventually pop, the techies will move out, and you'll have piles of now-affordable housing. Instead, all that VC money ends up getting funneled into the pockets of the landowning classes.
That does not necessarily change the city's average rent.
An ironic statement given the 3 paragraphs that preceded it...
Rent control coupled with NIMBY planning restrictions benefit connected locals who are able to secure the resulting limited spots and hinder the ability of non-residents to move in. In the short term, this freezes the existing situation - you keep your historical streets, you avoid SF turning into Hong Kong or Singapore ([2]). In the long term, (relatively asset-) poor entrepreneurial people move elsewhere (New York, Chicago, Austin... even Houston). Of course, it takes a LOT to move a global hub. We might not see it in our lifetime (how long did it take for New York to dethrone London as the global financial HQ).
The only way I'd move to SF would be if a company paid me a significantly larger amount of money, or once I retire to take advantage of the weather and food. So, do you as an SF resident see the city as a beautiful museum to be preserved, like Venice or EC2 in London, or is SF really about frontier spirit, which today looks more like Hong Kong than suburbia?
A better way to deal with bubbles is to tax them, as many nations such as Norway do with natural resources. If there is an enormous inflow of Chinese money, who are taking advantage of the great rule of law and property rights afforded by the American taxpayer to anybody willing to pay for said property, tax the property holder for the privilege. The bases at Guam and Okinawa aren't paying for themselves... how about 5% of the assessed property value a year, if you aren't a citizen or tax resident. The foreign money will STILL come because they still derive value from owning foreign property in attractive places, the probability of it being politically seized being virtually zero (I guess property taxes on foreigners are a form of seizure, though). The people who made the neighbourhood what it is benefit from the increased tax revenue (e.g. in decreased taxes or better services).
Singapore has a form of this - citizen can purchase HDB fresh builds (~80% of the market) at up to a 40% discount and without foreigners bidding for the first 4 years of the building's existence. (France also does, the ISF [3], but it applies to citizen and, due to rising property values, is chasing retired working class folks from their own homes as they do not have the liquidity to afford the tax.)
[1] http://bastiat.org/en/twisatwins.html
[2] http://scifanatic.wpengine.netdna-cdn.com/wp-content/uploads...