An issue that many commenters here are missing is that the problem with rent control will manifest more sharply in the future.
Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply.
But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to enter the rental market is utterly SOL. The people that are really getting screwed are 10 years old today: when they try to move out of Mom and Dad's they will enter a market with vastly reduced supply since nobody has any incentive to move.
This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.
A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents and still a stable supply of flats. One tweak they apply is that rent-control does not apply to new developments, so creating new flats is more lucrative than turning old buildings into luxury developments. The city also acts as a competitor, driving prices down by offering cheap flats. There are definitively problems with rent-control if applied bluntly, but the it's a tool that can be useful.
>A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents
I beg your pardon? You can't possibly call rent prices in Vienna incredibly low and still keep a straight face. Maybe for the lucky Viennese that got grandfathered in some rent controlled flats, but last time I looked (pre-covid), rents there for new comers were insane compared to the next "biggest" cities like Graz or Linz, while Viennese working class wages were not much higher than those other two cities, if you exclude fancy lawyers, bankers, UN, IAEA and other diplomats.
Maybe rent prices have come down a bit recently due to covid disrupting AirBnBs but even telling Austrians that rents in Vienna are incredibly low is a guaranteed way of getting a few laughs out of them.
Except not all Germans live in Munich, Europe's biggest property bubble. There are affordable cities in Germany that are cheaper than Vienna, if we keep moving the goal posts.
>There are afordable cities in Austria that are cheaper than Vienna.
That's exactly what I said. What's your point in the end?
>Munich is the only city in Germany that I can think of that's comparable to Vienna in terms of wealth, demand and size though.
"$EXPENSIVE_CITY in the country I live in, is less expensive than $EXPENSIVE_CITY with higher wages in another country I don't live in."
Great, how does that help me? I'm sure rent is even more expensive in SF or NY but I don't compete on the jobs or rental market with those over there. Whataboutism doesn't pay my rent or feed my kids.
>That's exactly what I said. What's your point in the end?
Turning it around since I don't see your point. Comparing to smaller, and/or less in demand, less wealthy cities doesn't give a good comparison to whether rent control/social housing in Vienna works or not.
Because as you put it, >"The measure I would apply is whether middle class people can live in the city", there are cities in Austria that are much cheaper for the middle class, as I said in the original post.
The fact that there are cities in Germany, or in any other country, that are even more expensive is irrelevant for the people here.
San Francisco also applies rent control only to older buildings. The effect is that developers only build top-of-market “luxury” housing (often cheaply constructed it rented at luxury rates). This helps them recover their development costs, which they couldn’t recoup on affordable housing.
SF also has some of the most ridiculously onerous zoning laws in the country.
A HUGE portion of the city is just giant single family homes or 2-3 story buildings and you are absolutely forbidden from redeveloping them into dense, affordable housing.
Change the zoning laws and developers will gladly build affordable market-rate housing.
Yes, the zoning laws in SF are a disaster. This map[1] shows the extent of the problem.
And it's not like people can easily find housing outside of SF and commute in, about 80% of the Bay Area is zoned for single-family housing as well. There was a damning report[2] from UC Berkeley on this just a few months ago.
I don’t understand how those things impacts each other. Are you saying that if old buildings didn’t have rent control then developers would build less profit maximising buildings?
What do you mean by that? Rent control in SF only applies to buildings built before mid-1979. New buildings built today, whether low-end or high-end, will not be subject to rent control now, or in 15 years.
There was a 2020 ballot initiative to change that so buildings older than 15 years old could be subject to rent control on a rolling basis, but IIRC that failed. (And even if it had passed, that wouldn't explain the last 10+ years of predominately "luxury" building.)
Not quite true. California passed statewide rent control at inflation + 5% in 2019. Now some have moved the goalposts and called that rent stabilization instead of control because it allow rents to increase.
I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.
"luxury" is one of the most meaningless and oft misused terms in housing/real estate.
It's not legally defined as anything so any developer can build a shoebox with a bathroom and a murphy bed throw in a nice countertop and call it "luxury".
It's also become a pejorative for ANY market-rate housing in cities by NIMBY anti-development types.
Few San Francisco new constructions have pools, and I don’t see how putting some exercise equipment in what would otherwise be a storage closet makes a building luxury. That can’t be more than a few basis points of total project cost.
I'm not sure those are the amenities that would signify a high end apartment; which probably tracks with the dilution of the brand. Those amenities are pretty standard for most corporate housing, (ex. Avalon's 55 9th[1] has those amenities, but doesn't market itself has luxury).
Compare that building with the 181 Fremont[2] in SOMA which has a several private lounges, a doorman, a building concierge, and valet parking. Several other building in that area, such as the Avery[3] do have pools. I'd consider that 181 Fremont would still be a luxury offering in a city like Chicago where the housing market isn't insane.
However, despite the range the building offerings, most units still rent out for $55-75/sqft.
Maybe we have different opinions of what qualifies as luxury. My example is in a trendy location and above a whole foods. Based on the price (and the units sold quickly) there are no middle or lower class folks living in those apartments/condos. Like zero.
Contrast that with the more spartan apartment buildings building 30-40 years ago. Basic construction, laundry in the basement was the main amenity. These were clearly built for middle or lower class folks to live in.
My point is the building isn't really competitive with other high end residences - it just gets away with charging high pricing because everything in SF high priced. Just because a bunch of high income earners live there doesn't mean it's competitive with other offerings, just like I wouldn't consider a Ford Fusion a luxury car just because Steve Ballmer drives one.
Rather than contrasting it to living standards 30 years ago, it makes more sense to contrast it with living standards today in real estate markets that aren't insane. A comparable apartment to 38 Dolores, with similar amenities is Chicago's Jeff Jack apartments[1] which has much of the similar amenities at a fraction of the price (~$1,000/mo for 1bd) - still likely targeting yuppies but in a different tier than Chicago's high end offerings. However something like a building in Chicago's Gold Coast (which has pricing of around ~3,500/mo for bd) includes features that are in 181 Fremont - pool, lounges, concierge, dry cleaning and even larger floor plans than you would typically find [2].
Alternatively you could say that a lot of apartments in SF get away with charging luxury prices for what really should be standard fan-fare apartment because demand is so high. The GP mentioned more succinctly, a lot of units in SF are cheaply constructed building that are actually rented at luxury rates.
Are you aware that the space for the outdoor living room and butterfly garden are almost certainly mandated by the planning code’s open space requirements? I suppose the builder could have left them as an unlandscaped pile of dirt, but most of the cost is a statutory requirement.
That's more like middle-class apartments than actual luxury. The amenities of Luxury apartments include things like exclusive Michelin star restaurants and grand ballrooms for rent.
Is there a functional difference between places that have a front-desk person and actual doormen, besides opening doors? Not that the former is super-common in San Francisco either, but it's at least existent.
My main dealings with them were, in my most-cash strapped days, delivering Postmates orders to their buildings. They also serve the valuable service of not having to explain to the delivery guy how to get into the building. Much longer notes from the people whose buildings were not manned.
NYC is one of the few places in the United States building truly luxurious condos. The per unit construction cost of new construction in San Francisco is probably within 20% of 100% affordable non-profit developer built subsidized housing (which runs at around $850k/unit).
How are you defining "luxury" here? The land in SF is inherently expensive; any newly constructed apartment building is likely to have rents meeting your definition of "luxury". The land is expensive and so too is building buildings on top of it! The granite countertops and stainless steel appliances are a tiny fraction of the overall cost.
I thought luxury was being used by marketers as their favorite new mouth-noise that sounds good but doesn't mean anythingm Like "premium". If you pay $150 for a $1.5 bottle of wine it actually means overpriced but it is used to make it sound posh. Snark aside it could be "quality enough that it sells above commodity prices" but it is still about what others are willing to pay.
Luxury has many uses as a euphemism "No Karen, just because it is an apartment doesn't mean it will cause a flood of criminals!" NIMBY defense, "Sounds good so you will pay more." and the hillariously low bar to pass "Literally anything above neccessities to sell the place."
NIMBYs define "luxury" very broadly as a semantic tool in their warchest. There isn't a good definition of it at all, but it's commonly used to mean "high rents", or simply, market rate rents.
Rent control only exists for one reason: to keep tenants in their apartments. It's not a tool that is solving a shortage of housing but lots of politicians will insist that new housing isn't needed. You just need to manipulate the useful fiction that is the market and fake everything. At least that's what the politicians think. Even if it means that the market is no longer useful.
Rent control, when coupled with other means of ensuring housing is built for those that can afford it, is a reasonable way of ensuring housing for those that can't afford it at the market price.
That is, globally applying a cap on rents would be a bad idea, since there would be no incentive to build new housing. However, when coupled with restrictions such as requiring only some fraction of new housing construction to be below market rate it can produce better results.
Imo we should just solve this issue once and for all by supplying government housing to anyone at a low price, but there seems to be little political will for that. It seems to me if you can reach the right people to pay for it they would gladly pay to solve homelessness (which, is admittedly more than just having available housing), but it's difficult to get that to happen.
1. There's no right to live somewhere. If you cannot afford it, it doesn't matter you grew up in the place or that you like the place a lot.
2. No place is inflatable. You can increase density, but only to some point.
3. Have you seen how housing built in this style looks like? Most of them are concrete cubes. You can find them anywhere in Eastern Europe. It's not desirable.
Let's imagine a beautiful town on a small island. Neat houses and everything. Place for 100 houses. But now, 1000 families decide to live here. So the politician replaces those 100 family houses with a five huge 100 unit buildings. Locals get units, living is more affordable for everyone. The place is destroyed. Nobody wants to live there anymore.
So those 1000 people find another beautiful island with 100 neat houses...
> Imo we should just solve this issue once and for all by supplying government housing to anyone at a low price, but there seems to be little political will for that.
Where would that end? If you always build more to accommodate any poor or homeless people, they'll come from other cities to enjoy the cheap housing.
This is a national problem requiring a federal solution. Anything less will be exploited by desperate people. Don't hate the poor players. Hate the rich exploiting them for profit.
No, it’s the definition of a local problem. Housing where I live is affordable. I sure as hell don’t want voters in San Francisco mucking with my housing policy through a federal solution to solve their own self-inflicted problems. It’s a recipe for exporting insane SF/NYC housing policies to the rest of the country.
I guess you could require municipalities greater than a certain (fairly small) size construct and maintain some public housing, with the required unit count related to population in some way.
If you applied that uniformly across the US, no one city or town would become hot spots for migration.
I don't think this is really a workable policy, however. Not even sure it'd be constitutional for the federal government to do this.
And public housing has a reputation for being lowest-common-denominator, poorly-built, and poorly-maintained. If you drive through the south of the Potrero Hill neighborhood in SF, you'll see a lot of public housing, and... frankly, it doesn't look particularly pleasant to live there. I'm sure there are much worse options, but the housing there doesn't look in great shape.
A federal housing guarantee. In every instance where someone cannot find affordable and sufficient housing for themselves and their family then they are entitled to the live in an unoccupied unit that meets their families needs (1 bedroom per kid and 1 for parents, at most 30 minutes by, public transit from their primary job, or car if they have a reliable vehicle and the income to maintain it) for at most 30% of their income. Their primary employer pays half the difference in cost and the property owner absorbs the rest. If this kills a business then so be it. Businesses are not entitled to impoverished workers.
Vacant properties should be taxed at an increasing rate sufficient to force the owners hand to either lower rates (and realize the losses from the new valuation from their creditors) or liquidate the property. The proceeds of these taxes can go towards the building and maintenance of affordable housing in the district their collected from.
This should encourage liquidation of speculative properties in hot markets and allow those without capitol to compete against those living parasitically off of their "investments".
Obviously this isn't perfect, and I'm open to admitting it's a terrible plan. But can we at least try something FFS? So long as people are homeless and can't afford to buy homes near their jobs I don't think anyone is entitled to profiting off of renting property.
Also worth trying:
Eminent domain land and task the national guard or army engineers with building minimally viable affordable housing condos. Attach a jobs program to train the un/under-employed from the area and scale up to the size of the problem.
No my rebuttal is that if your solution is laughably extreme and unserious.
You can advocate for Soviet style collectivization and liquidating all businesses in the US if you want but no one outside of SF is ever getting elected on it in our lifetime.
Your banal misinterpretation of my ideas is more applicable to your own trite comments than my own.
If you think taxing zombie landowners and forcing a more equitable evolution in the archaic property market is too extreme wait until you hear some other ideas like:
Nationwide rent and mortgage strikes
Renters unions
Actually collectizing housing by taking property, some people aren't even ashamed to say they'd be forceful about it if their positions continue to deteriorate.
We can keep debating solutions to these problems until the worst effected take matters into their own hands, and pay more to clean up the mess, or we can behave like rational humans and make sure that everyone has the basic necessities of life as a prophylactic against mob violence from those with nothing to lost but their miserable lives.
So please, take a stand and share with us what your solutions are and how you're so confident they're better than the ones I've mentioned. Casually calling ideas extreme and unserious without honest consideration is at minimum rude and at worse a disingenuous bad faith distraction from the merits of my statement.
I would expect it to actually increase the market rate because setting aside some amount of the supply at below market rate / subsidized means that there is a smaller remaining supply than if they hadn’t done that.
Market rate is the price where supply and demand are equal. If you set price below market rate, the demand will be higher than the supply. So if you create enough below market rate housing that there is no longer a shortage, then it must mean that the supply and demand are equal at that price, which means that it is no longer below market rate.
This may depend on where you are, but around here I’d have very low confidence that the government would be capable of efficiently delivering quality housing at a low price.
Edit: Ah, I’m realizing now that you may have meant delivering it to the occupants at a low price out of their pocket, and not necessarily at a low cost overall.
Not quite a “low price”. A 2 bed HDB costs around $500k SGD. And the median salary is ~10-15% lower than the US.
Way cheaper than a private condo ($1M), but still a significant barrier to many people in Singapore especially since you can’t buy one if you’re single until you’re over 35.
Barcelona has just introduced rent controls. It's a supply and demand problem so politicians play with the pricing instead. It isn't going to create any more housing, it will however create winners and losers from the policy.
Are new buildings exempted from rent control permanently, or just for a limited time?
The latter seems like it would be a workable system: incentivize new buildings by allowing the owners to charge whatever rents the market will bear for the first 10 or 20 years or so, then eventually they revert to rent control (presumably after the original construction costs have been repaid and then some).
Permanently. There was a 2020 ballot measure that aimed to change that so buildings could become subject to rent control on a rolling basis after they'd been around for 15 years or more, but it did not pass.
> One tweak they apply is that rent-control does not apply to new developments, so creating new flats is more lucrative than turning old buildings into luxury developments.
Typical YIMBY broken record here, but in the U.S. it's more or less illegal to build new housing on almost every inch of land (especially in the most expensive cities). We don't need to develop baroque incentives for developers to create housing; we need to stop making it illegal.
It's illegal to build at all on some plots of land. It's illegal to build apartments on most plots of land in most cities (this is called "single-family zoning" and it dominates most U.S. cities). It's illegal to build large apartment buildings on still more plots of land.
And then, yes, of course, there are some plots of land where it's legal to build one or more of the categories listed above.
The places where housing is scarce are in the former groups, by and large, not the latter, which is to say the problem where housing is scarce is indeed that it's illegal to build enough housing there. Those places don't need to incentivize development. They need to make it legal.
According to the article, this is the same system enacted in Berlin. The supply of new-build developments in Berlin has increased at a greater rate than in other German cities, just not fast enough for this Bloomberg writer's tastes.
This is interesting and we can definitely learn something from the Vienna model but it isn't a super dense city so what works there might not translate as well to other cities.
Manhattan for example is about 7x as dense as Vienna. There just isn't the space for the government to be churning out cheap flats for the amount of people that want to live there.
SF is not nearly as dense and there is absolutely a lot of space to build there but unfortunately the zoning there is an absolute nightmare that doesn't seem to be getting better any time soon.
This is interesting but doesn't appear to be evidence. Any studies with a plausible identifying strategy? It could be, for example, that rents wouldn't have gone up much regardless.
I experienced exactly this in the early 1980's. In Berkeley, CA. Apartments were scarce because of rent control. I had a coworker that lived in his apartment from late 70's until late 90's. He paid less than $300/mo. It was great for him. He saved a ton of money and bought a house in Berkeley in the late 90's. But, as a student I had to live in Oakland and was never able to find an apartment. Every time I went to look at one there were another 99 people there. It was so frustrating.
Around 1994/5 I wanted to move to Berkeley. I had a very hard time finding a place. I looked at so many attics turned into bedrooms and other crappy places. Eventually, I found an ideal (relatively) place and there was a good 50+ people looking at the same apartment during a showing...
I walked up to the landlord (who was a lawyer in his day job) and said... "I know you can't pick favorites, but I have a good salary and I'm not a student." ... he ended up making his top picks write an essay on why we wanted the apartment. I got the place and stayed there for 10 years.
Interestingly, during the last few years I was there, rent control ended and the landlord really wanted me out because he knew that he could make 2-3x more. He turned into a slumlord and refused to make any improvements and the ones he made were all half assed. The storage locker in the carport under the building got broken into as well.
Eventually, I left for SF and sublet the place to some friends illegally because they needed an inexpensive place. He eventually found out about that and I had to let the place go.
I guess my point is that I've seen first hand rent control and no rent control go through both phases. I really don't think there is a good solution. Someone always gets the short end of the stick.
If there was no rent control, why didn't he just raise the price up to market value when your lease came up for renewal?
I live in a city without rent control, and your experience is entirely foreign to me. Heck, my current landlord has offered to pay for things that I don't think are even really his responsibility. He's just happy to have good tenants paying market rate.
Switching tenants will probably cost a few thousand dollars in lost rent, and it won't earn him any more income, so he treats us well.
The removal of rent control only applied to new tenants. He was limited to a city controlled yearly mandated increase, the entire time I was there. He also couldn't kick me out unless he moved into the apartment himself for some period of time.
He also had to put my deposit into an interest bearing account and was required to pay me that interest. The rental increase and payment was a ritual I went through yearly with him and he always delayed giving me the interest as long as he could by law.
2-3x+ more rent is enough reason for a landlord to want to push someone out in a competitive market like Berkeley. There is always a stream of new tenants because it is a college town and limited rental housing is available.
Yes, but only until the current tenant leaves. Which gave that landlord all the incentives to make the current tenant leave, as evident by the half-assed repairs and other slumlord-like behaviors that the parent comment mentioned.
Yeah, so it actively incentivizes neglecting maintenance duties and driving out the current tenants rather than offering them to renew their lease at the market rate. Sounds like a terrible law.
That's the downside of rent control. Rent ends up being stable and predictable for tenants, but it reduces the landlord's incentive to fix thing when they break and to make improvements (though many rent control laws, including SF's, still allow landlords to pass some of the cost of capital improvements to renters).
Even when rent control continues to be active, landlords have an incentive to want to get their tenants out, because (at least in SF), a new tenant can be charged market rate when they move in (and then that rate is locked in with limited yearly increases until they leave).
When rent control in Berkeley ended, but existing tenants grandfathered in, the landlords were incentivized even more than usual to do things to make a tenant want to leave, since then they'd have a completely non-rent-controlled unit again.
It's not only bad behavior on the landlords' side. Tenants are incentivized to hold onto the unit as long as possible, even if they want or need to move out for a while. They'll often illegally sublet the place and hope the landlord doesn't come by to check on them until after they move back in. But they're also in some ways trapped: they may want to move, but know that they'll face a huge rent increase in their new place, so they stay put.
Honestly I can't really blame landlords or tenants for their bad behavior under rent control; the rules around it only tend to provide one good outcome: rent stable and increases are predictable. Other outcomes are usually negative, and that's an inherent property of the system. But that one good outcome is often good enough to justify keeping rent control around.
That that has anything to do with rent control is an absolute myth. Two counter examples are Sydney and Melbourne, both don't have rent control, Australia has big incentives for investing in housing (tax reductions if you don't live in the house). Both cities have seen an explosion of rents (10% year on year is not uncommon) and a building boom of cheap apartments that are only rented out via Airbnb. I can tell from experience that landlords do the absolute minimum they are legally required (mostly even less) and tenants are afraid to complain because they need the references when moving.
When I moved in, the pricing was fair, if not a bit high.
Over the years, cost of living increases for whatever reasons and now the rent I'm paying seems low.
Maybe the solution is to allow landlords to have larger increases that match changes in COL, but that is effectively the same as getting rid of rent control.
Right. The whole point is you said they got rid of it, but they didn't. It was still in effect and causing problems in your situation.
Your proposed solution is now to get rid of rent control, which is what they had supposedly already done. But I agree. Seems like (actually) getting rid of rent control would have been a good move.
I don’t know CA, but in NYC, rent controlled apartments can only become market rate apartments in a specific, legally prescribed way. Even if you are in a market rate apartment, the landlord is only allowed to raise your rent by a certain percentage each year; this percentage is higher for market rate and lower for rent-controlled, and there is also a third category called “rent stabilized” which is between market rate and rent controlled.
(Just as note about rent control in NYC—rent controlled apartments account for something like 1% of total apartments. The number is slowly going down, it was about 3% twenty years ago.)
Frequently, even on places that don't have "rent control", there's still limits on how fast landlords can jack up the price on a tenant in the place, but that doesn't apply to new tenants. So if you can only raise the rent by $100/mo once a year, but the market rent for the place is $1000/mo higher than current, you've got 10 years before you actually reach market rate.
Because of something called vacancy control. You can't raise rents on people in a unit. You could raise the rent of an empty unit to market rate (in Berkeley, in the 90's after rent control was changed).
To add more context, only a few cities (Berkeley, Santa Monica) had strong rent control with vacancy control in the 1980s and 1990s. Other cities, such as San Francisco, Oakland, and Los Angeles, had rent control but have always allowed the rent to reset to market rate when the unit is vacant.
The California Law called Costa-Hawkins phased out vacancy control in all cities from 1995 to 1999. After 1999, landlords have the right to set the initial rent, overriding local vacancy controls. (https://leginfo.legislature.ca.gov/faces/codes_displayText.x...)
In Nov 2018, California voters rejected Proposition 10 41%-59%, which would have repealed Costa-Hawkins and allowed vacancy controls again (https://ballotpedia.org/California_Proposition_10,_Local_Ren...). Berkeley, Richmond, and Santa Monica would immediately have imposed vacancy controls under their existing laws.
Interesting that it took an essay contest to break the tie. Seattle now has an ordinance that they must rent to the first applicant who qualifies. This is to prevent discrimination against minorities.
Yea, I felt like it was kind of weird at the time, but I was also young and cocky and used my privilege to get the place in a highly competitive market. I don't feel good about that later in life.
In his defense, I don't think he was discriminating against minorities as much as he was just trying to find a good tenant, in a sea of applications, that wouldn't cause him a lot of headache.
One side bit of information is that he had had an accident and had lost part of one arm. He was very apt and that didn't hold him back at all, he was used to challenges.
So Seattle entirely removed the ability of landlords to pick their tenants? Imagine applying that to anything else—must hire the first qualified job applicant, etc.
I don't know, this kind of makes sense. You've presumably rented apartments before. The process is shady as shit. I've been shaken down by several landlords for prepayments, and intrusively interviewed. It must be much worse for Black renters.
And it's how most purchasing works! I go to rent a car, they have to rent me the car if it's available; they can't wait to see if a safer-looking driver is right behind me. Renting an apartment isn't a job interview.
I'm not decided on the topic being talked about, but just want to say that my parents in Milwaukee renting out a condominium have gotten burned from a string of 4 tenants. Flat out didn't make payments, didn't respect the rules (i.e. rules of condominium association, which puts the owner in trouble), intentionally ruined the place on last day out, literally, with a sledgehammer, and basically ended up costing money. And my parents are by no means rich... the $800/month for a 3-bedbroom place was their primary means of income.
They're finally having better luck now that this time that they requested credit reports, actually exhaustively followed through on references, etc.
Don't know what the answer is -- maybe the regulations should selectively be applied to those who rent out multiple properties?
I don't think landlords screen tenants out of malice, and I know a bunch of landlords who have related their challenges to me. But environments like this are to unlawful bias what standing water is to mosquitos. It sort of can't help but creep in, and without some objective standard, there's no way to keep it from turning into a plague.
I talked to someone about renting once, I thought we'd agreed to go ahead, the next day they called and said, essentially, they'd decided to rent to someone they preferred better who expressed interest after me. Casually, as though it wasn't a slap in the face.
I concluded that I'm probably stuck renting from an impersonal corporate landlord that runs apartment complexes, but that seems more expensive.
At least in the US, I think people that are renting out part of the building they live in have, legally, a higher degree of latitude in terms of discrimination. It is kind of like a job interview. Or considering someone as a roommate.
> I go to rent a car, they have to rent me the car if it's available
I don’t think they have to rent you anything if they don’t feel like it. They can wait for safer looking driver just fine. It’s just they don’t, because it doesn’t make sense for them from business perspective, but they very much could do that.
And here I think that if Alamo started turning down drivers with reservations at the rental counter on sight, and those drivers were even slightly disproportionately Black, Alamo would be in a world of hurt.
If they had no reason to turn down drivers other than their race, sure, but that's because it's illegal (on top of being morally repugnant). They can turn down drivers for other reasons just fine, though, even if they are disproportionately black. For example, I'm told that voter ID laws are wrong, because black people are less likely to have ID (presumably driver's license). Alamo is perfectly able to turn down drivers without driver licenses, even if they are disproportionately black.
My point is that the expectation is so strong that, absent something on your driving record to prevent it, you'll get a rental no matter what you look like as long as you have a reservation (which you'll get sight unseen).
That is not true of apartment renting; in fact, I'd argue, it's distinctively untrue of renting. Thus, my rebuttal to Rayiner.
This is much more true of rental companies that work at a scale close to Alamo. If you pass a background check and have a deposit you get a spot.
This is less true of mom and pop rentals. This is probably less true of mom and pop anything.
I think you're right that intuition based decisions make it easier for racism to creep in and are harder to diagnose and fix than process based decisions.
But this problem with renting is probably more true of hiring and firing and more impactful. Should we apply the same rules to hiring and firing?
At first blush, it sounds crazy. I don't know how to make it workable. But in the large, tech industry hiring is super bigoted! The problem you'd be correcting is very real.
I'd be surprised if this had the intended effect. I'd imagine it'd cause most landlords to increase their qualifications, and bar them from making exceptions to those qualifications.
My urban planning teacher used to say, as a synthesis, that rent control does more damage to a city than bombing..
Why? Buildings will degrade. Fast forward some years and rents will not justify any building maintenance by landlords. History is full of examples that ideology recurrently ignores.
There is a good solution - for outsiders like you to go away and not come back. That leaves more housing for long term residents who are the people it's protecting. It sounds nasty but people everywhere can't stand outsiders coming into their place. Xenophobia.
> He saved a ton of money and bought a house in Berkeley in the late 90's.
That gave him a durable advantage and helped him acquire assets that would further gain in value. Not to mention, as a renter and home owner, he was able to vote against new developments for years, further increasing scarcity and the value of his house.
The beauty of it is it doesn't matter to the bureaucrats: since the 19 years old can't live in the city he also can't vote in the municipal elections!
It also has bad impact on the type of buildings that get built. If you have to build some rent-controlled housing as part of your development project, and some jurisdictions will force developers to do that, it pushes you to build the rest of your building to be as upscale as possible to attract higher paying customers (better margins).
And it also removes the incentives of ever upgrading the rent-controlled buildings more than the minimal legal maintenance. Because any dollar is better spent on the upscale offerings.
I don't know how it is in Germany, but in the US, rent controlled buildings can only have the rent increased if the landlord upgrades the building, so it actually incentivizes them to do upgrades, as that's the only way they can increase rent.
It does not, in fact incentivize upgrades. Because the landlords wait until the tenant moves out, then they can raise the rent to the (high) market rate and that is when they make improvements. Rent control is widely acknowledged to lead to a lower quality housing stock as maintenance and upgrades are deferred.
The provision for some capital offset for improvements is not, in practice, sufficient justification for making the improvements as the offset is only partial, and you want to encourage the long term tenant to move out so you are not going to provide upgrades to the unit.
In the US, rent control is regulated by states and enacted by cities. Each state and city is free to do so differently. As such, it can and does vary quite significantly place to place. This means it's impossible to offer an informed comment about rent control in the US.
In California the way this works is that a landlord takes a rental property off the market for 5 years, kicking out all of the existing tenants and leaving the property vacant, then remodels the building and rents the new luxury units to new tenants at market rate. The process is called "Ellissing", after the Ellis Act that allows it.
When a property is full of rent-controlled tenants paying far below market rate, it has a low value to most real estate investors. With the Ellis Act, however, the value of the property can actually go up as rents go out of sync with the market because it becomes an attractive investment to investors who would Ellis it.
The Ellis act allows you to convert the unit to a live in residence, and it can no longer be used as a rental. Thus it is not attractive to investors who are developing rental stock, it is attracted to investors who are developing homes for owner-occupants.
Ellis Act allows you to remove the unit(s) from the rental market and remove the tenants. In an apartment building you may do this before condo conversation but cities like SF have almost stopped condo conversions.
If you Ellis Act you can re-rent the units are market rate but only after 5 years (or else you have to rent it back to the original tenants at their old rate or new tenants at the old rate).
<strike>Ellis act</strike> Owner movein is for moving yourself or a relative into the unit so you can live in it. Condo conversion is separate from Ellis act and Owner* Move in, it has to do with splitting off units to sell them independently, for example turning a TIC into a condo.
Units that have been Ellised* or Owner Occupied* find it much more difficult to do a condo conversion, as there are laws about how long you need to wait and where you go in the lottery that determines if you get to condo or not. That lottery is itself a complex affair that involves giving more tickets to houses that failed in the past, and for all I know now, giving extra tickets based on victimhood points or something. Although right now I am hazy about the laws. SF housing laws are a labyrinth of absurdity, micromanagement, and graft. They are not even funny.
Ellis Act is different than Owner Move-In (which covers family members too).
Ellis Act, named after the law, was created as the govt can’t compel you to rent - you have the right to remove your home from the rental market.
” The Ellis Act (California Government Code Chapter 12.75)[1] is a 1985 California state law that allows landlords to evict residential tenants to "go out of the rental business" in spite of desires by local governments to compel them to continue providing rental housing.”
The only reason I know is because I thought the same thing! The rent control laws in CA are an absolute rabbit hole you can go down if you have the time!
As an aside, Owner Move-In isn't always available. Around here I sometimes see listings for condos that are priced far below market. The reason is that the unit is occupied by a rent-controlled tenant who can't be evicted, even if the owner wants to move in. Sometimes the tenant will accept a large payment to move out, sometimes not.
The irony with rent control is that it ultimately benefits the landlord if he can stick around long enough. The worst enemy of a landlord is another landlord. If the housing market is less competitive and the landlord can eventually raise rents back to market rate his property will become a cash cow.
That's a bit of a weird thing to say. If I were a landlord, there is no situation in which I would prefer to own a rent-controlled unit vs. one where I'm free to increase the rent however much I like.
When a tenant moves out of a rent-controlled apartment, the owner raises the rent to market rates, not above market. They've lost out on cash they could either keep or invest in improving the property (which would command higher rents, if they were allowed to raise it).
There is no "in the US" here; regulations vary by state and city.
For example, in San Francisco, landlords can usually pass on some portion of the cost of capital improvements on to their tenants, but not all of it, and only until that portion is paid off, after which the rent reverts to the previous amount.
So yes, the landlord gets the improvement done at something of a discount, but still has to shell out cash, and for not much benefit since the rent will still revert to the previous level. So there's not much incentive to do it until after the tenant moves out, if at all.
In the US, (e.g. NYC) landlords do very nasty things to get their rent controlled tenants to move out so they can raise rent to market rate.
And then, if the tenants sue because of course that is illegal, then the public court records can be and are used by all the landlords in town to avoid renting to them, who would dare to exercise their rights.
I happen to know this, not because I've ever lived there or had firsthand experience or anything, but I once happened to see a court document on the internet, in which the judge considered an emergency request from a plaintiff to not release information about their lawsuit at an early stage, because it would prevent them from having anywhere to live.
In other words, this corrupt system is well known enough that the housing courts acknowledge it as a matter of course.
There is plenty of scientific denialism on the right.
Along with anti nuclear, the belief that rent control is a remotely good idea is an example of scientific denialism on the left. There are some decent arguments to be made against nuclear but rent control has always always caused more harm than good everywhere it's been tried.
I think the key thing with rent control is to have reasonable limits. If you limit rent increases to something between 5% and 10% annually, it provides stability without causing a significant distortion except when prices are rapidly climbing for several years in a row.
This is the same issue with Prop 13. The idea isn't bad; it's useful for people to have bounded future expenses. The problem is the bound is too low, and it distorts the market.
Proponents of nuclear power labelling everyone who does not unequivocally support it "science deniers" is such infuriating populism.
Nuclear power obviously has immense benefits, but there are also undeniable risks associated with it. It's entirely possible to be in favor or against it while considering the exact same scientific facts depending on which of these you consider more important, no "scientific denialism" required.
I also don't see how nuclear power is supposed to be related to the economic left/right spectrum.
Coal kills thousands of people a year in the US (13,000 if you believe the extreme estimates)
Less than 20 people have died in Nuclear related accidents in the history of this technologies use. And almost every single one of those were unrelated to the nuclear technology itself (electrocution, other workplace accidents that could happen in any power plant)
If you want to lump in Chernobyl and Fukushima we are still only talking 3-4000 deaths in history. And there's zero reason to believe these accidents are likely to ever occur in the US.
So yes, there are "undeniable risks", but they are vastly vastly overstated.
Especially when the "undeniable risk" of climate change is many millions of deaths whilst climate change activists insist we can't use the only technology that can almost entirely eliminate cooking the planet via coal, oil and natural gas.
I am generally in support of nuclear technology but statements like "Less than 20 people have died in Nuclear related accidents in the history of this technologies use" don't help the cause. That's just flat-out false, and you indicate in the following paragraph that you know that.
Leaving out the two most significant accidents in the history of the technology shouldn't be the default...
Literally the previous sentence I was talking about the danger in the US of fossil fuels, then I wrote about the danger of nuclear and then move on to worldwide.
Nothing I wrote was false at all. It's almost like you're intentionally trying to misread my argument to paint me as disingenuous.
Maybe it’s my non-US viewpoint but I didn’t read it that way at all. The fact that you qualified the previous sentence with “in the US” made the next sentence seem intentionally broad.
I also don't understand why the number of people that have died in nuclear accidents only in the US is a remotely useful metric in the context of the discussion.
Why would I start talking about coal deaths in the US, then immediately broaden it to worldwide nuclear deaths. Lie about Nuclear deaths by only counting US, then immediately after lying bring up Chernobyl and Fukushima to prove I lied or something??
You're trying to ascribe malice and dishonesty because you happen to disagree with me. I don't know why the internet does this to people
> You're trying to ascribe malice and dishonesty because you happen to disagree with me. I don't know why the internet does this to people
Sigh. I made it clear in the first comment that I don't disagree with you. I would love to see wider adoption of nuclear power. The sentence that you wrote was inaccurate, and I felt that more accurate wording would improve the quality of the debate. I don't see the point in engaging any further on this.
In complex systems accidents do not tell the whole story, one has to also look at incidents and the "safety culture" of the organization (i.e. ~ how they avoid failure and how they react to failure).
Aviation for example has The Aviation Herald, where one can see that there's in fact quite many incidents that almost never result in accidents. There's lots of literature on safety engineering in aviation.
What's the equivalent for the nuclear industry? I was admittedly not very interested in this topic, so I'm only aware of the descriptions from Perrow's "Normal Accidents" book where he reported on several incidents which were actually published by the involved organizations. They didn't inspire confidence at all, on the contrary they were downright scary (and much scarier than one can find on the Av Herald).
Maybe the nuclear industry grew up, but it's absolutely necessary to have transparency here. Looking at global accidents is like trying to map a castle through a keyhole.
I'm not a nuclear engineer, although I have a couple friends that are and have assured me the risk is incredibly low. The scientific literature backs this up.
What annoys me is climate change activists that paint nuclear power as some terrible boogeyman we must never use lest we irradiate the entire United States.
They will never ever "show their work" and do the cost/benefit analysis of the ongoing thousands who die from coal and other carbon energy sources or the potential millions who will die from climate change.
No, no it's all just alarmist BS about nuclear being "dangerous" so let's just not use literally the only power generating technology that can replace almost every single fossil fuel plant in the US. Not even solar and wind can claim that!
So I think it's accurate to describe this view as "anti-science" at least for those who want to abolish the use of nuclear altogether (Green new deal types)
It's a policy that is intended, or at least marketed, to lower the price of housing in the interests of the general public. The science denial aspect is refusing to look at every single instance of these policies leading to negative outcomes, some sooner than others.
| to lower the price of housing in the interests of the general public.
Its purpose is to prevent displacement, especially of the poor and elderly for whom displacement is a major negative. For that purpose, it has done very well as a policy.
> For that purpose, it has done very well as a policy.
Well...for those who are not actually displaced, yes. But the ones that are displaced are often essentially banished by a dysfunctional housing market.
Rent control is not targeted towards the poor and elderly, and there are many others who benefit in the short-term (but then, again, are unable to move because the market rate has skyrocketed, though of course not just because of rent control).
| But the ones that are displaced are often essentially banished
Without it they would have been displaced even earlier. Speculative bubbles exist outside of rent control, especially in the US where rent control is never all that strong or comprehensive.
> Without it they would have been displaced even earlier
This is mostly hypothetical. In functioning housing markets that don't manipulate prices or limit new construction through policy, speculative bubbles make little sense -- why would housing become more expensive if it's easy to build lots of it?
The argument that removing just rent control would make folks worse off -- that I'm sympathetic to, of course. Obviously you also need to build. But rent control as practiced in most of the Bay Area causes lots of grief despite only helping a relative few of the desired beneficiaries.
That is, unless you define beneficiaries much more widely than you do -- to basically make it a benefit to seniority. Rent control, like Prop 13 and construction restrictions, work to allocate scarce resources based on seniority rather than wealth or ability/willingness to pay. The argument that it allocates based on need (i.e., poverty, inability to move house) is weak; that's a mild side effect, and policies that just straight up subsidize housing (i.e., vouchers, etc.) for those in need could be much better targeted, and could be funded in a way that doesn't also incentivize poor maintenance, harassment, and eviction.
Is allocating based on seniority better than wealth? For current residents--at least, until they're Ellis'd--sure. For their kids, who lack seniority? Almost never. Everyone needs a place to live. Right now, more people want to live here than we're allowing to (through construction limitations). So, sure, we could argue about how to allocate -- or we could just end the damn scarcity!
I don't know how useful an SFBA perspective is, given that area is dealing with factors that very, very few other places in America are: Namely, an historic single industry boom and a lack of expansion area. The only real comparable place in America is Manhattan.
Yeah, you're right that there are a number of SFBA-specific factors that don't apply elsewhere. But people aren't really making the rent control argument about Peoria, IL.
Any place that caps both rents and housing supply through policy amid increasing demand (like Berlin, the titular locale), is going to have a ton of politics around rent control, density caps, etc., because they are choosing to allocate scarce resources by policy instead of market -- and the way to affect policy is politics.
| people aren't really making the rent control argument about Peoria, IL.
We are more than you think. Rising rents due to speculation or just plain landlord greed have become an issue country-wide. Even in places like Peoria. Especially in relation to stagnant wages.
I advocate a combination of strong rent control, aggressively subsidized housing and consistent growth (especially vertically) where possible.
> Rising rents due to speculation or just plain landlord greed
Well, you'd need both, not just one: landlord greed has a cap, average rents can't be much more than the cost of buying, though there will always be some folks who don't qualify for a mortgage for whatever reason. The only reason landlords can be greedy is the leverage they have because supply is constrained -- otherwise, their greed would be thwarted by developers' greed!
Speculation and landlord greed only really affect prices in a supply-constrained environment. In markets where housing is a commodity, and can actually be produced, the cost of housing tends towards the cost of land acquisition & construction. Not always smoothly, of course...if demand jumps very suddenly, the construction market needs time to adjust, etc.
Yes, on the one hand you could bet on the power of a bunch of individuals the system serves well-enough (after all, they're still here!) to apply political pressure to some set of local governments (though, note that rent control is starting to be regulated at the state level) to change policy to help the less-well-off in their neighborhoods.
On the other hand, you could bet on "rational activity" from landlords and developers—aka greedy self-interest.
So, sure, you might get a conscientious grassroots group to apply political pressure for rent control when it's not in their own self-interest. But you can 100% count on developers and landlords to be greedy, and I'd much rather channel that group into the outcome I want while I wait and hope for the former.
Nope. Look who overwhelmingly applies pressure to local governments everywhere -- it's not the marginalized and poor! This is not an SFBA phenomenon, it's almost a natural law.
Poor and working people have mobilized plenty of times before. That's been constant throughout modern history and only in the past few decades have we had an ahistorical low period of organizing activity. I expect that lull to end in the coming years. In many ways it already has.
I'm not sure how it's a very SFBA thing to point out that the people who have a voice in local politics are the people who haven't been displaced?
> Poor and working people have mobilized plenty of times before
This would require them working in their own rational self-interest too, though -- which (a) there isn't much evidence for, and (b) kinda negates your earlier argument about assuming rational actors.
Displacement far enough that they are outside of the local political jurisdiction is specific to there. In places like Peoria, it's just further economic immiseration within Peoria. Most of America is not being gentrified, rents are just rising. There's a difference.
| (a) there isn't much evidence for
There is plenty of evidence for that. You might just have a recency bias.
| negates your earlier argument about assuming rational actors
I don't put people mobilizing into the ideological framework of "the market". I don't put much faith into the ideological framework of markets generally. I find it only slightly more useful of a tool of understanding social forces than, say, astrology.
Importantly, I'm not talking about what will happen by virtue of some outside force or guarantee of history. I'm talking about we need to make happen by force of will.
It only leads to negative outcomes if that's the only step you take though. Most societal problems need to be tackled from multiple angles to actually see any positive effect.
Rent control is a good tool for keeping existing tenants in their homes. That has a lot of value in itself but it must to be coupled with the construction of good quality, affordable public housing at or below the average rent controlled property in order to maintain the desired goals of keeping rents/property prices down for new entrants and increasing mobility.
The only issue with rent control is that it's applied as a band aid without also addressing the root causes.
I don't think this is scientific denialism since the people involved have a pretty big stake inn the policy. After all they will get to stay in the city. The problem with rent control is that it is very populist and selfish.
However, I have seen some comments and articles that talk about how building more housing in the bay area will drive up demand, somehow ignoring that there is an overabundance of commercial real estate that is driving the demand in the first place. It also ignores housing pressure, namely the concept that people increasingly live with room mates or adult children keep living with their parents. These people are already in the city and are looking for an opportunity to move out. How is giving them a place to live a net loss? If anything parents might move to a smaller residence and thus free up supply for larger families that truly need a single house.
I don't know why people believe that the laws of supply and demand don't apply to the housing market. Maybe they are misapplying the idea of induced demand which is really poorly named or at least the name is not directly putting the spotlight on what is actually happening. It's basically the phenomenon that as you increase roads people will switch to their preferred mode of transport even if it is grossly inefficient. Cars carry fewer people than buses or subways so it basically has a neutral impact on traffic. The problem with applying this to the housing market is that developers actually control their plot of land. A street will just let any vehicle drive on it. A developer will instead focus on building the most efficient housing possible because he wants to optimize his bottom line. So no, he wouldn't buy a plot with a house for 2 million only to rent it out, he would try to upzone the plot and build a duplex or triplex since this will result in greater profits. The street on the other hand is fully subsidized for the people driving on it, so they end up using it wastefully.
Rent control is not scientific denialism. Economics is not a science because nobody ever does controlled experiments. There are also disagreements about what end goal you're trying to optimize for.
Economics is just a bunch of biased political arguments using different priors for assumptions. This is evident when you about different "schools" of economic thought. There are no irreconcilable "schools" of thought in the hard sciences with whole universities dedicated to only one school or another.
Any biology forum that was 50/50 anti-evolution; or a physics forum that often argued newton is good enough and the rest we can control; etc etc, would be some kind of fringe, excluded place.
Deny supply and demand? Always popular. We're 100 years past the marginal revolution, yet, both the practictioners of the discipline and outsiders (marxist sociologists) think this can be controlled.
> Along with anti nuclear, the belief that rent control is a remotely good idea is an example of scientific denialism on the left.
No, because “good idea” isn't an objective claim within the domain of science , it's a subjective value claim outside of the domain of science.
Now, it's possible that in some cases this belief could be supported by belief in an objective claim that is itself an example of science denialism, but it could just be that people who believe that rent control is an good idea have different values than you do.
One can generally look at the stated values of the people advocating for a policy, and then run objective studies on whether that policy produces outcomes in line with those stated values. A lot of people, confronted with proof that their favorite policy does not do what they want, will simply deny the science and continue to believe that this policy is concordant with their values.
Some policies are also bad enough that one can safely say that no reasonable mainstream set of values could endorse it without denying the actual facts of the matter - for instance, re-introducing lead and asbestos is just plain Not A Good Idea for any set of values worth discussing, despite the fact that there are most assuredly a few sociopaths out there who'd be happy to make a buck gutting those regulations.
I've no personal experience with "rent control" but I get the impression that the people saying it's a bad idea genuinely mean one of these two cases, not simply a difference of values. Whether the science actually agrees with them, however, is quite beyond my expertise :)
The values that people hold don't necessarily match those that people profess. I don't think that's what's at play here, but it can be good to keep in mind.
I live in Berlin. What you're describing in "10 or 20 years" is already the case. That's why these actions are being taken now.
I waited 6 months for an apartment here when I first moved. Pretty much everyone who doesn't want to spend insane prices on a unit has to.
And even then, I'm still paying 500-600 more than I should be. It's insanity.
The main problem is that there are immigrants (primarily from one country in particular, but that's less important) coming in and buying up all of the "houses" here (note that "House" in Berlin means a large apartment-complex-like house, not a single American Style, white picket fence house) and then increasing the prices slightly.
I'm not anti-immigration, clearly, but there are still concrete economic effects that haven't been solved yet. I don't think anyone knows what these measures will lead to, but at least it's something.
You don't need the slightly racist comment, biggest problem imho is that house ownership is very low in berlin (last time I read about it was around only 15% of people live on their owned houses) and really hard to change that. You have to think that everytime you're looking at buying a place you're competing with Blackrock, Deutsche Wohne and other not so nice funds with much more room for negotiation than you. That's why even if you and your partner makes top 10% salary you're probably not rich enough to own a house.
And on top of that germany has very strict laws about transparency of home ownership so there's no clear way to know the distribution of home ownership or who are the biggest landlords and where they got their money from. Which is bad because there's a lot of shady people buying whole complexes, but it's also working as intended as a lot of politicians are also big landlords.
A country isn't a race, and I omitted the specific country for the very purpose of not painting a picture based on their skin color, because it has literally nothing to do with it. It's also not a reflection of their character or their culture, either. Please don't mis-assert that it's "racism".
Also, have you been to Berlin? Of course people don't own houses here. Unless you're outside the ring, there are very few houses to be bought. If you're talking about owning apartments within the large houses here, it makes sense that a lot of people don't want to own them - because not a lot of young people want to be tied down to a 40sqm unit in one part of the city for the rest of their lives, or deal with all of the hassle of subletting and the tenancy laws here unless they were serious about holding and nurturing those securities.
I live in Berlin, and my neighbours are in their 70's. Should they be forced to find a new flat way outside the city because the rent triples over the course of a few years so young tech workers relocating from London can have a place in the cool part of town?
The rental market is different in Germany than it is in other countries: less people own their homes, and getting a housing contract feels a lot more like a permanent thing than when I was living in the US. You pay 3 months rent up front as the security deposit, and most flats don't come with a fitted kitchen so you have to take care of it yourself.
> Should they be forced to find a new flat way outside the city because the rent triples over the course of a few years so young tech workers relocating from London can have a place in the cool part of town?
yes
why should they get to stay in berlin and have their housing subsidized?
Because they lived there half if not all their lives and want to continue to live there. It's as easy as that and it's a legitimate reason.
In the end, the Senate of Berlin is looking out at least in theory for the people of Berlin, not nomad developers or other people looking to move there.
The Berlin government considers it a legitimate reason, and since they get to make the rules that's all that matters in this case. If the people of Berlin would disagree, it's up to them to elect a new government with different views on the topic.
"I want to move to Berlin", on the other hand, is not a particularly legitimate reason to kick out a current resident for a newcomer.
> being enabled to continue doing something (at the cost of others!) just because you want to keep doing it is not a particularly legitimate reason
We are not talking about getting tickets to an NBA playoff game, we are talking about housing. If someone has been living in a city for their entire life, it's not reasonable to expect that due to "market forces" they should have to pick up their entire life and move to an unfamiliar place because they can't continue to compete in the market into their golden years.
Every other aspect of living is also subject to inflation. The berlin government is a hero for the poor, this is all it is. The Mietendeckel is not a good thing for a young person or a family but rather for old people and those who have been living in the city for a long time. It creates a class of haves.
i don't find it particularly compassionate or empathetic to subsidize someone's apartment just because they were living in it when a rent control bill was passed. yes, that person has a claim to some kind of housing, but why should they have a claim to the exact same kind of housing in perpetuity?
Supporting pushing them out while not offering any solution besides saying they have "a claim to some kind of housing" is essentially supporting throwing them out on the street in their 70s period.
Also minimize middle-persons and standardize the sales and transfer and ownership contacts (preferably at a state or higher level).
The goal should be to make it easier and more orderly to transfer property ownership, while also providing protection to those making the sales.
The standard contacts should also include enumerations of inspection agencies and what type of inspections were performed (and when), and the various types of insurance which might also be optional and cover protection for buyer / seller / etc.
Rent control could technically be done by handing money to tennants to then hand to landlords, but in practice it's done by taking money away from landlords. Obviously, that's going to keep landlords from being able to give that money to construction companies.
Another possible solution would be to take money away from tenants and landlords both to give directly to construction companies. That's socialized housing. However in the long run it's not likely to be much cheaper, because it's not like landlords are making that much profit in the first place. The profit in renting is about the cost of capital, the government is not going to do much better.
That’s how it was approached somewhat here in Australia. NRAS effectively did give money to the suppliers of housing so that rents could be lower to eligible people.
Is that how rent control is done in Europe? In the U.S. at least, rent control isn't taking money away from anyone. All rent control stipulates is that for the duration of your lease you cannot raise rent a certain percentage, such as 4% a year. Not having rent control allows rents to exceed earned wages for working people and pushes them to the street sooner than it pushes them out of the city.
That's taking money from landlords, (the point of reference is what everyone would have in the absence of a policy) and results in less money available for construction than would otherwise be. In the presence of supply problems you'd have to fix that either by taking money from tenants to give to construction companies (tax funded social housing) or by relaxing rent control so that the money goes tenant->landlord->construction.
Vienna has achieved a very good result with socialized housing, in terms of keeping costs down and providing adequate housing stock. It seems like an example of the government solving the problem of housing better than the market.
Well, it's not like there's a counterfactual Venice with a market to compete with the real Venetian government. But even accepting your claim at face value, all I said was that the government paying construction companies was not likely to outperform landlords paying construction companies by that much, because the best they could do would be to get rid of the (actually quite small) cut that landlords take for themselves. It's not exactly axiomatic that a well-functioning democracy can't sign the same contracts that landlords do, it's just that the amount to be gained is limited by a force all socialists should be intimately familiar with: the tendency of the rate of profit to fall.
First of all, it's Vienna, not Venice. And you don't need a counterfactual Vienna to compare it to cities of similar size and economic characteristics.
> the best they could do would be to get rid of the (actually quite small) cut that landlords take for themselves
Again, I think this claim is easily contradicted by the success of Vienna's housing market. The thing is, if you took the market as it is today, and the government just bought all the housing properties at market rates, then yes you would only see savings in terms of the profit margin which is currently enjoyed by landlords. But if the government takes the role of providing housing as a public good, it can change the incentive structure of the market in a way which benefits renters.
For instance, if your goal is to maximize rent profits, you will make decisions to maximize the year-over-year increase in rent, and you will build more units in a way which maximizes the rental price per unit. That's how you end up with so many shoebox-sized luxury condos in Toronto that nobody really wants and an under-served affordable housing market. If you treat housing as a public good, you make decisions to keep rent prices stable, and you build more housing to serve the need rather than the profit motive.
>If you treat housing as a public good, you make decisions to keep rent prices stable, and you build more housing to serve the need rather than the profit motive.
This argument strikes me as the tail wagging the dog. Vienna has no motive to limit housing since they build such an enormous percentage of it. If rents go up because the government of Vienna doesn't build enough housing, they will be removed from office. Profit is profit. Developers will build anything and everything that they can. The issue lies in the extreme costs involved in building anything new at all, mostly in graft by local municipalities and residents. If a municipality with a broken real estate market allowed housing to be built with less effort, more housing would be built.
Forty percent of Manhattan's buildings could not be built today.
So would you advocate that there be no zoning/building regulations? The article you linked has a slightly misleading title; it would be more accurate to say: "with today's zoning laws, 40% of the buildings in Manhattan would have been replaced by slightly smaller buildings which allow more light to reach the street." I already find Manhattan overly dense, and I can imagine those regulations were put in place for good reason.
In Berlin, we have had laws on the books forever which prevent tall buildings and excess density, and I'm glad because if developers had their way, they would build high-rises where all the parks currently are, and this would not be a city I would want to live in.
In general I'm not a fan of over-regulation or excess government intervention, but when it comes to housing, I think it does make more sense to treat it as a public good. Government is not perfect, but people should have some voice in how their community develops, and this will not be the case if housing development is left only to private interests.
>This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.
Or a real estate broker who knows building owners willing to rent out the stabilized units (50 pct are stabilized, 50 free market more or less). Or you paid a broker fee to this broker. Or you sublet from a rent stabilized tenant who charges market rent..
No one talks about how easy corruption happens in these situations. The bifurcated market in NYC sucks - it should be all stabilized or all free market.
SF famously has a black market in rent controlled sublets. In theory the amount a master tenant can charge for a room is a question of proportionate space and overall rent. In practice, they charge a lot more, and it's exceptionally rarely challenged.
Either a cheap apartment is hard to find and afterwards it's even harder to move somewhere else.
The alternative - as in other cities - is that it's still hard to find an apartment that has a normal price. Of course this also attracts scammers.
The apartment situation in dense areas is bad, no matter if it's Berlin or not. At least the local government is working on a solution to not end up like Manhattan, both price- and concrete-wise. If they find a sustainable solution, then this would be a game-changer and other cities might adopt that.
not just in 10 or 20 years, more like in 9 months!
The supreme court will probably rule that the Mietendeckel is unconstitutional in November, which will lead to a nasty situation for many renters with old contracts. If the tenants are lucky the landlord will just ask for the money "saved" to be paid back, but the unlucky ones will be evicted, as being in arrears of more than one month is grounds for termination regardless if you pay it back the the debt or not.
It's extremely unlikely that the court will strike down the law in a way that this situation arises. It's not like everybody starts to pretend that a law has never existed if it's ruled unconstitutional. Usually arrangements will be made for those that relied on it. Especially in a case like this, where another basic right is affected.
As I said, "strike down" usually doesn't mean "transport everyone into a parallel universe where the law has never existed but all people still have acted the same and deal with the fallout no matter how unjust". Rulings are usually much more nuanced than that (and constitutionally required to be that).
This is one more of those "software engineer tries to apply algorithmic thinking to law and gets ridiculous results" situations.
If you continue to be patient and repeat that humanity doesn't function according to algorithms, they'll eventually get the message or get bored and leave to work on the next disruption.
I have to say - I'm very jealous of my few friends who somehow managed to get a new place in the last few months. Their new contracts are already at the lowered prices so they don't have to fear the backrent like I do (and my reduction is quite big as I was paying way above the average for the area due to having a hard time finding anything in the first place).
The tenants are not in arrears. In the common case rents were lowered officially by landlords, with a footnote that the difference is due in full if the law is striked down.
And as stated in the third paragraph of your link, it's not grounds for termination if the landlord has agreed that part of the rent is suspended until the matter has gone through courts.
Kicking people out of their homes doesn't solve the supply problem, because it doesn't create new housing. It just shuffles around who lives in existing houses.
If you have a housing problem, and you want to solve it, you need to do two things.
1. Not kick people out of housing that they have. (Because it is incredibly disruptive to people's lives.)
2. Build new housing, until demand is met.
Rent control accomplishes #1, proper city planning accomplishes #2. If you're not doing #2, complaining about #1 isn't going to solve the problem.
You can't do #2 without doing #1 - most in-demand land is already occupied and unused land is typically not worth developing (or doing so would cause environmental harm).
In an all-owner-occupant suburb, this isn't so much of a problem: you're literally paying people lots of money to accept the disruption of having to move. However, in almost every other kind of housing arrangement, ownership over the building is separate from occupancy, and it's not the occupant's choice to make regarding increasing the housing supply. This is the left-NIMBY trap: any action to increase housing units necessarily displaces the most marginalized parts of society. If your pro-development policy doesn't include a plan to house people who are being displaced without increasing their expenses, then you're likely to make people start protesting the new buildings that need to be built in order to accommodate demand and actually cap rent growth.
Other than that, yes. Make housing printer go brrr.
This is one of the most reasoned explanations of the key problem where development meets rent control that I've ever read. If you turned it into a longer piece that explored the monetary and non-monetary incentives on all sides I would send it to everyone thinking about this issue. If I can help please let me know.
Of course you can. The law can be that normally rent control applies, but if you are building a new building, that doubles the amount of housing supply on the land, you can kick out the existing residents if you pay them a large payout.
This would allow new housing to built in the obvious places where it should be, and the obvious cases where a huge amount of new housing is planned to be built.
I'd actually totally love to see this proposed in more left-leaning city councils. This is sort of the idea I've had in my head for how to short-circuit the left-NIMBY trap, but I have no idea how good or bad it would actually be at moving the needle in favor of growth.
Part of the problem I could see right off the bat would be the fact that owners and occupants are inherently antagonized to one another; as in, the more money you require to be given as a displacement subsidy; the less is available to actually incentivize land development. Of course, in places like SF the market rate for housing is so hilariously high that there might actually be enough money for both parties, at least for a little while.
Another idea might be to require that the developer first offer to rent a unit in the new building to all the old tenants, at their old rent, if they want to move back after construction is complete. A side-effect is that this doesn't encourage the developer to build something nicer than what was already there. But in some cases that might actually be a good thing.
But yeah, these sorts of things generally reduce the amount of money available to do the new development in the first place. But maybe that's ok too?
The major flaw in your argument is that you can't do #2 with rent control in the picture. From the economist[0]:
> Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Even maintaining existing properties is discouraged because landlords see no return for their investment. Renters stay put in crumbling properties because controls often reset when tenants change. Who occupies housing ends up bearing little relation to who can make best use of it (ie, workers well-suited to local job opportunities). The mismatch reduces economy-wide productivity. The longer a tenant stays put, the bigger the disparity between the market rent and his payments, sharpening the incentive not to move.
Well, it depends on how rent control is implemented. In California, units built after February 1995 cannot be placed under rent control[0] (and in SF, it's June 1979[1]). A new development will never be under rent control (unless the law changes; two ballot measures to make some changes have failed in the past few years), so building new homes can still be immensely profitable.
In SF the reason it's not quite as profitable is because of the byzantine planning process and the inevitable lawsuits a developer has to win before even breaking ground. This is part of the reason why nearly all new SF housing construction is fairly high-end and expensive to buy/rent.
Germany is one of the counties that tries to avoid getting themselves into situations where a violent revolution is the best path forward for most young people. I'm sure they'll figure this one out.
> Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable.
Rent control tends to be adopted with the fairly explicit goal of prioritizing affordability for existing tenants in their current residences over either encouraging maintenance/updates or improving housing supply for people who aren't current tenants, so I don't think it's at all a policy that doesn't work.
A policy whose purposes are at odds with other, arguably more important, policy goals, sure, and possibly even with other more important, if less inmediate, interests of current tenants.
But saying it “doesn’t work” bases on it not encouraging things it is not meant to encourage is...not really useful.
Markets pick winners and losers all the time. It's just that winners in market housing situations are always the people with the most money.
It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'. Both are fundamentally unfair. Life, in general, isn't fair.
Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.
>Markets pick winners and losers all the time. Markets pick winners and losers all the time.
This isn't true. If people are paying enough for the developer to build additional housing then everyone will win in the end.
>It's just that winners in market housing situations are always the people with the most money.
That is the price you have to pay for allocating resources in the most productive way possible and ensuring that everyone wins in the end. It's a small price compared to the benefits.
>It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'.
As I said, it's the path to everyone winning. If you fail to allocate resources efficiently then you will just get a lot of losers and some special interests who are not losing.
>Both are fundamentally unfair. Life, in general, isn't fair.
The difference is that one of them will stay unfair forever, while the other would have the potential to get fairer, year by year.
>Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.
They will have to move one day, since there isn't enough room for everyone and when they do, they leave for good with no second chance.
> It's difficult to make an argument that it's a more virtuous way to select winners
That's because it's a strawman that you've constructed. Real debates involve consideration of the needs of people who can't find housing in heavily-regulated areas. Existing tenants aren't the only people worth considering. They just happen to be the people with the votes and the political power, so it's no surprise that local government focuses on their needs at the expense of everyone else.
You're conflating rent control (which impacts long-term tenant-landlord relations - which are largely a zero-sum game that does not create any new housing units on the market) with zoning and building and lending regulation, and tax rates, and returns on investments in real estate and stock markets and debt (which impacts construction of new housing.)
The entire purpose of this subthread is to tease the two apart. Rent control is a solution for the here and now. Building new housing stock is a solution for the future.
The two are largely orthogonal, and the causal relationship between rent control and construction of new housing stock is incredibly weak. There are a million factors that have a far bigger influence on the latter, compared to rent control. If you want to encourage development, relax zoning, cut the red tape for construction, stop letting NIMBY groups veto projects, raise property taxes, and actually start non-rent controlled property at market values.
If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors.
You have a wrong impression of who most local governments focus on. They don't focus on the needs of the tenants - they focus on the needs of landlords (mostly concerned with keeping rents high by preventing any new construction) and property developers (mostly concerned with getting concessions and hand-outs from their municipalities.) Most city councils are squarely in the pocketbook of the latter. Both of those groups have a lot more money to spend on influencing campaigns and elections, compared to unorganized groups of tenants.
Rent control is a mechanism to ensure that zoning can stay the same and construction is discouraged as much as possible.
>If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors.
Yes and as long as politicians don't get the dumb idea of reinstating rent control they would be forced to listen to all those angry voices instead of just giving them rent control to make them shut up. Rent control is a tool to reduce accountability. It's mostly abused to sweep problems under the rug.
That's the problem. People absolutely love dysfunctional systems. They love it when the machine is broken. They get to complain and then they get their preferential treatment.
> With rents capped, building new homes becomes less profitable.
At least in Berlin, the rent control doesn't apply to newly built apartments (leading to the "split" market the title refers to), so this argument shouldn't apply.
No, this is not the reasoning that helps your argument at all.
It's false to claim you need to kick people out of homes in order to have new developments. Though the notion of 'lack of investment in capped rentals' may be true, that has nothing to do with new housing.
The entirety of Ontario and Quebec (and I'm going to bet most of the rest of Canada) has a form of rent control, in that at least there are caps on the amount of rental increase.
New builds are outside the scope of rent control, so I'm not sure it's a relevant factor in Berlin.
I think a lot of this discussion may be around gentrification as much as anything.
Some nice neighbourhoods in Berlin were on the E. Side and they were kind of run down, but over the last couple of decades the hipsters moved in, now the professionals.
I don't know the ratio, but it would be hard to determine anything from that because rules are broad and have been in place for some time.
What I do know is that construction is vast and booming. Driving through Toronto over the last 20 years it seems there's a ton of new buildings every time I am there.
There's entire area of Montreal that has gone vertical over the last few years (formerly industrial area).
That said, there is a lot of immigration to Canada.
I don't think it's about housing supply. People want to live in the city and in desirable suburbs. These suburbs have existing tenants who could not afford the market rate of rent today. Gentrification basically.
The question is how much should existing tenants be entitled to their apartments just because they lived there for a long time, balanced against the impact on investment in new real-estate because of lack of incentives due to earning caps.
Even if you put all of your efforts into #2, it will take years from the decision to ramp up the planning and construction efforts until enough houses are actually built to have a noticeable impact on the market. And you still have to do something about the situation in the meantime. That's why the rent freeze in Berlin is limited to 5 years.
I think you're missing a larger point: why should people be forced to move? There's no natural law that says people should be ceaselessly pushed around by market forces.
One could just as easily say that you're missing the opposite point: why should policy prevent new people from moving in? In either scenario, policy will disadvantage one group and advantage another. Any policies that aim to give stability to long-term tenants is liable to disadvantage new and shorter-term tenants. There's no natural law dictating that people should be forced to move out, but there's also no natural law dictating that newcomers should be forced away.
Policy should instead favor constructing supply to fit new people moving in while not displacing current tenants. Extending commutes from ten minute bus rides to three hour car journeys in the name of hyperlocal market forces is neither good for the economy or the planet.
Insiders almost always have more rights than outsiders.
Berlin has more than enough people living there, they don't need the outsiders and its within their rights to discourage them from moving in. But this isn't even doing that as they're very welcoming, they merely want to protect the people already living there.
I agree, but I don't think the literal lord of a property should be able to force people to migrate by demanding higher tribute. There should be a rational humane process that isn't driven by simple greed.
You can flip this argument on its head so easily, though: "why should a person be able to keep out others who want the property more, in an arrangement that both the newcomers and the person who has poured their money into the property, solely out of their own selfishness in not wanting to move."
When you frame the motivations of individuals with such simplistic motivations as natural market forces being entirely driven by "greed", I have a hard time believing that you'll actually get to the bottom of things. In much the same way I don't think that workers/unions fighting for higher wages is "greed", I don't think that people that have invested in homes wanting to get the market rate for their homes is "greed".
Real property is a limited resource. We accept that buying a piece of land often doesn't give you the legal right to do literally anything you want with it. You can't open a store on land zoned for residential use, for example.
From there it's just a matter of deciding what is and isn't allowed. I happen to be viscerally against the idea that a person's basic need -- a stable home -- should be overridden by another's desire to get more money out of an investment.
You seem to be of the opinion that people shouldn't have the right to a stable home if the owner of that home wants more money. I... guess that's ok? Not really big on compassion or empathy, but... it's an opinion, I suppose.
Your focus on "greed" completely lacks nuance. A landlord raising rent 30% just because demand is high (when the costs of being a landlord have not meaningfully increased; the concept of "market rate" is irrelevant here) is greed, absolutely, no question about it. A worker or union fighting for higher wages may or may not be greed, depending on the circumstances; usually it's not, because in general employers have much more power than employees (even when unions are involved), and worker pay has stagnated in recent decades, while executive pay has skyrocketed.
> You seem to be of the opinion that people shouldn't have the right to a stable home if the owner of that home wants more money. I... guess that's ok? Not really big on compassion or empathy, but... it's an opinion, I suppose.
I mean, that's painting with a pretty broad brush. Nobody said anything about legalizing doing anything you want with land. You're never going to have a perfectly stable arrangement when renting someone else's property: I don't own a car or exercise equipment; if Uber or my local gym raise rates, I'll be bummed, but I don't begrudge them for doing it (even if it means I have to move to a less convenient gym.) I have empathy for those Uber drivers and workers at the gym.
I can absolutely empathize with those living through increases in rent, I just happen to believe that the solution to that problem is not to implement policies that make those renters beholden to their current landlords forever (even if their circumstances change and a new home would be more convenient). And just as I have empathy for those renters who want to stay in their homes, I have empathy for those renters who got a new job across town but can't afford to move, because they've lived in the same home for fifteen years and can't afford market rate at a new place.
As far as landlords go, I see no reason why they shouldn't be able to raise the cost of rent to keep up with cost-of-living just like anyone else. My current landlord own a house or two on my block, and they make their living off of the profits they earn by renting and maintaining these houses. Just like I want to get a bump in pay every year, it seems eminently reasonable (and not greedy of them) to grant that to them as well. I have empathy for the landlords who provide me with my home, and provide repairs and maintenance.
If the problem that we're talking about is that people can't afford their homes because the rate that others is willing to pay is higher than they can afford, the solution is not to form isolated bubbles that ignore what's going on in the rest of the market and create indentured renters. Just one of many better solutions would be subsidized rent assistance: give the renters the difference they need to make rent, straight up in cash. If costs in the city have gone up by 10%, that's just evidence of the fact that there's a ton of demand fighting for not enough supply. Artificially restricting supply even further is an unsustainable solution for the city as a whole, and far better solutions already exist for keeping people in their homes.
I guess my big point is that if you boil down a complex issue like this to good people vs. bad people, you're not being honest to the actual issues at hand. To assume that landlords increase rent solely out of greed, or to assume that being okay with rent increases implies a lack of compassion, or to assume that support for policies that lock-in rent are the only empathetic stance to hold don't seem to leave a lot of room for discussion or understanding.
> * I don't own a car or exercise equipment; if Uber or my local gym raise rates, I'll be bummed, but I don't begrudge them for doing it*
That's... not really the same? Having to change gyms or pay more for transportation (or use public transit) is a lot less of a drastic life change than having to find a new home, possibly not even in the same neighborhood or city that you may have lived in for years.
> As far as landlords go, I see no reason why they shouldn't be able to raise the cost of rent to keep up with cost-of-living just like anyone else.
I agree, and most (all?) rent control laws account for that by allowing limited yearly increases. SF's rent control increases are indexed to inflation. That's not a perfect proxy for cost of living; maybe CPI would be better. But the point is that it can be done, and landlords can raise rent yearly.
But when we look at non-rent-controlled units in SF over the past 10-15 years, that's not what we see. We see double-digit increases, sometimes above 25%. The cost of living or cost of being a landlord has not magically jumped by that much in a single year. They are jacking up the rent because they can, because they want more money, and because they don't care about how that affects their current tenant. That's... pretty much the definition of greed.
> My current landlord own a house or two on my block, and they make their living off of the profits they earn by renting and maintaining these houses.
I don't entirely subscribe to this view, but I know people who are basically against this form of making a living. Consider that it's literally rent-seeking behavior. Is it good for society to allow people to get into a position where they may have to displace a family from their home because their financial system has changed?
> Just one of many better solutions would be subsidized rent assistance: give the renters the difference they need to make rent, straight up in cash.
What stops landlords from just jacking up rent further? If they know a portion of the rent is coming from the government, and the government will pay a fixed percentage of the rent, they can simply raise rents and demand more, and we're in the same spot all over again. It then becomes a transfer of wealth from taxpayers to landlords.
> If costs in the city have gone up by 10%, that's just evidence of the fact that there's a ton of demand fighting for not enough supply. Artificially restricting supply even further is an unsustainable solution for the city as a whole, and far better solutions already exist for keeping people in their homes.
I used to be against rent control for this reason, but the problem is that it ignores reality. Zoning can be restrictive. Political will for building can be difficult to come by. Planning processes can be lengthy and expensive. Incumbent landowners can lobby to restrict new housing from being built. If we eliminated rent control in SF tomorrow, without making any other changes, it wouldn't magically make rents reasonable across the board. Many (perhaps even most) people in those formerly-rent-controlled units would still become displaced. And that's the point, here: rent control is a way to keep rents affordable when it's not possible -- for whatever reason -- for supply to meet demand.
Also consider its importance when the rental market becomes extremely volatile. Sure, maybe you can say in some locale that over the span of 50 years rents on average only grew 3% per year, and on the face of it, that sounds pretty reasonable. But like in equity markets ("the market can stay irrational longer than you can stay solvent"), that doesn't matter if in that 50 year period, rent increases were 10% per year for 10 years (or 20% a year for 5 years, or whatever). Most people can't handle that sort of shock to their finances.
Pick a duration upon which to re-evaluate the value of property. Distribute this roughly evenly over all the property everywhere so that it isn't all at once.
When a property's up for evaluation, offer it for 'sale' via a distributed dutch auction as part of a block with similar properties in the same jurisdiction (roughly, zipcodes, or maybe divided up should work).
The block is bid on as a whole, with up to 25% (rounded up) of any of it excluded from the bids (high or low) and with any 'inspection noted defects' (post sale) deducted from the transfer price of the property. Price for a given unit would be proportional to the previously evaluated (by market sale or bid) price of the property among the whole group. Any units not receiving sufficient bidding coverage to provide a fair price should be re-tried with the aim towards the median value of the next group of properties in that area.
The resulting offer is then forwarded to the residents as proof of their new property value and the basis for all taxes upon it. The resident has an option to accept that value anytime within 8 months, for a specified date of no more than 6 months from when they've accepted the offer.
Why are we randomly forcing residents to leave? Why don't we just take the available housing stock and divide it between old and new residents in a rational manner? Should an individual or family be kicked to the curb just because someone has a preference for living somewhere? What if they could prove a necessity?
There's a lot to be said for knowing that once you pick a place to live you can depend on it being there as long as you need it and can develop a community, take risks in other areas of life, etc.
> Why don't we just take the available housing stock and divide it between old and new residents in a rational manner?
How on earth to "divide" it fairly though?
This is exactly what the free market (attempts) to do, and might do better without rent control or overbearing zoning restrictions - allocate resources optimally according to demand.
Want to live in a super fancy place in the middle of the city? Pay lots because it's a luxury.
Can't afford that or don't want to? Live further out where there is plentiful cheap housing stock (I said no overbearing zoning restrictions remember!) and commute via a well resourced, publicly funded transport system (unfortunately the US doesn't do this well).
They don't have to accept the deals, they'd have the __option__ and I'm trying to make it easier for them to take the highest bidding option so that someone knows they have the best deal. The highest bid from among bids in their area.
This is to ensure a __fair evaluation__ of a property's value on a real market, rather than some random assessor's opinion.
If you define natural laws as the things that happen when you remove actual laws, then I would say people being forced to move would be exactly what happens.
Yes, if you define natural laws this way, people being forced to move by roving bands of gun toting warlords would be exactly what happens. Or maybe "forced to move" isn't quite strong enough to describe it.
Seems like this way of defining natural laws is a bit silly.
It's very nice for homeowners that have built a small fortune over decades, thanks to rising house prices, to have a way to exit the market and move into a rent controlled apartment in the best part of town.
It's not as nice for young people or other newcomers without capital and a couple of decades in the apartment queue. They still have to pay market prices to rent, but have to make do with second or third hand renting where they have no protection and can be forced to move on a very short notice. Meanwhile, the difference in rents is pocketed by someone that is probably using it to pay down a mortgage on their actual home.
Where would that person in that rent controlled apartment be otherwise? Chances are, on the street. Moving requires upfront capital. It requires promise of a job at the other end. If you are in a high cost of living area like NYC or CA, you might have to quit your job if you want to find a more affordable apartment; there might be absolutely nothing affordable within a three hour drive of your job of cleaning up a downtown office or working a bar, and there may be absolutely no jobs in areas that are affordable. Throw in multiple earners, as is the case of many working poor in overcrowded rent controlled apartments, and you've complicated the problem further and make it even more difficult to wind down your life in one location and wind up in another.
And let's be reasonable here, rent control is not some handout. It's not a subsidy or a tax. The price you pay on your first year in a rent controlled apartment is market rate. Rent control simply says rents cannot go up say, beyond 4% a year. Perfectly reasonable in a world where wages for the working poor rarely go up beyond 4% a year. If landlords want to make more rental income per year, they should instead lobby their city council members to allow them to build more units per parcel, rather than lobby to artificially constrain housing supply with zoning and/or red tape in effort to raise real estate values.
And that will work fine for 1 person or 10 people but not 100 people or the 1000 in that rent controlled building in NYC, because you don't have a Manhattan's worth of jobs for working people in some suburb in New Jersey. Sure, some people can afford the car, the insurance, the gas, the parking, the hours a day commuting, but for those that can't, they end up on the street. In some areas, like in CA, you really don't save very much at all going out to the suburbs. A house like this one (1) would be literally 1/10th the price if not less somewhere else, but such is the housing market for some metropolitan areas in the US these days.
> And that will work fine for 1 person or 10 people but not 100 people or the 1000 in that rent controlled building in NYC, because you don't have a Manhattan's worth of jobs for working people in some suburb in New Jersey. Sure, some people can afford the car, the insurance, the gas, the parking, the hours a day commuting, but for those that can't, they end up on the street.
You’ve got it backwards. There’s not enough jobs in Manhattan for all the people who want to live there. The unemployment rate in NYC this time two years ago (before pandemic) was 4.2%. In Iowa it was 2.7%. In December 2020 NYC unemployment was over 11%. In the rest of NY it was 5.9%. In Iowa it was 3.1%.
Cities like NYC are a Mecca for yuppie jobs. For the most part, they are shitty places for normal people to find work.
> In some areas, like in CA, you really don't save very much at all going out to the suburbs.
That’s because California is the epicenter of bad ideas about housing policy: https://www.latimes.com/opinion/op-ed/la-oe-broughel-hamilto.... I live an hour outside DC and you can buy a 3BR family home for 3x median family income in the county. In CA it’s like 7-8x even in the suburbs.
Everyone gets rent control, whether they'd be "on the street" otherwise or not. My brother lived in SF and drove down the peninsula to Google (an hours long commute) while living in a rent controlled apartment for 10+ years while rent was shooting through the roof. He's not the only one. There's obviously a lot of people living on the street in sf -- rent control has failed to stop that.
totally agree: here's no rent control but a friend could see trickle-down economics at work from his office with half the condos (10years old building) across the yard being "under renovation" so that owners can just squeeze supply to artifically increase prices without being fined for this antisocial behavior...
> everyone... is still living in the same apartment
I don't think this is a function of rent control. The people who were renting 10-20 years ago will still need somewhere to live.
If there isn't sufficient new housing available, then this increases competition for existing housing, but kicking people out of their homes doesn't seem like a good solution either.
If people could move en masse out of cramped expensive rent controlled housing in manhattan, they would. Moving requires upfront capital that a lot of people don't have. Banning rent control doesn't move these working people into more space in some suburb on the outskirts of town, it moves them into a tent under an overpass.
Right. Rent control has created a situation where people are stuck in cramped apartments and no one has incentive to fix the problem. And there aren’t any easy outs. Just have to relentlessly attack the housing supply crunch until rent control isn’t needed.
All rent control says is that you can't raise rent more than x% a year. In my city that is 4%. For a landlord, being able to raise rent 4% a year is a great thing; that's a 15% increase every 3 years. Not all real estate markets even support that level of growth, my rent in collegetown USA was stagant for my four years, but for places where rents surge by double digits a year it puts some brakes in place, since wages don't follow suit with a double digit hike a year.
In a world where wages aren't going up by that much, rent control is needed to protect workers from price gouging by scrupulous landlords taking advantage of a sellers market. I don't know why so many are against simple consumer side protections such as preventing price gouging on shelter; we make it (sensibly) illegal to price gouge on food and water and other essential goods, but shelter is somehow an investment.
Manhattan has been unchanged for 100 years. You’re either rich or poor to live there. It’s kinda bizarre that you see the ability of people to live in their home for 20 years as a problem.
Frankly it goes to show the hypocrisy of many of the cheerleaders for higher density housing, pushing for a future where as an individual you get discarded and banished to the hinterlands when your value declines.
It’s because there’s isn’t that many people that want to live on Montreal.
The root issue in Berlin and SF and NYC is the demand far outstrips the supply. The only solution is to create more Berlins, but that’s not going to happen for myriad reasons.
But politicians need votes within 4-5 years. So who really cares. At least the young people getting apartments now are getting a good deal. Who cares about the future??
I feel the discussion about rent misses the forest for the trees: most houses are sold, not let out by developers. Price of house is affected by the interest rate much more than it is affected by the rent: i.e. if interest rates fall by half, and rents fall by half, house prices go up.
If you could buy a house with zero percent interest rate, then any rent, no matter how tiny, is building you equity.
Then you have to conisder thay mant houses are bough as 'investment' and many owners literally dont bother renting them out, they just wait for price of the house to go up. This is a serious problem in london
Giving people "incentive to move" – aka forcing them out of their homes – doesn't increase supply. Unless they're "moving" onto the streets in which case you did free up a flat.
That could happen if the Mietendeckel is made permanent and the Abgeordnetenhaus refuses to do its job and adjust it as necessary for a few decades. In reality, your strawman is not realistic.
For every one person in that situation, there are nine who can't move out of their rent-controlled apartment, not because they don't want to walk away from their rate, but because they can't afford to.
Well-off-techies who somehow stumbled into both getting a grandfathered rent controlled rate, and a job in the next city over might be a majority of posters on HN[1], but are a tiny minority of the population. You probably shouldn't be basing overall public policy around them.
It's not that simple. Opioids are used all over the world, only in the USA did they cause a crisis. Countries with saner political systems shouldn't judge policies by how they worked in the USA.
Huh? Give one example of a working transfer of the rent controlled apartment from one jurisdiction to another.
Even if there was rent control both places, you'd have to find a rent controlled apartment in the new place. And in reality, you can't, because nobody is willing to leave their rent controlled apartments in the next place either.
Indeed, every apartment in Mountain View is rent controlled by municipal ordinance. But it only applies to increases on existing tenancies; when someone moves out, the landlord can charge whatever they want to the new tenants.
Pure lotto to get a rent controlled building. The whole problem with rent control, is there is always a limited supply and you can't use dollars to vote where more supply should be made. Market forces determine where new construction should go cause its profitable to do so. Otherwise you just have to hope you can get a house and if you can't you are out of luck
It might not be their apartment (or house or whatever), but it damn-sure is their home.
First-world jurisdictions (including all 50 US states) universally recognize that eviction is a big deal, and that it is not equivalent to forfeiting any old rented property. Accordingly, landlords cannot do whatever they please just because they own four walls, a floor and a roof.
Of all the things you could nit-pick, I can't even begin to understand why you would choose this. Your point is not only pedantic and cringe-inducing, it also betrays callousness beyond that of even American courts. This is truly an accomplishment. Bravo.
Woah, slow down. I’m not arguing that eviction isn’t a big deal, or that renters have no rights.
By renting you’re in a (heavily regulated) business relationship with an owner, and they own the property. Growing overly attached to something that you don’t own, and calling it yours is risky. I know that tons of people don’t have luxury of owning their places, but that’s how our capitalism world works - ownership is king.
A purpose built apartment building owned by a property company (of which there are many in European towns/cities) can easily be a home for large part of person (or families) life. There are also fairly strong renters rights in many European countries, unless the tenant wants to move they don't have to.
Renting a converted property or whole house from a small landlord could mean they decide they want it back with short notice, at least that is the situation in the UK. Assuming that will be a home long term is a bad idea.
"Your home" means the place where you live. It's not the same as "your house", which is a building that you own. Evicting a renter is kicking someone out of their home.
“Your” here is like with a chain - as strong as a weakest link in the chain. Creating your home in someone else’s property doesn’t really make it yours overall.
You don't really own your house either. Stop paying your mortgage, stop paying taxes, watch you eventually end up the same as someone who stops paying their rent, just through a slightly different bureaucratic process. Sometimes you might not have the liberty to freely modify your home, much like a lease.
Yeah, totally. But you have very different risk profile in terms of likelihood of you being kicked out - your expenses are much more predictable than with renting. Capitalism approach heavily prefers owning vs renting.
"Price changes in the regulated market dropped relative to those in the 13 other cities. That’s because real estate loses value if its future cash flows to landlords are capped. There was also an acceleration of apartments going up for sale, as landlords tried to cash out of their now less profitable investments." & "And whenever somebody does move out — when moving to another city, for example — the landlord tends to sell the unit rather than re-let it."
Sounds like it is a massive success? Those units don't magically disappear, they are bought - by homeowners. It seems like the landlords were artificially driving up the housing market while not adding any value.
The only problem here is that they limited it to pre-2014 apartments. Maybe they should just extend it to all apartments instead.
So you're driving out renters, who are typically less affluent, in favor of the wealthy.
Whether or not you call that success or failure depends on what you're trying to achieve, but usually these sorts of actions are trying to create housing affordability. Taking most of the supply off the market for new renters (by selling to people who can afford to buy and by incentivizing those who were already renting to stay for as long as possible) definitely does not create an affordable situation for those who need it.
Without creating more supply, you end up with one of two problems for folks at the bottom. Either you don't regulate housing, and their prices go up too much for many to afford, or you do something like this and you keep the existing stock affordable but guarantee that there won't be nearly enough stock for all the people (at the bottom of the economic ladder, at least) who want it.
In this case, you're not helping poorer folks as a class, you're only helping the specific set of poorer folks who were already renters (and who don't need to move into a bigger place, since they can't leave their current rentals). If you want to move to Berlin and you're not rich, you're SOL.
That certainly doesn't seem to be the intended effect, so based on that I don't think it's fair to call it a massive success.
This is not how it works. Without the possibility to rent out or consolidate homeownership, the inflationary pressure on home prices collapses.
You create an insane level amount of supply for homeownership on this market. An absolutely insane level.
Indeed, the vast majority of increase in housing prices is because rents are so high that 7% YoY returns are possible. Without these returns, then there is no way to justify inflation in housing prices for simple homeowners.
If somehow millions of people do buy houses in Berlin, then you build public housing to undercut the price of housing.
The idea that your scenario will happen is not really rooted in fact. To me, it seems like a way to rationalize the principle that rent control must always fail - whereas in the real world it doesn't, see Vienna.
Homeownership in Berlin is very low, at 17% or so. The absolute majority of the housing market is based on renting out units. Before saturation of homeownership happens, a gulf remains.
"You create an insane level amount of supply for homeownership on this market. An absolutely insane level."
You're completely ignoring the fact that homeownership, even if prices aren't incredibly high, requires a large down payment that many people don't have, which is why they rent. Those people still can't afford to buy and are pushed out, and they're the ones you're supposed to be helping.
"If somehow millions of people do buy houses in Berlin, then you build public housing to undercut the price of housing."
This is where your argument totally loses steam. You can't just handwave and say you'll build public housing... that is an incredibly expensive and politically difficult thing to do. When your theoretical solution to the problem is something that is very much not guaranteed (or even likely), and you pretend it'll just be no problem at all, you're ignoring reality and not presenting a useful solution.
> This is where your argument totally loses steam. You can't just handwave and say you'll build public housing... that is an incredibly expensive and politically difficult thing to do. When your theoretical solution to the problem is something that is very much not guaranteed (or even likely), and you pretend it'll just be no problem at all, you're ignoring reality and not presenting a useful solution.
Just issue municipal bonds, and use that money to build. Investors pay the German government to hold their money. Building is not expensive at all.
Public housing is neither incredibly expensive nor politically difficult as long as you have a competent government and laws that don't artificially make it more expensive (see: US).
The economics are very simple. The price of housing if it's not profitable to rent and even less profitable to hold will drop until occupancy is high. Those that can't put down a down payment will rent, the others will buy. If not, the price will just continue to go down.
This argument isn't theoretical. It's an actual process that has been done and works.
Where abouts does it work currently and do you have any data to support this? I'm genuinely curious.
Also don't forget about renters keeping tennancies vacant temporarily, to avoid losing their locked in rent control rate. I have heard many stories of affluent people keeping a "cheap" apartment in New York vacant for years on end.
>This is not how it works. Without the possibility to rent out or consolidate homeownership, the inflationary pressure on home prices collapses.
No, as we seen in north america that's not really true. Homes can go up on speculation alone.
>You create an insane level amount of supply for homeownership on this market. An absolutely insane level.
Is homeownership a necessary component of this? Creating a insane level of supply for apartment rental achieves the same thing. If there are more units then there are renters, prices have to fall to meet demand.
I'm not speculating at all. The article has the data to back the facts : house prices went down in Berlin.
Yes, homes can go up on speculation alone, but this is a bubble that will pop. In North America, rising rents act as a backstop that prevent the bubble from popping, because of guaranteed rental incomes that protect you.
It's not possible to create an insane level of supply for appartment rentals. There's two reasons for this. Firstly, there's the obvious limit to how much you can build within a reasonable commute time with reasonable infrastructure at a good quality of life. Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less. Coupled with 4% rent increases over inflation every year, it's just not feasible to rely on additional supply.
In the real world, free markets lead to rent increasing right up until the level where too many people are in poverty due to high rent. That's because the natural increase in rent is simply too high to be counterbalanced by supply.
That's why from the worst planned cities to the very densest like Hong Kong, housing stays more or less as expensive as it can be without people moving out due to poverty.
The only solution is to make real estate a barely profitable or depreciating asset. This is done here by aggressive rent control. As renting stops being so affordable, apartments are sold, homeownership increases, and renting becomes something you do to prevent depreciation, not to make profit.
Crucially though, here, building more apartments stays profitable, because they can go to homeowners or to people who buy housing as a stable asset (and then rent it out). Coupled with public housing, you can get the best possible trade-off.
> I'm not speculating at all. The article has the data to back the facts : house prices went down in Berlin.
but supply has dropped as well. Freezing food prices would also drop food prices, but won't stop bread lines.
>Yes, homes can go up on speculation alone, but this is a bubble that will pop. In North America, rising rents act as a backstop that prevent the bubble from popping, because of guaranteed rental incomes that protect you.
Not exactly. Price-to-rent ratios are above 30 in major north american cities, reaching as high as 50 in SF. While future cashflows might provide some backstop in terms of your investment, that's really not much of a consolation when you can be doubling your money roughly every 20 years with stocks.
>In the real world, free markets lead to rent increasing right up until the level where too many people are in poverty due to high rent. That's because the natural increase in rent is simply too high to be counterbalanced by supply.
>The only solution is to make real estate a barely profitable or depreciating asset. This is done here by aggressive rent control. As renting stops being so affordable, apartments are sold, homeownership increases, and renting becomes something you do to prevent depreciation, not to make profit.
I'm not sure how rent control fixes this. If you have 1M families but only 100,000 plots of land, they're going bid up the price until enough people can't afford it. This dynamic is in play regardless of whether there are landlords or not.
Nowhere does it say that supply has dropped. If renting is less profitable, then supply of houses to be sold will actually go up.
The ability to rent is not the primary driver of speculation. But it drastically lowers downside risk, which gives less incentive for anyone to pop the bubble.
>I'm not sure how rent control fixes this. If you have 1M families but only 100,000 plots of land, they're going bid up the price until enough people can't afford it. This dynamic is in play regardless of whether there are landlords or not.
"If renting is less profitable, then supply of houses to be sold will actually go up."
You wrongly assume that the landlord gets to make this choice. In this situation, the landlord does not - the tenant does. If renting is made more attractive by rent control, then fewer renters move out and supply is thus lessened.
> when you can be doubling your money roughly every 20 years with stocks.
With housing, a poorly-capitalised speculator can get a mortgage to buy property, and pay it off using rental income, with a deposit of maybe 15-20% of the value of the property. This lets them capture the price increase on a multiple of their deposit.
It is much harder to do something similar with the stock market and loans. Amount loaned would be lower and interest rates higher.
>Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less.
Source?
This also hand waves the fact that a 1% decrease is still great in the face of say, a 4% increase, totaling a 5% spread — even more if factoring in inflation.
Sounds like increasing supply is still one of the best ways to keep prices in check.
I don't have the time to dig up the study, but it already factored in inflation.
Even with a 5% spread, to hold off real rent increases for ten years, you'd need to increase housing by 116%. Which is completely unrealistic. This rent control policy had the same effect as reversing 12 years of rent increases, which would require you to multiply supply by 2.5 over those twelve years.
Needless to say, this is not possible.
Increasing supply is assuredly important and necessary for keeping prices in check. But it will have a much smaller impact than rent control. The main purpose it will serve is to make sure mobility is still good.
The affordability crisis many cities are facing are not caused by the fact that rent increases exist, it's that they're increasing faster than wage increases.
One does not need to hold off rent increases for an arbitrary amount of time, they just have to stay inline with wages to remain affordable. With that in mind, it is certainly not impossible to build enough to keep up with job/wage growth.
I agree that no single policy can fix everything, but the current status quo of pitting the haves (rent control) vs. have-nots (newcomers/movers) is not working.
Nobody was talking about nationwide averages, because the housing crunch is local, not an average of what's going on throughout the country.
Wages in [U.S.] metropolitan areas have increased much more than what was referenced in your source [1], while housing in many of those areas has not kept up with that growth.
Just look at the wage growth at top metros, many of which have grown a lot recently, but have failed to increase housing supply to correspond with that growth.
Affordability crisis in these metros are the result of restrictive zoning policies that greatly restrict supply. The ones holding the bag are those that need to move, or had the unfortunate timing of being born more recently and are stuck paying recent market rates.
Rent control adds even more fuel to the fire by artificially constraining supply even further through reduced liquidity. People will stay longer than they otherwise would in their rent controlled unit because moving to a new one means paying market-rate on a different unit.
No, throughout this entire thread I have been specific about:
- Cities/metros, not the entire US.
- I was also specific about cities/metros that are experiencing a housing crisis, and not making an argument that all metros are in a housing crisis.
- I then cited my sources, and once again was specific about wage growth in top metros and how many have failed to grow their housing supply along with wages. That 86% of the U.S. is urbanized and growing 1% faster than average is not the issue here, it's that where growth is happening, supply is not keeping up.
- I then argued that restrictive policies are constraining supply. In the case of this article pertaining to Berlin, it's rent control. Metros in the U.S. with supply constrains (Like the SF Bay) also use rent control and limit supply.
Despite being specific, you keep conflating my arguments, or steering away from my core argument: Constrained housing supply is not keeping up with demand. I'm also arguing that it isn't impossible to build enough supply to keep up with demand.
The idea that if half of all housing in a city were sitting empty (which is what doubling housing supply means) would only cause prices to decrease by a couple percent is completely ridiculous on its face.
Go look at SF housing prices lately to see how the moderate increase in supply, from people moving out of the city lately, has caused an absolutely huge rent drop of around 30% .
> It's not possible to create an insane level of supply for appartment rentals
This is technically true, but not for the reasons you list, and it isn't the case here.
You can always build up. 150 floor buildings are not possible - if rent goes high enough they are worth building. Nobody is going to build that if they don't expect a return on investment though.
It isn't a problem in reality because jobs face the same pressures. eventually some company will decide rent in those dense neighborhoods (sometimes cities as well) are too high, and move. That moves some housing demand with it.
Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less. Coupled with 4% rent increases over inflation every year, it's just not feasible to rely on additional supply.
That doesn't follow. To build more supply the question how much it costs to build vs how much you can rent for. A a landlord the total profit in rent for the city isn't my concern it is my marginal profit that matters. Even if we double the supply of apartments in the city, my building 100 more isn't going to make much a difference in that, but I get a larger share of that 10% decrease in price and so my profit is still higher building 100 apartments than zero.
I don't know what is going on in Berlin (I can guess). I know in San Francisco the city has for many years refused to allow building at anywhere close to demand. Thus more people want to live in the city than actually can get an apartment there. Plenty of builders are willing to build more supply, but they are not allowed to under reasonable terms so they don't. (as a result of this there is a lack of experienced people in construction and so even if SF allowed unlimited building in practice there would only be a gradual uptick in building over 10 years while the industry gets experienced people back)
You are assuming that the only reason anyone would build is to rent things out. This ridiculous. A great many constructions are for people that own their houses. That alone solves the conundrum.
It doesn't in SF, because the problem there is that they can't reasonably build anything. Whether it's a house or an apartment building, it's not really getting built. And building a new house to replace an existing house (which is happening), doesn't increase housing stock. It just makes it newer.
Based on what I've seen elsewhere in Germany, Berlin will start seeing lots of empty apartments now that it is too much of a gamble whether you'll earn profit renting (since Germany's laws protect the renter more than the landlord, which you can combat with a portfolio of properties that earn a certain level of rent to cover the non-paying tenant that you can't evict), and because there isn't much of a good reason to sell (maybe in a few years things improve, or maybe the apartment is useful for family, or one's own future retirement home).
You could try the Japanese solution of treating houses like cars, with strict inspections and tearing down/rebuilding essentially buying a new one every 10-20 years. (Obviously they can't export the used houses so it's not a complete analogy)
> If there are more units then there are renters, prices have to fall to meet demand.
Not if it's so cheap to keep empty apartments around that you would rather not make money now, in the hope that you will be able to make more money in the future.
It's not exactly the same, but around here there is a huge oversupply of spaces for shops/restaurants. Owners prefer to keep them empty rather than have someone give them money.
EDIT: Well, maybe it's not actually oversupply. There might actually be a lot of demand, but not at the excessive prices landlords demand.
>Not if it's so cheap to keep empty apartments around that you would rather not make money now, in the hope that you will be able to make more money in the future.
Ironically rent control laws that cause this. Accepting a lower rent now would mean locking in a lower monthly rate for the future, whereas if you left it empty you can hope that the rental market will recover and charge high rents in the future.
If only the state could heavily tax empty apartments and cap resell price to counter that. But wait, it actually can.
Pushing renters and speculators out of the housing markets in favor of people who actually want to settle in the city is probably the best you can do as a municipality.
I must absolutely thank you. I derive personal enjoyment from broken systems and the mass suffering that they produce. Everyone is happy. Isn't that nice?
My personal enjoyment is watching people argue against measures which have demonstrably been effective in cities around the world (Vienna, Toronto) based on purely theoritical and ideological reasons while failing to address both their poor understanding a subject underpining their ideology and the fact that the current situation is actually broken.
This is exactly the BS that happens with houses in foreclosure / bank owned. The solution should be to raise taxes on units that are not presently being used or actively being refurbished / litigated / etc.
Commercial spaces aren't rent controlled here, and many of them are empty. Many apartments are rent controlled, and I've never heard of them being empty for any appreciable amount of time.
>Commercial spaces aren't rent controlled here, and many of them are empty
AFAIK that's not due to government regulations, but due to how banks handle valuations. Leaving a property empty doesn't affect the valuation, but accepting a lower rent does. This has effects on the landlords, such as making it harder for them to get new loans, or triggering covenants on existing loans.
There is still legal uncertainty. The German Constitutional Court hasn’t settled this matter yet. I would assume that that’s causing most uncertainty and people waiting. A temporary effect until legal certainty exists.
If there are 1000 units and they are being rented out then people are more willing to move to a residence that suits their needs better. When it makes sense people move away.
Once you add rent control people might stay simply because of the low rent, even if they are fully capable of paying market rate rent. They might have to commute to the edge of town and it still is a better deal for them. You get a stagnant housing market where people rarely move. The vacancy rate goes down and instead of renters always being able to at least visit an apartment with the fair chance of competing with say 5 people at most you now have dozens of renters all looking at the same apartment. This gives the land lord more power to charge higher prices and since he has to cancel out the losses from existing rent controlled apartments he might not even have a choice and simply increases the rates when possible.
The problem is that the land lord is being put under more pressure to perform and thus he becomes more selective and only gets the "best" tenants which favors the wealthy.
Of course, all those people getting paying dirt cheap rent are happy since they benefit personally from an externality.
> Indeed, the vast majority of increase in housing prices is because rents are so high that 7% YoY returns are possible. Without these returns, then there is no way to justify inflation in housing prices for simple homeowners.
The market is constrained by supply, which is constrained by regulation. If you want to see how this works without any rental market, look at Oslo. The prices are truly something else.
You assume prices were merely driven by greedy landlords. That is of course untrue. Prices were driven up by the popularity of the city, with people seeking a place to rent outbidding each other and bidding prices up.
That demand will not simply go away, but newcomers will have to buy instead to rent. Or, there will be a huge black market. I've read an article about Stockholm were that seems to be what has happened.
A big irony is that the left who created the law has hurt some of their staunchest supporters, who did subsist by subletting their flats, which they had rented at old, low prices. That income is now also going away - it is not just "greedy rich speculators", but also transgender artists getting by on minimum income from subletting their flats whom they have hurt.
It is of course possible to lower prices by making the city less attractive. Socialism has succeeded in doing that already once, that is why Berlin was so cheap in the 90ies.
>So you are replacing landlords with people who actually live there.
...who are now saddled with decades of mortgage payments, and have a high percentage of their net worth being tied up in a not very well diversified asset class.
If land prices are increasing faster than inflation it is bad unless they can get out before the bubble pops. Obviously if they bought too high that is a bad investment. Lets ignore this and assume a sane market where values mostly are similar to inflation.
While property increases with inflation are not nearly as good an investment as investments that do better than inflation, it isn't as bad as it sounds. The whole point of buying property in this case is a place to live. So in 30 years you no longer have a rent payment at all, and in between your rent never goes up. This payment situation needs to be factored in to the calculation since you will be living someplace no matter what. (unless you would normally live in a cardboard box) As a result people who invest in property to live in need to invest a much smaller portion of their total portfolio into something else. And since this is a place to live it doesn't matter how well it performs overall since you are not selling (at least not until you go to a nursing home which you can/should insure for).
Let me point out that rent doesn't increase when you own property. So if you invest just the difference between market rent and your rent over the years you will have more money to invest. Now that money doesn't have as long to grow (since it isn't front loaded as much), but owning is still a good part of a long term portfolio.
Note that the above makes some assumptions that may not be true, or that could be true but you don't want to for lifestyle reasons. That is perfectly fine - there is no one size fits all. Every situation is different, you need to make your own decisions as best you can. The first assumption above is you live there for the rest of your life (some amount of trading is allowed, but be careful as each trade is costly), the second is you pay off the dwelling.
Technically, for many owners their carrying costs do increase year over year. Property taxes, HOA, maintenance, etc all tend to increase over time. Depending on where you live, these non-mortgage costs can be thousands of dollars per month and they don't go away when the mortgage is paid off.
If you look at it in terms of portfolio construction, you would never want more than 10-20% of your net worth in your home, much less the 50+% many people have in practice. Owning your home is a pretty mixed bag, financially, and made worse in practice because people have far too much of their net worth in it. They'd benefit from renting much longer and buying much less home if it was a financial argument.
I've owned my current home for several years, and go back and forth between renting and owning. Even though I live in a "hot" property market and benefited from appreciation, I actually lost money versus renting the equivalent and investing the difference, and I do keep track.
Carrying costs are important to this consideration. They shouldn't be significant compared to rent or the payment, but in some areas they are.
I fully agree that 50% of net worth in a home is too much. Though I doubt that the people you are thinking of actually have that much net worth in a house - the house might be worth that much, but odds are they only own 5-10% of it, and the rest is net worth of the bank. By the time your house is 50% yours you should have seen enough decrease in carrying costs - compared to inflation - that you have more investments elsewhere to pay it off.
The analysis of lost money vs investing needs to compared over a lifetime not a shorter span. Your payoff comes at the end when you need much less invested in the first place to pay for the rent you no longer owe at all. If God hasn't told you the future in detail you can't know: how much will inflation be, when will you die, and other such things that affect how your lifetime investments play out.
That last also gets into life goals. if your plan is to live cheap and work for the rest of your life to leave a large sum of money to your heirs that means a different investment strategy vs someone who wants to retire early and leave nothing behind when they die. For the latter there is a difference between someone who wants to retire and spend all their time in the shop building something vs someone who wants to retire and travel the world.
Only you know your life goals today (and you don't know how they might change in the future!) so you need to make the right decisions for your. Renting and buying a dwelling both have pros and cons so there is no right decision for everyone.
> The caps represent a windfall to one group of tenants: those, whether rich or poor, who are already ensconced in regulated apartments. Simultaneously, they hurt all other groups — especially young people and those coming from other cities — by all but shutting them out of the market.
That’s not success, that’s picking winners and losers. Same as with SF Bay Area, Santa Monica (in LA) and any other place with rent control - being in place early makes you a winner. Finding a vacant rent stabilized place is like winning a lottery. Problem is what do you do with young people that should be moving out, or moving to the city for school?
Only real answer to housing is to build more of it. Else, you force people to move, pay more and/or cram ever more bodies into the same space. The latter is also what makes poor much more vulnerable, and not just in the pandemic.
The solution is make it so that no one benefits from this dynamic (via a land tax), rather than just expanding the group that gets the benefits (which will never expand to include everyone, since land is scarce).
And then, of course, California decided to pass Proposition 13 [1] which made sure that owners who got in early also "win" vs more recent buyers.
There are owners of identical homes on the same block in San Francisco who pay 10x what their neighbors pay due only to when they bought (and the resultant purchase prices).
This is unlike saner places in the country which reassess property values regularly.
Even without Prop 13, this problem still applies, and is inherent to real estate.
Buying land is essentially buying a monopoly (since land is in fixed supply), and getting access to its rents for perpetuity. Prop 13 gives you even more of the rents, but in places with Prop 13, property taxes are low enough that most of the rents still go to the landowner.
You can compare land to taxi medallions, and see that all the reasons taxi medallions are bad also apply to land. Allowing indefinite ownership of the rents from a scarce resource essentially gives a slice of the future productivity of the community to those who were lucky to buy early enough.
Not at all, owners take on the risk and capital responsibility. I suspect those who bought in Detroit in the peak of that market would not look like a winner today. An extreme example, but still. Other less extreme examples would be in international markets where the base currency has declined - nominally the houses are more expensive, but in real terms could have lost over 50% of value.
If the housing market is relatively flat (and the currency is stable), then owning still typically provides you with benefits, such as equity accumulation.
Unfortunately, Berlin-style appears to mean “moving is almost impossible because 50 other people also want to view the same flat as you at the same time you’re looking at it, and you literally can’t outbid them”.
That was my experience, anyway. I eventually found a house share to get started, and after I arrived a hooked up with someone who happened to already have a place big enough for me to move into.
If I move within the city again, it will have to be by buying a place.
Of everyone I know, the very few who looked for and somehow got a new flat right now benefit even more as they don't need to fear any backrent - their rent is lower from the start.
In my case, yes I benefit from the lowered rent but it's even harder to move if I want to (which I would if it was easier), I might owe a pretty big amount if the law is overturned, my flat is now getting sold and the other tenants are writing on the walls and threatening 'war' over the sale (even though realistically nobody here can be kicked out for 10-11 years after the sale).
> Those units don't magically disappear, they are bought - by homeowners.
I think you're assuming that the units are bought by owner-occupants and not other investors who have higher risk tolerance or who are betting that the law won't survive review by higher courts.
If you know more than others, that's great. If you're going to post about it, please share some of what you know so the rest of us can learn. Just putting the other person down doesn't help, and poisons the atmosphere.
The situation in Berlin before the policy change was that the city government had made it very hard to build apartments at all. Each time a project it developed, the developer is blackmailed into supporting various unrelated policies, being it parking space related, maximum stories, etc., and sometimes capriciously denied permission to build. This is how my green-leaning, government-trusting architect friends describe the situation.
This happened all the while time Berlin changed from being viewed as a forgotten backyard in Germany with few companies and high unemployment to the capital city of the dominant and richest country in Europe. Especially the great financial crisis accelerated this change of perception.
Consequently, many people moved to Berlin. For many years 100k people per year moved into a city of 4m. Stated in terms of economics, supply of apartments was very steady, and demand jumped up.
The sound response of a market is to signal that through price hikes. That should encourage investment in residential building. When this is being suppressed nothing can even get better. Only longtime renters are favored. People with already cheap and large apartments benefit. Losers are those young couples expecting a baby.
A solution that could potentially work would be to accept temporary pains from high prices, remove regulatory obstacles from new construction and let the industry find a new balance. Maybe accelerate the process by governmental subsidies, if you like that sort of policy.
But the current policy can't work in theory, it doesn't work in practice. And it only benefits old established interests who are privileged already.
I moved to Berlin two years ago and the finding a house was incredibly exhausting. As the article mentions, there are two categories, rent capped apartments and non rent capped apartments.
For the first category, there are 2000+ applicants per day per apartment, making it impossible to actually have a chance to get the apartment. The odds getting that apartment as a foreigner that do not speak German is non existent, you actually have better odds on playing lottery and winning it, then buying a new apartment.
The second category is the overpriced apartments, the "landlords" (mostly the same three evil companies) are asking stupid amounts of rent for small apartments (1100 - 1200 cold rent for 50sqm ??). Those apartments are not accessible to 90% of the population. They are very happy to rent to the foreigners, since they can extract money from them, plus they do not know the local laws, so they can push newbies around.
Currently there are two categories of people living in the Berlin as well: The new comers, who are screwed and the old renters who rented for cheap, who landlords can not get rid of.
The first category are mostly expats, who are being screwed by landlords who do not want to rent to foreigners (especially if you are not from Europa), so they are pushed to new, non-rent capped apartments, making their lives even harder.
The second category is people rented huge apartments for 300 Euro per month 10 years ago, with 2% increases per year, who are not going to move soon.
Berlin wants to be the startup capital and an expat center, but it is not going to happen if they allow systematic exclusion* and abuse of expats that are trying to settle in the city.
I can go and rant for days but I think this post is already long enough.
* I did not want to use "racism" word here but it really feels like it is.
Berlin's a big city and I bet most people don't care about start-ups or expats. Don't confuse what some politicians and companies are saying with the broad opinions of the entire population of Berlin.
Now that we got the alleged need for expats (which isn't) out of the way, let's address some of the other points:
* if you're a foreigner, especially from outside Europe you have less of a shared cultural background with the typical local landlord. Of course they're gonna like someone local more.
* if you don't even speak the local language, you're at a disadvantage in almost every imaginable situation in a foreign country. Some people are nice and make an effort to speak English - that's a courtesy, not something that is owed to you.
It looks like you were sold some fantasy start-up heaven which doesn't exist. Not everything revolves around software and nomad developers, shocking as that may be.
> it is not going to happen if they allow systematic exclusion* and abuse of expats that are trying to settle in the city.
I don't think its deliberate exclusion/racism as you say.
When we looked we always found that there were other people more deserving than us. Like a pregnant couple with baby always needs more room more than us. If you are German, speak German, and are going to live here a long time, it makes more sense for landlord. If you don't earn a tech salary you will struggle to find anything within the city, so you are probably more deserving.
The tech foreigners usually can pay more, they just see cheaper rents that they can't get because of rent control and feel hard done-by.
If Berlin was your city, Germany your country, would you prioritize apartments for the wealthy tech people over the teachers for example?
All that matters should be how likely the person is able to pay the rent and not damage/burn down the apartment/disturb the neighbors.
> would you prioritize apartments for the wealthy tech people over the teachers
I am not German so I am not sure how to answer that. Logic says someone that earns extremely well, has unlimited working contract and is educated very well is a very good candidate, just as a public worker. But, for some reason, the applications that I have sent in German, even though the company representative (or very rarely the owner) is able to speak English, got 10 times more responses. Go figure.
>"The second category is the overpriced apartments, the "landlords" (mostly the same three evil companies) are asking stupid amounts of rent for small apartments (1100 - 1200 cold rent for 50sqm ??)."
Which companies are these?
>"The first category are mostly expats, who are being screwed by landlords who do not want to rent to foreigners (especially if you are not from Europa),"
Unless I'm reading this incorrectly doesn't this contradict your earlier statment that they want to rent to expats "since they can extract money from them, plus they do not know the local laws, so they can push newbies around."?
I'm curious How did you ultimately end up finding a place?
My first apartment was a limited lease for 6 months (like AirBnB but a private company), which I could terminate within a month if I could find another place. I could not, had to extend it to 2 years (the landlord said it will not be possible to extend beyond 2 years). After the 1.5 years of search, I was able to get not so affordable but acceptable place.
1.5 years to find an apartment, that is not cheap but bordering the acceptable rent. Nobody should suffer this in their lifetimes.
I am not going to name the companies and get sued. Stuff like that are serious in Germany.
First question: I looked mostly in the center, nothing more than 7 kms away from my workplace. I needed somewhere that I can commute by bike, since the traffic and the fight for parking spaces are too exhausting. S-Bahn is too overcrowded.
For your second question, double of the rent cap, two rooms (or maybe 1.5), don't care if the building is old or new. Partly furnished is preferred but I do not mind unfurnished.
Please post with your main account if you are going to ask more personal questions.
Confirms my thinking that everyone wants to live in the middle and there isn't enough supply and really not enough space for new supply.
From my anecdotal experience, if all listed rents were double the rent cap, all apartments would still be filled, but lots of people would be locked out of the market.
Classic gentrification problem. I don't know the solution.
I think for foreigners it just means paying a ton more, and just accepting that the value-for-money trade-off when seeing cheaper but more desirable places is not real - because they are mostly unattainable.
>as a foreigner that do not speak German
Nothing is preventing you from learning Hochdeutsch. It is a simple language. Easier than python, certainly.
The problem is not caused by these land lords or real estate owners, but broken USSR era govenrnment planning combined with extremely lazy and corrupt modern government. Berlin had higher population than today in 1938, and the city administration did not have any issues.
> The situation in Berlin before the policy change was that the city government had made it very hard to build apartments at all.
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
I have mixed feelings about this policy as a berliner.
But the article is definitely skewed towards the landowners and huge renting companies.
Some facts for you:
Rate of home ownership among Berliners, Londoners, Parisans:
- Berlin: 17.5%
- London: 52%
- Paris: ~60%
The main problems is huge home-renting corporations.
The article refers to a separate discussion about breaking up huge companies that own more than 3,000 apartments. As far as I know this criteria meets only a couple of huge companies such as Deutsche Wohnen that over the past couple of years have artificially created a sense of scarcity and caused the rent to increase without a proportionally increase to wages(Not only blue collar but also High Tech wages)
It is very ironic that companies such as Deutsche Wohnen were able to grab so many apartments when Berlin wall fell with dirt cheap prices. You can argue rushed privatisation caused this problem and something needs to be done if Berlin wants to avoid becoming SF.
Regarding the rate of home ownership among Berliners. I remember reading that Germans in general are more likely to to rent than own their housing. Is that not true?
>"It is very ironic that companies such as Deutsche Wohnen were able to grab so many apartments when Berlin wall fell with dirt cheap prices. You can argue rushed privatisation caused this problem and something needs to be done if Berlin wants to avoid becoming SF."
Interesting. Is Deutsche Wohnen origins the old East Berlin then?
> Interesting. Is Deutsche Wohnen origins the old East Berlin then?
Not really, no. It was founded in 1998 and initially had no Berlin holdings at all. It then bought various entities with housing stock in Berlin, which also have complex histories - e.g. one example was founded as a city-owned company in the 1920s, lost its East German properties obviously but continued to operate in West Berlin, after reunification got the eastern bits back, and then was privatized in the 90s. But of course East German state ownership plays a role in how the situation overall came together.
>I remember reading that Germans in general are more likely to to rent than own their housing. Is that not true?
The majority rent not because of a lifestyle choice but because they can't afford to buy anything so renting is their only choice. What else are they gonna do, be homeless? All mid-upper class German families I met owned their properties.
Potential math illiteracy aside, is this such a terrible policy? This seems to me like a nice compromise that provides some stability to the renter while still allowing the landlord to raise the rent substantially over several years.
Downsides that come to mind (but that don't seem too serious):
* It incentivizes landlords to keep empty apartments on the market longer before lowering rents to the true market price.
* It might encourage landlords to regularly raise prices more than they otherwise would, lest they forego the limited opportunity.
I'm normally much more free-market oriented, but I ask with the understanding of how much work and expense is involved in suddenly needing to find a new apartment. Just patching the holes in the drywall can take a full day. Then there's credit check fees, truck rental fees, pet fees, admin fees, move-in fees, new couch because the old one doesn't fit in the new living room fees...
> encourage landlords to regularly raise prices more than they otherwise would, lest they forego the limited opportunity.
if they raise the price too much, they will not get tenants as long as there's competition between landlords. So all this is basically just another way of saying there's not enough supply for the demand. So policies should target the supply problem directly, such as subsidies for new buildings, or tax incentives, etc.
I don't mind this as 7% per year seems like a reasonable safety measure to me. The issue is they need to make it much easier, cheaper, and faster to build more housing along with it. Portland is probably particularly bad about this, as I see plenty of new apartments and rowhouses going up in Hillsboro and Beaverton. Still, these units aren't what I'd consider affordable.
I think we need to seriously reconsider the effect some building requirements and property taxes have on housing prices. It may not be ideal but very small apartments with shared commons and no parking for a few hundred dollars a month would be better than living in an RV or on the streets. This is a pretty common setup in Japan, not to mention college and military dorms. This isn't even that different from having roommates.
For the most part, our high housing prices are purely a matter of supply and demand. If you own a piece of land, and you want to build housing, you're not allowed to build as much as you want. NEARLY EVERY building proposed builds to the maximum currently allowed on that land.
The market wants to supply more housing. We don't let it, based on laws that originally were created to keep black people out of neighborhoods. Those laws continue to be very effective at that goal.
> The market wants to supply more housing. We don't let it, based on laws that originally were created to keep black people out of neighborhoods. Those laws continue to be very effective at that goal.
Why does this continue to be such a problem in deep blue areas?
Go on, mate. I think we both know why that's the case. Poor people and rich people make poor neighbours for each other. Maybe you can afford the house, but you can't afford the car, the motorcycle, the road bike that costs more than your annual daycare.
That is a pleasant breeding ground for justification for crime.
So there's the anti-poor angle that rich deep-blue neighbourhoods take and that ends up being racially discriminatory because of the underlying demographics.
> So there's the anti-poor angle that rich deep-blue neighbourhoods take and that ends up being racially discriminatory because of the underlying demographics.
That makes sense, but that just raises the question of why racial demographics are so regressive in those areas.
I genuinely asked because I don't know much about the inner workings of progressive coastal areas. It seems like if nearly all of the politicians and most of the population are committed to very progressive racial policies, you would expect to see... I don't know what exactly, but not this. I'd like to understand why things went so wrong.
Are there any US cities that are good examples wrt to racial demographics? Something that we could learn from?
They are committed to these policies in the abstract but any time there are winners and losers for a policy, the losers will fight harder than anything.
Second and third order effects are also hard to control through publicly popular policy.
And I am not aware of any significantly sized US areas that don't have race-discrepancies in educational attainment. American society has very strong positive feedback loops and I think the strong economies of the coastal paradises amplify that. Take any uneven distribution of wealth and it will get worse in that environment.
It's a problem everywhere in the US; all cities have these policies, but the coastal cities have much higher demand.
The reason you don't see prices spike in inland cities is that they can expand outwards, and they don't have much economic opportunity. Cities on the coasts can only expand in one direction - and because of international trade, they have more economic opportunity, so more demand.
There were limits like this already in place in Germany. Rent could only be increased every 12 months, and for Berlin, I believe, no more than 15% total in 3 years.
It didn’t help much. Landlords could circumvent it in many ways: by offering contracts to new renters that automatically increase each year, which then isn’t bound to the limits. For existing tenants they could do bullshit renovations that trigger a modernization clause, also killing the limit. Or put an Ikea couch in the apartment, then renting it as furnished, again circumventing some of the rent limits. Sure you could sue, but in many cases people were just happy to finally find something and ate up the higher prices.
Although I’m positively affected by the latest rent control laws in Berlin, I’m also not totally sure what to make of it. But I wanted to let you know that this is by far not the first law that was passed to try to curb price increase.
There are market dynamics at play in both places. If the rents are increasing by double digit percentages within a couple years then that means that demand is rapidly outstripping supply. There's really only two options here: Reduce demand by banning people from moving to the city, or increase supply by building a lot more housing. #1 is illegal in the US and likely illegal in Germany too, so #2 it has to be.
Those policies often work through gradual tightening, rather than a sudden change. So it might start with a 7% + CPI cap, then a few years later they'll change it to 5%, then remove the CPI, and so on. Sometimes the cap is allowed to be changed by a simple committee vote or determined by a "Rent Board," which is easier than passing a new law. That way the initial law can get passed without too much opposition.
More likely, someone did figure it out and convinced the legislature and public because they know they will react with emotion instead of math
In my experience, people don't have experience outside of their local bubble, so you can easily recycle policies from another city or slightly tweak them
Thats what they really mean by land of opportunity
When something is baked into the law like that landlords will raise the rent. Renting in San Diego my last two places never had a rent increase (I lived in each for about 4 years per).
If rent increases are capped at 7% per year, landlords will have an incentive to increase it at the max, because that gives them more flexibility the next year.
For example, let's say the free market would raise rents 5% this year, and 8% next year. A cap of 7% means the rent will rise 7% this year, as the landlord won't want to have caps permanently reduce future rents.
This is a weird argument. Would this still happen if rent increases were capped at 10%/year, what about 50%/year? At some point no one is going to rent at the rates you're asking and you're going to have to stop.
It all comes down to business risk. For example, with all the trillions being printed and stuffed into the economy, I'd be afraid of a return to 20% inflation like in the 70's. If my rates were capped at 7%/year, you can bet I'd raise it now by 7% just so I don't get caught next year with 20% inflation and only a 7% rate increase.
Yes, right now, I'd risk fewer tenants with 7%, but balance that against what might happen next year when I'd be full and still lose money because of the cap that year.
They already had an incentive to increase it at the max, because it's more money in their pocket.
For this to be true, they would have to either (1) under present conditions, not be raising the rent to maximize profit or (2) under the scenario, raise the rent past maximum profit
Landlords in a free market will usually act to maximise longer term profit not rent. Increasing rent in the short term by too much (even if the resultant rent is below market) only to see a tenant leaving soon afterwards can be a net loss due to void periods and the costs of finding a new tenant etc. Eventually the gap to market rent may grow to the point where the risk is worth it and then an increase makes sense.
In the presence of a cap this strategy becomes riskier so it forces landlords to think about a shorter term horizon.
There's also a signalling effect of the cap which may mean tenant reactions to an increase at the cap are different.
> They already had an incentive to increase it at the max, because it's more money in their pocket.
They'll set it based on supply & demand. But caps increase the business risk to the landlord, and therefore increases the price as risk always translates to an increased price.
I think the parent's point is that since price increases are capped, landlords cannot increase beyond a certain point in a single bumper year. To compensate, they may increase rents beyond what they would otherwise to be able to maintain a similar average increase. Citation is needed, of course.
>In a food shortage, for example, regulating the price of bread only trades one expression of scarcity (high prices) for another (empty shelves).
Well sure. But the total amount of people who have some bread is now greater, versus a select few wealthy people getting all the bread they want, as the wretched masses stare longingly. You can either increase total happiness, or concentrate it to the powerful. It's pretty clear by the tone of this article which side the writer lands on.
Rationing bread would increase the number of people who have some bread.
Regulating the price to a point well below the free market supply/demand driven price causes a decrease in the amount of bread supplied to the market (and probably increase hoarding/decrease the breadth of distribution).
Think back to toilet paper shortages last spring. Rationing was arguably the best move (and was what local markets around me did).
I think this is something that is often overlooked in progressive circles. Markets treat high prices as signal to increase supply. When supplies cannot be increased you get market inequities.
Rationing for goods like bread, paper, milk, gasoline, etc. Can be a stand-in while the problem that is preventing the market from responding by increasing supply is fixed.
The problem is that usually supply isn't the problem, it's demand. For example, America's main problem with agricultural products is finding enough people to buy and eat them. That's why the government spends lots of money on agricultural supports. Hell, even welfare programs, as inadequate as they are, help stabilize prices by basically injecting a minimum amount of demand into the system. So, usually, supply shocks are temporary and resolvable without needing to resort to price gouging. The producers know that prices of a particular commodity aren't going to collapse if they invest money in switching over to produce it. Instead of getting a 10x jump in the price of, say, bread; it gets a little hard to find at first and then goes up 5%.
Housing is almost completely the opposite; supply of the underlying land is fixed and most cities cap density. We can, of course, uncap density; but that still requires we basically displace everyone living in the city eventually to make way for larger buildings that can house more people. The thing that really grinds my gears is that the solutions to housing scarcity effectively amount to building a wall around a city and making foreigners pay for it - and they're often championed by exactly the same kinds of people who otherwise are rightly opposed to immigration formalities.
> we basically displace everyone living in the city eventually to make way for larger buildings that can house more people
In theory, this is true. In practicality, at least in America there's enough land with very little density, that a new building could be constructed while displacing basically no one (because the previous occupant of the land is already willing to move, it's just that the new seller isn't allowed to build anything).
Eventually, yes, we'll get to point where displacement is an issue, but right now it's not worth worrying about. Building dense really is a "free lunch" so to speak.
I probably agree with you overall, I just bring this up because a lot of NIMBY arguments use displacement as the boogeyman, and I'd rather not give them more support.
> The thing that really grinds my gears is that the solutions to housing scarcity effectively amount to building a wall around a city and making foreigners pay for it - and they're often championed by exactly the same kinds of people who otherwise are rightly opposed to immigration formalities.
Many of the arguments even go beyond that and sound like anti-immigration arguments: I've heard a lot of people say that techies/yuppies in SF should go back to the cities they came from.
I almost want to agree with you on the displacement point, but the problem is that building on empty land is how we got Phoenix. The ROI on dense buildings isn't great unless you're closer to the center of an already developed city, and then all the problems with displacement and NIMBYs apply. Also, building out to avoid zoning laws isn't great for the local environment.
That being said, displacement almost certainly shouldn't be used as an excuse not to build... but it is. I bring it up specifically to front-run certain left-NIMBY arguments against ever increasing housing supply. Equitable pro-growth city planning needs to assume that the short-term pain of growth will be borne on the backs of the poor; and then implement policies to ameliorate that pain while still promoting density. Just dismissing left-NIMBYs as crypto-Trumpist won't dismiss their otherwise valid concerns, as much as it really feels good to do so from behind a keyboard.
> I almost want to agree with you on the displacement point, but the problem is that building on empty land is how we got Phoenix. The ROI on dense buildings isn't great unless you're closer to the center of an already developed city, and then all the problems with displacement and NIMBYs apply. Also, building out to avoid zoning laws isn't great for the local environment.
I think you misunderstood my point. What I meant is that are many empty/available lots ready for development in the city, which could be redeveloped with minimal to no displacement. The problem is that zoning laws (and in many places like SF, community reviews/objections) prevent building there.
For example, in Sunnyvale, a developer bought a empty mall, so they could redevelop it into housing/offices. However, that project took years to get started because of lawsuits and red tape. In New York City, a proposal to replace a parking lot with 300 units of housing in South Seaport was rejected for not fitting the character of the community. Why worry about displacement if projects without displacement take forever to build, or are not allowed?
More generally, most cities have plenty of neighbourhoods that are currently zoned for single family housing. Increasing density there would lead to minimal displacement, because the density is so low that you'd displace on the order of 10s of people per project, which is not a massive amount to deal with.
And if we redefine displacement as being forced to leave against your will (which I think is what left-NIMBYs and I really care about), you could probably get that number down to 0, because I'm sure there are many owner-occupiers who would be willing to sell their property to a developer and move out; they just can't because zoning law forbids increasing density.
> then implement policies to ameliorate that pain while still promoting density
Many efforts to increase density take this into account, and are designed to minimize displacement. For example, the upzoning bill in CA (SB 50) disallowed rebuilding properties that had renters occupying it for the past 5 years, which means that only owner occupied units would be rebuilt (and thus causing no displacement under the definition I used above).
Eventually, we'll run out of empty lots and owner occupied properties in cities to upzone, at which time, we'll have to decide how to make the hard tradeoffs around displacement. But right now, we're not close to that point, so there's no need to muddle the waters with future concerns. Let's just build.
> Just dismissing left-NIMBYs as crypto-Trumpist won't dismiss their otherwise valid concerns
I think left NIMBYs do have valid concerns, and I don't think they're "crypto-Trumpists". My opinion is that they're just "useful idiots" [0] for existing property owners and landlords, because they don't have a good understanding of land economics and how their proposed policies will interact in the real world, which just leads to homeowners and landlords getting richer at the expense of those without property.
[0] - Sorry for the harsh phrasing. I don't mean this in a super derogatory way, I just can't think of another word for this.
I agree, although the toilet paper situation was a bit different IMO because the shortage wasn't in the supply chain -- it was absolutely clear that inventories would restock sooner or later. In that situation, higher prices wouldn't have incentivized more production.
Still, supermarkets could have temporarily raised prices 10x and still sold their inventory. Why didn't more of them do it? Presumably, they made the rational calculation that the bad reputation they'd get from such a move would outweigh any short-term profits.
I think this is part of the nuance: we've gotten ourselves into such a bind with housing in so many places that it feels like we need the short term, crisis relief that rent control provides. For some people, it absolutely means not being kicked out into the streets. Go tell that mom and her kids about 'the market'. Yet at the same time, markets, supply and demand are real, and we need to bring them back into balance by at the very least not artificially constraining housing supply in so many places.
> it feels like we need the short term, crisis relief that rent control provides.
These programs have a remarkable way of being sticky over time. For example, New York's current rent stabilization program has its origins in a World War 2 era program which never died (first a federal program, then taken over by the state).
Solution: Build more and build it higher. If you are looking for a different kind of short-time-horizon solution for the mom and her kids who are in a precarious situation due to housing costs, give them cash assistance! But in the long run give them more options and lower prices. There is no reason we cannot do both.
The political complication is that it's very easy for people to be convinced that the short-term answer is the only one that will ever be needed. Addressing long-term problems often involves painful choices that people would rather not face.
That's part of it. The "losers" with rent control are newcomers who may have a harder time finding housing, and some landlords. They're kind of anonymous. But turn up to a public hearing on building some new housing, and the people there to yell about it are your neighbors, ordinary people who "got theirs".
> Yet at the same time, markets, supply and demand are real, and we need to bring them back into balance by at the very least not artificially constraining housing supply in so many places.
Or we could just go ahead and find local governments to directly build houses like we used to (at least here in the UK). If you know what the desired result is then why not enact it directly rather than incentivising it. Markets are most useful when you don't what you (we) want.
So if you wanted to apply the rationing strategy to housing, would high taxes on unoccupied be a way of doing that? I think I have heard of cities (Vancouver?) implementing such taxes.
That would be akin to banning people from hoarding toilet paper. Not a bad idea, but the reason why hoarding affects prices is because there's already scarcity to begin with. Unoccupied units are not driving up the cost of housing, increased demand is.
A toilet paper factory has a long planning cycle and supply contracts, so it cannot react very fast to large changes in demand. The machinery also costs a lot, so they cannot increase the capacity for every spike in demand that will usually disappear in a few weeks. The weakest chain is the Wall Street pressure on these companies to "improve cash flow or else" that lead to reducing the stocks (product and raw materials alike) to minimum, so any surge is even harder to compensate. I worked in this area for some years, this is how it's done.
I don't like "gotcha" style discussions, but I admit I could have worded that more precisely.
What I meant is: There was no reduction in overall toilet paper production, and people didn't suddenly start to shit more. The shortage was mostly a distribution/packaging issue in the form of "not available in packaging X at location Y". Markets tend to solve that kind of problem incredibly quickly.
Very interesting, I guess my experience here in Germany was very different. No toilet paper anywhere for 2-3 weeks last March/April, and then suddenly supermarkets drowned in it.
Do you know if these are really meaningful shortages, or if businesses have just kept the signs up to make people feel taken care of?
I don't know for sure, but even with the max-1 purchase limit, the toilet paper section of the aisle is somewhat lightly stocked on some of my visits. (Of course, if you've told me for a year that TP is in short supply, you can bet that I have a lot of it on hand in the basement, so it's hard to get a clean read. "If there's space in the cart and TP on the shelf, why not pick one up? It's $10, never spoils, and never goes out of style.")
There were some interesting theories floating around about how everyone was home so the residential TP market demand jumped but the commercial demand fell.
Rationing does nothing to increase the supply, and distributes the existing supply to people who don't need it. Rationing assumes everyone has exactly the same need, which is nonsense and leads to gross inefficiencies. Rationing inevitably leads to hoarding and a black market.
Maybe, maybe not. Depends on how you handle prices (or subsidies) along with the rationing.
>distributes the existing supply to people who don't need it.
A bit, but in the case of housing and food you can safely assume people all need it in about the same amounts. You will be wrong, but close enough. The black market might even by your friend in correcting some of your mistakes.
> Rationing assumes everyone has exactly the same need, which is nonsense and leads to gross inefficiencies.
yes and no. You don't have to assume the same needs. You can figure out rules. Families need more space - which can be used to encourage/discourage having kids depending on your goals. Overall it leads to inefficiencies I agree.
> Rationing inevitably leads to hoarding and a black market.
True or not based on how much trust there is in the ration plan. If people agree with the reasons and means there will be a lot less than if people disagree, or find they can't get even the minimum. WWII rationing in the US mostly worked from what I understand - people were proud to not use their entire ration of sugar, but there was overall enough food (including gardens) so it wasn't hard. That is probably the exception (and even then there was a black market!), but it does make the point.
> WWII rationing in the US mostly worked from what I understand
It suffered from all the faults I mentioned. The black market in gas was extensive, and even included drive by shootings. In public, people proudly supported rationing, in private, they sold their extra gas to people who needed it at black market prices. Yes, the government did try in their blundering manner to give different rations based on need, but it inevitably grossly mismatched supply with demand.
I've talked to people who lived through it, and there was certainly two economies going on - the ration one, and the black market one. For example, one lived on a farm that wasn't doing much, but got a big gas allocation because "farm". They made a mint selling it under the table.
> You can figure out rules.
Yeah, like the byzantine vaccine rules, along with the confusion and fights over it. Politicians moved themselves to the front of the line, naturally. Just like in WW2, politicians got all the gas they wanted.
Not to mention the 1942 Labor Stabilization Act[0] that led us the modern employer-provider health insurance situation (which isn't strictly rationing but is an example of well-intended market intervention/price controls being outsmarted by the market participants and casting an enormously long shadow over the country).
[0] Formal title is "An Act to Amend the Emergency Price Control Act of 1942, to Aid in Preventing Inflation, and for Other Purposes"
That part is true, but the decision to take roommates vs not affects the demand on rental properties. The decision to rent a 2 or 3 BR instead of a 1 BR as a single person working from home affects the demand as well.
In a rent-control environment, people have incentive to hoard their rent-controlled apartment as well, especially if rents reset on turnover. If I have a rent-controlled apartment that's well below its replacement cost to me, I'm going to be more inclined to keep it when I initially move in with a significant other. If that relationship fails, I can move back. If it were a market rate apartment, I'd have much less to almost no incentive to do that.
Yep, I know at least one family that’s pretty well off that held onto their rent controlled place for years after no longer living in it, and then essentially passed it down to their kids. They basically own that apartment for less than it’d cost to maintain if they actually owned it, in terms of HOA/property tax, since the rent is stuck where it was like 30 years ago.
And when I was looking for a place, I came across a couple people playing landlord and trying to sublet out their rent controlled place for more than they were paying the landlord.
I don't think this is a very useful way of looking at it. it's uncommon, but not unheard of, for people to rent more than one apartment in the same city. especially if it's a large city, someone with a lot of money might find it attractive to rent a small studio by the office and a larger space in a nice residential area. if rent were really cheap, I might lease a second unit in my building for out-of-town visitors. it would probably be more practical to just rent a 2BR instead, but in some sense this is the same thing. renting two 600 sqft apartments takes roughly as much living space off the market as renting one 1200 sq ft apartment. if rent were way cheaper, you would probably see developers start building much larger units and people renting them. indeed, this is often what you see when you compare housing stock in the city vs. the surrounding suburbs.
I know at least 4 people who lucked out on a rent control unit and have essentially moved away but don't want to give it up, and so keep it as a second residence. Or in other cases, rent it out to someone else at market rates.
Maybe for you, in your current life situation, but that isn't for everyone. You might want a large apartment to live in, and a small room near the "party/bar zone" where you can sleep off your night. Similar to the above you might want a large place for the family, and a small place near work so you can get to the next shift. The above are somewhat common reasons people already take two apartments in the same city.
And there are also people who would be interested in an apartment in a different city. A favorite vacation destination. Near the in-laws so you can visit and yet get away. A short term job. The foreigner in an unstable country who wants every possible reason for customs to let him in if things get bad enough to flee. Hotels fill some of that, but if the price was right an apartment where you can leave spare things instead of packing starts to look nice.
Mostly it isn't economical, and I don't see that changing. However in the imagined world where it was very cheap you might be interested in a second flat just across town. It would change your lifestyle to use it.
> Regulating the price to a point well below the free market supply/demand driven price causes a decrease in the amount of bread supplied to the market.
In some countries like Egypt, bread (or another basic staple) is heavily subsidized below the free market price, but that doesn’t seem to meaningfully impact the market’s supply: any consumer able to pay that artificially low price can still eat all the bread he or she wants.
Subsidies are different from price ceilings; subsidies often spur over-production along with over-consumption (think HFCS), whereas price ceilings discourage production and encourage hoarding (arguably a form of over-consumption). Price ceilings also foster a domestic black market, whereas subsidies foster an export black market.
I agree that subsidies perturb the free market, but in this case to the side of increasing supply. (You can model it as the supply curve being shifted downward by the amount of the government subsidy.)
> You can either increase total happiness, or concentrate it to the powerful.
The nasty, invisible catch with price caps is that this outcome you've described is an idealized one. It's possible to get neither as you make whatever you're trying to regulate functionally unavailable to anyone.
How much bread do you think bakers will produce if a loaf costs $1.20 to make, but politics dictates they cannot sell for above $1 each? In such a scenario nobody gets any bread except what the bakers make for themselves.
It's also possible to try to increase total happiness and actually just wind up concentrating it to the powerful. This is what rent control has done in San Francisco. It's dangerously easy to confuse goal and outcome in policy-making.
This is related to Goodhart's Law, which is "When a measure becomes a target, it ceases to be a good measure." It's a large area of study to figure out how to get the outcome you actually want, while measuring something close, because good metrics can be hard to come by.
The bread example is apt if considered in the context of the apartment issue. What was driving up the price of housing was that they were not creating new housing at a pace to keep up with demand.
So using the focus you had on bread, so you lower the price of bread so more people can afford it. However you don't increase the bakers ability to create bread and they still only have the same amount of bread as before. Well for the most part you have only swapped who has the bread and the number without is basically the same as before. You have done nothing but reduce the profit of the bread maker, at most.
The right answer is to increase availability to where those who have the desire to have bread are satisfied and bread remains around that needs someone to buy it.
Almost all housing shortages are government created if not 100%. Either through direct changes to laws and regulation or through providing the means for other groups to contest the construction of new properties in the courts because enough loop holes exist to stop any new housing.
If anything, the article is too optimistic, because supply isn't constant. We're rehashing Eco 101 here, price controls decrease supply, in housing just with a longer delay. Tragically, that delay may be longer than an election cycle, which explains the political motivation to implement such policies.
In the short term, I'm in agreement without caveat, but in the long term letting the prices rise supports industrial growth. The wealthy buying all the bread they want funds the expansion of the farming industry, allows them to invest in more intensive farming practices, and even better encourages price discrimination, whereby the wealthy actually get the same amount of bread as everyone else but pay extra for the "artisan" varieties. Getting the rich to pay more for essentially the same thing is itself an equalizer.
It's not hard to draw the comparison with housing. Let the rich buy the "luxury" apartments on the top floor (just an example), helping fund the building of large buildings which don't get built without cost-benefit and risk analyses squarely in the black.
The issue is, there's only a limited supply (Berlin can't grow forever), and as result there's already many apartments left empty today to artificially increase the prices of apartments, as they're treated as investments in a bubble, with the intention to profit from increasing value, not from rent.
Not regulating the price was tried for 30 years, and led to many families unable to afford housing, or spending 80%+ of post-tax income on housing.
Berlin is a small city on the global scale. It doesn't need to grow forever, it needs to grow to meet its local demand, which is apparently larger than the existing housing stock.
It's not like this is a hard border. It's completely feasible to live outside its limits. Sure, that's not technically Berlin but for all purposes regarding the housing market it is.
Not quite. If I understand right (as a recent-ish migrant to Germany, I expect to have half an understanding at best), different states have laws and slightly different taxes. Not as much so as American states, but perhaps more like Newark vs. NYC than Cupertino vs. Sunnyvale.
The difference in taxes is zero or negligible for almost all persons (income tax, VAT, etc. is exactly the same – dog tax probably is the highest difference). Corporations pay less taxes outside city limits.
The most relevant law I can think of is that if you live outside the city limits you might not be able to send your kids to a school in Berlin.
Okay, but suppose I got a job in Berlin - why would I have to live in Berlin proper as opposed to some place out side of Berlin? What is stopping me from getting a place just outside of the Berlin limits?
When talking about city growth, population dynamics and long timescales, do you really believe those administrative boundaries matter in any practical sense?
Paris is one of the densest city in the world (overall, there are denser areas) despite having a cap at 6 floors on building height. (I might be off by a floor or so) At that height the cheapest building technologies* still apply and up is not that expensive.
Now going up to 200 floors is very expensive. However on a per unit area it is only a few times what the cheapest building style* is. So it does require more expensive rent, but not that much more expensive, and as rent gets expensive you expect apartment sizes to fall to balance some of it out.
* cheapest that can meet reasonable building codes. I'm ignoring the uninsulated, fire-prone shacks you see in poor countries which are cheaper by far.
On that basis, I’d be interested to see more grand buildings like those on Frankfurter Tor. While the insides of Soviet era buildings are the targets of German jokes [0], the outsides are grand, and they are more than 6 levels high.
[0] IIRC “if you come home to find your wife has changed her hair and redecorated, you went into the wrong apartment”, according to the DDR museum. I’m sure it lost something in the translation.
That's interesting that Soviet era buildings there have a reputation for being grand outside. In Prague, buildings built in the Czechoslovak Socialist Republic era have a (well-deserved, IMO) reputation for being brutish, simply, and inelegantly built on the outside, especially as compared to the beautiful buildings from the earlier eras.
I mean those specific buildings on Frankfurter Tor look good, not Soviet[0] in general. I think it was where they were showing off, just like the TV tower in Alexanderplatz.
[0] DDR? I’m not actually sure who made the decision, now I think about it
In practice, this almost never happens. There isn't a fixed supply of bread. When the price of bread goes up, the following all happen:
- Bakers will bake more bread
- People from an area with cheaper bread will travel farther to sell bread where it's more expensive
- Individuals will decide to bake bread for themselves
- Companies that don't bake bread but that have the capability of baking bread (either directly, or with minor changes) will start baking bread.
All these activities happen in proportion to the price increase, increasing volume and putting pressure on prices to go back down. And this article describes the data showing that this happens.
Unclear on how claimed price controls would ensure equitable distribution of bread. Why is the price of bread being capped making it so that more people get bread? If I’m rich and the price of bread is artificially low, maybe I’ll just buy up even more bread and now fewer people get bread.
One apartment per person or per family? If per family, is it still per person if the couple is not legally married? If they are married, but divorce, get an apartment each and then re-marry, are they supposed to give up the properties?
What if my nephew from another town moves in to live, it becomes tight… are they eligible too?
There are plenty of places in the world where real estate was/is rationed or distributed, and they all end up having very similar social distortions.
>If they are married, but divorce, get an apartment each and then re-marry
Or more likely divorce to get the apartment, but continue to live as if married except for purposes of that extra apartment. It isn't unheard of for couples to not legally marry today because of the tax difference even though for all social purposes they act as married. That is despite some social pressure to marry.
But at what point does someone try to solve the shortage by baking more bread? If the price rises, more people will open bakeries.
Economics answers 2 questions:
1) Who gets what today?
2) What should people prepare for tomorrow?
Regulating an excessive focus on (1) will get bad results on (2) because it makes it less sensible to be come a baker.
I'm not writing software because I believe there is a philosophical shortage of software. I do it because there are decent odds that I'll be overpaid relative to the work I put need to put in. Those odds are resulting in a lot of software being written.
No, they use it to buy lands, resources, mercenaries to get more land and to keep the status quo. I suppose if you are a mercenary you will be fine (as long as your head is not split in 2)
It is exactly the same right now, with the difference that the crumbles of the pie are enough to feed the people. (Housing, health and education is another story)
Software Engineers are being paid for labor, as are the "starving poor" from the original analogy. However, the wealthiest citizens of the world have been amassing wealth at a comical rate for the past few decades, while the poorest citizens have not, suggesting that "Once the evil rich pigs have lots of bread, more than even they can eat", they in the aggregate do not start using it to purchase labor from the starving poor, they tend to hoard it.
Then you should read the list of famines rather than just looking at the page, because after the invention of fertilizer which brought an end to mass starvation (and was another product of capitalism), the biggest famines in the history of the world have been from communist nations, whereas the main problem in capitalist nations is obesity. Even the homeless here suffer more from obesity than from hunger.
I moved to Berlin with partner in late 2019. We were looking for 3 rooms for < 1800 in East (Pberg/Xberg/Friedrichshain).
After long, tiring search of 20+ places with 100+ people at each, through a friend of friend we got a place for 1400 because we were the only ones that looked at it. Then rent control happens and now we pay 1000.
And we would have paid 2000+...
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If you find something you like, it doesn't matter because there would be 20 other people applying. Landlords want to rent for a long time, so they prefer Germans over foreigners/expats, and people with long-term stable jobs (government, teachers, etc.) instead of startup people, so we were at the back of the queue.
When we found a place we liked, we would have been prepared to pay way more than the asking rent, and put down multiple years of rent in advance just to get it - like happens in NYC for example. But no landlord/agent is interested in this in Berlin. I guess this is an example how well-paid tech ppl are driving rents up. Even though "well-paid tech" in Berlin is not that much.
Only at rent levels of 2200+ do you start to find places you really like in good areas, but there are lots of places advertised at ~1500 that were even more ideal but unattainable due to demand, which is frustrating.
I really don't know how anyone can get an apartment in Berlin now after rent-control.
When we move out, we will most certainly find a friend to hand over to.
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Re: Rent control
Before it was impossible to find a place, now it must be insane. For existing tenants though, it's like an unexpected yearly bonus - but for us, completely unnecessary. It's like a middle-class handout.
Do you not think this was the entire point of the policy? Rent control doesn't exist to lower rent for everyone, it exists to reward the long term residents who voted for it at the expense of newcomers. Berliners essentially voted themselves a handout.
There is no reason why housing cannot be much much cheaper than it is now -- so cheap that it is nearly free. Larry Page, in an interview in 2014 discussed how. "Rather than exceeding $1m, there’s no reason why the median home in Palo Alto, in the heart of Silicon Valley, shouldn’t cost $50,000" [1] and attributed this entirely to a policy problem.
The answer is continuously increasing supply in a manner that outpaces population growth dramatically.
If we reorganized the market such that there were incentives to massively build new housing, this would be a solved problem. The price of housing could effectively be the marginal cost of construction as opposed to the market power driven pricing derived from scarcity.
Couple that with remote work and efficient high speed transit both within cities, to the suburbs, and to other cities, and we should be able to enable the demand to spread out (enabling more diverse supply to compete) and to add significantly more supply everywhere.
It is infuriating that a simple problem of supply and demand has not been able to be solved by developed governments. I recognize that it isn't as simple of a market problem as say a true commodity because location matters -- causing heterogeneity in the goods. But that location difference is alleviated by the increasing supply in high demand areas and by empowering more competition across areas through transit and remote work.
$50,000 for a house in Palo Alto sounds implausible, simply because there are a lot of people who want to live there and not enough land to satisfy demand. But, I agree that houses can and should be a lot cheaper. We could just build houses in the middle of nowhere, but without jobs and infrastructure it's not attractive to most people. Desirable cities exploit network effects. People want to live there because other people they want to be around also want to live there. We need more of these desirable cities.
Sometimes I wonder if one possible solution would be a sort of kickstarter-type deal for bootstrapping new cities. In other words, find a large plot of cheap rural land big enough for a few tens of thousands of people that's close enough to another town to have access to basic necessities but not where it's going to become a suburb of some other city. Get a bunch of people who want to live there to put down an up-front deposit. Create a non-profit to manage the deposits and handle the logistics of buying the land, installing roads and utilities, creating lots, and so on. The people who put down deposits are given lots that they can build on. Leftover lots are sold over time to finance more infrastructure development. The non-profit is replaced by a city government once there's a sustainable population.
My assumption is that if you can buy rural land cheap (like a few thousand dollars an acre or something) and then convert it into residential lots that are still cheap by urban housing standards for a few tens of thousands per lot, maybe 3 or 4 per acre, that generates the necessary funds that can then pay for the infrastructure needed to turn that rural lot into a buildable city lot. Another assumption is that this is being done purely as a non-profit venture; I don't think it would work as a real-estate get rich quick scheme because the temptation to not put enough money back into the town would be too high.
Another necessary component is having at least a few employers who are willing to set up shop in this new city. (Perhaps a branch campus of a major university would be ideal.)
Housing can at most grow as l^3, population can grow as e^n. If you want to be withing t hours of place x then you need transport systems that travel at l/t km/h.
Until people have two children or less population will always outpace housing. Anything else is wishful thinking.
Population growth is slowing worldwide and is below replacement in all major developed countries. Thus, your e^n is only applicable if n is between 0 and 1!
Sure, desirable cities can grow faster than the overall average, so let's put that at somewhere between linear and quadratic -- heavily towards the linear.
Even so, the ability to build at I^3 can easily outstrip that demand with the right policies.
Furthermore, remote work can spread out demand. We are seeing that right now with the pandemic. I believe that the pandemic will be one of the greatest accelerators of globalization due to it's enabling remote work.
As further proof of the slow pace of population growth in developed countries eventually causing an impact on the housing market, look at Japan.
"Government statistics as of 2018 consider 13.6 percent of properties in the country to be ghost houses. Put another way: By 2040, the total size of abandoned properties in Japan is estimated to equal the land size of Austria." [1]
Space only grows as l^3 and the speed of light. Any species that does not limit the number of surviving children per parent to two will run out of space no matter what they do.
the absurdity of that argument can be shown by demonstrating that if the rate of population grows so fast that it outstrips the l^3 at the speed of light, the biomass would just collapse into a black hole.
the point is that human's growth is slowing, and the fact that space can open up means that as long as humanity reaches being a space faring species, it won't really be a problem.
American and European urbanites need to become comfortable with Chinese and Japanese style mega cities or their urban areas will always be unaffordable. Chinese and Japanese cities are affordable for everyone because they build! They build as much as they need to in order to fit everyone into the city. We don't do that here so cities are for rich people.
uh Chinese apartments are super expensive and you dont even get to own the land. Japan was super expensive but is now affordable since the bubble popped and the population started shrinking.
Berlin's population is growing quickly so doesn't have much to do with Japan.
I expected to agree with that article, but honestly the tradeoff seems reasonable. Given just the data presented there, is it actually worse if rent controlled apartments are hard to get if lots of people are also paying much less rent? I'd really want to see some data about lots of people wanting to move to or within Berlin who are not able to due to lack of supply. That data may well exist but isn't presented here.
It remains to be seen whether they are just paying less rent, or there are other disadvantages. Beside the obvious maintenance issue (will landlords invest more than legally mandated?), a german-specific issue is that it is quite common in Germany that renters who want to end their lease search for their own successors. The reason is that apartments often come without kitchens, low-end apartments even without flooring. The renter needs to take care of that, and if you end your lease, your investment is lost. Unless you find a successor who is willing to pay for it, which is quite easy if you live in a desired, low-rent apartment. Where I live (outside Berlin), people pay several thousand euros "for kitchen and floors" to the previous tenant to get a city-owned, low-rent apartment. Often they pay more than the kitchen and floors are actually worth, even though legally they are not even required to pay for this. But it's the price to be chosen as successor among many applicants. Landlords usually play along, as it's less work for them and this process will ensure that they get only the most affluent renters. I expect that renters in Berlin will be willing to pay even more to get one of the regulated apartments, as they are even cheaper.
Is it worse if now there is a special class of people who happened to be in the right buildings at the right time when this law passed who will now forever get discounted rent, leaving everybody else to pay full price?
Well in most of US you can pay off the land but you still have property taxes which can go up. Also the tax basis can be adjusted based on the market value of similar properties in your area.
The vast majority of rent controlled cities have rent control boards where landlords can request and increase in rent in case of exceptional circumstances. In those cases, the landlord must show that the rent is not enough to cover maintenance, and the increase is granted.
In general though, maintenance on average only costs ~150-300$ a month, so it's not necessary.
Exactly, it should be extended to all rental units.
An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move.
> An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move.
The consequence of that, as claimed in the article, is that when the old tenant leaves, it often ceases to be a rental property - it's not offered for rent but put on sale for someone who'll live there as an owner. Already there are half as many spaces available for rent as it was a few years ago, and the number is still shrinking. If this goes on, most of the rental stock will get converted to non-rental and you'll be able to move only if you can get sufficient credit to buy the dwelling.
You mean, exactly like people who have enough money to buy instead of rent as real estate values keep climbing?
In Berlin, people that already have social relations and support structures are the one that get discounted rent, which is what we want! This is better than if wealthy people get to pay less for housing. It's not as if the alternative made it cheaper.
You also need to look at how many formerly rent controlled apartments have been sold and taken off the market. The charts don't really show that, but the articles suggests that is happening
The purpose of this regulation is to provide cheap rent for the poor. Not to enable "the rich" to acquire new real estate which they then proceed to not rent out at all ... Increasing the number of homeless.
Now of course this legislation "prevented that", by refusing owners do this while tenants are in the apartments. Except the net result seems to be when tenants do leave, the apartments are taken out of the housing market altogether, exacerbating the already pretty critical problems.
And in the German press you will find accounts of pressure tactics (such as schemes to force tenants into default, "using" things like a divorce to kick people out (man signed contract, woman stays in apartment, gets kicked out when man refuses to pay but woman is not allowed to sign contract in her own name), creating critical maintenance problems ...) to create that situation.
Apartments aren't kept out of the housing market, actually. If they are, then the Vancouver solution is very effective - a 1% tax on the value of the property if not occupied.
The key thing here is supply and demand. If there is no profit to be made in renting out the property, then there is little reason to buy them up, in actuality. The exception is large companies that buy up a large amount of properties to manipulate the markets, but this has already been thinked of.
The main result of this if the unoccupied tax is used when necessary is a fall in the value of properties. This is a good thing for everyone that doesn't own a property that is unoccupied. This is what is wanted.
The point of occupation was vacancy. Rent control is used to lower rent, and vacancy taxes are used to enforce vacancy. These are two separate effects and goals.
Not that I know Berlin's situation, but hypothetically they could be converted into Airbnbs which end up competing with local hotels instead of rentals.
I know rental stock immediately opened up in Dublin when the pandemic started, for example, before such a large increase would have arisen from renters leaving the city for suburbs.
But, people are not buying it, companies are. Most known offenders are Akelius and Deutsche Wohnen, who just buy those apartments for cheap, wait until the renters leave (or make them leave), then renovate the apartment and rent for 4 times the price. The rich is getting richer, while people are being screwed.
Which is why the ruling alliance is trying to expropriante all entities with more than 3000 units. That's a nuclear options but it certainly fixes the issue.
> I'd really want to see some data about lots of people wanting to move to ... Berlin who are not able to due to lack of supply.
Even if there were those lots of people unable to move, would that actually be a problem in various cases? Unlike many other European countries, where the countryside has emptied out and brain-drained as its young people move to the big city, Germany has managed to keep many of its small towns viable places to live and work.
Phrases like "reasonable price" are meaningless. There is only "what someone's willing to pay". Property is the one place where people tend to actually get that.
Whether or not this succeeds or is a disaster a) depends on what wants the outcome to be like, and b) when this is settled in court. As of now house owners (and remember: we talk mostly investment companies, not individual persons) are encouraged to speculate that the court overrules rent controls and (somewhat illegally) hold back appartments from the market. Once this is settled one way or the other these flats will be available on the market again, and if rent control survives, at somewhat acceptables prices.
Remember that rents did increase ~300% or so over the last 15 years, but income maybe only 10 or 20%.
Lots of points missing in this article, clearly written by someone looking from the outside and not someone actually familiar with the rental market in Berlin.
Even without these specific rent controls, most rental contracts have either "staffelmiete" or "indexmiete", that is, fixed points at which the rent will increase or an index against which rent is pegged. There are very strong laws supporting renters.
I live in a somewhat newer apartment, so it's not subject to the discussed changes. My rent increases were agreed with the landlord when we moved in, they are fixed in my contract, and after the built in increases are done, the rent won't go up anymore.
The issue with housing and prices is Berlin is not the same as other places in the world. For years Berlin was an economic wasteland. Just now it's become desirable to live here, and there are jobs and an economy to support it. The rent in Berlin is, despite increasing 5-10% per year every year for the past decade, still less than that in Munich or Hamburg. This isn't a case of a speculative bubble or outlier system, just a historically depressed economy returning to the mean, and fast.
Yes, it's unfortunate, that people cannot afford to live in Berlin as they did in 1996. But Berlin is not the city it was in 1996. To alleviate this price pressure, more housing needs to be built than demanded, and that has not been the case for a long time now; place is limited.
> as demand from new arrivals far outstripped supply
This is mischaracterizing what is going on. There is rampant speculation by multinationals buying up old housing stock and attempting to do the New York City model of hyperluxury renovations at the expense of existing residents.
Why? That argument doesn’t address the fact that many cities have an absolute limit on supply in the form of space, and no amount of construction that starts today will bring prices down today.
Here are some arguments to refute if you want to oppose rent control, particularly the first one (copied and pasted directly from investopedia):
“Rental prices in many U.S. cities are rising far faster than wages for moderate-income jobs. [edit: note here that most of the US has banned rent control, and this is happening regardless]
“Rent control enables moderate-income families and elderly people on fixed incomes to live decently and without fear of a personally catastrophic rent hike.
“Neighborhoods are safer and more stable with a base of long-term residents in rent-controlled apartments.”
Berlin has 4,227 inhabitants/km², Hong Kong (widely considered to be a very livable city, and also one with hard geographic constraints on expansion) has 6,300. So we have existence proof that Berlin, if it chose to, could support an increase in housing of 50% or so, which would certainly drive rents way down.
Edit: Not sure why I looked so far away, Paris is at 21,000. Like virtually every housing story, this is an example of the people who live in a place deciding they don't want anyone else to live there, and putting up economic walls that only the rich can surmount.
> Berlin has 4,227 inhabitants/km² [...] Paris is at 21,000.
These numbers aren't comparable: The municipality of Paris is just the small urban core of a much larger metropolitan region. Berlin has about 3.7 million inhabitants on 890 square kilometers, Paris 2.2 million on 105 square kilometers.
A fairer comparison is with the Petite Couronne consisting of Paris + the innermost ring of its neighbors (https://en.wikipedia.org/wiki/%C3%8Ele-de-France#Petite_Cour...), which has 6.7 million people on 760 square kilometers. Still denser than Berlin! But the ratio is far less extreme than you made it look. For an alternative approach, take Berlin's densest districts: Friedrichshain-Kreuzberg, Mitte, and Neukölln add up to about 100 square kilometers (like Paris) and a bit over a million people. So about 2x less dense than Paris rather than 5x.
> [edit: note here that most of the US has banned rent control, and this is happening regardless]
Where do you get that idea? It is false. New York? San Francisco? California has statewide rent control as of January 1 of last year. Many of the places where people want to move still do have rent control. Rent control is not a live issue in, e.g., Tulsa, OK or Amarillo, TX, whether it is legal or not.
> “Neighborhoods are safer and more stable with a base of long-term residents in rent-controlled apartments.”
If you have good evidence for this claim, I would like to see it. Moreover: "safer" and "more stable" relative to what? I guess your claim would be "safer and more stable than the counterfactual w/out rent control and with more housing." If you have good empirical evidence for that claim, I would love to see it.
"As of 2019, five states (California, New York, New Jersey, Maryland, Oregon) and the District of Columbia have localities in which some form of residential rent control is in effect (for normal structures, excluding mobile homes). Thirty-seven states either prohibit or preempt rent control, while eight states allow their cities to enact rent control, but have no cities that have implemented it."
> Why? That argument doesn’t address the fact that many cities have an absolute limit on supply in the form of space, and no amount of construction that starts today will bring prices down today.
You mean... scarcity? That the argument specifically mentions as the thing that price controls doesn't fix? Are you _sure_ it doesn't address it?
Calling a permanent unfixable limit a market “scarcity” is bizarre, and so is comparing it to something that’s only temporarily scare. Obviously the solutions to permanent loss of supply and temporary shortages must be completely different. There are some real downsides to rent control, and there are some real upsides in some cities and for some people. There are also huge downsides to allowing a free-for-all, especially for the people who need housing anywhere near their jobs. It’s easy to ignore an argument that is only semantics and opinionated dogma when it’s avoiding the realities of the problems at hand.
If the bread price explodes, poor people will starve and the rest of the population ends up paying a boatload of money to the lucky few bakers. If the bread price remains stationary, people will starve randomly.
People are going to starve either way, why not skip the whole "make the bakers filthy rich" part?
I fully agree, thousandfold price increases would suggest that processes that control prices in free market system had become unstable. In such cases I'd agree with state intervention. Fortunately it doesn't happen that often.
> Also, this doesn't really apply to housing.
Correct, it's more complex there and some of the reasons are mentioned in the article.
This is a silly simplification that posits that sticking the word "market" on something means that it will behave the same way and is beholden to the same forces. The bread "market" and the housing "market" are not comparable in this way. I think a lot more nuance is required for convincing case against (or for) rent control.
Given the unmeasurable social costs of people starving and dying when there isn't enough food (you can say similarily for people not having houses and freezing to death when there's a blizzard, but also read the sidenote at the end), the capitalists involved in selling and distributing food should not be compensated equally in monetary terms (by selling at higher prices) when there is a shortage of food, since they are the ones at fault of not having reserve resources and prepare their production line from various disasters such as storms and droughts. Even people from the ancient times built and used granaries to store food for years and opened it up to their fellow villagers when storms/droughts happen (even without any profit motives, there wasn't even a notion of "profit" at all!) Capitalists in the current era should prepare far better than them, as our knowledge of biology, climate, and logistics are much more sophisticated than before; a shortage of food should be outright unimaginable given the advanced technology we have. Once there are empty food shelves, the disaster's already happened (at least in the short term you can't materialize food anymore by doing smart "economics"), and really at that dire point capitalists don't deserve the right to receive profit in the same way as normal times.
If the moral argument for this doesn't convince you - then there is a much more convincable political argument (of "dialectical materialism"), which basically goes as: once basic things like food and shelter aren't a given, and then capitalists gouge prices up creating an even bigger moral catastrophe among the poor, enough people would be fucking mad at them and band together wreck shit up, and some people would eventually have their heads cut off (as happened in many points in society, for example the French revolution). It's only that the current structures of power (the state & capital) are much more powerful than the past that this is more unlikely to happen, but if I were really in power I wouldn't dare try to steer closer to this event, as bloodshed doesn't really feel that good to participate. And that's the most uncontroversial center-wing take I can create.
Sidenote: I think your analogy of bread isn't really comparable to the housing problem though, since housing acts less of an ideal commodity than food in economic terms. Housing is far more troublesome if you approach it in a free-market lense, since it's far easier to create a natural monopoly on land than anything else, and thus it is hard for free markets to create a "fair" price that matches with the actual use-value. That's why even some libertarians in support of free markets also think economic rent from land is unfair business practice and should be controlled by heavy taxes (such as the economic ideology of Georgism: https://en.wikipedia.org/wiki/Georgism)
I read your entire comment and despite being three paragraphs long I can't see how it addresses gp's point, which is that the scarcity is still there whether you institute price controls, and instituting price controls only changes the symptoms.
Housing is not scarce though, some people (companies) own 14 houses whilst others have non. It's not a problem rent control can solve, but it's also not a scarcity problem.
This is an odd statement. The claim is - I think correctly - that regulating a price to combat scarcity will never help. Why should this statement apply to bread and not housing, or vice versa?
I think this article is getting the interpretation of the facts all wrong.
They point to the predictable drop in supply in the regulated market as if it was a bad thing, but they ignore where that supply is coming from. Those are not newly-built apartments, because the price controls don't apply for new construction.
When an old apartment becomes available, it's because the previous occupant moved out, e.g. because they could no longer make rent. So making rents more affordable leads to fewer people having to move for financial reasons, which I think is a good thing.
Disclaimer: I live in a regulated apartment and don't intend to move, so it's probably not surprising that I like this policy.
It also leads to fewer people being able to move. Have a kid and your one bedroom apartment is too small, but don't have enough cash to buy a bigger place? Unfortunately, you're going to have to move out of Berlin, because two- and three-bedrooms are being sold when their tenants move out, so there's no supply available for you to move into.
You're definitely one of the people this type of policy helps, but you're benefitting at the direct expense of less affluent people who want to move into bigger apartments and who want to move into your city from outside of it.
That's fine if it's what they intend with these policies, but they're almost always championed as helping poorer people, when that's too overbroad to be accurate, because they actually only help poorer people who are currently renters and don't need to move (and bear in mind they also help rich people who are currently renters and don't seem to move, which hardly seems to be the goal).
The proposed rent control in Berlin is sticky, in that the rentier cannot increase rent between renters beyond a certain amount.
The most likely scenario is that they will find a place to move into in a year or so, which will fit their family planning.
Otherwise, if they have enough for a modest downpayment as the collapse of the renting market leads to increased supply in bought housing, they can also buy a condo.
If even that doesn't happen, they can also go into public housing.
I live in a rent controlled city. The scenario you are describing doesn't happen. When I was a kid, we moved 7 times. All we had to do was look for housing a few months in advance, and move as our lease was up.
I've also lived in rent controlled cities (like SF), and my experience runs counter to yours. Your experience is an anecdote, not data.
I get the impression you didn't actually read the article. It points out very clearly that when apartments go vacant in Berlin, they're being sold, not re-rented. If that's what happens when a renter leaves, then there's no stock for new renters to move into.
And just throwing in public housing as though it's a magical solution is wildly unrealistic, especially when you're dealing with large numbers of people.
I'm sure you live somewhere nice, but it's not reflective of the world.
If the apartments are being sold, then they must find buyers. If there is no way to rent them, then it's not profitable to hold on to them, and their value decreases. At that point, people can simply buy apartments, and everyone is happy.
My experience is typical and backed by data. In my city, roughly 25% of the renting population moves every year.
> you're benefitting at the direct expense of less affluent people who want to move into bigger apartments
Aren't you forgetting about the even less affluent people who wouldn't be able to afford a bigger apartment even at the same price per area as their current apartment and who'd be priced out of the market (a.k.a. forced to move out) by rising rents?
> and who want to move into your city from outside of it
I think not being able to move to your city of choice is less bad than being forced to leave it. The only way someone can move to Berlin without pushing others out is if the supply increases, which the rising prices for new apartments certainly incentivize. So the policy endures that the additional construction required to accommodate newcomers is paid for by them, rather than by all citizens.
"Aren't you forgetting about the even less affluent people who wouldn't be able to afford a bigger apartment even at the same price per area as their current apartment and who'd be priced out of the market (a.k.a. forced to move out) by rising rents?"
What? No... the whole point is the answer is supply, not rent control. Supply keeps prices down, rent control pushes prices up (for those units that hit the market, which are the only ones that matter in this case). Having a lot of supply on the market is what those people need, and rent control is what drives them out.
"I think not being able to move to your city of choice is less bad than being forced to leave it."
Okay, that's a fair preference, but the problem is it's never what anyone says they're trying to achieve when they enact rent control. The reasoning is always to help people who aren't well off financially, not to keep outsiders out of your city. If xenophobia is the goal, then by all means rent control away.
> the answer is supply, not rent control. Supply keeps prices down
Supply requires construction, which takes time, which limits the speed at which supply can be created. Meanwhile, demand has been growing much faster. So far, supply has not succeeded at keeping prices down, while rent control has.
> rent control pushes prices up (for those units that hit the market, which are the only ones that matter in this case)
First of all, units that hit the market are not the only ones that matter. There are already people living in those apartments who don't want them to hit the market because they'd like to continue living there, thankyouverymuch.
Secondly, the Bloomberg article shows that rent in rent-controlled apartments fell and the price for apartments that are sold, not rented, fell as well. The price increase is concentrated in the unregulated market for new construction, where it at least serves the useful purpose of incentivizing increasing supply, although still not quickly enough.
> Having a lot of supply on the market is what those people need, and rent control is what drives them out.
What? No... their landlords raising the rent to a level they can't afford is what drives them out, and rent control prevents that.
> The reasoning is always to help people who aren't well off financially, not to keep outsiders out of your city.
The reasoning is that poor people shouldn't get evicted from their apartments just because someone else is willing to pay more, and if that limits the ability of some outsiders to move there, that's an acceptable tradeoff. If those outsiders are willing to provide for their own supply by paying for the construction of new housing, they're very much welcome. I wouldn't call that xenophobia.
The thing I'm curious about is the impact of rent controls on traffic and commute times. This is a big deadweight loss of rent control, I think - people will often move because where they work changed, so if person A gets a job in person B's neighborhood and vice versa, the efficient outcome is for them to swap apartments rather than have opposite commutes. Rent control effectively locks people into their current apartment, which means some combination of longer commutes and taking worse jobs in lieu of an excessive commute that cannot be ameliorated by moving.
Those aren’t really analogous. Doctors aren’t pro-vaccine because it’s good for their business interests. They’re pro-vaccine because their community agrees that they work and are produced safely. In the case being discussed, the argument is the anti-rent-control folks are letting business interests drive their argument.
What do all businesspeople have in common? They are trying to make money – and that's all they have in common. So we can expect a pro-business publication to advocate for policies that funnel wealth to businesses, without much regard for anything else.
In contrast, the one thing all doctors have in common is that they try to keep people healthy. So we can expect the medical community to advocate for policies that accomplish that. Of course there are doctors who could potentially have a conflict of interest between getting more business and doing their job correctly. But then we can still expect both factors to play a role, i.e. very few doctors would focus purely on getting business. And many doctors don't even have that conflict, e.g. employed ones whose job is secure.
If vaccines harmed people's health while benefitting doctors' bottom lines, we'd see a split between employed or ethical doctors vs unethical self-employed ones. It's inconceivable that there's a consensus among doctors for a policy they believe is harmful.
Anyway, I doubt vaccines even do increase demand for doctors. Administering them is cheap (~5 minutes of a nurse's time), treating the diseases they prevent is not.
This is a good point. You can't ignore the overall real estate investment climate. If you think the city is going to tighten the screws on builders and landlords, why bother? Find a city that's more friendly to people building new housing.
I don't know... maybe because you need an apartment for yourself, and you now can afford to actually buy the lot because you do not have to compete with investors expecting a dividend of 20% on their investment?
Do you really think that suppressing professional home builders to make room for homesteaders building their own homes by hand is a good idea for Berlin?
Why not get rid of greedy farmers so people can grow potatoes in their backyard? Why this longing to re-implement the failed policies of East Germany? Is it nostalgia for police states and shortages?
> Do you really think that suppressing professional home builders to make room for homesteaders building their own homes by hand is a good idea for Berlin?
No, and it isn't what I am suggesting. The point is that just that it becomes uninteresting for investors, it isn't for people actually living there. That doesn't exclude the professional execution of housing projects. I seriously doubt that people can build their home with their own hands and comply with German regulations. Especially in cities.
Housing developers might expect a lower margin, and if the margin is too low for such a business, people can take on the risk themselves and contract professionals to execute a joined housing development. People are already doing that.
Well if homes are not built by homesteaders then they will be built by for profit companies that are funded by investors.
If your goal is to have more of something then you tax it less and impose fewer costs on it. If your goal is to create less of something, then you tax it more and impose more costs on it. People understand this with cigarette taxes and carbon taxes but suddenly when it comes to apartments the signs are reversed? No, getting the sign right is important. If you want more homes, then reduce the costs of building homes -- or in your parlance, make it "more interesting" for investors.
I agree with you that increasing the supply side will decrease the price.
However, housing is not a consumable (a large part of the houses are over 100 years old). It is not movable (a house in Hamburg does not satisfy demand in Berlin, Potsdam only to a limited degree). And it is a basic need (everyone needs exactly one).
However, the demand side is driven not only by local demand for housing, but also but "external" demand using housing as a source for investment and rent seeking.
The prospective home owner and tenant has to compete with their local salary and capital against international capital buying mostly existing property.
But all that money does not make new space appear. There is no factory to build "space".
So, like the cigarettes, we want to have less "consumers" of property, and that's why I think it makes sense to lower the demand side by making it less attractive to buy housing for investment.
For the people living there, it is a basic need, and that will keep the demand from going to zero.
I live in Berlin. I've found a regulated appartment for rent last year.
The author clearly exposes his sentiment in their choice of words. There's lots of buzzwords thrown around and not much reporting from here. Was the author even in Berlin before writing?
Anyways, in Berlin it will now get even "worse" as an initiative is now starting to collect signatures to disown "Deutsche Wohnen" of hundrets of thousands of flats they own.
I can see that the market is "bad" from that article. My experience with renting a flat was different:
The law allowed me to reduce my rent to a price I indeed find reasonable. It's roughly 100€ less. I'm happy with that. And in case our supreme court overthrows the Berlin ruling, I've gotten read and saved the "shadow rent".
> The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction
Hmm but didn't they indeed provide incentives for increasing supply, by exempting new construction from rent regulation? In fact the later argument saying that prices started going up in the unregulated market would support the notion that the policy is indeed providing a powerful incentive to new buildings. Sure, the article also laments that there still isn't enough supply, but can one argue that giving more rent money to owners of old properties would help fix this?
How did new construction change in Berlin? What about homelessness? I don't know but find it shady that the numbers aren't shown.
One thing I've always wondered is why we as a society even let real estate be a thing that people can buy a lot of. Why does an individual get to buy, say, 10 buildings and rent them? The title "land lord" even seems like a holdover from some feudal time.
Not that I think you completely outlaw the practice, but why not start taxing after, I don't know, you own 20 units or something. Just figure out some sort of scheme that disincentivizes people from hoarding a resource required for life. I'd much rather rent from someone that lived in the building and actually cared for the place than some random LLC in Florida I mail checks to that can't be bothered with anything.
Rent seeking is hard to eliminate, there has to be some way for lazy aristocrats to feel safe in their complacency. Try to remove it and the sleeping dragon gets very angry.
This reminds me of that time the Italian Government decided to regulate the price of face masks (about a year ago, in response to the COVID pandemic).
The result was that (my relatives in Italy told me) it suddenly became impossible to find masks anywhere.
Most producers decided to keep stock unsold hoping that the regulations would change in the future, and some smaller producer actually stopped production altogether or went out of business because it was no longer viable (source, in Italian) https://www.ilsole24ore.com/art/mascherine-primi-espulsi-mer...
I get that it's Bloomberg's duty to root for the landlords, but to me the data in the article shows a very clear win for renters.
If I'm reading the graphs right, price controls in Berlin have slashed rent price growth by nearly 60% for almost all of the city's apartment stock.
Meanwhile, rent for the remainder, those apartments built since 2014, is only growing 10% faster than the baseline.
So if we're gonna do the math: [lots of apartments * -60% inflation], against [fewer apartments * +10% inflation], equals a presumed windfall for renters, versus the alternative history where this rent control policy doesn't get enacted.
The issue is that supply fell, so while there was a windfall for existing renters, anyone trying to join the renter class (by moving into the city, growing up and moving out of their parent's place, etc) is unable to find an apartment.
If you project this trend forward 10 or 20 years, you end up with a situation where most affordable rentals are being used by an aging population and the young have nowhere to live.
This also explains why these policies become entrenched: before, the world was divided into rich vs poor; now it's divided into (rich + old and poor) vs young and poor.
The graphs seem misleading or at least raises additional questions.
Yes, compared to the next 13 largest cities there seems to be a difference. However, the difference in graphs existed even before the policy proposal+enactment. The margin is also relatively small and only for a small timespan.
There should also be comparison to more comparable big cities like Munich, Cologne, Hamburg, or Frankfurt. Other cities are substantially smaller or have no (or even negative) population growth.
Of cause the rent in those cities grows differently compared to Berlin. Thereby shifting the average.
It's somewhat interesting that in the "most damning" two graphs related to the listing of apartments nothing actually happened. The listing of old apartments were on a downward trend well before the policy was a enacted (and considering the noise on the limited data, I'm doubtful that there is a significant increase in slope) and the article even admits that there is not much effect that can be made for new developments.
Which means a comeback of Soviet-style blocks. Given that red-green-red coalition is basically a comeback of DDR socialist party, this feels like DDR strikes back in Berlin.
I live in Berlin and don't find anything wrong with Plattenbau (Soviet-style blocks). It can be done cheap or good, but even cheap is durable in this case. Many buildings are only now being refurbished, many decades after construction. What I like about former East Berlin is the walkability. Wide open pedestrian walkways, focus on public transport and plazas for people to gather. Contrast that to wide open roads, focus on the private automobile and malls elsewhere.
There were actually two types of Soviet blocks in general terms. The first type was based on community and had a lot of greenery, a lot of community shops in walking distance, and those are actually worth quite a lot of money nowadays.
The rest were those that were built in order to rapidly provide housing to workers as industrial capacity was being massively built up.
In any case, in my city, the most iconic and beautiful housing structure was public housing, so if done right it can be beautiful and amazing to live in.
Otherwise, the private housing market is always there as competition.
If there's anyone I'd trust to get it right, it would be the Berlin lefties. Hopefully they are successful and set a good example for others to follow.
I grew up in a city with a lot of Soviet-style blocks (Ostrava).
Construction quality of said block living was notoriously shoddy. State of the buildings only improved when most of the units were sold into private hands (usually that of the tenants, no megacorps). After that, the tenants-turned-owners started investing into repairs and reconstructions.
Let us recall that that inflation in Germany is close to 0. Thus, saying that policy X is responsible for a price hike is hilarious. There is no reason to raise the prices of unregulated apartments (second plot), except the greed of those owning the units.
Another way to read this article is "this rent control is bad because we real-state speculators are now focusing our greed on a smaller number of people, instead of focusing it on everyone else".
That being said, it is not clear from the plots that the overall amount of money that is being spent, city-wide, on housing has increased or decreased. I would argue this is the only valid metric to asses how effective this particular policy is.
> Let us recall that that inflation in Germany is close to 0. Thus, saying that policy X is responsible for a price hike is hilarious. There is no reason to raise the prices of unregulated apartments (second plot), except the greed of those owning the units.
This is a "not even wrong" attempt to connect inflation with supply and demand.
> Let us recall that that inflation in Germany is close to 0.
OK.
> Thus, saying that policy X is responsible for a price hike is hilarious.
Not so fast. If inflation is close to 0, and policy X is introduced, and then price hikes show up in a category subject to policy X, why is it hilarious to say that policy X is responsible? Why is it not reasonable to at least suspect X?
Thanks, I was searching comments whether anyone had klaxons going off in their head reading this drivel:
> If populism on the political right corrupts democracies, populism on the left ruins economies.
Might as well stamp "this article is written by a conservative fanatic, proceed with caution". Looking at the author his short bio says worked for Handelsblatt -- I peeked at wikipedia, why am I not at all surprised to find they printed a fake vaccine story recently?
Indian living in Berlin. Can confirm. Finding a new apartment is almost impossible and the rents on unregulated apartments is now through the roof. An apartment that would cost ~800 EUR for rent is now atleast 1100-1200 (even for a good developer salary, this is insane).
Berlin is the SF of Europe at the moment. Unless you want to spend 6 months at a minimum hunting apartments I would avoid this city.
Once I get comfortable with German, I am thinking of moving to cheaper, smaller cities , probably in the south and working full time remote.
They are pushing for something similar in Spain. And there's some disagreement in the coalition government because the far-left wants the controls to be more aggressive.
The goal of rent control - or more accurately rent stabilization - should be to smooth out fluctuations in rent over time, not to create a class of housing stuck below market in perpetuity. Most of what people object to about rent control isn't the attempt to stop families form suffering wild rent increases that can destabilize entire neighborhoods/workforces, but rather to smooth out those increases to give families a proper chance to adapt or move.
A different policy (Mietpreisbremse -> rent price brake) with this explicit goal is in place in "high-pressure" rental markets all over Germany. It means price cannot be more than 10% over the local average.
> If the judges nix the legislation, lots of tenants in the formerly regulated sector could get hit by huge and even retroactive increases in their rents.
Am I reading this correctly? So, these tenants might find themselves in thousands (maybe dozen of thousands) of euros of debt to their landlord. And I assume they'll be required to pay it up overnight? In this case, the politicians really screwed these "poor" people in the most unimaginable way.
Yes. It even said so in the letter you get when the price was lowered. My rent was fairly 'overpriced' for the area so if it gets overturned I'll owe around 500e per month for every month that the law was in effect. Needless to say, most who lost their jobs and even many who didn't won't have the 5k or whatever it is in their case to give up suddenly.
I guess if many of us find ourselves in debt here and can't rent because the debt means we cant ever pass the Schufa which every place checks then possibly that'll ironically help solve the housing crisis..
Is it me, or it is just irresponsible to push this through before it gets legally cleared. You basically endangered the finances of most renters in the city.
It was extremely misguided and the local government campaign was so focused on how much 'for the people of the city' it is that it never even mentioned things like the very significant chance it can't get cleared or that it will slow down building even more or that many of our flats will be put immediately on sale (which mine now is, along with graffiti by other tenants against it and declarations of 'war').
This applies to both sides, the so called shadow contracts might also be not enforcable in a lot of cases, be it for legal reason or private persons declaring bankruptcy.
This uncertainty is the way bigger driver for the current situation, coming to conclussions from this about the effects of rent control is premature at best.
This current situation of legal limbo is a phenomenon on it's own. Not even mentioning COVID.
As a tenant living in Berlin, the lede is buried in the last paragraph.
To complicate Berlin’s situation further, Germany’s constitutional court is expected in the coming months to decide whether these rent controls are even legal. If the judges nix the legislation, lots of tenants in the formerly regulated sector could get hit by huge and even retroactive increases in their rents. That would create yet more chaos.
The current Berlin housing market Situation has little definite insights on the effects of rent control, but all about risk aversion and maximization of profits.
The current shortage of supply is all about landlords withholding their vacant listings until that final court order. Or they are cashing out by selling them after fantastic interest rates averging above 10% year over the last decades.
If you feel you have like a 60% chance of getting double the rent, you avoid it at literally at all costs, below that threshold, to rent out on unlimited terms, if you can affor it in any way possible.
Where you're stuck on the long established mandated single digit rent increments, if the current pratice of shadow contracts should prove to be not enforcable.
There simply is just so much more uncertainty than actual rent control happening for the time being.
My immediate neigborhood, with quite a few empty appartments?!
Even the service workers asked to install the mandated smoke detectors were commenting about this, since they can't access quite a few of appartments even during COVID's stay at home policies.
There is no offical data on this, since it's illegal to keep them vacant for more than 3 months. So they are under "maintenance" or the like.
In San Francisco, there are plenty of people who have the same anecdotes as you, but their story falls apart when you look at the numbers. Yours may as well.
Rent controls provide a strong disincentive for people to move, which prevents people taking jobs they might otherwise have taken. It's hard to estimate the overall economic cost of this, since the effect is diffuse, but it is likely significant.
This article is a joke, starting with "If populism on the political right corrupts democracies, populism on the left ruins economies.". It really sets the tone and bias.. Maybe someone should introduce to Bloomberg the concept of gentrification.. The only difference between the rent cap and no rent cap is that now there are affordable places.. the prices were already ridiculous pre-rent cap.
At least they have tried something. In some other areas, like Sydney or Melbourne (Australia), everyone who matters (landlords + politicians) owns homes. So nobody is doing anything about it.
Economic benefits are probably the biggest reason for being stuck in those unlivable cities. However the downside might outweigh the upside: higher cost, long commute and lots of worries.
Ahh, once again the single most divisive topic on Hacker News. Where contempt for the rich and contempt for the poor battle with the same points of view.
Let me get this straight: the population of Berlin has been stagnant since 1950, wages aren’t rising, but the reason real estate prices are rising is because of demand from renters?
Sorry folks, the correct answer is: it’s a real estate bubble. And deregulation is not going to help with that.
We all lived through 2008, didn’t we? We’ve seen this before. It shouldn’t be a big mystery. Speculation drives real estate prices, real estate prices drive rents. Government intervention is necessary to break the cycle.
I found this article to be rather unbalanced, like the free market always knows best. For example, cutting red tape may increase housing supply, but red tape is not the only thing holding back building. I used to commute through miles of ex industrial wasteland, zoned for housing that was not being built on, because it was being landbanked because tax rules in the UK help large land owners store weath that way. So it seems to me that a right wing policy is damaging the market, the community and the economy. Perhaps the article would be more balanced if it acknowledged that better policy from both wings is needed?
Rent control, minimum wage, compulsory employee classification, "free" healthcare, "free" education. All sounding good on paper, but every time the unforeseen side effects rear their ugly heads.
Every time we try to "improve" on the market "failures", we screw up. Because there is an universal law it seems: you f.ck with the free market, the free market f.cks with you.
I don't actually see the disaster at all. Prices are staying low for millions of people already living in the city. Yes it's a pain for people who move but it might very well be a worthwhile trade-off.
However the real long term point is made at the end of the article.
>"The biggest question is whether this episode of left-wing populism has damaged confidence in Berlin’s real-estate market permanently. If investors fear that local property rights will be put at risk in every election, they might stop building houses in the city at all."
This isn't a disaster, this is what needs to happen. Drive down the property market, reclaim the housing stock, turn it into mixed income public housing, which is exactly what Vienna did when the Social Democrats took control of the city in the early 20th century. Today most of Vienna's housing is public housing, and it is considered one of the most livable cities on the planet. Driving the landlords and real estate companies out of the city is only a disaster for the professional rentier class. The only problem Berlin has right now is that it hasn't gone far enough.
If there are 100 houses in Berlin, and 101 households want to live there, no amount of reclaiming the housing stock is going to create space for that additional household.
Berlin's population has been growing by leaps and bounds. The only way for everyone to have enough housing is to create enough housing for everyone to live there, or to make it sufficiently unattractive to live in that people leave.
"limiting profits is bad" says the worlds biggest pro-capital megaphone while referencing a company that usually does paid pro-business questionnaires.
"As expected, rents in Berlin’s regulated market plummeted in relative terms." and "Newly built apartments have therefore become even more unaffordable for most people."
They are not directly lying, but I'd count this as dishonesty by omission. Newly built apartments in Berlin's city center were already impossible to finance for most people before the regulation started. So their complaint is like saying "most people cannot afford a home in Pacific Heights" which is true, but irrelevant to the regulation.
"There was also an acceleration of apartments going up for sale, as landlords tried to cash out of their now less profitable investments." You know, for the families trying to live there, that is amazing news!
"the landlord tends to sell the unit rather than re-let it" Wasn't that the goal of the regulation, to increase home ownership by those living there?
"The biggest question is whether this episode of left-wing populism has damaged confidence in Berlin’s real-estate market permanently. If investors fear that local property rights will be put at risk in every election, they might stop building houses in the city at all." Oh wow. I'd wager that 99% of those living in Berlin won't mind if international investment corporations build their overly shiny and overpriced apartments somewhere else.
And lastly, this article appears to not mention one critical thing about Berlin at all, which is "Wohnungsbaugenossenschaft". Regular families joining a non-profit to construct apartment buildings for their own use together. One of the goals of this regulation was to boost that, and scaring away for-profit investors might just be the way to make space for non-profit investments.
I don't blame Bloomberg and Ifo Institute for delivering what their customer base wants to read. But it would be foolish to treat this as objective reporting.
Disclaimer : I am not supporting any kind of police state with state controlled production
Everybody you met had probably left because of so called "socialism", so you have quite a bias in your data. Have you heard of "Ostalagia"? There is still a not so small "communist" party in Russia by the way.
The alternative proposed by the article is basically : let it unregulated, the market will provide.
Which is how it was before. Was the problem solved? No. Maybe it is not the right solution but I doubt very much the author is concerned by the problem.
The article says only some places have their rent capped so the rents of the uncapped ones are skyrocketing. I am not convinced it is a solution cause I don't claim to be competent in the matter but how about all rents be capped? This is a solution the article does not even bother to discuss. So it's just yet another piece telling you that things are how they are (that is to your disadvantage) and nothing should be done about it. The article put right wing populism and left wing populism on a equal footing but as far as I can see one tries to give access to a decent life and public services, the other leaves to fend for yourself while blaming any minority group for it.
> The alternative proposed by the article is basically : let it unregulated, the market will provide. Which is how it was before. Was the problem solved? No.
Sigh. Here's what the article actually says:
> The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction.
That's an alternative reform proposal, not going back to how things were before. I think it would work better than rent control, because increasing supply is better than haggling over fixed supply.
Edit: another possible solution is a land value tax. It's non-distortionary (doesn't lead landlords to reduce or increase supply) and prevents a lot of rent increase.
It frustrates me to no end that on threads like these, comments on Georgist land-value taxes are buried so deeply. I wonder why they are not more widely recognised or discussed?
So increase offer by deregulating even more? Zoning and urban policies actually have a purpose : A nice city to live in And I am ready to bet that red tape has been cut again and again everywhere without solving the problem. Sorry for misrepresenting the article reform proposal but it did not strike me as a very innovative solution. More like more of the same.
Shrug. If two million people want to live in a city which has room only for a million, something has to give. Rent control doesn't increase housing. You must either increase housing somehow, or leave a million people unhappy.
If you don't mind the other million, and only care about people already living in the city, you can make it honest by introducing a city-wide Tenant Permit issued only to current tenants. Rents stabilize due to fixed demand, people aren't tied to one apartment, and landlords are incentivized to offer better service. It has all the benefits of your plan and none of the drawbacks, right?
> Which is how it was before. Was the problem solved?
One of the problems is that when Berlin was partitioned it was a showcase for Eastern and Western Germany and lots of money flowed in for construction without really enough people to fill it. Now people are moving there and no one building.
I’m amazed that the writer can spin this as bad. Low housing-costs are both fantastic for residents and fantastic for the economy due to increased disposable income. Only a Rentier Capitalist would want the opposite.
If you’re going to argue that supply will only go up if you allow price to rise infinitely, you’re getting it backwards- the increase in supply is supposed to make the price go back down, that’s the whole idea. There is supposed to be a balance that develops that holds the price down to an affordable level.
Why does this never happen? Well, there are many areas of the United States where real estate prices are skyrocketing even though all the houses are vacant- because real estate is being used as a vehicle for speculation. And the same thing is happening in almost every city in the western world. It’s likely the same thing is happening in Berlin. The demand is not coming from renters so allowing the price to go up does not help renters, it’s all just a tidal wave of free money from central banks looking for somewhere to go.
Also the author of the article is an Ayn Rand free-market-as-magic-bullet ideologue with an axe to grind. He makes no pretense of trying to write a balanced analysis. He even appears to be framing things like rents and real estate prices falling as pure negatives when both those things are purely positive from the point of view of anyone but a real estate owner.
> If you’re going to argue that supply will only go up if you allow price to rise infinitely, you’re getting it backwards- the increase in supply is supposed to make the price go back down, that’s the whole idea. There is supposed to be a balance that develops that holds the price down to an affordable level.
The article argues that the people who construct apartment buildings operate on incentives. Their incentives are the revenue generated by the apartment over, say, 30 years and the cost of constructing the apartment (in materials, regulations, time, ...).
Decreasing the expected rents and/or increasing cost of construction should result in less new apartments (supply increase is slow or nonresistant).
Conversely, increasing the expected rents and/or decreasing cost of construction should result in more new apartments (supply increases quickly).
The article does not suggest:
>supply will only go up if you allow price to rise infinitely
but instead:
>> The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction.
Right, that works in theory, but in the real world it’s not happening. Once supply is increased, the price should go back to a lower equilibrium, right? So why isn’t that happening anywhere in the world? Because it’s a real estate bubble and speculators are buying because the price is high. Real estate prices drive rents not the other way around. They don’t care if the buildings are half vacant as long as they can sell them later for an even higher price. Demand by renters is irrelevant.
> Right, that works in theory, but in the real world it’s not happening.
This is a fair reasonable and response to the article. In essence you are arguing: the housing market can act irrationally and is seemingly disconnected from the underlying asset. Furthermore, people get hurt by these spikes in prices.
The reason I responded to your original comment was not to pick apart who is right but because you seemed to be attacking a point that the article didn't make.
The demand is coming from renters though. People are moving to Berlin. They need to build more houses or prices will go. Markets dont solve everything but they do here. Just ask tokyo how they got out of their housing crisis. Build More.
The population of Germany is declining, (Berlin population has been stagnant since 1950), wages aren’t rising but housing prices are going up everywhere. And the same story is repeating in multiple countries all over the world. So clearly, must be supply and demand and not just a speculative bubble, right?
Germany's population is increasing over time. In fact, 2020 was an all time high [1].
> Berlin population has been stagnant since 1950
Between 1980 and 2020, Berlin's population increased by half a million people [2]. In addition, it's population has increased every year since 2004 with an average of ~0.3% yearly increase.
Trivia: The term "dismal science" was coined when economists argued for abolishing slavery:
> Carlyle attacked Mill, not for supporting Malthus’s predictions about the dire consequences of population growth, but for supporting the emancipation of slaves. It was this fact–that economics assumed that people were basically all the same, and thus all entitled to liberty–that led Carlyle to label economics “the dismal science.”
Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply.
But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to enter the rental market is utterly SOL. The people that are really getting screwed are 10 years old today: when they try to move out of Mom and Dad's they will enter a market with vastly reduced supply since nobody has any incentive to move.
This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.