[theduro]

Rent control is a failed experiment. All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases.

Basically, if the real market price of an apartment is ~$3,000/mo, but in 5 years it realistically would be $5,000, they will simply list it for $5,000 now, to mitigate the loss.

My mother-in-law is a land lord in Los Angeles (a very fair one at that), and is also about as bleeding heart liberal as you can get. She is a staunch opponent of rent control.

[bendmorris]

>My mother-in-law is a land lord in Los Angeles ... She is a staunch opponent of rent control.

Is this supposed to be surprising...? Regardless of whether it works for tenants, obviously rent control isn't there for the landlord's benefit.

[paulgb]

Having read up on some of the building purchases in my own neighborhood (East Village of NYC), it seems that rent control is bad for honest landlords and good for the slimey ones who are willing to "encourage" people to leave. And thanks to Coase's theorem the building sales are usually in that direction.

[noobermin]

Wouldn't the fix be to stop the slimey ones from "encouraging" people to leave in the first place?

It sounds like blaming the game rather than striking out against those who abuse it.

[jules]

It's not a question of blame, it's a question of the results of a particular policy. Rent control creates an incentive for landlords to bully their tenants. You can create another government agency to police this, but in reality that is extremely difficult because you can do a lot of bad things legally, and trying to police that will have negative unintended consequences in itself. It also causes bad behavior that would be impossible or incredibly undesirable to police, such as simply neglecting the state of the housing and shared spaces. We've already learned decades ago that rent controlled housing rapidly deteriorates.

Perhaps another example: the drug war. Making marihuana illegal creates criminal activity other than just selling it. You could say "okay, so just police that", but that's not so easy in the real world, and we've seen the negative consequences of attempting it.

A lot of problems would be solved if politicians thought less about the intentions of their policies and more about the incentives those policies create. Too many policies make bad behavior rational. Even worse is that once you do that it's not just that good people start behaving badly, but also that bad actors out compete the good ones. A good policy aligns self interest with the common interest.

[noobermin]

You're going to have to help me. I don't know what you mean by "bad behavior that would be[...]undesirable to police." It seems very abstract, and because of that, is less than convincing. Please give me an explicit example of that.

For example, how does, "rent-control => neglect the state of housing" That happens already without rent-control.

[anthuswilliams]

It's true that there are many landlords who provide ill-managed, neglected housing even in areas without rent control. However, rent control exacerbates that problem, in my opinion, for two reasons:

1) It incentivizes the landlord to shorten the amount of time a particular tenant will inhabit the property, because it is only when a tenant leaves and a new one comes in that the landlord is free to jack up the rent to market rates.

2) It compels the landlord to lower his expenses in order to ensure that his investment stays profitable. Ordinarily, a landlord is constrained by a desire to keep a property that will attract and retain good tenants, but since that is no longer (as much of) a factor, he will avoid making repairs and enhancements except in emergency situations where the law requires him to.

Source: landlord (albeit one who has never worked in an area with rent control policies)

[BearGoesChirp]

Is that possible?

The good landlords aren't pulling out every technically not illegal trick to make more money because they value things more than just being in the clear legally, but they do value being in the clear legally. The slimy landlords don't care about other effects, as long as they are legally in the clear. If you increase punishment/enforcement of the laws, you will hit both the good and the slimy landlords harder, with the slimy ones still taking a lead because they don't care about factors like a good reputation or having a clean conscious (yes, I'm somewhat stereotyping the good and slimy groups).

That the slimy ones know and practice working around the law may even mean that the good landlords get hit harder from a crackdown. In some way the government can't focus on the slimy landlords because by their very being they avoid government focus more than the good landlords.

[paulgb]

Better enforcement might help, but even if everyone is acting in good faith you'd still expect to see a higher incidence of condo conversations and Tenancy in Common simply due to Coase.

[ardit33]

agreed, lived in apt in the East Village, and while my apt. was really nice, the common areas were in shambles and it looked like the managing company didn't care about its exterior either.

The reason was that almost half of the apt. in the building were rent controlled (grandfathered in).

I think a mix of limited rent control (i.e. 5 years, max) plus building more apt for people that can't afford it, is a better combo on keeping a stability and folks being able to afford and live closer to work.

The only way to build more affordable apartments, is to allow for building more market rate apartments as well. Right now this current older (baby boomer) generation is screwing hard the upcoming one.

[lern_too_spel]

I know several slumlords who have made a killing off of rent control. It rewards bad actors disproportionately more than bleeding hearts like GP's mother.

Because slumlords are better able to extract profits from rent controlled properties, they are willing to buy them for more than they are worth to bleeding hearts. All rent controlled properties will be managed by slumlords in the long run.

[kemiller]

Yes, this, exactly. And I suspect that this is partially behind its persistence in the face of evidence it doesn't work.

[theduro]

Agreed. I guess what I was getting at was, given her particularly less than favorable views on deregulation and hyper free-market views in other respects, I find her opinion on this interesting.

[bendmorris]

No offense, but I don't think it's especially surprising when people support one set of political views when it affects other people, but deviate from it when it affects their own bottom line. See for example the powerful in Silicon Valley, who are mostly "progressive" until it comes to economic issues that affect their personal finances.

[kinkrtyavimoodh]

Nothing against your MIL but it is extremely common for people to not walk the talk. It's much easier to talk in pure abstract models when it is someone else's life and money on the line.

I am sure most people here who claim that the likes of Google and Apple should not 'avoid' taxes take every possible tax deduction in their personal lives so as to minimize their tax liability.

There's a reason the young are such idealists. It's easy to preach in the abstract about how OTHER parents should raise THEIR kids. Or how OTHER landlords should manage THEIR property investments. When these people become parents and homeowners themselves is when the rubber hits the road, and most just regress to the mean.

[closeparen]

The young are not going to become homeowners or start families if they can’t afford it. It’s not a wait your turn, stages of life kind of thing. There is no path for someone who is in their 20s now to ever own a $2m home. Indeed, household formation and fertility are low and declining compared to previous generations at the same point in their lives.

[michaelchisari]

My mother-in-law is a land lord in Los Angeles

I'm a tenant in Los Angeles, and a staunch supporter of rent control. Knowing that my rent (which is already high) can only go up so much year-over-year provides some bit of stability as the tech industry devours eastward from Santa Monica.

[Gibbon1]

I've been paying attention to what economists say fairly rigorously for the last ten years and they have some huge blind spots. One of them is they completely and utterly ignore the importance of income and social stability. Which is they see any expenditures needed to provide those as a unacceptable drag on society.

[rayiner]

> they ignore the importance of income and social stability

They don't ignore it, they're just not ignorant about the costs of income and social stability.

For example: I grew up in a relatively modest house (3BR, 1,100 square feet) about 40 minutes outside of D.C. Growing up, there were quite a few young families in our neighborhood. Average household income was probably about $70k/year in today's money--relatively well off but not even what you'd call "upper middle class." Today, you'd need about $130k/year to afford to live in the same house. You're talking about a completely different class of people at those two income levels. It's two people with average jobs (maybe even without a four-year degree), versus two people with mid-level white-collar jobs (GS-11, since this is D.C.). It's people who had kids in their 20s versus people who put off having kids for 5-10 years to focus on their careers.

Today, the people I know starting families in the area are professionals making multiples of what my parents and our neighbors made at a similar stage in their lives. Instead of playing the housing bubble game, my wife and I commute in 60+ minutes each way. Partly because it enables us to raise our kids in a neighborhood with young families. But also just out of spite.

All this "stability" is a huge drag on young people that proponents of things like rent control ignore. That grandma living in her rent-controlled apartment is displacing some family that now has to live out further and end up seeing the kids they put off having for fewer hours each day.

[mywittyname]

The population has grown such that urban areas have far less acreage per person than they use to, so there's more competition for housing in that neighborhood.

Plus, income distributes follow a pareto distribution: in DC a 60th percentile family earns between ~35% more money than an 50th percentile family does, and a 70th percentile family earns ~35% more than a 60th family does, etc.

Those two factors are behind the explosion in housing prices around the nation. The same number of people can afford to pay substantially more for housing than they could previously. When you were growing up, your parents were competing with median income families for housing. But today, you're competing with ~70th percentile families for the same housing (per your income assessment).

The solution is to tear down low-density suburbs and replace them with high density residencies. But there's no incentive to do this because people are more than willing to just spend more time commuting so they can have a yard to mow on the weekends.

[rayiner]

> The solution is to tear down low-density suburbs and replace them with high density residencies. But there's no incentive to do this because people are more than willing to just spend more time commuting so they can have a yard to mow on the weekends.

It’s hard to tell what people actually want. The lots in my neighborhood, laid out in the 1930s, has a standard plot size of 1/15 of an acre. This is a suburb of detached single family homes. A few people have doubled up the lots, but for the most part people just deal with having no yard. Today, the minimum lot size is five times bigger, 1/3 of an acre! So is there no incentive to build denser because people are willing to commute more to have the space, or because it’s illegal to do anything other than build ultra low density housing?

[antisthenes]

> Instead of playing the housing bubble game, my wife and I commute in 60+ minutes each way. Partly because it enables us to raise our kids in a neighborhood with young families. But also just out of spite.

Who exactly is being spited here when you waste 10% of your life sitting in a car 'commuting' ?

[rayiner]

Each buyer that refuses to bid on an inner-suburb house drives the market price down by some real, but infinitesimally small, amount. Symbolic, sure, but I can't in good conscience bid some split level in a 1950s Levittown development up to $600k.

[icelancer]

>> One of them is they completely and utterly ignore the importance of income and social stability.

This is literally an entire field of focus of economists and one of the fastest growing ones in the field. Have you considered that maybe you are the one that is ignoring the second-order effects of being a proponent of rent control and how it helps a specific person over a population?

[Gibbon1]

Or perhaps maybe you ignore that that unfettered capital and a flattened banking systems so beloved of economists is the actual root cause of these problems?

Fundamentally modern economics despises the use of any other type of social control and signaling other then capital. Solution's to all problems must be in the context of markets.

One can see the effect that has had on middle and lower income families. And on our political systems. Where families are starved of resources and politicians are fearful of exercising independent political power on behalf of the voters.

That's the system that economists insisted was going to work much better than the system we had before.

[kemiller]

Would you rather have rent control, or just lower rents overall? For the sake of argument. Because that's the thesis: rent control is partially responsible for the out of control rents.

[mjevans]

I would rather see rents controlled in an area by requiring that sufficient housing is built.

Address the issue with more supply.

(At a livable standard of living, including proper sound isolation and fresh air, and even a space for vehicle storage* because people need to leave the city some time... *: Having an in city goods and services transport layer in weather controlled environments that leads to peripheral IO structures such as mega parking garages is fine.)

[gwright]

> requiring that sufficient housing is built.

I realize what you are trying to say (I think), but your phrasing is curious.

Shortages are almost always caused by government intervention in a market by increasing the burden for suppliers and/or capping prices. There is no need to mandate anything, but instead just let developers do what they already want to do, build. It is the prohibitions (zoning regulations) on development that are the problem, not disinterest by developers.

[mjevans]

Actually construction wants to expend the least effort for the most profit. Given how critical the housing gap is in most areas* (that are near jobs) right now all that 'wants' to be built is the upper end of housing. If the market hadn't reached these levels that /would/ be fine, since then previous housing from that category would depreciate in to the lower income strata in an actual trickle down method. What will happen instead is that only enough housing will be built to maintain the current status of an unhealthy market.

In order to have an actual //correction// in current trends directed building must be several times beyond a normal build rate to make up for the decades of under-performance.

[michaelchisari]

I'd rather tackle things like speculation and improper use (high volume airbnb) before going after rent controls.

[pmoriarty]

"Rent control is a failed experiment. All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases."

Forces them? As if they wouldn't raise rents as much as they felt they could get away with anyway.

Or as if without rent control landlords would keep rents low, merely out of the goodness of their hearts.

[aero142]

This isn't as obvious as you make it sound. If all landlord realized they will have a future loss, they are looking for a way to recoup this. If they believe other landlords are going to do the same thing, they know they can raise prices without getting undercut because others know the same thing they do. Quips about the goodness of their hearts isn't as deep a thought as you think.

[JamesBarney]

In commercial real estate there are two types of contracts.

I agree to rent this place for a year.

I agree to rent this place for a year, and I'm paying for the option to re-rent it at the same rate for the next 5 years.

You can imagine that in commercial real estate one of these contracts is more expensive per month than the other. Especially in markets with rising rents.

Basically rent control bans the first type of contract, and requires the second. And therefore increases rental rates.

[lern_too_spel]

It is an economic certainty. If more of the housing supply is tied up by rent controlled tenants who won't move out, supply and demand places the equilibrium price for available units far higher than it would be without rent control.

When you institute rent control, you save existing teachers some money, but when they retire, good luck finding new teachers willing to work in the new market with much higher rents.

[hindsightbias]

I'm all for getting rid of rent control - as long as she gives up Prop 13 too.

[lern_too_spel]

Get rid of both, but there's no reason to gate one on the other.

[nicholas73]

Landlords will rent at whatever they can a tenant to pay for, not some number in their mental ledger.

[cowsandmilk]

What your response misses is the time component of vacancy.

If I have rent control, I will list at a higher price and let the property sit vacant for longer to find a tenant because the law says that I am limited in the ability to later adapt the rent to the market.

Without rent control, there is much less incentive to leave a property vacant, looking for a tenant willing to pay a higher price point.

Most microeconomics courses teach that markets don't have one price for a good, and one of the lessons will be in strategies, such as coupons, that owners of goods use to sell into the market at multiple prices. There isn't a single number that a landlord can rent a unit out for in a given market.

[kelnos]

Except that in SF, a landlord can get a tenant for nearly any price, because demand really is that high, and supply really is that low. On the occasion that a rent controlled apartment goes back into the market in SF, it's snapped up within a week, even if the listing price is set above market rate. A savvy renter (which you have to be, if you want to get a place in SF) will know that they're paying a higher price for a much more stable rent year over year.

[refurb]

That's actually a really good point. One could argue that value of rent control is priced into the rent.

I've know plenty of people who winced at the rent they paid, but told themselves that in 5 years it'll be worth it as the rent will be below market.

[carlmr]

>in SF, it's snapped up within a week, even if the listing price is set above market rate

That makes it the market rate for the apt though. You'd be above market rate if it didn't get rented out in a normal timeframe.

[kelnos]

No it's not; that's a pretty circular definition. Determining the market rate involves comparisons with similar units in the same neighborhood.

[ddebernardy]

So... in other words, what you're missing is a punitive tax on vacant property, as an incentive to rent asap - at any price.

[cjalmeida]

Keep adding obligations to landlords to the point no one wants to be one. Then, if you can't, for any reason, secure a mortgage your only alternative is homeless. Sounds like a good idea.

[mhuffman]

Real estate, by multiple measures, is the most profitable industry in the US private sector. It is heavily taxed and regulated because it is a money-printing machine. We are not in danger of there being no landlords.

[1] https://ftalphaville.ft.com/2016/03/29/2157698/ranking-ameri...

[linkregister]

Exactly! If the landlord can get a tenant to pay $5000 per month, then the market rate for that particular unit is $5000 per month.

[icelancer]

No, not exactly. In the scenario above, the landlord obviously has to keep the property vacant for some time at $5000/month, much longer than at $3000/month. But because it is a near-certainty the real price would go to $5000/month in 5 years - but he is unable to increase rent to that if he rents out today at $3000/month due to rent control (and this is critical) - he would rather keep it vacant until someone comes along and pays the higher amount.

If not for rent control, he would charge $3000/month now at market-clearing rates, get a tenant in there in 30 days, and increase rent by the standard market price every 12 months. But due to rent control undercutting profits, he can't do this, so he keeps it open at a higher price.

[linkregister]

I was going to refute your (uncited) comment, but it appears that San Francisco's vacancy rate has increased from 4.9% to 8.3% over ten years, affirming your position.

http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty....

[icelancer]

There's really no citation available so to speak for my comment, unless you want citations in Economics texts. It's fairly rational activity by landlords (or anyone who has controlled supply of any good/service) to take. The vacancy rates aren't surprising to me but there are other effects that cause that number to rise/fall, not just rent control (though the arrow is in the expected direction based on policy).

[kelnos]

It's unclear from those stats the reason for the vacancies, though. I've read about a lot of foreign investment that is buying up properties and then intentionally leaving them vacant, or are using them as vacation homes or vacation rentals.

[learc83]

>and increase rent by the standard market price every 12 month

That's not what he would do. Tenants tend to value a property more as time goes on. Beyond increasing market rates.

Without rent control, your rent will increase faster than the average market increase would indicate unless you move very often. Rent control may not be the optimal way to combat this, but it is something many societies recognize as a problem.

[kelnos]

In a place with higher supply and less demand, I'd absolutely agree with you, but in SF, that property will get snapped up within a week regardless of whether it's listed at $3k or $5k.

[gozur88]

>All it does is force land lords to massively increase rent amounts when someone moves out to account for multi-year market increases.

Depends on the scheme in place. There are a lot of places where the amount the landlord can raise the rent between tenants is capped.

There are two big problems with rent control: It results in a constriction of supply over time, and it causes degradation in housing stock quality. There's no reason to put one cent more into your rent controlled place than required by law.

[pfooti]

The real failed experiment is that of renting property in general. If nobody were allowed to own more homes than they could live in, or derive income from rentals, there'd be a much bigger supply of housing on the market for buyers, and a much more liquid market for buying and selling as people's jobs shifted.

[balthasar]

Yr right. Rent control doesn't make sense in a bull or bear market. Only when the market is stable.

[classwarsteve]

>All it does is force land lords to massively increase rent amounts

Ah yes, the landlords are forced to massively raise rents, unlike the tenants, who are allowed to choose whatever price they want.

Simple reliance on a profit model for housing is never going to adequately meet housing needs.

[AnimalMuppet]

> Simple reliance on a profit model for housing is never going to adequately meet housing needs.

Can you give something to justify that statement, something more than just a bare assertion? To me, it looks like reliance on something other than the profit motive (that is, rent control) is what's causing the problems here.

[classwarsteve]

A start would be the pervasiveness of homelessness throughout the history of the United States as contrasted with its abolition in the USSR and its dramatic return with post-soviet privatization.

[cjalmeida]

Likely because being homeless in USSR was a crime and motive to send one to a Gulag?

[classwarsteve]

At least in the USSR you were guaranteed housing as opposed to the United States where homelessness is largely criminalized while the homeless are offered little support and in fact regularly have their lives upended because they're considered an eyesore.

https://www.nlchp.org/documents/No_Safe_Place

[jules]

Why don't you start a communist commune? You can do that in a capitalist system. You can't set up a capitalist commune in a communist system because they'll put you in the gulag.

[classwarsteve]

Actually you should check out the long history of western capitalist supported right wing death squads that have been sent to break up communist governments.

https://www.globalresearch.ca/a-timeline-of-cia-atrocities/5...

[AnimalMuppet]

And how does that answer jules' point? You sound like you're just looking for a chance to spew your talking points, rather than actually having a conversation with us.

[Spooky23]

When the earthquake levels half the city and your mother in law is bankrupt because here tenants have no connection to the community and jet, I’m sure she will be very interested in government asssitance.