It's a disastrous policy, and one of the main reasons SF housing is such a mess. Tenant laws also tend to incentivize booting everyone at once and converting to condos instead of renting units.
Rent control rewards the entrenched people who were lucky enough to find a unit early, at the expense of everyone who came later. The beneficiaries of this may not consider it that way, but it most certainly is a form of wealth for them. So I would argue that even they too, are wealthy.
The victims of rent control are everyone who is pushed out of the city -- or those who cannot move there -- because of how rent control makes building rental units unprofitable.
> because of how rent control makes building rental units unprofitable.
In Mountain View units have to be built before 1994 to be subject to rent control. This actually incentivizes developers to build new units, because they will be market rate units.
There are problems with rent control, but making building rental units unprofitable isn't one of them.
How do we explain the rapid displacement of people in cities without rent control then? Markets are not as rational as your line of thought would lead us to believe. Actually — there is one clear rationale, capital accumulation at all cost.
> Rent control rewards the entrenched people who were lucky enough to find a unit early, at the expense of everyone who came later.
And market housing rewards well-paid, rich professionals at the expense of everyone who isn't pulling in a FAANG salary.
Neither is a 'fair' distribution of shelter - that much is true.
> The victims of rent control are everyone who is pushed out of the city -- or those who cannot move there -- because of how rent control makes building rental units unprofitable.
If you remove rent control tomorrow, there's going to be no shortage of immediate, acutely suffering victims of that political decision. Forgive me that I have more sympathy for those individuals, then some nebulous group of 'People who, for whatever reason, really want to move to SF, and can afford a $2,800 apartment, but not a $3,400 one, so they don't move to SF.'
>If you remove rent control tomorrow, there's going to be no shortage of immediate, acutely suffering victims of that political decision.
That's how rent control works in a high demand area by design.
people suffer from high rents -> rent control is introduced -> people suffer less -> people oppose higher density because they don't suffer -> prices of real estate increase in the meantime -> rent control ends (moving/displaced) -> people suffer from high rents even more
The ideal scenario would be this:
people suffer from high rents -> higher density is introduced -> people benefit from low rents
> If you remove rent control tomorrow, there's going to be no shortage of immediate, acutely suffering victims of that political decision.
I have no dog in this race but I'm curious how this would play out long term. The people that are made homeless and have to move are all working in jobs necessary to a functioning society, cutting hair, stacking shelves, cleaning toilets, etc. How do these functions get replaced?
Would higher salaries be offered? If so the relative pay of tech workers would go down and it could create a real inflationary feedback cycle, surely tech workers would probably price themselves out of the market at some point.
Would people commute from further away instead? Surely the number of people willing to commute 2 hours each way for low pay would be limited. This would also cause a whole heap of traffic issues.
Would these sorts of jobs simply move out of the city? It's hard to imagine but what if a grocery store simply couldn't afford people to stack shelves and they all closed down? Does everyone order from Amazon?
In most cases it seems having a viable working class in the area is what allows tech workers to be rich.
News flash, in a capitalist society, scarce resources are more readily available to those with money than those without. Regarding “fair distribution of shelter”, what do you consider fair? How do you allocate scarce resources in a fair manner? You make it sound like having an apartment in downtown SF is some sort of inalienable right.
Among other problems rent control has this really nasty side effect of stopping that community action that would help control housing prices, Seattle is a good illustration of this.
When rent started increasing in Seattle all renters were immediately effected and so that segment of the population mobilized and applied pressure to do the one thing that keeps housing prices down in a free market: Increase supply. Lots of people were forced out but after over a decade of non-stop, fevered construction prices are finally starting to get under control.
In San Francisco a large portion of the rental market is insulated from rent prices until it's time to move. At that point if you're priced out, you tend to leave. Some people try to tough it out and fight but that rarely lasts more than a year or two. This staggering of resistance to increased rents into smaller chunks of the renting population makes political change almost impossible as no small chunk has a chance against the more consistently committed land owners.
That's incorrect: Seattle is building new apartments but only those who make large salaries can rent them. The population that used to pay reasonable prices for rentals now cannot afford the prices and are either leaving the city or in extreme cases living in the streets. In this respect Seattle is now closer to San Francisco than what you imagine.
You are asking the wrong questions. The only thing that matters is whether the population of Seattle increases and it does indeed grow more quickly than in San Francisco. San Francisco only sees some population growth because of a high influx of international migrants. The Americans are moving away to Seattle and other cheaper cities.
The biggest injustice in the US is that thanks to globalization jobs are now concentrated in few major cities. But people cannot move where the jobs are because of opposition to new housing. Those cities are basically taking "jobs" hostage by pretending to care about the character of their neighborhood.
As long as more construction is allowed and matches the number of new jobs then it simply doesn't matter how much some magical number called "rent" increases because the jobs that can pay for the market rate housing are already there but what's missing is housing capacity.
Also all I can find about Seattle migration outflow is that there was a big dip in Q1 2018 but in Q2 there was a net inflow again. [0]
You clearly don't know what the situation of Seattle is. The influx of people to Seattle is to work on high tech companies. These people make enough money to pay for the increasing costs of rent. The locals (Americans, by the way) are forced to leave the city because they can't afford to live here anymore. The poorer ones that have no prospect of finding jobs in another city become homeless. That's the perverse reality.
New apartments rent for more than older apartments, forcing them downmarket. So ya, new developments are priced higher, but enough of it has come online in the last year or two that down pressure is being applied to the rental market (though perhaps not enough?). At least rents aren’t rising as fast as they were.
I'm aware that most of the new housing is luxury apartments, but rents are finally dropping. I think the reality of the past 30 years is simply that prices were increasing faster than we could build for a long time and we had to play catch up.
multiple economic papers have shown that Rent Control is a huge disaster for a city. As said in another comment, it rewards those that moved in early (and those might be super rich techies like most of my friends that like to brag about having a rent controlled 2000$ 2bedroom).
Rent control forces new units to be priced super high because the landlords know they will not be able to increase afterward. Probably one of the most failed policy in SF (and there are a lot of failed policies there)
According to the most recent paper, "renters who came later paid about 5% more than they would have in the absence of rent control." https://www.gsb.stanford.edu/insights/rent-controls-winners-... That doesn't sound disastrous. After the 2016 election I would think free market proponents would be more appreciative of the value of economic security and the costs of structural dislocation, but I guess not.... Anyhow, rent control in SF only applies to pre-1979 buildings, so if anything rent control provides an incentive to build new housing.
We need more new housing, period. We can at least agree on that. I don't see how rent control prevents the creation of new housing. The city and its voters do that all by themselves.
"Economists are virtually unanimous in concluding that rent controls are destructive. In a 1990 poll of 464 economists published in the May 1992 issue of the American Economic Review, 93 percent of U.S. respondents agreed, either completely or with provisos, that “a ceiling on rents reduces the quantity and quality of housing available.”1 Similarly, another study reported that more than 95 percent of the Canadian economists polled agreed with the statement.2
The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners milton friedman and friedrich hayek on the “right” to their fellow Nobel laureate gunnar myrdal, an important architect of the Swedish Labor Party’s welfare state, on the “left.” Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”3 ___His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”___
it's literally the only reason most of the remaining long time citizens who aren't wealthy can live there still