[phil248]

I'm shocked at the ideological fervor here and the fact that virtually no one seems to have looked at the details of the actual bill. This is nothing like the rent control ordinance in SF that has caused $3000 units to get stuck at $500 rents. That will never happen under this law. The allowable increases are so much higher than "normal" rent control laws that any given unit will catch up to market rates in a matter of years, at most. Whereas the laws we love to hate result in units getting stuck far below market for decades or even generations.

The difference with this law is that a 20% rent hike will take 3-4 years to be implemented instead of 30 or 60 days. That difference, while not enough to allow all families to remain in place, will allow families time to adjust or move within a reasonable time frame.

This law is different. If you want to complain about rent control in SF or NYC or elsewhere, have at it, but know that most of your complaints do not apply to this law.

[34679]

The lack of affordable housing always has been and always will be a supply problem. When demand for homes outpaces the number of homes being built, prices go up. Plain and simple.

Homes that are built for renting (mainly apartments and condos, but some houses, too) are built for profit. If you make it less profitable to build, fewer will be built. If fewer homes are built, the problem is compounded, not rectified.

If you want to make housing more affordable, make it as cheap and profitable as possible to build new homes. Get rid of the fees that can push over $100,000 for a single family home in some counties, before the builder even buys a nail or 2x4. In most states you can build a home for less than the price of permission to build a home in some California counties.

[verbify]

I used to think so too. Now I'm on the fence. High interest rates means people can borrow less, and has a dampening effect on house prices, low interest rates means people can borrow more, so house prices go up.

Our current environment of low interest rates means that borrowing is cheap - which has pushed up prices, as now people can now afford larger mortgages. This has come at the same time as a withdrawal of mortgage finance from first-time-buyers, so effectively people who have bought before can buy another house, while those who haven't can't get on 'the housing ladder'. This is according to economist Ian Mulheirn, and is very much based on the UK (although similar arguments might apply elsewhere). Supply is part of the problem, but according to him, the smallest part.

https://housingevidence.ac.uk/wp-content/uploads/2019/08/201...

[ng12]

> low interest rates means people can borrow more, so house prices go up.

Sure, but they go up by the amount of money you saved on the mortgage, the net price is the same. The amount homebuyers can afford to pay doesn't change with interest rates.

[verbify]

> The amount homebuyers can afford to pay doesn't change with interest rates.

The amount people can afford to pay doesn't change, but the cost of the house does change.

Assume a 30 year mortgage. If the interest rate is 2%, and I spend 1.5k a month on my mortgage, I can afford a mortgage of 406,000 and own the home at the end. However, if interest rates are 10%, even if I'm still earning 1.5k a month, I can only afford a mortgage of 171000 in order to pay it off by the end. You can double check my figures using this calculator - https://www.bankrate.com/uk/mortgages/mortgage-repayment-cal...

Given that deposits are usually at a minimum 10% of the house price, it's very hard for first-time buyers to gather that amount of money - while people who have purchased before can sell their existing home.

The issue the paper describes is that interest rates have gone down, so house prices have gone up, _and at the same time_ it's harder to get your first mortgage (i.e. you need a larger deposit) - which most new buyers cannot afford.

[ng12]

The error in your logic is assuming the bank is going to want the same % down payment for a 2% and a 10% mortgage.

[verbify]

A down payment is usually a percentage of the value of the house (typically 10-20%). If the house is worth more, the down payment is higher. As I said before "effectively people who have bought before can buy another house, while those who haven't can't". A higher downpayment is yet another barrier. However those who have houses already can use their existing previous equity as a downpayment and therefore can sell their home and buy another.

This underscores the view I was promoting - that interest rates play a large part in the difficulties besetting new buyers.

[notSupplied]

But it results in a higher overall level of societal leverage despite consuming the same quantity of housing.

[dragonwriter]

> The lack of affordable housing always has been and always will be a supply problem.

Yes, but in the expensive parts of California the limiting supply factor isn't how much people want to build but how much they are allowed to build because of zoning and other constraints, so there is a fairly large range where reducing the incentive to build will have no effect on actual results.

But, anyway, does this really reduce incentives for new construction? It seems to me rent control and eviction restrictions of this type increases the expected profits for new construction, because it doesn't limit existing rents, and doesn't allow high-end demand to be met by bouncing tenants out of lower-end units and renovating them and raising the prices. So, it reduces the competition new units face from existing ones at the top of the market while leaving the rents that can be charged initially for those new units unrestricted. (And, by limiting the ability to bounce unprofitable tenants in favor of new ones, if it doesn't spur new rental-focussed unit construction and housing demand remains the same it creates a greater incentive to build for sale as owner-occupied housing where, again, prices are unrestricted.)

The real danger isn't lack of incentive to build, it's lack of incentive to maintain existing units instead of milking what remaining profits can be made in the short term, then letting them fail in isolated, judgement proof, limited liability business enterprises by not reinvesting because you can't recover reinvestment with rent increases, while reinvesting the extracted profits elsewhere.

[devtul]

Doesn't zoning fall under the same category as high permit prices when it comes to roadblocks for new units? Even when you say

> It seems to me rent control and eviction restrictions of this type increases the expected profits for new construction

Zoning and high fees will still be a problem, new units can be rented/sold at a premium but then we have the issue of it being affordable in rent or credit. My guess is that the new rule protects(temporarily) whoever is already in the game, any new comer will still get screwed.

[davinic]

Prop 13 also plays a huge part in why vacant areas don't get developed.

[mikeash]

Lack of supply is a problem, but is it caused by an inability to turn a profit? It seems like developers have no trouble making money from new construction. The difficult part, and the part that limits supply, is getting permission to build.

[Symmetry]

They aren't unrelated. The more hoops a developer has to jump through to get permission to build anything the more outside returns are required to get people to push to do that. The people who thrive in this environment aren't the most ethical of business people and you'd get more ethical developers if there were clear rules allowing certain things to be built and less outsized returns. But better that than nothing getting built.

[mikeash]

You’re totally right. It just looks like the current situation in places like SF is almost entirely due to difficulty in getting permission. Remove rent control entirely and the supply wouldn’t increase much. It’s different in various other places.

[cat199]

> If you make it less profitable to build, fewer will be built.

.. and fewer will be speculated on, driving up the underlying price, which is then translated into rent.

this is my problem with simple smithian models of real estate - they ignore the wider capital market impacts.

not a fan of rent control, but also not a fan of fund fueled real estate bubbles, and both influence the cost of rent.

[folkrav]

Not American, so my knowledge on the matter is limited. Is it that expensive even outside SF and LA areas?

Also, AFAIK, these two areas (and surroundings) are very, very stressed in terms of traffic, and more housing means more people, and more cars. Can those cities deal with more traffic?

[dragonwriter]

> more housing means more people, and more cars.

More housing in SF requires design that supports fewer cars. That's not as true in LA, perhaps, but it would still be the best way to do it.

[rayiner]

Remember the US is a federal system so costs vary greatly depending on state/municipality. California regulatory costs result in high prices even though the state is less dense than many others like Ohio with far cheaper housing. https://finance.yahoo.com/news/house-costs-500000-build-sell....

[noxToken]

Very expensive. When you leave a lot of major metro areas, housing costs way less. There are 3+ BR homes on ½ acre of land (approx half an American football field or half a soccer pitch) in the South roughly 15 minutes from downtown areas for $125k - $175k USD. The cost of living in areas like SF and NYC are very high compared to the rest of the country. Housing is a major part of that cost of living hike.

[knightofmars]

> Get rid of the fees that can push over $100,000 for a single family home in some counties.

It depends on what outcome you wish to achieve. Single family zoning is backwards policy in urban environments.

https://www.citylab.com/equity/2018/11/single-family-zoning-...

[intended]

Thats incorrect - not all land is equally valuable, so just building more buildings doesn’t mean that housing is solved.

Infrastructure around the builds also matter, which means just building denser isn’t a solution.

Complimentary services like schools, stores, pubs, churches, skate parks, parks etc change the value of a location as well, and change it differently for different demographics.

So making it cheap and profitable only makes it profitable to build - it does not solve the problem of affordable housing.

[FussyZeus]

> Homes that are built for renting (mainly apartments and condos, but some houses, too) are built for profit. If you make it less profitable to build, fewer will be built. If fewer homes are built, the problem is compounded, not rectified.

Arguments like this continue to be made for more and more aspects of our market: pharmaceuticals, heathcare services, elder care services, and now housing. Everywhere you look the markets seem ill equipped to handle the needs of people.

Maybe the problem is markets then? Maybe the problem is expecting our entire society to work based on profit motive? I don't deny it's served us fairly well for awhile, but it seems like we're hitting the wall a lot lately.

[eloff]

Markets are hardly perfect, but in this specific case it should be the most efficient solution to the problem - if you could fix the zoning and other laws that distort it so badly that it's dysfunctional. And your still going to want to add incentives for things you value but the market does not - perhaps like lower income housing. In some of the other cases you mentioned markets are not necessarily the best solution. Canada benefits greatly from having a single buyer for pharmaceuticals - that concentrates the negotiating power and we get better prices because of it.

[FussyZeus]

What are the zoning laws you see as the problem? Serious question, I'm not in that area and don't know much about SF's zoning issues.

[sologoub]

There are severe restrictions on density and heavy parking requirements just to start. It’s much much more complex than that, but to simplify - people who lived in a given area want it to remain the same.

SF Bay Area is creating 3+ jobs per new unit built (any unit). So the gap is growing rather rapidly, resulting in demand far outpacing supply.

Most of the peninsula cities/towns do not want any growth and want to remain single family home neighborhoods. However, based on demand, they should probably evolve more into either denser row houses or apartment/townhome type.

The way to restrict this from happening is to require more land per sq.ft. of housing and require more parking per bedroom and guest parking for Multifamily housing. All this makes land use less efficient and therefore more expensive, deterring development.

[EpicEng]

The reason that supply is not meeting demand is because the market is not free to expand to meet the needs of the people.

[proverbialbunny]

Kind of. It's improper regulation. You need some regulation or people die, but when regulation is bad it can sometimes be worse than no regulation at all.

In the SF/Bay Area (and possibly CA as a whole) there is more space allocated for businesses than there are for houses. Likewise, zoning is spread out so people have to commute to work. This is why, eg, the greater Los Angeles area has some of the worst traffic in the US, only beaten by Texas and DC.

The history behind these bad regulations comes from racism. In the 50s suburbia was created in such a way to isolate residence selling safety. I don't want to go into the details here, but it's a fascinating piece of US history.

When businesses and commercial are interwoven with residential people stop fighting for the few places close to work, which stops spiking up the price of those areas. Likewise, when the ratio is right there stops being a supply problem, even if it is the same amount of houses. In CA's situation it could mean less business buildings or more urban housing.

[EpicEng]

Well sure; I didn't mean to imply that there should be no zoning/housing regulations, only that it has gone too far in some areas, which has stifled development and caused prices to skyrocket.

[tathougies]

Right instead of a society in which everyone behaves accorsing to their own free choices, and incentivized to make a socially helpful choice via some kind of personal reward (profit), we should instead have a society in which people are incentivized to work for others because of what? Force?

[el_cujo]

You could make the opposite argument as well, that if the market was "freer" or less regulated or whatever then anyone could build and supply would better match demand. It's a situation where you can skew the message whichever way you want to benefit an agenda since most of our systems are neither pure free-market capitalism nor pure socialism. Obviously zealots from either side are going to say our shortcomings are because we've given too many concessions to the other.

[busterarm]

The rent control laws in NYC aren't even nearly as bad as SF, despite how much they get demonized here on HN.

In NYC units that might be _actually cheap_, as in rent controlled and not stabilized, number roughly 17k units _in total_. And only about 1/3 of those are significantly below market or in desirable neighborhoods. It's almost insignificant and the number of rent controlled units has gone down by roughly HALF in the last 5 years, because the tenants in them are dying and income limits on any descendants usually kick the units out of being controlled into stabilized.

NYC has a much larger number of rent stabilized units, which is somewhere near 1/3 of all available units that are renting at or below $2700 (twice the national average, btw). The overwhelming majority of these are within a few hundred dollars of market rate.

There are about 4.2M housing units in NYC with roughly 30k being added every year. The "cheap" rent-controlled units are a rounding error.

That is not anything like the situation folks in SF are rightfully railing against.

[heyoni]

I think rent stabilized apartments can go a lot higher than $2700. Lots of luxury buildings are taking tax abatements in exchange for rent stabilization and setting aside a number of rent controlled units.

[busterarm]

Nope. Units deregulate at $2700. Also there's no such thing as new rent controlled or rent stabilized units since 1970.

There's other housing programs like Mitchell-Lama, some that are like what you mentioned, but that's a completely separate thing and a small amount of units. "Rent controlled" and "Rent stabilized" are technical terms in NY.

[bardam]

Your information is correct in general, but there are many exceptions that prove the grandparent correct. My apartment was built in the last 10 years (i.e., after 1970), rents for close to $4k, and IS rent stabilized. See information here:

https://www1.nyc.gov/site/rentguidelinesboard/resources/rent...

Specifically:

"Also, some newly constructed buildings may be stabilized due to a 421-a or J-51 tax exemption even if the rent is $2,000 or more."

A program that a significant number of developers have taken advantage of.

[heyoni]

Yup, that's exactly what I was thinking about. Same deal here, rent is nearly $4k but I know it can only go up by guideline amounts.

[busterarm]

Do tell me how your $4k apartment rental, at nearly 3 times the national average rent and above market for most of NYC, is the scourge of housing markets, forcing rents up for everyone and preventing new construction.

Because that's what rent regulation's detractors are arguing, even though your empirical evidence (and mine) suggest the opposite. That's the context we're discussing this in.

[heyoni]

OP and my apartments are actually new developments benefiting from these breaks.

[nicwolff]

NY State repealed high-rent deregulation in the Housing Stability and Tenant Protection act of 2019. https://www.nysenate.gov/legislation/bills/2019/s6458

[jcranberry]

I live in a rent stabilized apartment in NYC and my rent is 3400.

[irq11]

The rent control laws in SF aren’t even as bad as HN comments would have you believe.

Rent control doesn’t apply to new construction in SF. It also allows a regulated annual increase, and rent automatically jumps back up to market upon a number of different conditions - not the least of which is that the owner can push you out to renovate the building!

HN commenters are usually just repeating stuff they heard somewhere, and have no idea what the laws actually say.

Moreover, while there are indeed lots of publications on the theoretical impacts of rent control, few of those publications consider laws as they actually exist, or if they do, the scope of the impacts is rarely communicated when translated into HN talking points. Every study I’m aware of has shown, at worst, diffuse, long-term negative impacts to housing costs. Meanwhile, many of them do exactly what they set out to do: stabilize short-term prices for vulnerable populations.

These laws are simply not the boogeymen that comments here make them seem.

[refurb]

Rent control in SF really is that bad. Rent increase limits are 60% of CPI, so it can’t even match inflation. If your costs go up (utilities) or you want to do capital improvements, good luck getting the rent board to approve a pass through. Want to prevent other people than the tenant from moving into a 1 bedroom? Tough, can’t say no to that, it just has to be under 3 people. Want to move into your own house? Sure, just pay the tenant a few tens of thousands in “pay off”.

SF rent control is absolutely onerous and definitely shrinks the pool of potential landlords and thus potential units.

[toastal]

Why should I care about the woes of landlords as opposed to renters?

[cm2187]

Because if it is uneconomical to rent out, there are few units available to rent and the few that are are super expensive. And the property won't be maintained properly. These unintended consequences ultimately hit tenants.

In Paris there is a similar impact of bad regulation. It has become so hard to expel a tenant that has stopped paying that landlords will demand extraordinary guaranties: bank credit lines, guaranties from relatives, sometimes even medical exam, etc and will be super picky. I knew of a foreign investment banker, high salary, not allowed to get in financial dispute because of his profession, who just couldn't find a place to rent in Paris because he couldn't provide some of those.

[jjav]

Because it is hurting the would-be renter group even more?

I personally know two people who are renting rent-controlled apartments in SF and don't live in them. Their lives have moved elsewhere and they don't need the place anymore. One uses it as a weekend getaway and the other one visits rarely.

Thanks to rent control their rent is so cheap that it's worth hanging on to it even though they don't live there.

So these two units are off the rental market effectively forever, sitting empty most of the time.

[icebraining]

Because landlords start being unable to afford repairs, and you get a bunch of decrepit buildings falling apart all over the city (with all the dangers that implies, not just to occupants, but to nearby buildings as well). It happened in my home town, and it wasn't pretty.

Landlords are not social security. It's probably better for the city to forcefully buy them out and create a new management model of the buildings than to impose strangling limits on prices.

[Jweb_Guru]

Rents are growing insanely fast in SF compare to anything else. The idea that landlords can't afford to make repairs because they aren't extracting maximum rent from the property is completely ludicrous on the face of it. Do you actually believe these arguments?

[lr4444lr]

Because the result is that small landlords who can't deal with the fixed costs hassles simply sell out and consolidate into larger ones with more clout with politicians to weaken renter rights and legal resources to fight pesky tenants whom they simply don't want, or create shared blacklist databases like has been done in New York. If you're going to gird up for class warfare, realize that tenants are probably going to lose as long as zoning restricts your options

[amyjess]

My experience has always been that dealing with a large PMC like IMT or Greystar is far preferable to dealing with some guy who's renting his property out.

[34679]

Wow, I literally belly laughed.

If a renter can't find a landlord to rent from, then what?

"Why should I care about the woes of water treatment plants as opposed to water drinkers?" Do you want drinkable water, or not?

[aaronblohowiak]

Because shrinking the number of landlords shrinks the number of units available, raising rents, _hurting renters_.

[falsedan]

are these vanishing landlord eating their properties or just throwing them into the sea

[macspoofing]

Ok. Then care about the tenants. Do you have one shred of evidence that rent control, broadly, helps tenants? Because every economist I ever heard on this topic, left or right, argues rent control is bad for tenants.

[dfilppi]

Rent control is good for politicians getting elected. No point in analyzing farther than that.

[rayiner]

Unless you have the capital to build your own house or apartment, you need landlords to put up their own capital to do that. It’s not like landlords are just assigned houses for free from the government to then lord over renter peons.

[vixen99]

Because landlords supply housing and renters don't.

[mruts]

Why should I care about the woes of you opposed to me? Why should I care about the woes of the poor opposed to the rich?

[ryan_lane]

A lot of what you're saying in here is blatantly incorrect or misleading. Water is frequently covered in utilities, but other utilities generally are not. Leases are very specific on the number of people in a unit for rent controlled apartments and is one the few things a tenant can be evicted for. The board frequently approves pass throughs. Increases tend to be higher than inflation.

If you lease out your house and you want to take back ownership, yeah, you need to pay out the tenant and that's completely fair. You're upending another family's lives, and they may not be able to afford to stay. You're paying them moving costs and covering a period of time of adjustment for them. If you think this is unfair, you have poor morals.

Also, for good measure: fuck the landlords.

[refurb]

You need to do more research.

The rent increase law is 60% of CPI. Look it up.

SF introduced a new law a couple years ago that additional people can live in a unit even if they are not on the lease. They only instituted caps on how many. Google search it.

Plenty of apartments have not only water, but also heating included in the rent. If that goes up drastically, the rent board will likely tell the landlord “tough”.

And I’m not against buying out tenants. I am against them having to pay $100,000 or more.

----

Sources:

This amount is based on 60% of the increase in the Consumer Price Index for All Urban Consumers in the Bay Area, which was 4.4% as posted in November 2018 by the Bureau of Labor Statistics.[1]

Legislation that went into effect November 9, 2015 allows tenants covered under rent control to add occupants, if reasonable, despite restrictions in the rental agreement.

[1]https://sfrb.org/sites/default/files/Document/Form/571%20All... [2]https://www.sftu.org/roommates/

[irq11]

You need to exaggerate less.

The maximum rent increase rate is 60% of the trailing twelve months CPI in the bay area. But landlords’ costs do not scale with the CPI. Mortgage rates are fixed (if a landlord has a mortgage at all), taxes are independent of CPI, and principal+interest+taxes are the vast majority of a landlord’s expenses. Maintenance is typically a small fraction of that number.

Landlords are not obligated to pay your heat or water under rent control. Mine certainly never did.

The roommate law changes you mention are not rent control, but tenant protections applicable to all rentals in SF. The 2015 change brought rent controlled units up to par, because landlords were evicting people for doing things like getting married or switching roommates (horrors!) Basically: preventing predatory landlords from being scumbags.

I’m going to go with the GP on this and say that if you think people should have their rent hiked for getting married or changing roommates or having a kid, you have poor morals.

In essence, you don’t like being told what you can do, you have a theory that it hurts the housing market, and you’re inventing reasons to justify your theory of reality.

[thatfrenchguy]

... But Prop 13 guarentees every landlord in the state that they won’t have to pay their share, and they get it even on >1980 construction, unlike rent control.

It seems fair to me that if you’re going to protect landlords (and companies !) you need to protect tenants as well.

[bobcostas55]

>Rent control doesn’t apply to new construction in SF.

Conveniently, SF doesn't allow new construction either.

[xxxpupugo]

Well said. It is weird to see so many people jumping out to lay the accusations of 'uninformed!', 'never works', etc...

In fact, the CA, especially in bay area, the rent is already top among this country. 7% on top of that is still a quite sizable increase. And it is hilarious to see those (aspiring) landlords playing the blame-the-game-not-the-player rhetoric here to blame the government not allowing more houses to be built, while themselves being one of the biggest opponents to such initiative.

[bko]

It is uninformed. Note that in a survey of economists ~80% of economists disagreed with the statement below and only 2% agreed:

> Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them. [0]

The negative effects of price controls, especially when it comes to rents is the most unifying issue in economics. Rent control isn't a new idea, but there is agreement that it's a bad idea. It's not the landlords who say this, its the people who study this stuff. Paul Krugman wrote about this in 2000 [1].

Putting in arbitrary controls on prices to fight cost increases is about as effective as putting arbitrary controls on thermometers to fight global warming.

[0] http://www.igmchicago.org/surveys/rent-control

[1] https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...

[chmod775]

Your quote is completely irrelevant to this discussion, because increasing "amount and quality of broadly affordable rental housing" is not the goal of this law as described by your GP.

The law is supposed to give families enough time to adjust or move away and find affordable housing elsewhere, without becoming bankrupt in the meantime.

A completely different goal. Quoting opinions on something that is at best tangentially related does nothing.

[leftyted]

How is "economists broadly agree that rent control is bad" irrelevant to a discussion of rent control?

The intention of the law is what's irrelevant. What matters is what the law will actually do. Economists broadly agree that rent control will drive down supply. Are they right? Is this law different? Time will tell. But there's every reason to be skeptical.

[HelloMcFly]

This is not really an apples-to-apples comparison. Yes, it is a form of rent control, but it's not the "rent control" that people typically think of or was referenced in that quote given its link to SF and NYC. While there are some increase limits, they are large and not on a scale likely to have a material limiting impact. What is definitely impacted is the timeframe in which the changes are applied.

> Is this law different?

Yes, it is, both in intention (i.e., to give people time to move vs. enabling them to stay where they live) and in details. I think this will certainly reduce investment groups buying properties though, which I personally think is a great thing overall. I think that clearly something needs to be done, I'm glad California is trying to find a middle-ground here. Not to say they shouldn't also find ways to increase supply as well, but to me the two are not mutually exclusive.

But hey, maybe I'm wrong and totally off-base. I think it's a worthwhile bill though, and look forward to seeing the impact one way or the other.

[YPCrumble]

Saying "7% on top of that is still a quite sizable increase" is not a fact, it's an opinion. Furthermore it's like my employer telling me "you should take this 7% raise and be happy even if the market dictates a 20% raise. It's still a quite sizable increase".

Then you make an ad-hominem argument about landlords being hypocrites which isn't relevant. Landlords act in the best interest of landlords.

I don't yet know what I think about the bill so I'm reading the HN comments to form an opinion. The points you're making aren't very convincing.

[tibbon]

It’s fair to say that 7% is faster than wages increase for many people on average. Why should my rent outpace my income?

[xxxpupugo]

> Landlords act in the best interest of landlords.

That is the point. Landlords will gather information or their side of evidence to push for their arguments, as well as ones that called for rent control.

All players are just playing our own shares in the game here. Is rent control necessarily good or bad in this particular case? Only future number can verify that. But because the landlord-just-be-landlord arguments, it is probably not good for the renters to take the other side of stories for granted.

Let the bullet fly for a moment.

[rongenre]

"blame-the-game-not-the-player" is so typical of polite SF (and greater CA). A lot of homeowners are quietly rubbing their hands knowing their houses suddenly got more valuable.

My experience with SF rent control is that it's really only valuable if you've got limited resources. I lived there for 5 years, saw market rent double, and my landlady politely asked me to pay a "generous discount from market", which was about a 50% increase and I declined - it would have busted my budget.

Then eviction proceedings started: completely made up, and I lawyered up. I was threatened with OMI (there's no defense if they actually do move in), and I negotiated a settlement. Because if I'd won I'd have a super hostile situation ending in OMI, and if I'd lost I'd have killed a substantial portion of my savings.

If I'd had nothing to lose, I'd have hung on for dear life.

[seraphsf]

I agree with you. I’m renting out a previous condo, and as a landlord, this law strikes me as reasonable and measured. The market will still find its natural level. These controls merely dampen short-term shocks, allowing tenants and communities time to adjust as market conditions change.

[rjf72]

To take the other side of the argument here I'm completely against this change but I'm happy that it passed. The reason is simple: without data we're all just speculating. If I'm correct, now I will have real bias-free (since we're looking at this exact location as opposed to other locations where rent control has had... issues) data to support my views.

And of course only a fool would cling to certainty on issues this complex. It's very possible my views are wrong. And if they are then that's a great outcome. If they're not? Well the cost of this experiment is not going to be that big, and it can be reversed relatively easily.

The one thing I think both sides often fail to do though is to set falsifiable metrics before running such an experiment. Take a group of qualified individuals against the program, and those for the program. And have them sit down and work out their expectations of the program. So for instance homelessness. The pro side probably expects this will cause it to decline, the neg side probably does not expect it to have much of an effect. Why not convert those views to numbers collected in a mutually agreed upon fashion, which can then be regularly published - alongside results? And let's see who's right, with accurate data. Of course there are confounders. If we hit a major recession, homelessness will increase regardless. These factors could be mentioned alongside such data.

Instead without doing things beforehand both sides are simply going to spin arguments entirely in their favor, such as with the case of minimum wage increases. Did minimum wage increases collapse the economies? No. Did they cause some economic damage? Yes. Did they bring about a great life for low earners? No. Did they improve the quality of life of some low earners? Yes. And so both sides just create disingenuous arguments painting themselves as 100% correct, which informs nobody and divides everybody, since both sides come back with 'told ya so!'

[hcknwscommenter]

"Did minimum wage increases . . . cause some economic damage? Yes."

Citation needed. My admittedly cursory review of the latest results suggest no damage at all.

[rjf72]

There's a reasonable related article here [1]. It discusses two different studies on the effects of Seattle's minimum wage increases. The first is from Berkeley and based on limited data. It suggested there was mostly just a small reduction in employment with an overall positive effect. The other study was from the University of Washington and had access to detailed low level data on hours worked, salaries, etc. It found numerous very negative affects, many of which were worse than even minimum wage critics generally suggest might occur. This included an overall gross decline in overall wages due to declines in hours being worked - overall wages rose 3% while the number of hours worked declined 9%.

The reason I mention the Berkeley study at all is because this now led to arguments based on after-the-fact retrofitting. In particular increase supporters have now tried to argue that Seattle was in a unique boom phase and so the study was comparing against a local max, and thus there was actually no damage - but just Seattle 'regressing to the mean' if you will. But the Washington study also considered this possibility and contrasted it against other control cities within Washington that did not increase wages, and found that they did not experience the negative effects. And so on back and forth it goes.

And so who do you believe? Probably whoever you want to be right. This is why I'd suggest laying out metrics beforehand. If Seattle was in a unique boom phase before the minimum wage increases then this is something everybody could agree on beforehand. When you do after-the-fact analysis, you risk peoples biases getting in the way of things. And because of the complexity of systems such as these, it's always going to be pretty easy to prove X and also prove not X after the fact.

[1] - https://www.nytimes.com/2017/06/26/business/economy/seattle-...

[joe_the_user]

Well,

It's not entirely unreasonable to think landlords somewhere in the state will take this "5% + inflation" as automatically what's called-for. Conceivably a few landlords who otherwise would have held the line will do this. But given this was more or less already standard for the large landlords and given the landlords who have been really, really gouging, this sad collateral.

[xenocyon]

The Urbanist has an article on how modern rent control proposals differ from older ones, and the ramifications thereof: https://www.theurbanist.org/2019/08/05/the-case-for-rent-con...

[robomartin]

At a basic level I would not have any issues with these laws if they also limited expenses. In other words, if you are going to use force to limit income then landlords ought to have the right to limit expenses proportionately. For example, make tenants responsible for wear and tear on the property, just like you pay for mileage on a rental car and are responsible for damages.

As it is, they are using force to limit income while expecting the landlord to offer the same product and services and foot the bill on unlimited expenses.

How about legally limiting salary increases while requiring the same or more work? And, when you change jobs, you are only allowed to make 10% more. Oh, yes, but you have to spend thousands to renew your credentials.

And how about truly severe penalties for tenants who destroy or damage property?

Anyone who has been a landlord for with more than a handful of properties knows how much of a nightmare it can often be.

Try running 10, 20 or 100 units and see how quickly you are going to bug out once even this mild form of rent control rears it’s ugly head. Because you know, with almost absolute certainty, that this is the proverbial slippery slope. And nobody wants to be the guy waiting for the last seat out of the Titanic.

Oh, yeah, unintended consequences: If Airbnb is more profitable than conventional renting...

[streb-lo]

No one should own 10, 20, or 100 units of housing.

When people finally realize that, there will be hell to pay.

[robomartin]

Why not?

[ovi256]

At a maximum 5% increase per year, it takes 37 years for a $500 unit to catch up to the $3000 market price. So this law doesn't help that much with that particular case.

[moccachino]

I think the example was that this law will not create such a scenario, in the way that previous rent control schemes have.

The example given is of a 500% increase in rent, by definition no rent control law should make such an increase possible in a short time frame.

[eru]

Some reasonable law might allow that.

Eg a law could allow any increase up to some benchmark, and up to 5% per year when above the benchmark.

(No clue whether that would be a good idea or not.)

[andrewla]

For those like me who do not subscribe to the nytimes, the text of the bill is here: https://leginfo.legislature.ca.gov/faces/billCompareClient.x...

[meerita]

This has been tried in several countries, and it failed miserably. Rent control never worked. In Sweden you have to wait 20 years to get a flat with rent control. The only solution for the people is to increase the offer, how? by deregulating and allowing others to build more.

[Ardren]

But this is not what the new bill is about. It doesn't cap total costs, it allows 5% per year increase, it doesn't apply to new homes, etc.

[bko]

> It doesn't cap total costs, it allows 5% per year increase, it doesn't apply to new homes

If you tell everyone that you cannot increase more than 5% a year, this is used as a signal to all landlords to increase 5% a year. It's a coordination mechanism. And it helps hedge for years in which the market rent has increased by more than 5% and the landlord is unable to adjust. A commenter who is a landlord confirmed this as well.

And this will increase the incentive to build new homes. This could be good but new homes tend to be more expensive and serve the high end. Much like the median price of a new car is significantly higher than the median price of all cars on the market.

There are entire industries in New York that focus on buying units and converting them from rent stabilized/controlled to market rents through any means (direct payment, intimidation, legal, etc). To think this will somehow lower what people actually pay for housing is naive.

[eru]

New homes being nicer is not a problem. It's good. (See https://www.planetizen.com/blogs/100293-how-filtering-increa... ) It's how we upgrade the national housing stock over time.

Landlords already charge as much as the market can bear. Coordination isn't really necessary.

[bko]

> Landlords already charge as much as the market can bear. Coordination isn't really necessary.

This statement doesn't mean anything.

Consider a game where you try to maximize revenue. You play along with other players with the same goal. If you set your rent too high, other players undercut you. You set the price too low, you leave money on the table. Now consider a rule that says you can at most raise the prices x% a year and the same is true for all players. Now you're anchored to this increase and an equilibrium is more likely to emerge such that every participant increases prices by that amount every year. Much like a minimum wage gives a signal to employers who rely on low cost labor to pay the minimum wage allowed. If you look at distribution of wages, you'll see a huge spike at the minimum as employers essentially use that value to coordinate among themselves.

[0] https://pbs.twimg.com/media/DBkn94UVoAEqBey.png

[Retric]

With rent if the increase is above what the market accepts, units will stay empty. That limits price increases to what the market will accept.

[eru]

If you allow new players to enter the game or existing players to expand their supply, the coordination strategy you outline invites defection.

[meerita]

If there is any attempt to rent control is what I mentioned, not any particular point of the bill. The truth and I don't get it why people downvote me for just plainly state a fact, any kind of rent control and construction regulations just bring housing problems. Making caps (control) will not ease the crisis. Areas like SF or NY are very crowded and need more offer, not caps.

[tomohawk]

Yah - all you have to do is deal with the super awesome and efficient state government every time you want to do anything with your own property that you're responsible for. The responsible agencies will never let feature creep create ever more strangling regulations based on this law, and ever more byzantine procedures to interact with them.

[MarkMc]

Given the booming demand and restricted supply for homes in San Francisco, the market rate for rent could easily outstrip inflation by 3% per year. That means it would take a decade for a rental rate that is currently 20% below market rate to catch up.

[throwaway5752]

This should be the top comment. The upshot is that if you are a family that is renting, you won't be forced out of your home on short notice.

Try - for a moment - to imagine you are living close to your maximum expenses and your landlord increases your rent by 20% next year.

[m463]

This happened to a family I know, except it was 50%. The building was purchased, "refurbished" and the rent was reset to a very high number.

[optimusclimb]

> The building was purchased, "refurbished" and the rent was reset to a very high number.

And if someone was willing to pay that number, then that's what the place was worth.

[heyoni]

Yea but moving as an individual is stressful and 10x moreso for families. We’re trying to keep people off the streets and from having to make bad decisions without hurting the landlords ability to capitalize on their investment. This is a compromise.

[mratzloff]

Not to mention a sudden, unexpected expense in a situation where renters are on a tight budget and likely don't have much or any savings.

[heyoni]

That’s it. That’s all this is. The law is just regulating shitty behavior. But you always have those who say “well I can legally raise blah and if I don’t less money.”

Well now they can’t. Good. We’ve made it slightly hard to be a major cunt.

[nostrebored]

What are you talking about... One of the nicest things about being a renter is being able to choose to live in a place where you can get those savings.

[mcv]

True, but if someone is already using it, it's shitty to increase the price that much. It makes it a bait-and-switch: offer for a reasonable price first, and once the family is all settled, jump a massive price increase on them. That's absolutely something that needs to be banned by law.

[eru]

It's bad behaviour all right, but that doesn't automatically mean a law is the best fix.

Tenants could ask for contract terms that forbid such raises.

Or, if landlords are not forthcoming, they could take out insurance.

And yes, such insurance would need to have its terms written carefully. And it probably doesn't exist as a product at the moment. But eg sponsoring the development of such insurance would be an easier to justify action by the government than a law. Also less likely to backfire.

In any case, the underlying problem is lots of pent up demand for building, and permits only being given out in a trickle. If there was more building, landlords couldn't pull those tricks, at least not profitably.

[moduspol]

To me, it's working against reality (and will have unintended consequences) if the price of rent is being held back from market price.

If I were a landlord, this just means that rather than charging a higher rent following renovations, I'd have to front load my raising of rent while they were being planned / ongoing. It might become more standard practice to raise rent closer to that limit proactively in the state.

Proponents might argue that's fine--at least it gives a family more time to adjust or move out. In practice, though, it may just make it easier for that family to weather through the first bump and be in an even worse situation when they absolutely can't afford it next time around. They might have been better off moving with more money available when a bigger hike comes later.

But hey, we've never known California to shy away from band-aid legislation.

[mcv]

I'm not sure what insurance is going to accomplish here. Tenants could negotiate it in the contract, but most people are not lawyers who will understand and negotiate the finer details on a contract.

The law is not automatically the best fix for all kinds of bad behaviour, and in many cases it clearly isn't, but I think this is one of those cases where it really is. Dramatically raising rent prices on someone who is already living there, is taking of a situation where the other party cannot simply refuse the offer, because moving every year gets really expensive quick. With many other kind of subscriptions, if the vendor suddenly doubles the price, they're easy to cancel. But not when it's the place where you live. It's taking advantage of a kind of vendor lock-in. A kind of monopolistic abuse.

And it's exactly the kind of thing that many countries do try to protect tenants from.

And no, the problem here is not pent up demand for building. That would be a likely cause when it's the initial rent for a new tenant that's too high. That's a sign there are simply not enough houses and too many potential tenants. But when the initial price is low, the landlord clearly does want to rent it to you. And when they then dramatically raise the rent, they're taking advantage of the power they have over your living situation. Preventing that by law is entirely reasonable.

[anthony_doan]

That doesn't help the housing issues... which is the whole point of this article and the comment your replied to.

While what you're saying isn't false it's not going to solve anything. Unless you don't think there is a housing issue.

[rdtwo]

A lot of units require seismic retrofitting and that’s super expensive. If you can’t pass that cost on a lot of these buildings won’t be retrofitted

[CryptoPunk]

As counter-intuitive as it seems, this should happen. People should not look at rental property with no rent stabilization provision as a stable housing arrangement. If there is a sudden shortage in housing, we need prices to suddenly reflect that shortage, in order for people to be suddenly incentivised to and compensated for building housing to fill that shortage.

Shortage is pain and rent control simply distributes that pain in a different way than the market would and does so in a way that reduces the ability of the market to gradually alleviate that pain.

The more the government intervenes in rental contracts to mandate that they be like a lifetime lease agreement, the less incentives and sustenance there is to build a rental property overall. Society is better off having more rental units that have prices that are not legislatively stabilized than have a smaller supply of rental units with mandatorily stabilize prices.

If someone wants stabilized rental prices and they should sign a lease agreement with the landlord that gives them that at the price of a slightly higher per month rental rate. These kinds of things should arranged by actors in the market rather than having the government ban all alternatives in order to force people into stabalized rent contracts.

[SquishyPanda23]

> I'm shocked at the ideological fervor here

Really? This is pretty common on HN. This is IMO one of its weaknesses.

There are certain topics that bring out political rants. One is regulation and another is housing prices in the bay area. This story brings out both.

[quotemstr]

>> I'm shocked at the ideological fervor here > Really? This is pretty common on HN. This is IMO one of its weaknesses.

HN is heavily focused on the Bay Area. This fervor seems like a persistent feature of that region's culture and not HN in particular.

[t34543]

Plastic, climate change, and identity politics also bring out radical behavior.

[skybrian]

Also, privacy and anything somehow related to Google or Facebook.

[jquery]

Are there any provisions for periods of high inflation in the market?

[WalterSear]

The limit is 5% plus inflation.

[macspoofing]

So ... you are arguing rent control is good? Or that this isn't rent control? Or that some rent control is good, but more is really bad?

[ac29]

The point was that this CA statewide bill is quite different from places like SF.

New state law: 5% + inflation

SF: 60% of inflation. This has has never been over 2.9% a year since the law changed in 1992 from a fixed 4% [0].

I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restriction, while limiting increases to significantly below inflation is not.

[0] https://sfrb.org/sites/default/files/Document/Form/571%20All...

[macspoofing]

It is still rent control. The problems you see will not be fixed by the law.

>I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restrictio

Based on what data?

And no, it's not a 'sane' argument:

1) if 5% + inflation is above market rates then this rent control is either a no-op or detrimental because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes.

2) if it is below market rates, then it's just rent control and it comes with all the same baggage and detrimental effects we always see.

Rent control does not work. I don't understand the appeal to continue experimenting.

[azernik]

> 1) if 5% + inflation is above market rates then this rent control is either a no-op or detrimental because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes.

It incentivizes landlords to even out their rent increases over time, and to avoid sudden jumps. Especially for lower-income people, price shocks are devastating; having warning of an expected rise in prices, so that you can move or downsize with a year or two of notice, is a boon, and this kind of measure forces landlords to do that work.

[macspoofing]

>It incentivizes landlords to even out their rent increases over time, and to avoid sudden jumps.

No. It doesn't 'incentivize', it mandates.

Also, I have no idea why you're arguing this point, this is rent-control. This is how rent-control works. It sets a cap on what you can charge for rent.

>Especially for lower-income people, price shocks are devastating;

Rent-control is devastating for lower-income people.

Price shocks are a result of spirling supply in face of rising demand. THIS DOES NOT FIX THAT. Rent control does not fix this problem and you can't just wish it away. Rent control makes it worse. In a normal market, prices stabilize. Landlords don't just spike prices over a month because either a) there's a lease agreement which sets these terms out, b) they won't be able to rent the unit out at the higher prices, or c) Good tenants are hard to find and finding tenants takes time and is expensive while your apartment sits there not generating income.

[azernik]

Rent control that permanently keeps units below market price is devastating for lower-income people. Rent control that simply smooths out price increases, and loses landlords perhaps a year of the new price during sudden spikes, is pretty innocuous.

> No. It doesn't 'incentivize', it mandates.

Well, they always have the option of not keeping up with market-rate increases. Not that I think anyone will take that option.

> Price shocks are a result of spirling supply in face of rising demand. THIS DOES NOT FIX THAT.

The point isn't to "fix" the increase in price. It's to give renters a year or two to adapt to the change, either by moving out, finding new sources of income, or getting roommates.

> Landlords don't just spike prices over a month

#NotAllLandlords. But enough do to create a serious public policy problem

[eru]

> [...] because it may incentivize landlords to hike rent to maximum because they won't have have the flexibility to do that in the future if the market changes.

Relatively unlikely to have a big impact. Even without such a law they already have an incentive to raise rents as how as possible: profit.

Mostly the law should be a no-op.

I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily?

[macspoofing]

>Mostly the law should be a no-op.

Mostly? Uh huh.

Sorry - then why are we wasting time with this law in then? Because OP and supporters certainly don't think it's a no-op. California doesn't think it's a no-op.

>Even without such a law they already have an incentive to raise rents as how as possible: profit.

That is such a shallow, nonsensical argument. By your logic explain why Starbucks isn't charging $5000 for a coffee ... because after all: profit.

I'm sure landlords would love to raise prices to astronomical levels. I'm sure tenants would love to live in the apartment for free. So tell me, why doesn't that happen? Why is it that prices in a market will tend to stable point?

>I'm not sure what the argument is for why freedom of contract can't provide the "increase < inflation + 5%" provision voluntarily?

They can. That's called a 'lease'. It's common.

[eru]

> I'm sure landlords would love to raise prices to astronomical levels. I'm sure tenants would love to live in the apartment for free. So tell me, why doesn't that happen? Why is it that prices in a market will tend to stable point?

I'm not sure we are disagreeing?

> They can. That's called a 'lease'. It's common.

Indeed. And I'm saying that if people want what the law is providing, they can negotiate it voluntarily. So there's no good orthodox economic argument for the law. (Basically, no argument from market failure.)

(And, if you have a sufficiently clever financial derivative structurer, you could probably get around the law as well, if you really want to. Basically, you'd construct a swap between a fixed rent and a variable rent. Similar to an interest rate swap.

One big problem with such an insane scheme would of course be transaction costs---ie too much hassle to set up complicated derivatives or repo agreements etc for a private tenancy. Especially since a court might not allow a normal unsophisticated person to be bound by such a complicated contract, even if they wanted to. Tenants are treated like children.)

[adamsb6]

What if the market clearing price increases at greater than 5% plus inflation?

This isn’t a free lunch, the tradeoff of a price cap is under provision of a good.

[namesbc]

We currently have a drastic under provision of a good to the tune of 3.5 million homes in CA alone.

This under provision is not because building new homes isn't profitable, it is because realtors, landlords and homeowners are actively blocking new supply in order to extract above market rents from desperate people.

Adding a rent cap of MORE THAN DOUBLE inflation will have no affect on supply, it is ridiculously profitable to rent out your property right now.

CA would have to do something like cap rents at less than $500 per bedroom before profit margins would affect supply.

[jjav]

> it is ridiculously profitable to rent out your property right now

I'd be curious if you can share specific numbers on where this is true?

Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance? A link to the MLS listing would be appreciated.

Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out.

[mattbreeden]

> Every now and then I look at housing costs vs. rental income to consider buying some investment property. But the numbers never work out, I'd always end up loosing money to rent it out.

'Maybe' in the case of buying a new property now to rent. But it's clearly the case for many or there wouldn't be places to rent.

[hcknwscommenter]

"Where in CA can I buy a house/apt and rent it out for more than the mortgage+insurance+taxes+maintenance?"

Anecdata for sure, but I know of more than a handful of landlords in SF that charge more rent (and get more rental income) than mortgage+insurance+taxes+maintenance. Moreover, that equation ignores the increase in value of the property. You are confusing cashflow with making money, which are two very different things.

My current landlord just bought our entirely rent-controlled building three years ago. As part of the sale/marketing, gross income from the building was made available at a very granular level. It is certain that our landlord is losing money in terms of income-(mortgage+insurance+taxes+maintenance). However, it is equally certain that the landlord has profited greatly. First you have the fact that the building itself has increased in value by about 20% over the last three years. Accordingly, the landlord has made a profit in the low seven figures. Second, you have the straightline depreciation, which is a massive tax benefit if you have other appreciable income.

[brohee]

renting is profitable if you can rent for more than

interest_on_mortgage+insurance+taxes+maintenance-raise_in_house_valuation no?

If your formula was the one, renting would never make any sense...

[azernik]

Market-wide price increases of 5%+inflation are rare; sustained market-wide price increases of 5%+inflation are very rare.

This forces landlords to do two things:

* When there is a sustained rise in fair market rent, they will need to implement that increase over time instead of falling behind, and then raising it all at once 5 years later when they realize they're leaving 20% on the table. This allows people being priced out advance warning.

* When there is a spike in fair market rent, like the 8-10% spikes of '14-'15 in the Bay, they will need to spread that rise over multiple years. Since this doesn't affect the profits of new units brought onto the market in response to the demand spike, it should have minimal if any effect on supplier behavior.

(And what happens when market clearing price does increase at 5%+inflation for years on end? Then housing will come to dominate the CPI, and the "inflation" term will more and more closely track housing prices.)

[rdtwo]

This will still affect new units as it changes the forecasted rates over the lifetime of the loan (usually 10 year balloon) so instead of being able to forecast market rate increases the max value is now 7%. And maybe less if all units aren’t filled right away and you miss a year of increases. It’s not a huge impact but it does put a cap on the upside profits against potential huge losses

[azernik]

> sustained market-wide price increases of 5%+inflation are very rare.

No sane investor forecasts an increase in rent of over 5% over a decade.

> if all units aren’t filled right away and you miss a year of increases

If a unit isn't filled, then you don't miss out; when it is filled you can immediately charge market rates.

[rolltiide]

Why does someone have to be arguing anything? They wrote what happened and described it adequately with no disclaimers or partisan copy-pasta to assign favor to any mob.