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.
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.
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.
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?
I know a few landlords and that’s exactly what’s happening. I’m not sure why you find it hard to believe.
When you have a 3 unit building and everyone is paying less than 1/3 the market rate, it’s not worthwhile in the least for a landlord to fix up the building beyond the absolute minimum. Contractor rates have skyrocketed in SF, so even just repainting the building might cost $15k, which might represent several years of profit.
The skyrocketing rates for services are directly tied to the skyrocketing rent increases. The cost of performing these services does not change substantially from city to city, or else landlords renting to people in cities with more reasonably priced units would not be able to repair them. The big difference is the cost of living for the contractors, which gets passed to the people paying for repairs--and by far the largest component of cost of living in SF is rent. Like I said in the other comment, this is a largely self-imposed problem.
Not sure how big an impact that is. There aren't many contractors moving into the area like tech workers. Most of them are locals who have lived here for decades, so either have a rent controlled place or bought a home when prices were more reasonable.
Yup, our three floor building was 40k to repaint and fix a few custom windows (with plastic instead of custom wrapped glass) . Hadn’t been painted in over 20 years though.
Property taxes in California are miniscule. Mortgages are only as high as they are because people assume they can extract ridiculous rents from tenants, so this is a self-made problem that should go away with sufficiently stringent rent control. The other bills do not vary significantly enough from city to city to justify the absurd rent differences between them.
So no, I'm not assuming anything of the sort. Beyond that, landlords are extremely notorious for spending much less money on repairs than they should and saddling their tenants with the bills.
Are you talking about all rents, or controlled ones? The post above wrote that rent control rules in SF limit increases to "60% of CPI, so it can’t even match inflation". If that's false, then my post doesn't apply, sure.
Rent is far above its CPI-inflated average right now, so saying that rent increases must match inflation makes no sense. The time to do that would've been long ago. But in any case I'm pretty sure rent increases are capped at much higher than inflation.
One possible scenario is if a landlord purchased property at a price factoring in assuming certain increases in rent, then they’re constrained by the debt payments.
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
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.
And if those markets were the same except for the rent control rules, we could conclude that rent control doesn't increase the vacancy rate. But they aren't.
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.
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.
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.