[RandomNick]

It's basic economic principle: Price ceiilngs, like rent control, cause a shortage of supply. Price floors, cause surpluses in supply.

Everything else is just nonsensical hand-waving people use in an attempt to justify why various schemes they favor are not working yet again.

[epistasis]

This applies with spherical cow-like assumptions for commodities.

Housing and land require further analysis due to inelastic supply of land, and huge restrictions on construction, both for political and safety reasons.

The biggest determinant of supply of housing is not the ability to charge more for it, but all the other challenges around building.

[thinkharderdev]

The supply of land is (mostly) fixed but the relationship between land and housing units is not. You can build row houses or multi-story apartment buildings instead of single-family homes, so the supply of land is almost never the binding constraint. What is a major constraint is various restrictions on building additional housing stock (and particularly building higher density housing stock) but that is a malleable constraint. Given that constraint maybe price controls on housing aren't so bad but still having an equilibrium where there is dramatically more demand for housing than supply is bad. Either you get sky-high prices or you get rationing through other means (you can only get a rent controlled apartment if you have connections or just get lucky).

[imtringued]

That's an argument for (land) taxation, not direct control of prices.

Here is an idea: Measure average rent per sqft. Put a 20% tax on rent above the average and use it to subsidize low income households. That way you tax wealthy tenants and subsidize poor tenants.

[epistasis]

Yes, I agree on all this. But rent control is about price changes on existing houses, not on new construction, at least in the US.

So it's not a "price control" as much as it is a control on rentierism, on existing rentiers taking unearned profits without working.

[da_big_ghey]

Land is not some large problem in Sweden, relatively it is a not dense country and can fit more people if needing. Better to say that demand for housing in urban areas is very inelastic. You are right that there are problems with building being slow and expensive but removing rent control make the paying off time for an investment shorter, more attractive to build houseing.

[kwhitefoot]

There really isn't a lack of land in Sweden. The population is only 10 million in a country considerably larger than the UK. Mean population density is 25 per km2, UK is 270 per km2.

What there is is a lack of accommodation where people want to live.

Ultimately people need to be persuaded or given a good reason to live elsewhere.

[Finnucane]

Or not. I mean, we used to have rent control in Boston and Cambridge, and when it was eliminated (by statewide referendum) rents just went up. And they went up in surrounding areas, as people went looking for cheaper rent elsewhere.

[seoaeu]

A trend which surely had nothing to do with the tech/biotech boom in the area. When a region gains hundreds of thousands of new jobs and doesn't build housing to compensate, then rents are going to increase

[Finnucane]

There's actually been a fair bit of construction. In fact, a 2400 unit development is under construction here right now.

[seoaeu]

There have literally been hundreds of thousands of new jobs created in the region in recent decades. Cambridge alone added nearly 50,000 new jobs since 1980!

So yes 2400 units is a start, but we need dozens more like it before we start to even come close to solving the shortage.

[Finnucane]

>Cambridge alone added nearly 50,000 new jobs

But not 50,000 new residents. Adding jobs doesn't necessarily mean more people, just more employed people.

[seoaeu]

Of course Cambridge didn't add significantly more people than it added housing units. People aren't going to move to the city for a job only to live in a tent down by the railroad tracks!

Instead what happened is that new residents came to the city for high paying jobs and bid up the prices for local apartments. Basically a cruel game of musical chairs where low-income households were forced from their homes and into cheaper neighborhoods in the surrounding cities. (Those poor neighborhoods actually did grow in population faster than housing: people were forced to pack into overcrowded living conditions)

If you're curious about the numbers, over the last 40 years Cambridge added about one housing unit for every four new jobs

[colinmhayes]

Because people were previously unable to find units where they wanted, so they were forced to live further away. Now everyone can compete for the good location units so price goes up.

[zip1234]

This is why supply is constrained in Boston and most places: http://www.bostonplans.org/zoning

[qnsi]

what you are saying is not contradictory to the commentor you reply to.

Rents go up, because price ceiling is removed. Idea is that in the future supply increases and you don't have to wear a suit when looking for a flat

[fulafel]

Many basic economic principles work only in imaginary simplified scenarios.

[oolang]

No, what basic economics says it that a price ceiling causes a shortage of supply _if_ no other variables change. Which they do in general but especially in the housing market. That is the principle called "ceteris paribus".

And that is in addition to having the right supply curve in the first place. The potential shortage of supply created by a price ceiling may very well be irrelevant when supply decreases from other factors.

[asdff]

it just doesn't make sense to allow rent increases past 5% in a world where wages remain nearly constant for the working class

[rguillebert]

That's not how the market sets prices.

[asdff]

The market sets prices by charging as much as possible and since housing is indispensable rather than an optional commodity. People pay as much as they absolutely can for it, which can be like 90% of their wages in some extreme cases in high cost of living American cities. It's a race to the bottom until there is simply no money left for the landlord and you are on the street, while working a job in some cases.

[thehappypm]

This is so baffling but you're right, a price floor (that is, setting a minimum rent) would create a feeding frenzy for new housing units to come online, since they would backstop risk. Clearly terrible for tenants -- no deals to be had for anyone -- but might actually be better for society!

[imtringued]

The government would rent the apartments and then sublet them to tenants it wants to subsidize.

[pasabagi]

It's obviously a bit more complex than that, though. Most countries in europe have some form of rent caps, and some have fairly low average rents, while others have high rents. The economic idea simply doesn't fit with reality that well.

[maxsilver]

> Price ceilings, like rent control, cause a shortage of supply

They don't have to. We've had price ceilings in the US in many places for over 60+ years without ever experiencing a shortage. (In my hometown, for example, education is price-capped, electricity is price-capped, water + sewer are price-capped, natural gas is price-capped. No shortages since the 1950s).

You just have to require reasonable regulations on the industry, and strictly enforce those regulations. Heavy Regulations + Price Ceilings is the magic combo for success, more or less.

[flavius29663]

Everything you mentioned "has" to work, day in and out. If gas or water would go out, the local government would be out with the first elections. So they have a very strong incentive to make it work with public subsidies.

Whereas the politicians won't care that a large percentage of would-be new residents for their city can't get in and have to commute. In fact, it's a perverse incentive: the locals love the lower rent, and there is no one to vote out the politicians that like rent controls.

[maxsilver]

> Everything you mentioned "has" to work, day in and out.

Agreed, but this is true of housing as well. Housing "has to" work, or you end up with a huge commuting and homeless population (and the state of being homeless is effectively a crime in the US).

> In fact, it's a perverse incentive: the locals love the lower rent, and there is no one to vote out the politicians that like rent controls.

It's not perverse, it's a good incentive. Locals love lower rent from rent control, so the commuters who don't have it should be incentivized to also vote for rent control, and it's a great idea that should continue to spread. In a ideal world, every rental unit in the nation would be under a strict rent control (just like how power/water/sewer/natgas often is).

[davrosthedalek]

And like the people in musical chairs without a chair when the musics stops, if you don't have an apartment at that time, you are out of the game. No roof for you.

[seoaeu]

Why should newcomers to a city be forced to endure long commutes just because they happened to be born in a different part of the country? We have the capability to let everyone who wants to live in those areas do so. I see no reason that the privileged minority that already lives there should get to dictate that for everyone else in the region

Not to mention, designing metro areas to require long commutes basically amounts to climate arson

[dntrkv]

Everything you listed works with price caps because they are effective monopolies. Usually a single entity in an area is responsible for providing that service and its profits are heavily regulated.

Housing is completely different for many reasons, primarily:

1. Housing isn't provided by a single entity, it's a market that a majority of people will participate in. All of the things you listed are one-to-many, not many-to-many.

2. Difference in quality for different price points. You either have electricity or you don't. You either have natural gas or you don't. This is obviously not the case with housing where there are limitless price points and differences in quality. Unless you're suggesting that the government build all homes, this won't work.

3. You want the effects of the market to drive development and settlement. Manipulating the prices of NG has little consequence outside of providing a steady supply to the users. Manipulating the prices of housing won't allow development to fulfill market demands in price point, location, etc...