100 years ago if you wanted to open a store all you needed was a building and a door. Now if you want to open a store, you need a parking lot bigger than the building itself to serve the same number of people.
You used to be able to house thousands of people in what is now a suburb that houses just a hundred.
It's a crippled land-use philosophy which forces a land shortage in any city more populated than a village.
When paired with artificially constrained supply I would agree due to the negative pressure on housing liquidity.
However as long as rent increases are capped at the maintenance cost increases I don’t see the negative effect, because the landlord still captures the cash flow at the time the lease begins. Yes it has a negative effect on equity compared to if the landlord could raise rents as much as they want, but I don’t see that as an objective good nor does it affect many people besides the landlord.
Rent control does create perverse incentives regarding subletting, evictions due to factors other than the nonpayment of rent, and fulfilling tenant maintenance requests though. But in terms of market participants besides the tenant and landlord I really think only the lack of liquidity is a problem.
Serious question that I don't know the answer to: when and where, in the US, has rent control not been accompanied by constrained supply?
I'm not using your phrasing, "artificially constrained supply", because it seems like artificial could have a very squishy definition. A lot of economists these days are saying that rent control leads to lower supply, but they seem to mean it as more of a natural consequence (i.e. without necessarily needing the kind of NIMBYism and red tape that gets blamed for low supply in the largest cities with rent control).
However as long as rent increases are capped at the maintenance cost increases I don’t see the negative effect
If the rent increase (and thus profit) is capped, but the market price isn't then it soon becomes rational to sell your rental apartments, stop being a landlord and invest in something with better returns. You see this a lot in Sweden. More and more rental apartments are being turned into owned apartments, sold off and removed from the rental markets since it's simply the most profitable thing to do.
nor does it affect many people besides the landlord.
It affects people who need an apartment and who want/have to rent instead of buying. Make being a landlord too hard and risky and you get fewer landlords and fewer apartments to rent on the market. When I got a job in Norway (no rent control) it took me two phone calls and less than a week to find a rental apartment in the part of town I wanted to live. When I got a job in Sweden (strict rent control) it took me months to find a place and it was a short term contract for a place way out in a shitty suburb far from where I wanted to live.
How are they less good for everyone else? Or, put another way, how would a variable mortgage payment work and how would it benefit non-mortgage holders?
Because if housing gets too expensive in some area, you'd leave and that'd open up supply. By locking in the price, future changes in demand are irrelevant to you -- but place great pressure on newcomers to your area.
It's economically inefficient for Grandma to continue living in Palo Alto in a $4 million home when that land could instead have a multi-family housing complex to support the demand for workers in the region. It'd be the same story for someone who's in rent-controlled housing for $400/mo but the equivalent market rate is $3500. It's inefficient.
If we're saying rent control has externalities, we need to acknowledge that any scheme that fixes your housing cost has the same effect.
If mortgage holders are viewed as property owners who borrowed capital to fund their investment, how would it he fair for their mortgage rate to increase with cost of living?
Agreed, but I don't think that really addresses the parent's point. Remove "investment" from their statement, and it's still a perfectly valid question.
Beep boop beep grandma is economically inefficient she must be replaced with more productive economic units boop beep newcomers are more important than existing citizens
Please don't do this here; there's a much less inflammatory way to say what you're saying.
I agree that efficiency of use should not be the driving factor around property use and ownership.
I don't think newcomers should be considered more important than incumbents, but currently the pendulum has swung way too far in the other direction; often newcomers just cannot enter many housing markets, and that's not fair or healthy either. There's nothing inherently "right" about being lucky to be born at a particular time and in the right place and right financial situation to buy housing in a region that just happens to become highly desirable decades later.
> that just happens to become highly desirable decades later
Why should people be forced to give up their homes just because someone else desires them?
By this logic, if newcomers seize granny’s house they should expect to immediately be forced out by the next group who has desire.
There is no coherent argument about fairness or luck here.
The only argument here is a new group of relatively rich people looking for a way to seize desirable properties for themselves without.
Why should a tech-bro who just sits at a keyboard all day be able to force out granny and grandpa who worked as a secretary and an auto-mechanic? Does the tech-bro ‘deserve’ it more?
If they succeed in forcing granny out it will be at least as unfair as it was before.
The other comenter was probably referring to how in some states, you essentially have something even better than rent control for your property taxes. With rent control, your rent may only rise maybe 5% next year, its not a price set in stone. In places like CA, your property tax rate is set in stone when you buy. So if you bought a house in the 1970s for like $30,000 and its worth $2,000,000 today, you are only paying taxes on property worth $30k. How that's less good for everyone else is now local government has to find other ways to fund things as the buying power of the taxable revenue per property that doesn't change hands each year gets smaller and smaller.
> So if you bought a house in the 1970s for like $30,000 and its worth $2,000,000 today, you are only paying taxes on property worth $30k.
That is not at all how California Prop 13 works, although it is an often repeated myth.
Under prop13, the property tax goes up 2% every year (technically up to 2%, but unless you're in an economically depressed area it's always 2%).
So it is a damping function, essentially equivalent to rent control, to smooth out the swings in market price and replace it with a fixed yearly increase you can predict.
In practice, however, the property tax goes up more than 2% per year because counties and cities are allowed to attach all kinds of fees under the umbrella of property taxes and those don't count towards the 2% increase limit.
In the past I've been very much against rent control, believing it to be a band-aid on structural problems that helps communities avoid fixing the real problems.
I still believe that to be mostly the case, but I think a) tough luck, communities have housing problems that rarely have easy fixes, and rent control can help, and b) rent control, if implemented in a certain way, is probably something that is generally good.
By "certain way", I mean removing the problem you state: all units in a city should be subject to rent control. In addition, rent increase caps should be indexed with wage growth, or some sort of wage growth + CPI blend that ensures housing costs don't rise faster than wages, but that landlords can still remain financially solvent as their own costs go up. And finally, tenants moving out and new tenants moving in shouldn't be a trigger for a landlord to "reset" the rent to "market" rate.
Change those things, and I think rent control will work much better. And I think it will also serve as downward pressure on purchase prices, because prospective landlords won't want to buy rental properties if their rental income can't cover a high monthly mortgage payment. It might push down on non-rental property prices too, since if they get too high, people will prefer to rent instead of buy.
Of course, all of this needs to be accompanied by building new housing all the time. Affordable rental pricing is great, but it still sucks if you end up unable to rent something because you're competing with 100 other people for 1 unit. Supply must rise in response to demand, and that alone will serve as a powerful check on rent and purchase prices. (Then again, arguably in an place where supply and demand are in equilibrium, you don't need rent control in the first place!)
I'm not an economist or housing expert, so I know this won't fix everything, and there are probably problems with my (overly simple) proposal above. But I agree that the current implementation of rent control in many places (in the US, at least) offers pretty bad trade offs.
But at the same time, once supply is tight, then the incentive to build is high. The only reason why we don't see building happening when supply is low and demand is high is because zoning doesn't allow any more supply. Rent control isn't even in the mix up here. Permissive zoning would mean rent control wouldn't even be relevant as theoretically rents would hardly raise at all past wages in that situation.
Yeah, it's a disaster here in Stockholm. A 12+ year queue with lots of young working people basically subsidising wealthy older people to live in the city centre for under half of market rates.
Renting as a whole should really be much more restricted as a short-term thing though - build more houses for people to own, and lower the deposit requirements so people can start a mortgage earlier.
Every professional worker should be able to own their own home - so they have security, can decorate it, etc. and aren't losing tens of thousands just to a landlord every year.
I don't see why to be honest. If supply is tight, chances are that's because of zoning not allowing for more capacity rather than rent control somehow limiting how much supply is available.
For real. What else is to be done? Pricing out your labor from the local economy isn't sustainable. Plus if the economists are to be believed, once developers are unfettered and available supply goes to infinity to meet our latent demand, rents shouldn't rise beyond wages, and rent control rent increase limits of perhaps 5% a year (as they are where I live) wouldn't even be hit. So why all the consternation? I don't get it.
100 years ago if you wanted to open a store all you needed was a building and a door. Now if you want to open a store, you need a parking lot bigger than the building itself to serve the same number of people.
You used to be able to house thousands of people in what is now a suburb that houses just a hundred.
It's a crippled land-use philosophy which forces a land shortage in any city more populated than a village.