[CraigRo]

So many people here do not know the details of NYC rent regulation, and are posting generalizations and falsehoods.

Basically, you cannot raise rents aside from annual increases that are below inflation, and you are limited to a relatively small amount of renovations, and cannot increase the rents much if you do.

So you either commit to a potentially multi lifetime below market tenancy that will bankrupt you eventually, or you keep it vacant and hope to demolish it or combine units or pray that the law will change.

Or sell it to a guy who will run air bnbs until the city puts him out of business at which point it will go in the tax lien sale. In any event, nobody is investing in bringing these units back online in this legislative environment.

[Renaud]

But isn’t this only true if you want to profit from the property?

What about you buy the property for you and your family to live in rather than as an investment that needs high return?

The property value will still increase with time. That should offer some form of protection for the initial capital investment if you need to sell later in life.

[djbebs]

Buying it for you and your family to live in *is* an investment.

The only thing you're doing when prioritizing that type of investment over others is you're picking winners and losers for political reasons... at great cost to everyone else.

[goodpoint]

Buying a house to live in it is fulfilling a crucial basic need.

It's extremely different from an investment in many ways. If the value of a house goes up spending a day in it does not feel any different.

If someone offers you a lot of money for it you can sell it but you still have to buy or rent another one. Very very few people want to have a lot of cash but live under a bridge.

[worik]

> Buying a house to live in it is fulfilling a crucial basic need.

Absolutely.

> It's extremely different from an investment in many ways

That is not so true, and is part of the problem, in two ways.

(1) People are buying properties to live in at one stage in their lives, when they have high incomes, or prospect of high incomes, thinking they will sell when they are older and make a large profit they will use to fund their retirement. This drives up prices and drives out people with lower incomes.

(2) The above is part of the cause of the housing bubble. Also driven by increasing populations. As that bubble goes the way of all bubbles, especially as population decline sets in, those people get to retirement with an asset that is not worth anything like what they expected. This will cause a lot of impoverishment (some actual poverty too) amongst a lot of those older people

Yes. We all need somewhere to live. Also most of us (those who have incomes) need a place to save.

It is a problem that the two things are confused now.

[goodpoint]

> We all need somewhere to live. Also most of us (those who have incomes) need a place to save.

The first is a crucial need, the second is a want.

> It is a problem that the two things are confused now.

Yes, that's what I meant. And when they mix together the investment market takes over because it drive prices above the house-as-necessity market. Which translates into: houses are taken away from people who need shelter and give to people with money to invest.

[refurb]

If they are multi-tenancy buildings, then you need to buy the entire building, do a TOC or make a co-op.

They aren’t individually purchasable units.

[cm2187]

What other purpose than investment would a rental apartment have to the owner?

[Gigachad]

Likely the people renting these apartments couldn’t afford to buy at almost any price.

A much more logical system would be for the government to raise minimum wage and welfare to the point that people can afford rentals at the market rate rather than rent control which is a head in sand solution.

[vouwfietsman]

If done in the short term (years), wouldn't this just cause inflation and landlords will happily follow that inflation with higher rents...

As long as a good is scarce and controlled by the market there is no reason for the situation to improve for people who want that good.

Thats why housing should never be part of a market, because people don't want houses, people need houses.

[fn-mote]

> Thats why housing should never be part of a market, because people don't want houses, people need houses.

I don't understand this at all.

A market is designed to solve the problem of allocation of resources (think: scarce).

Can you state your non-market proposal to provide housing (in economic terms)? Sorry, but the idea of managing allocation of resources without a market is very foreign to me. I just don't know what you're proposing, and I can't imagine how it would work.

Separately - not much talk about the importance of location. NYC housing is expensive... why live in NYC?

[vouwfietsman]

I don't know where you're from, but it's generally known under the name "public housing" and is basically a gigantic success throughout many western countries. So much so, that its systematic demolition throughout the neoliberal glory-years of the 80/90s has caused serious housing crises throughout those countries, which we are now stuck with.

Managing resources without a market is actually quite simple: you work out what people actually need, and what you have, and you divide what you have over the people that need it.

This might sound weird because we're bringing it up in the context of housing, but it's something we do all the time everywhere. Some good examples here are: healthcare, insurance, infrastructure, military, utilities, public transport, science, education, etc. Basically anything your taxes go to is managed this way, its pretty boring stuff.

Most of these things have long histories of socialist community-thinking that make them very obvious shared resources that are placed outside markets, but somehow housing missed the boat. This does not make housing significantly different in any way though: one can own a mansion just like one can own a Tesla, it does not prevent public housing or public transport from existing, nor does it adversely affect the market from profiting off luxury goods where common goods are freely available. The trouble is, a house is now a luxury, even though you can feel in your guts that this is just not true.

The market effect on housing should decide the quality of house that you have, not whether you have a house at all.

[worik]

> Can you state your non-market proposal to provide housing (in economic terms)? Sorry, but the idea of managing allocation of resources without a market is very foreign to me. I just don't know what you're proposing, and I can't imagine how it would work.

Easy. There are so many options. Here is one:

Establish housing trusts, whose purpose of existence is to house people. Non profit (that is not their purpose) . No debt, start them off with a huge wad of cash. Allow them to build, convert, do what ever.

Such a trust can set up its own systems for allocation, but not entirely at whim. There can be political control too.

Allow an occupation right where tenants cannot be evicted for no reason (that can be applied to all housing, and in civilised places it is - not where I live amongst barbarians)

Not perfect, nothing is.

There is no need to outlaw private property or private land lords, there will still be niches for them. But the great mass of rental housing could be supplied by such trusts.

> but the idea of managing allocation of resources without a market is very foreign to me

Please open yur mind, look into some economic history, look around the world. Markets are not the only solution to allocation and markets can reach terrible equilibriums.

The Irish Potato Famine happened in a free market. Markets can even be genocidal.

[parineum]

People don't need houses. Lots of people don't have houses and do just fine.

[lifeisstillgood]

Sorry? Homeless people?

I am taking the OPs use of "house" as "place to live" not "detached residential building with single family occupancy"? Are you ?

[parineum]

Lots of people live in vans by choice, I've considered it. A PO Box, a cell phone and a van is pretty cheap.

Furthermore, in context of the topic at hand, we're talking about housing _in NYC_, which people certainly don't need. I certainly don't. I don't even want it.

[EricDeb]

How about a vacancy tax? Then sellers are forced to sell driving prices down so more people who actually want to live there (not rent it out) can afford to buy?

[scotty79]

Better idea. Progressive property tax. You don't have to track vacancy, just ownership.

[AmericanChopper]

That’s a guaranteed way to increase rental prices.

[Gigachad]

Once the rent increases enough, new construction becomes more and more worth while. Artificially depressed rents lead to a slowdown in construction while allowing them to rise uncontrolled keeps construction flowing at a desirable which itself controls rents because its increasing the supply.

[AmericanChopper]

Sure, artificially decreasing supply with pricing controls is a bad idea, but artificially increasing demand with subsidies isn’t the solution to that problem.

[zajio1am]

> But isn’t this only true if you want to profit from the property?

You have implicit profit living in your property through imputed rent.

[y7]

> below market tenancy that will bankrupt you eventually

Why would pricing the rent lower than the insane market prices cause bankruptcy for the owner?

[anonymoushn]

The owner rents the property from the government at prices that are not capped below inflation. This is called property tax.

[api]

Are property taxes actually that high in New York? They’d have to be very high to eat enough of rental income to bankrupt landlords.

[dchftcs]

Many landlords still have mortgage, which tends to be higher than the rent already.

[vouwfietsman]

Calling landlords owners is deceptive, they are investors taking on risk. This is the risk.

[TomVDB]

Being an owner and being an investor are orthogonal concepts.

[refurb]

Right, and with the current legislative environment they lower their risk/maximize gain by keeping it empty.

[vouwfietsman]

Exactly, that just enforces the idea that the ownership itself is meaningless, and the investment aspect is the only thing of value.

A landlord owns a house like a hedge-fund owns stocks: its not about the houses or the stocks themselves. Obvious problems arise since houses are actually rare things people want for their own sake, and stocks are not.

I feel like the discussion often trends towards criticizing legislature, but we should not forget that choosing the darwinist approach is still very much a choice made by the individual in their own favor.

Why is lowering risk/maximizing gain at the expense of others a defendable choice because it produces/saves money for an already wealthy individual. Why is this not viewed similarly to other things which are legal but unethical, say cheating on a spouse?

Why is it that the government needs to produce ever smarter and more complicated legislature to prevent people from exploiting others for wealth?

Is government really to blame for this rat race? I don't think so.

[squeaky-clean]

> Why is lowering risk/maximizing gain at the expense of others a defendable choice because it produces/saves money for an already wealthy individual. Why is this not viewed similarly to other things which are legal but unethical, say cheating on a spouse?

Most people I know absolutely hate landlords. I've hated 3/4 of mine. But what are you going to do? I can sneer at my landlord all I want but I still have to pay him my rent. I don't want to move out of New York (not yet at least) and buying seems nonsensical.

I don't think anyone is defending them, but do you expect the investor who owns 100 units to not attempt to maximize profit? Most people who get into that business can be assumed to prioritize money over community. The only realistic way to change things is to make it not profitable to sit on these.

> Why is it that the government needs to produce ever smarter and more complicated legislature to prevent people from exploiting others for wealth?

Humanity has kind of always been that way. And even if most people aren't, a small number can disproportionately affect many.

[scotty79]

That's why the best way would be to have progressive property tax. So that owning large amount of real estate becomes uneconomical.

[refurb]

So nobody builds large apartment buildings any more? Sounds anti-density.

[goodpoint]

The right word is "scalper".

[fn-mote]

Scalpers provide liquidity in the market.

The reason scalping is possible is that the official prices are below market prices. In this case, is the inference is that scalping is made possible by rent control? That's what I'm getting out of the parent's comment.

[bamboozled]

So it’s the governments fault for protecting people from predatory rent hikes?

[Eisenstein]

The current implementation seems to be causing an issue where it is not in the landlord's interest to offer the units to the market. It is the regulation's fault for creating disincentives for the landlord, so it depends on how you allocate blame for making a judgement based on that.

That doesn't mean we shouldn't try, or that we need to stick to a counterproductive plan because some people think arguing about regulations on free markets is more important than fixing a pressing problem.

[bamboozled]

No you just made it sound like it was kind of stupid to even attempt such a law.

Similar laws exists in Tokyo and it seems like a non-issue. Find me an empty apartment in Tokyo and I’ll be surprised. Maybe the problem exists elsewhere in society, for example: maybe the cost of living and property in NYC is just too expensive no matter what regulations exist?

I’m saying this because I’d imagine if people don’t think it’s worth renting the apartments, why not sell to citizens so they can buy in them and live there?

I feel like the world is starting to wake up to the fact that while it’s not easy to outlaw properly speculation, it’s going to be one if the major problems that define our time.

[Eisenstein]

How it sounded to you was not my intended tone. If you read what I wrote again you may take away from my response that knee-jerking an argument about regulations in general is not something I find productive, but rather discussion of specific policies. It appears this one is not effective at its goal.

[tomcam]

Asking questions on HN can be… tiring

[Dwolb]

Your original comment laid out the logic very well.

I’m not sure why the response took an emotional turn, but it wasn’t warranted.

I wish there were sites where more people people could wage discussions in your manner.

[MichaelZuo]

The larger the community the more it will trend towards the population average. That's why exclusive clubs began in the first place.

[djbebs]

Tokyo has significantly stronger property rights thay make it almost impossible for anyone including the government to stop someone from building something on their land.

[sokoloff]

An apartment market with zero vacant units seems like a non-functioning market as well. How does anyone move into (or within) such a city?

[Gigachad]

Rent control is about as useful as solving climate change by drawing a lower number on the screen of the thermometer.

Rents are a product of market conditions. You have to solve those conditions rather than try to stop the output from changing. Fixing the rent results in supply dropping off so the supply/demand equation is still met.

[oezi]

In inelastic markets such as housing some form of government control can prevent excessive market distortions.

[imtringued]

There is a misconception about private property. People think they work and then the thing they have is private property for free. As if private property only has a physical manifestation in the form of a product. Private property is a physical object plus the services provided from the institution we call private property. This means that private property is protected by the judicial system. It is protected by the police. It is possibly protected by neighbours watching over the neighborhood. It's value may be a function of the value of adjacent property. If you consider unavoidable positive externalities as a positive aspect of private property, then those positive externalities are also a service provided by the private property instituion. In fact, governments build utilities and road networks, they protect the land through a military force. The government does a lot of things to make your land valuable. Then there is the community surrounding your property, the businesses providing jobs and shops selling products, your neighbors, etc.

When I think of private property I not only think of the object itself but also a stream of public services for which you barely even have to pay something. If you are a landowner you could now come up with the idea of selling the public services. The revenue that this process produces is called ground rent.

Is the market distorted by the landowner who is basically just selling free services from the government or is it the government that makes these blatant gifts paid for with taxes unrelated to land ownership?

Manipulation of rents will not reduce those public services, the value of the land remains.

[parineum]

If the market is inelastic, why does construction ebb and flow?

[oezi]

Inelastic just means that it takes more time for supply to match demand or demand to match supply than in a more elastic market.

Ebbing and flowing is a typical effect of inelastic markets.

[parineum]

Inelastic means consumers buy the same amount of some good regardless of the market. That means there's a constant demand.

This is not the case with housing, at least in a local area. Prices go up, people move away and demand goes down. That's elastic.

If housing suddenly cost 10 billion dollars a day in Manhattan, the city would be a ghost town tomorrow. Elastic.

[refurb]

Yup. You can’t be “half in” the market. You’re either entirely in or not. Otherwise every intervention just squeezes the balloon and it bulges somewhere else.

The problem is a lack of housing. You either live with higher prices (reduced demand) or increase supply.

Everything else is just a shell game.

[JKCalhoun]

Maybe the lack of affordable housing?

I mean if you own a parcel of undeveloped land are you going to build a small mobile-home park or expensive condos? One of those two is going to make you a fantastic profit.

[Ekaros]

They are not predatory. They are entirely market based. Why shouldn't companies be allowed to charge whatever is the market price? Or maybe in general we should start applying price controls to absolutely everything. Let's say only ever allow 5% net profit on any good or service.

[vasco]

Every economist knows price caps never worked and yet you're being downvoted for stating a plain fact. Price controls only make it so that nobody can buy the thing in the first place by exhausting supply. It's way better to let the thing be sold at whatever price it has than to just exhaust it. In this case it means property sits empty which is the worst possible outcome.

[kevingadd]

Or instead of market based they're set by an algorithm that pushes them as high as it possibly can: https://www.propublica.org/article/yieldstar-rent-increase-r...

“The beauty of YieldStar is that it pushes you to go places that you wouldn’t have gone if you weren’t using it,” said Kortney Balas, director of revenue management at JVM Realty, referring to RealPage’s software in a testimonial video on the company’s website.

The nation’s largest property management firm, Greystar, found that even in one downturn, its buildings using YieldStar “outperformed their markets by 4.8%,” a significant premium above competitors, RealPage said in materials on its website.

[Ekaros]

So they are fixing an inefficiency in market by actually charging what market can bear. Should be applauded for the work, as inefficient markets are bad. Now they genera more profit which they can invest in more property thus enabling possibly more units to be build.

[Arainach]

Moving all the money into the hands of landlords means that the population has no money to spend on anything else. This is massively detrimental to society.

[parineum]

Good thing nobody suggested that.

Allowing landlords to actually build would drive prices down but overregulation and zoning laws have broken the supply end of the market.

[sofixa]

> Now they genera more profit which they can invest in more property thus enabling possibly more units to be build.

Except that investing in new property might bring the revenues and profits of their current properties down, so there's a direct disincentive not to build more.

[pjscott]

Unintended consequences may not be obvious when you first hear what a law is meant to do, but sometimes they really, really matter.

[cm2187]

Any time you apply artificial price controls you create scarcity. Ask Venezuelans. The same bad policies are applied over and over with the same effects.

[cuteboy19]

Is it the government's fault that people raised their own cobras to claim the cobra-killing bounty?

[djbebs]

Yes.

[throwawaysleep]

Yes. As the rent hikes are so low that it is better not to rent at all.

[bamboozled]

Why do people own the apartments at all if they can't rent them and don't live in them ?

[hackerlight]

Three reasons. It's a store of value asset, a speculative asset, and a real option that the law will get changed.

Also, these kind of things get priced in, leading to lower property values. There will always be a willing buyer as long as the market price is above $0, implying that the benefits exceed the costs of ownership.

[chrischen]

Rent controlled buildings are priced in during the sale so they go for lower values. As for why the very original people even bothered to invest in the building in the first place, then the answer is that the regulatory environment was one that allowed of incentivized it back then.

[Gigachad]

The laws haven’t always existed and you could reasonably bet they will revert them if they aren’t working.

[sofixa]

Why would it bankrupt you? "Rent stabilization" is in place in the big French metropolises (a landlord can only increase rents at a specific rate at specific intervals) and there's no shortage od landlords due to compensating policies encouraging building.