[michaelje]

>> critics argue that it reduces the supply of rental apartments and creates housing shortages

I don’t follow the logic. It doesn’t destroy the property or take it out of supply, it just means someone might not purchase it specifically to rent it out. Which in turn means less demand buying houses overall, which means more opportunities for people to buy (if they want?)

[neom]

In Toronto, as it has been explained to me by some banker types, in 2006 they introduced some pretty strong rent control, and developers just switched from building rentals to building condos, now Toronto has no rental units and a zillion condos that not many people can afford to buy or rent.^ Friend of mine lives in a condo and over half the units in his floor are now managed airbnbs.

^ Couple this situation with no restrictions (in fact encouragement) on foreign buyers for many many years, and you have condos sitting empty, condos rented out for amounts nobody can afford, and condos turning into airbnbs for rich tourists. From what I gather, both Toronto and Vancouver are a real mess because of this.

[voisin]

> friend of mine lives in a condo and over half the units in his floor are now managed airbnbs

This should change with the new Anti-AirBNB(Short term rental) rules at municipal, provincial, and federal (CRA) levels.

[infotainment]

…and it ends up being a cascade of new regulations to try and address the unforeseen consequences of the previous regulation. Eventually you end up like San Francisco where no new housing ever gets built ever again and prices are sky-high because of it.

[redserk]

But go too far in the other direction of not regulating enough, you also end up in the exact same spot.

[friend_and_foe]

Do we? How does that work?

[omnimus]

Yes. Most places have had unregulated property market like forever and are similary broken by speculation, collusion, price fixing and just exploitation of tenants.

The regulations actually attempts to answer this. They might not work well but atleast somebody is trying to do something.

The notion that if you got rid of the regulation and suddently situation would fix itself is suspiciously naive.

[osigurdson]

Doesn't that make it worse for people who want to rent AirBNBs?

I think the solution is to overbuild like crazy. Particularly in Canada where there is infinite land. People will be less interested in speculating as there is no supply limit. Cheap real estate is a net good for humanity.

[paulddraper]

So now fewer condos and apartments are produced.

Brilliant.

[jayski]

It doesn't destroy the property or take it out of supply.

But it also strongly disincentivizes potential investors in building new rental properties. Which makes perfect sense,if you inherited 5million euro would you spend it building rent controlled apartments or put into stocks&bonds?

[dehrmann]

Or in a US scenario, would you rather build rentals in Texas or California?

[toomuchtodo]

California. It’s the world’s fifth largest economy. I will take some regulatory risk over volatility in Texas. California vacancy rates speak for themselves, there is voracious demand for housing there vs Texas. Texas also has the nation’s 7th highest property tax rate.

https://austin.culturemap.com/news/real-estate/texas-propert...

[dehrmann]

> It’s the world’s fifth largest economy

You're comparing $3.9T to $2.4T, but that's still not the metric you look at. It's whether you're a landlord in a town of 5,000, a mid-sized city, or a 2M metro, and what the local economy looks like.

> California vacancy rates speak for themselves

This goes two ways. On one hand, it's an opportunity. On the other, it's an opportunity a lot of people clearly don't want to take.

> Texas also has the nation’s 7th highest property tax rate

As long as it's consistent and the regulators allow it, you just pass it on to tenants. CA's Prop 13, while making overall property taxes lower, puts you at a weird disadvantage compared to incumbent landlords.

[graeme]

This analysis only works if you assume the supply is fixed.

If you increase the returns to building ownership then people will build more buildings. Which lowers prices.

Capping supply by decreasing the returns leads to less supply, other things equal.

[emmacharp]

Won't lower prices reduce returns to building ownership?

[Jensson]

Yes, that is supply and demand. Supply will expand until it is no longer profitable to expand supply.

[emmacharp]

But for supply to expand, prices must go up, right? They can't go down.

That is what I'm trying to understand, since a lot of people here imply that "increase in supply will lower prices".

[sethammons]

It is called The Law of Supply and Demand. I'm sure there are zounds of articles or videos on it.

In the model, the price of a unit will change as you adjust either supply or demand. If there is lots of demand and little supply, the price is high. If there is lots of supply, the demand cannot force the price higher. Assuming the seller wants to sell, they have to compete with other sellers. The more units for sell, the less negotiating power they have because someone more desperate can sell cheaper.

[emmacharp]

I understand supply and demand... but it's a really basic theory.

My point is: prices will have to increases for supply to increase as well. Saying that increasing supply will keep prices low makes no sense if right now prices are too low for private interests to build more housing.

Supply won't keep prices "low" and certainly not lower than they are now. How would that work? How would they make profit?

[colonwqbang]

1. Few new rentals are built, because it's not profitable

2. Existing rentals are converted to condominiums, because that is more profitable

If you can afford to buy a condominium, great. If not, there is always the public housing company. I hope you're not in a hurry though because the typical waiting time to get a rental in Stockholm is 7-11 years.

https://bostad.stockholm.se/english/

[paulddraper]

I refer you to https://news.ycombinator.com/item?id=39655144

> there's a queue for rentals, so you register that you want to rent in Stockholm, and then you get put on a list, and then wait two years for it to be your turn

Price capping any good -- housing, fuel, food -- by definition produces a shortage.

A shortage is when there is more demand than supply at the market price.

And artificially lowering the market price increases the amount demanded and reduces the amount supplied.

[tonoto]

I believe that the queue hasn't been as short as "two years" in a couple of decades.

[owisd]

It only creates a shortage in a world where you have the x-shaped supply and demand curve from econ 101, which doesn’t apply here because the shortage already exists because of zoning/planning laws limiting the construction of new housing. If there wasn’t an existing shortage then no-one would be calling for rent controls. Rent controls just change who the winners and losers are as a result of a given shortage, in Stockholm’s case, existing residents are the winners and new residents are the losers. Existing residents who benefit get to vote to maintain the status quo in municipal elections whereas the people that can’t move there because of rent controls don’t, hence the system is self-sustaining.

[Jensson]

> If there wasn’t an existing shortage then no-one would be calling for rent controls

False, rent controls isn't about shortage it is about land lords raising rents for people who already live there and since it is so much work to move people will stay and pay overpriced rent.

Then that rent control easily leads to the shortage and extremely high prices for new entrants, but that was never the original goal.