I am a landlord in Oregon, but not California. The curious, although ultimately predictable, outcome of the new rent control measure in Oregon is that while I have historically had an arrangement with my property management to be restrained in annual rent increases, they are now advising a default annual increase of the maximum allowed (7 percent before inflation). This is because larger adjustments cannot be made if and when necessary due to market conditions, so it's smart to just steadily increase rent at the maximum rate permitted. If I agree, I believe the result will be more profitable for landlords, and hurtful to tenants.
The real solution to a housing problem is to incentivize and facilitate the building of more housing. ADUs, relaxed zoning, reduced building regulations, reduced fees for permitting, etc. I fear rent control is actually going to do more damage to the housing market than good.
The entire point of the law is to prevent you from being able to make those larger adjustments, though.
How often do you replace tenants? And what's your occupancy rate? If you're in a situation where you can reliably raise rent 7% YoY indefinitely without decreasing your occupancy rate, then you were severely underpriced for the market (and you should probably fire that management company for pricing you that absurdly low). 7% YoY after inflation is a big increase that outstrips average wage increases.
If you aren't severely underpriced, then what's going to happen is that when you increase by 7%, the tenants will choose to end the lease because they can find something cheaper (or they emmigrate from the city because nothing is affordable), and you'll struggle to replace them with wealthier tenants willing to pay what you think is market price, so you'll have to lower rent to attract a tenant. Once you get to the point where your price is roughly in line with what the market will bear, you'll only be able to squeeze one or two years of rent increases out of a tenant before the non-monetary costs of moving are outweighed by the cheaper rent, so constantly trying for 7% YoY post inflation will just mean a decrease in your occupancy rate, both because you'll be replacing tenants more frequently and because finding new ones will take longer.
What in your second paragraph doesn’t apply without rent control? In other words, what makes 7% the magic number? Your entire argument seems based on market forces (if you raise too much, your tenant leaves and if there’s no wealthy people to replace them, you're stuck). How is this not the case without rent control? Do wealthy tenants somehow appear without rent control?
I think your argument is contradicting itself at least partially because you say if an LL (landlord/landlady) was already getting market price, they’d price themselves out of the market so the 7% cap is more than enough... so in essence you’re saying the market will tell the LL not to raise the rent... which then means you’re relying on market forces... but you’re saying despite that you need a YoY cap... so something seems amiss...
- He may be socially responsible and not want to charge through the roof. E.g. likes the tenants, prefers stability etc.
- The whole point of the law is indeed to prevent large raises. But what if expenses suddenly skyrocket, or inflation does, and he has to increase more or go bankrupt? That’s the worry here. No, the law won’t react quickly enough. It’s preventing him from being socially responsible.
- You assume annual 7% would not work eventually because it will raise the price too much in the market. This assumes free market, but you don’t have it anymore, now you’re regulated. In particular, your missing that everybody else will adopt the same rational self-preserving policy. Approximately the entire market is going to grow 7% YoY now.
This makes me curious... is it the property management company or the landlord that sets the rental price? I recently rented a house and tried to haggle with the PM but they refused to budge on price but were willing to negotiate on other factors (like lease term and property rules), which made me wonder if the PM's hands were tied re: price.
In Ontario the rent control is even worse. It’s set by the landlord tenant board at a number near inflation, this year it’s 2.2%, the last few it’s been 1.8%.
Similarly, i tell my tenants that they should expect the minimum increase yearly as i cannot make up for any lost increases nor can i make larger increases if something about the economics of the house changes.
The real issue here is the cost to provide housing, and the limited amount that exists. I wanted to finish a basement in one of my places, to do this legally, i owe the city $140k in fees alone. This is around 5-6years of rent. You can probably imagine why i opted to put this money in a bunch of index funds and do nothing instead...
This is really bad policy... Treating the symptom while making the root problem worse.
The core issue is there is not enough good housing for everyone in California.
The real solution is to greatly loosen building regulation and make getting permits much faster and easier statewide. Then entrepreneurs will double or triple the housing supply and drop the costs of renting or buying a home by 80%. You could see rents go from $2500 per month in LA to $1000 a month or less.
I got out of renting out a place I owned in CA a few years ago for this very reason. The company that bought it eventually turned it into a parking lot. I’m just glad it’s not my problem anymore.
You are absolutely correct: rent control (1) increases upward pressure, and (2) decreases rental supplies (and therefore drives up the price of rent) , and (3) benefits high-income earners when not coupled with income limits.
(1) Since rent control laws put limits on increases (and not decreases) every landlord understands that he/she should test the upper boundary at all times to avoid renting severly below market rates during boom years. With sufficient landlords undertaking this task, rents should go higher than without this limitation. Moreover, the cost of moving is higher for the tenant (who has to find a home and move his/her property) than the landlord (who has to find a new tenant).
(3) high-income earners tend to benefit the most on rent control over time. As market rates for rentals increase (i.e., property up for rent), only higher-income individuals can afford to move in. Over time that leads to the displacement of lower-income individuals. Anecdotally, I can attest how some of my high-income earning friends pay very little for housing in SF because they locked in rates before 2011.
Lastly, pro-rent-control reports/papers I read highlighted the need for a comprehensive housing strategy beyond rent control, like increasing rental supply by making it easier to build ("It is also critical to recognize that the need for reforms extends beyond rent control and housing policy more broadly ... This includes developing new funding sources for affordable housing development and addressing exclusionary zoning policies at the root of the displacement crisis, https://haasinstitute.berkeley.edu/opening-door-rent-control). As the article already mentions, Scott Wiener's bill to override local zoning laws was shelved. The CA legislature did not have the stomach to address the underlying cause.
A far more sensible solution (IMO) is: (1) override zoning laws / ordinances that prohibit building more homes (2) tie rent control to income.
In Montreal we've had universal rent control all my life, and it actually works quite well. The rents are comparatively low. We have a decent tech scene, but it's still an affordable, left-leaning city, where even struggling artists can scrape by if they want to dedicate themselves to artistic work. I'm sure some people would argue that apartments in Montreal are less well-maintained as a result of universal rent control, but I've lived in the bay area, been to San Francisco many times, and uh, a two-bedroom San Francisco shithole which rents for over 3000 USD/month would rent for about 700 CAD here (~550 USD). If you go to the 800USD/month+ range, you can find very nice apartments.
Funnily enough though, I would say that Montreal has less of a supply problem, despite being on an island with no room to expand into an infinite suburban sprawl like the bay area has. Construction still seems to happen here. People are bitching that too many condos are being built, but I think more supply is good.
Anyway, I think rent control can work pretty well, as exemplified by this Canadian city. At the very least measures to prevent surprise rent tripling while someone is renting an apartment are very much a good thing. Sidenote: I think that rent control can also help prevent property price explosions. It makes no sense to buy an apartment for over a million dollars when its rental value is only 1000/month.
Another thing to consider is that rent control can depress interest in building more housing units. Why build if you won't be able to make the profit you'd expect due to price controls? More generally, this is an effect of price controls, especially those that can't easily be worked around.
Landlords who choose to increase rents at the maximum rate permitted each year do so at the risk that they will be undercut by competing property owners who do not do so. Given this, I think that your property management company is offering you bad advice.
Most landlords already increase rents at the maximum rate that the market will bear. Capping annual increases at 7% just ensures that in a year when the market would allow landlords to get away with increasing rents by over 7%, they won't be able to do so.
I do not follow when you say that the strategy of increasing rents by the maximum amount permissible is necessary "because larger adjustments cannot be made if and when necessary due to market conditions". In what scenario would larger adjustments be necessary? If you made a viable investment in a property and are currently renting it out, wouldn't rent increases just need to equal inflation in order for you to maintain the same level of profitability? Sure, increasing by more than inflation allows you to increase profits, but I hardly see why maximizing profits should be seen as a necessity---especially when it comes at the cost of pushing people out onto the streets.
>Landlords who choose to increase rents at the maximum rate permitted each year do so at the risk that they will be undercut by competing property owners who do not do so.
Price ceilings (even non-binding ones) can create market power for suppliers by providing a focal point for tacit collusion.
That’s how large corporations behave, but what the OP is voicing is a common sentiment for smaller investors or people doing landlording as a side gig or housing hack to financial independence.
If the market can support it, these laws guarantee the maximum increase. If the market cannot, well you are already at the top of the market aren’t you? So no benefit here.
>>> If you made a viable investment in a property and are currently renting it out, wouldn't rent increases just need to equal inflation in order for you to maintain the same level of profitability?
Not necessarily - taxes on property owners don't follow inflation. They may go up greatly compared with inflation.
>>> I hardly see why maximizing profits should be seen as a necessity---especially when it comes at the cost of pushing people out onto the streets.
Because if don't allow it to be profitable people won't do it. Particularly in California it can be quite risky the rent out a property. It's an extremely tenant friendly location, so much so that evictions for major infractions can take several months, or in some cases years.
One example I could imagine is that a landlord may not want to raise rents significantly on a long-term reliable tenant, but would want to increase rents when the reliable tenant leaves. “Market price” probably doesn’t include the cost risks of having a nightmare tenant.
The Hilarious thing in Oregon is some of the 'marketing' for this new rent control law stressed over and over that rent had grown 25% in Oregon over the last 4 years, so 'something needed to be done'. So they capped at 7% per year.. Someone really, really sucks at math...
I was talking with a real estate agent in SF and he said it’s not unusual for landlords looking to sell their rent controlled building to just let units sit empty.
Why? Because it can increase the value of the building by hundreds of thousands of dollars. Losing out on $24k worth of rent each year is easy if you know it comes with an extra $300k in your pocket when you sell.
Vacancy rates in San Francisco are very low compared to the rest of the state and the country. Rent control in SF is problematic not because it leads to vacancies but because the allowable increase is far too low, way below inflation.
As a landlord this doesn’t make too much sense. The value of the property is net operating income divided by cap rate, so vacancies would lower value. It doesn’t matter what the gross scheduled rent is in that calculation.
I would suggest you fire your property management company. Any relatively savvy tenant is not going to pay above market rate. Then you'll be out of a presumably stable tenant and taking a risk on a new one. You'll also forfeit the money while your unit is vacant. Lastly you're gonna have some repair and cleaning costs. All in all unless there's crazy price appreciation in your market this strategy is going to cost you money.
> it's smart to just steadily increase rent at the maximum rate permitted.
FWIW rent control advocates agree with you.[1] It’s a point in which the “PHIMBY” left[2] and the real estate lobby agree.
The reasoning is that it’s not actually a full rent control bill (it just stops the most extreme cases of gouging) which is why the California Apartment Association stopped opposing it. Thus it doesn’t go nearly far enough to stabilize rents.
I know there are a lot of supply siders on HN champing at the bit to dump on rent control, but this particular bill is a bit more nuanced.
> The real solution to a housing problem is to incentivize and facilitate the building of more housing.
You need to have some degree of control. I live in a suburb close to a tech hub in WA. They built a lot of housing in the past 3 years. And I mean a lot. At least a couple of hundred of apartments on the market every year, after raising 3-4 buildings at the same time, in a town of 20k people.
One would think that the price would go down based on supply and demand, right? More than half of the apartments were empty while the management companies were not budging on the price. Nobody wanted to go below 2k/month for a one bedroom and they were sitting around with empty apartments. Finally they managed to reel in some suckers by offering 2-3 months free rent but again, no rent was going below 2k so the next year, you pay up or move out.
Right now, people are moving out and the apartment buildings aren't what you'd call full but again, the rent is not going down. It actually increased. Because what happens is that they're owned by large landlord corporations which can take the hit for a year or two to keep the prices up. I know this because I used to live in one. They increased my rent (years ago) from 1.2k to 1.7k and I moved out. The apartment was on the market afterwards for about a year and they didn't try too hard to get new tenants, they just posted it periodically on Craigslist. I tried to negotiate to bring it down to 1.4k and they said no. It was way profitable for anyone to keep the price up, although they lost a year of rent from it.
This tends to happen with new apartment buildings for the first 2 years or so, and its an artifact of real estate finance. For finance purposes, the building is valued on the theoretical sum of its leases when its at full capacity. If you have a 100 unit building where each unit rents for exactly 2.5k/month, then your building is valued on a multiple of of the $250000/month it generates. That value is used as capital for the real estate company that owns the building to use to get a loan to build another apartment complex. Where this gets tricky is that the max cashflow a building can generate is decreased when you lower rents in leases for for finance and accounting purposes,but when you give someone 1/2/3 months free rent the "max theoretical monthly rent" remains the same as if you hadn't given them the free rent. Thus, while the 2 months free rent is an effective ~18% rent decrease for the tenant, it doesn't impact the ability for the development company to borrow, and thats why it is widely used.
Losing an entire year of 1.2K rent breaks even with 1.7K rent after roughly 3.3 years, breaks even (1.7(x-12)=1.2x, x = 40 months). And that’s if the new tenants stay with no churn and you don’t play the same game forcing them out for another year. Had they just raised your rent $200, the break even point becomes almost 6 years. I don’t understand your landlords at all.
With regard to the story before it, it sounds like they actually lowered rent to about $1600 (2 months free is a 17% reduction, which is pretty hefty. Sure, you’re betting on them staying after, but it switches to month to month usually after a year so it’s risky).
If it's true what you say that "the result will be more profitable for landlords, and hurtful to tenants," then it seems odd that landlords are not universally applauding rent control.
Landlords want to be able to raise rents at whatever rate maximizes profit without generating turn over - except when they want turn over (to get renters out).
When the market will bear an increase less than rent control, it gives landlords something to point at as justification and help mitigate turn over. When the market will bear a greater increase, it is unfair and harmful to communities, etc. etc. etc.
The tendency for government regulation is to subsidize demand (rent control, housing assistance) and restrict supply (zoning, permitting, etc). The side effect is always higher prices.
>they are now advising a default annual increase of the maximum allowed (7 percent before inflation)
Is the property management company collecting an extra commission each time a new tenant moves in? Because all this strategy is going to do is let tenants quit once the rent goes considerably above the market rate.
A much wiser strategy, IMO, would be to watch the market rates and keep the existing tenants' rate constant until the market rate climbs considerably higher (7% sounds like reasonable threshold) and then raising it to be marginally below the market, incentivizing the tenant to stay.
I've been tenant in France, with restrained rent increases. Every year my rent was increasing 20 euros or so.
I've been tenant in California without rent control. After one year, my rent went up 500 dollars.
But well, maybe that's because in France the allowed increase is calculated from a rent index in the area, not a fixed number like "7%" (no idea where it comes from).
Also, don't say "necessary due to market conditions" when the reality is just "can get away with it due to market conditions". It's not like the increase of the rent market causes you more fees or increase your mortgage.
> because larger adjustments cannot be made if and when necessary due to market conditions
When are "larger adjustments" necessary vs just opportunistically profitable?
The question I always see is "why shouldn't I have the right to make as much money as possible from my investment," but the answer seems pretty clear: because evictions and massive rent hikes have nasty social consequences, as does treating rent-seeking as an investment.
A new rent control law changes the market. If the tenant leaves, they will need to sign a new lease, and the leasor will build in extra rent because they are worried they won't be able to raise it enough later.
In other words, it scares all the landlords at once, and they all raise prices a little because of it.
Counter anecdote: I've lived in a rent controlled apartment in Santa Monica for 5 years. My rent increases by the maximum allowed every year, but that's drastically lower than the non-rent controlled apartments in Santa Monica and West LA. My rent is now pretty significantly below market.
Yes, the real solution is to make life as easy as possible for real estate developers and strip tenants of their rights. That is definitely good for tenants, according to landlords such as yourself. For the rest of us, I hope you understand why this sounds fairly nonsensical. "More housing" does not automatically translate to "affordable housing" and many regulations are there for a reason--including regulations protecting tenants from unscrupulous landlords.
> "More housing" does not automatically translate to "affordable housing"
Imagine two hypothetical cites, each with one million residents. The first one has half a million apartments, while the second one has ten million apartments.
Before Mountain View landed rent control a few years ago, my rent was being increased 10% year over year - I had enough after 3 years and moved to Sunnyvale where my rent was $50 more a month for an extra bedroom and 300-400 sqft extra.
Interestingly, my rent has remained stable ever since moving - guess it's possible to have much better luck with smaller landlords.
In the US, it is very common the past decade or so.
I'm in bumblefudge-nowhere-Midwest USA, and even we've averaged 10% yearly rent increases, for more than 5+ years now. Every top-20 metro area I've looked at, has had it worse than us on rental price increases.
Landlord here in Oregon with just a single unit. I was a renter and now I’m fortunate enough to be an owner and I go out of my way to do right by my tenant. Rent increases are just for inflation for me 1-3% on renewal only.
There is a lot of knock on affects that rent control brings that are negative that I don’t have time to go into
It is the case in New York City, and also in this California Bill (I don't know the case in Oregon) that you can charge a tenant less than the "legal" rent by offering incentives and discounts.
In other words, it is totally permissible to increase the legal rent by the officially allowed 7%, but increase the effective rent paid by your tenants by only 2% (or whatever you want). There does not appear to be any restrictions about removing such incentives/concessions/discounts in the future.
It also appears that the California law resets as soon as the tenancy changes hands; so as soon as there is a vacancy the landlord is free to increase the rent by as much as they want. This is not the case for NYC rent stabilization; there the increase in the legal rent is a property of the unit, not of the tenancy.
Not really, landlords who choose to increase rent with rent control in effect , will increase rent no matter what. The only thing stopping any landlord to not increase rent are supply/demand (market conditions)
I was simply thinking, Unintended Consequences in 5,4,3,2,1...but that's one I hadn't thought of. Of course people will push up against the limit in order to buffer out market values.
You could easily see rents above where they should be from a market standpoint simply because of the inertia in a system of annual increases.
It also makes me wonder if you are allowed to increase rents if you improve a dwelling. If not, nothing gets fixed beyond the bare minimum.
This same thing happens prior to rent control coming into effect - landlords institute a forward looking rent increase to compensate for the fact they’ll be limited in the future.
Same when a rent control unit opens up in SF, the goal is to push the rent as high as possible since it’s not going up much after that.
> they are now advising a default annual increase of the maximum allowed (7 percent before inflation).
7 percent is a pretty high allowed increase. I suspect that it really doesn't do much except stop gouging in the case of someone who had really cheap rent in a place that gentrified suddenly.
> The real solution to a housing problem is to incentivize and facilitate the building of more housing.
This argument comes up here in Australia with regards to Sydney and Melbourne in particular -- the two largest cities.
Building more houses only makes more sprawl. Increasing density causes problems for current residents and puts enormous strain on existing infrastructure[1].
The only real solution is to get people to live in other places that have more and cheaper housing.
[1] Not just utility infrastructure like water, sewer, power, gas, (roads, sanitation, what the Romans did for us etc) but natural environment and leisure like sport and recreation areas, parks and bush land, and (particularly in Sydney) beaches. It's really hard making new beaches for the increased population.
That’s not a real solution, that’s just wishing the problem would go away on its own. What you are advocating for here is that prices should be more expensive due to limited supply, so that people are forced away due to inability to afford living there.
I agree with your final statement, even if zoning and build regs are revamped rent control restricts the potential profit of those new buildings which will cause developers to build elsewhere.
I don’t know if this a direct result of the laws passed but prices definitely seem to have dropped from last year to this year (don’t have numbers, just perception of someone living here)
Indeed. If you have a crises stemming from "not enough housing", increasing the number of potential customers for that housing is only going to make the lack of supply worse.
Bay Area has more jobs than it does housing for the people who work those jobs. There just isn't an option for everyone to move away from the bay area and still have work.
Take your "I've got mine so screw everyone else" attitude out of the bay area, we don't have room here for people with so little empathy for their neighbors.
I'm shocked at the ideological fervor here and the fact that virtually no one seems to have looked at the details of the actual bill. This is nothing like the rent control ordinance in SF that has caused $3000 units to get stuck at $500 rents. That will never happen under this law. The allowable increases are so much higher than "normal" rent control laws that any given unit will catch up to market rates in a matter of years, at most. Whereas the laws we love to hate result in units getting stuck far below market for decades or even generations.
The difference with this law is that a 20% rent hike will take 3-4 years to be implemented instead of 30 or 60 days. That difference, while not enough to allow all families to remain in place, will allow families time to adjust or move within a reasonable time frame.
This law is different. If you want to complain about rent control in SF or NYC or elsewhere, have at it, but know that most of your complaints do not apply to this law.
The lack of affordable housing always has been and always will be a supply problem. When demand for homes outpaces the number of homes being built, prices go up. Plain and simple.
Homes that are built for renting (mainly apartments and condos, but some houses, too) are built for profit. If you make it less profitable to build, fewer will be built. If fewer homes are built, the problem is compounded, not rectified.
If you want to make housing more affordable, make it as cheap and profitable as possible to build new homes. Get rid of the fees that can push over $100,000 for a single family home in some counties, before the builder even buys a nail or 2x4. In most states you can build a home for less than the price of permission to build a home in some California counties.
I used to think so too. Now I'm on the fence. High interest rates means people can borrow less, and has a dampening effect on house prices, low interest rates means people can borrow more, so house prices go up.
Our current environment of low interest rates means that borrowing is cheap - which has pushed up prices, as now people can now afford larger mortgages. This has come at the same time as a withdrawal of mortgage finance from first-time-buyers, so effectively people who have bought before can buy another house, while those who haven't can't get on 'the housing ladder'. This is according to economist Ian Mulheirn, and is very much based on the UK (although similar arguments might apply elsewhere). Supply is part of the problem, but according to him, the smallest part.
> The lack of affordable housing always has been and always will be a supply problem.
Yes, but in the expensive parts of California the limiting supply factor isn't how much people want to build but how much they are allowed to build because of zoning and other constraints, so there is a fairly large range where reducing the incentive to build will have no effect on actual results.
But, anyway, does this really reduce incentives for new construction? It seems to me rent control and eviction restrictions of this type increases the expected profits for new construction, because it doesn't limit existing rents, and doesn't allow high-end demand to be met by bouncing tenants out of lower-end units and renovating them and raising the prices. So, it reduces the competition new units face from existing ones at the top of the market while leaving the rents that can be charged initially for those new units unrestricted. (And, by limiting the ability to bounce unprofitable tenants in favor of new ones, if it doesn't spur new rental-focussed unit construction and housing demand remains the same it creates a greater incentive to build for sale as owner-occupied housing where, again, prices are unrestricted.)
The real danger isn't lack of incentive to build, it's lack of incentive to maintain existing units instead of milking what remaining profits can be made in the short term, then letting them fail in isolated, judgement proof, limited liability business enterprises by not reinvesting because you can't recover reinvestment with rent increases, while reinvesting the extracted profits elsewhere.
Lack of supply is a problem, but is it caused by an inability to turn a profit? It seems like developers have no trouble making money from new construction. The difficult part, and the part that limits supply, is getting permission to build.
Not American, so my knowledge on the matter is limited. Is it that expensive even outside SF and LA areas?
Also, AFAIK, these two areas (and surroundings) are very, very stressed in terms of traffic, and more housing means more people, and more cars. Can those cities deal with more traffic?
Thats incorrect - not all land is equally valuable, so just building more buildings doesn’t mean that housing is solved.
Infrastructure around the builds also matter, which means just building denser isn’t a solution.
Complimentary services like schools, stores, pubs, churches, skate parks, parks etc change the value of a location as well, and change it differently for different demographics.
So making it cheap and profitable only makes it profitable to build - it does not solve the problem of affordable housing.
> Homes that are built for renting (mainly apartments and condos, but some houses, too) are built for profit. If you make it less profitable to build, fewer will be built. If fewer homes are built, the problem is compounded, not rectified.
Arguments like this continue to be made for more and more aspects of our market: pharmaceuticals, heathcare services, elder care services, and now housing. Everywhere you look the markets seem ill equipped to handle the needs of people.
Maybe the problem is markets then? Maybe the problem is expecting our entire society to work based on profit motive? I don't deny it's served us fairly well for awhile, but it seems like we're hitting the wall a lot lately.
The rent control laws in NYC aren't even nearly as bad as SF, despite how much they get demonized here on HN.
In NYC units that might be _actually cheap_, as in rent controlled and not stabilized, number roughly 17k units _in total_. And only about 1/3 of those are significantly below market or in desirable neighborhoods. It's almost insignificant and the number of rent controlled units has gone down by roughly HALF in the last 5 years, because the tenants in them are dying and income limits on any descendants usually kick the units out of being controlled into stabilized.
NYC has a much larger number of rent stabilized units, which is somewhere near 1/3 of all available units that are renting at or below $2700 (twice the national average, btw). The overwhelming majority of these are within a few hundred dollars of market rate.
There are about 4.2M housing units in NYC with roughly 30k being added every year. The "cheap" rent-controlled units are a rounding error.
That is not anything like the situation folks in SF are rightfully railing against.
I think rent stabilized apartments can go a lot higher than $2700. Lots of luxury buildings are taking tax abatements in exchange for rent stabilization and setting aside a number of rent controlled units.
The rent control laws in SF aren’t even as bad as HN comments would have you believe.
Rent control doesn’t apply to new construction in SF. It also allows a regulated annual increase, and rent automatically jumps back up to market upon a number of different conditions - not the least of which is that the owner can push you out to renovate the building!
HN commenters are usually just repeating stuff they heard somewhere, and have no idea what the laws actually say.
Moreover, while there are indeed lots of publications on the theoretical impacts of rent control, few of those publications consider laws as they actually exist, or if they do, the scope of the impacts is rarely communicated when translated into HN talking points. Every study I’m aware of has shown, at worst, diffuse, long-term negative impacts to housing costs. Meanwhile, many of them do exactly what they set out to do: stabilize short-term prices for vulnerable populations.
These laws are simply not the boogeymen that comments here make them seem.
Well said. It is weird to see so many people jumping out to lay the accusations of 'uninformed!', 'never works', etc...
In fact, the CA, especially in bay area, the rent is already top among this country. 7% on top of that is still a quite sizable increase. And it is hilarious to see those (aspiring) landlords playing the blame-the-game-not-the-player rhetoric here to blame the government not allowing more houses to be built, while themselves being one of the biggest opponents to such initiative.
It is uninformed. Note that in a survey of economists ~80% of economists disagreed with the statement below and only 2% agreed:
> Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them. [0]
The negative effects of price controls, especially when it comes to rents is the most unifying issue in economics. Rent control isn't a new idea, but there is agreement that it's a bad idea. It's not the landlords who say this, its the people who study this stuff. Paul Krugman wrote about this in 2000 [1].
Putting in arbitrary controls on prices to fight cost increases is about as effective as putting arbitrary controls on thermometers to fight global warming.
Saying "7% on top of that is still a quite sizable increase" is not a fact, it's an opinion. Furthermore it's like my employer telling me "you should take this 7% raise and be happy even if the market dictates a 20% raise. It's still a quite sizable increase".
Then you make an ad-hominem argument about landlords being hypocrites which isn't relevant. Landlords act in the best interest of landlords.
I don't yet know what I think about the bill so I'm reading the HN comments to form an opinion. The points you're making aren't very convincing.
"blame-the-game-not-the-player" is so typical of polite SF (and greater CA). A lot of homeowners are quietly rubbing their hands knowing their houses suddenly got more valuable.
My experience with SF rent control is that it's really only valuable if you've got limited resources. I lived there for 5 years, saw market rent double, and my landlady politely asked me to pay a "generous discount from market", which was about a 50% increase and I declined - it would have busted my budget.
Then eviction proceedings started: completely made up, and I lawyered up. I was threatened with OMI (there's no defense if they actually do move in), and I negotiated a settlement. Because if I'd won I'd have a super hostile situation ending in OMI, and if I'd lost I'd have killed a substantial portion of my savings.
If I'd had nothing to lose, I'd have hung on for dear life.
I agree with you. I’m renting out a previous condo, and as a landlord, this law strikes me as reasonable and measured. The market will still find its natural level. These controls merely dampen short-term shocks, allowing tenants and communities time to adjust as market conditions change.
To take the other side of the argument here I'm completely against this change but I'm happy that it passed. The reason is simple: without data we're all just speculating. If I'm correct, now I will have real bias-free (since we're looking at this exact location as opposed to other locations where rent control has had... issues) data to support my views.
And of course only a fool would cling to certainty on issues this complex. It's very possible my views are wrong. And if they are then that's a great outcome. If they're not? Well the cost of this experiment is not going to be that big, and it can be reversed relatively easily.
The one thing I think both sides often fail to do though is to set falsifiable metrics before running such an experiment. Take a group of qualified individuals against the program, and those for the program. And have them sit down and work out their expectations of the program. So for instance homelessness. The pro side probably expects this will cause it to decline, the neg side probably does not expect it to have much of an effect. Why not convert those views to numbers collected in a mutually agreed upon fashion, which can then be regularly published - alongside results? And let's see who's right, with accurate data. Of course there are confounders. If we hit a major recession, homelessness will increase regardless. These factors could be mentioned alongside such data.
Instead without doing things beforehand both sides are simply going to spin arguments entirely in their favor, such as with the case of minimum wage increases. Did minimum wage increases collapse the economies? No. Did they cause some economic damage? Yes. Did they bring about a great life for low earners? No. Did they improve the quality of life of some low earners? Yes. And so both sides just create disingenuous arguments painting themselves as 100% correct, which informs nobody and divides everybody, since both sides come back with 'told ya so!'
It's not entirely unreasonable to think landlords somewhere in the state will take this "5% + inflation" as automatically what's called-for. Conceivably a few landlords who otherwise would have held the line will do this. But given this was more or less already standard for the large landlords and given the landlords who have been really, really gouging, this sad collateral.
At a basic level I would not have any issues with these laws if they also limited expenses. In other words, if you are going to use force to limit income then landlords ought to have the right to limit expenses proportionately. For example, make tenants responsible for wear and tear on the property, just like you pay for mileage on a rental car and are responsible for damages.
As it is, they are using force to limit income while expecting the landlord to offer the same product and services and foot the bill on unlimited expenses.
How about legally limiting salary increases while requiring the same or more work? And, when you change jobs, you are only allowed to make 10% more. Oh, yes, but you have to spend thousands to renew your credentials.
And how about truly severe penalties for tenants who destroy or damage property?
Anyone who has been a landlord for with more than a handful of properties knows how much of a nightmare it can often be.
Try running 10, 20 or 100 units and see how quickly you are going to bug out once even this mild form of rent control rears it’s ugly head. Because you know, with almost absolute certainty, that this is the proverbial slippery slope. And nobody wants to be the guy waiting for the last seat out of the Titanic.
Oh, yeah, unintended consequences: If Airbnb is more profitable than conventional renting...
At a maximum 5% increase per year, it takes 37 years for a $500 unit to catch up to the $3000 market price. So this law doesn't help that much with that particular case.
This has been tried in several countries, and it failed miserably. Rent control never worked. In Sweden you have to wait 20 years to get a flat with rent control. The only solution for the people is to increase the offer, how? by deregulating and allowing others to build more.
Given the booming demand and restricted supply for homes in San Francisco, the market rate for rent could easily outstrip inflation by 3% per year. That means it would take a decade for a rental rate that is currently 20% below market rate to catch up.
As counter-intuitive as it seems, this should happen. People should not look at rental property with no rent stabilization provision as a stable housing arrangement. If there is a sudden shortage in housing, we need prices to suddenly reflect that shortage, in order for people to be suddenly incentivised to and compensated for building housing to fill that shortage.
Shortage is pain and rent control simply distributes that pain in a different way than the market would and does so in a way that reduces the ability of the market to gradually alleviate that pain.
The more the government intervenes in rental contracts to mandate that they be like a lifetime lease agreement, the less incentives and sustenance there is to build a rental property overall. Society is better off having more rental units that have prices that are not legislatively stabilized than have a smaller supply of rental units with mandatorily stabilize prices.
If someone wants stabilized rental prices and they should sign a lease agreement with the landlord that gives them that at the price of a slightly higher per month rental rate. These kinds of things should arranged by actors in the market rather than having the government ban all alternatives in order to force people into stabalized rent contracts.
The point was that this CA statewide bill is quite different from places like SF.
New state law: 5% + inflation
SF: 60% of inflation. This has has never been over 2.9% a year since the law changed in 1992 from a fixed 4% [0].
I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restriction, while limiting increases to significantly below inflation is not.
Why does someone have to be arguing anything? They wrote what happened and described it adequately with no disclaimers or partisan copy-pasta to assign favor to any mob.
There is no functioning market to begin with. Housing prices and rent are through the roof in California, yet supply is not rising to meet demand, largely because existing owners oppose new construction.
Turnabout is fair play. If owners organize politically to control supply, tenants can organize politically to control prices.
The biggest myth is that this kind of stuff actually helps the less-powerful. In reality, it just means they are hurt twice: government artificially suppressing supply, and government manipulating prices which has bad side effects for mamy even if its good for a few.
Also, in reality, the powerful often don't get hurt, and arbitrary market manipulations just introduce new ways for them to get an advantage somehow.
Give me a break. Until suppression of building new units stops (by poor, helpless owners), this is the only recourse. I agree wholeheartedly that the real solution is to build more homes but that doesn't appear to be in the cards. So the idea that rent control doesn't actually help lower income people is _completely_ nuts. I know of many people off the top of my head that no-way would still be living in San Francisco if there weren't rent control (including my elderly aunt and uncle).
> manipulating prices which has bad side effects for many even if its good for a few.
There are way more renters than owners. Prices have been going up more than 5%. Owners are most definitely not the "less-powerful" here.
So in reality the gov't might be artificially surpressing supply (though it's mostly due to owner pushback), but the "manipulating prices" (trying to keep rent growth from getting out of control) is helping less-powerful.
I get the point about how this can default owners to just increase prices. Well they were going to be doing that anyways! Especially with surpressed supply!
Arguing that "overall price increases with this law" > "overall prices increase without this law" is non-intuitive and probably just not true.
(thought experiment: if raising 5% every year with the law made sense, why would it not make sense to raise it 5% every year without the law? This law doesn't prevent other owners from offering _lower_ rents, if the market calls for it)
Think of it as landlords having to share some of their Prop 13 savings with tenants. Now both owners and renters can both enjoy the protection of not being forced from their homes due to an increase in cost.
Let's just not even talk about the fact that regulation is the reason why housing is scarce, let's just assume California is 100% at capacity. How the hell does rent control increase turnabout? It just let's people who got in at the right time have their status as a resident enforced indefinitely, when there are plenty of people who are willing and able to pay far more in order to live there.
It hurts the owners who would be receiving the wealthy newcomers' money.
It doesn't solve anything directly, but it's an attack on the prosperity of the people who are maintaining artificial restrictions on new construction.
A laissez-faire approach to both construction and rent would probably be a better option. But that's already not happening, and it's not going to happen without pressuring homeowners and landlords to stop opposing construction.
Many parts of California are already beyond 100% capacity for certain pieces of infrastructure like transportation, schools, water, and sewers. So I only support more housing in those areas if building permits are directly coupled with equivalent infrastructure upgrades.
I highly doubt that. At least in LA county, this place was built up in a giant friggin profit-motivated hurry.
Now, if we're talking about planned cities built in the 80s in orange county, maybe we have a point! Maybe.
SF has a similar story of sorts. Building code regulations were heavily relaxed after the 1906 earthquake in fear that people wouldn't rebuild otherwise.
Businesses will build whatever is most profitable. If it's more profitable to de-regulate and unzone everything, then they would be lobbying like hell to get that.
Getting in at the right time is a big part of free markets and capitalism. It's the same as someone complaining that Zukerberg or Henry Ford just got in at the right time and didn't deserve their wealth.
> tenants can organize politically to control prices.
That's fine for existing renters, but think about people who would like to move there to pursue a job, or live in a state friendlier to gay people or for whatever reason. They're going to find it harder to find a place to live, in all likelihood.
This is the best argument I've seen to support these price controls. They're a bad idea on their own, but as a response to another bad idea (landlord opposition to construction) they make political sense.
Sometimes the system has to break down before progress happens.
> yet supply is not rising to meet demand, largely because existing owners oppose new construction.
So when over-regulation drives up prices, the appropriate response is to introduce new regulations to fight the other regulations? Because that’s exactly what this is. It won’t even improve the problem. The problem is that there are more people who want to live in California than there is housing. The reason for that is because regulations prohibit the market from increasing supply at a rate that comes anywhere near keeping up with demand.
Talking about "regulation" doesn't really say anything. All laws, good and bad are regulation. There is regulation passed by businesses, and very few passed by citizens. When you cry about regulation, it is similar to crying about the water being wet or over having to breath. In modern society, very few things are done without regulation. Even basic rights that we take for granted, such as freedom of speech, are guaranteed in the US because there is a piece of regulation, passed more than two centuries ago, called "constitution".
> So when over-regulation drives up the costs, the appropriate response is to introduce new regulations to fight the other regulations?
Yes. The effort to reduce regulations on construction has failed. As such, retaliating against the beneficiaries of those regulations with counter-regulations is appropriate.
It's not pretty or efficient, this is a fight between different interests, not a group problem-solving effort.
We are so very very far above market equilibrium rents. Even if CA did something drastic and limited rents to say $500 per bedroom it would still be profitable to build more housing.
Lack of profit incentives is NOT what is blocking housing construction in CA right now.
This very minor, way above inflation, rent cap will not affect housing supply.
California building code is really not that different from anywhere else in the US, since almost all states base their code off the IBC. it costs a little more to build in a seismic zone or a high fire risk zone, but that is inevitable. The code does help keep people alive and healthy, and protect against more costly damage than otherwise in case of natural disasters.
In California, 25% of a new SFR is land. Another 25% easy goes to permits and municipal utility connections. 40% construction costs (including paying the boss a salary), and if you are lucky, 10% profit. Simply reducing permitting costs and streamlining the process to reduce holding costs (without even easing restrictions, just being more efficient/faster at the municipal level) could shave 20% off a new home price. That would drive down all home prices to some extent and open up a large number of people to get out of the renters pool.
So CA government is the major player to blame for housing costs, and these laws are in place of just doing their jobs well. This might drive prices down too, eventually, but not nearly as quickly or fairly as bureaucratic reform would.
That’s just not true, of course there is a functioning market. It’s disingenuous to say that just because the market has problems that means there isn’t one at all and to justify taking away what little freedoms are left.
One thing I have noticed as I have become more aware is that many of our laws are aimed at trying to freeze a moment of time, often by piling on contradictory policies on top of each other.
Subsidize home loans
Ban new construction
Ban rent increases
It is no wonder why housing prices/rents continue to rise in these markets.
In software engineering sometimes conclude that a rewrite is necessary. How can we completely rewrite our regulations?
"In software engineering sometimes conclude that a rewrite is necessary. How can we completely rewrite our regulations?"
A currency collapse or a successful invasion perhaps.
Even 'freezing a moment of time' is kind of a suspicious thing. People don't understand the present time and they sure as heck don't understand previous ones.
While fixing the plane while it's in flight is hard, I'm trusting our upcoming robot overlords to understand tax or criminal law. Accreting everyone's good ideas for a century or two was bound to result in a hairball.
It usually comes from a recession or a depression were rewrites are finally deemed necessary. Unfortunately unless people with common sense participate in government and we vote in selfless people a generation will suffer the consequences of our inactivity.
>It usually comes from a recession or a depression...
Don't forget crime and violence. Historically speaking those get laws changed quick. That said, I don't think rent control is going to have a very direct effect on crime and violence.
I've seen this argument before. Why shouldn't it be an investment?
1. Land is a limited resource.
2. Property improvements last for a very long time, and are incrementally improved.
3. The buy-in price is relatively high, so only very interested parties get involved.
4. It's a home for goodness sake, why would you not call it an investment?
Prices should increase in the case of increased demand. Prices must increase in that case if you want the supply to increase, which is the only way to actually meet demand.
Not in isolation. But if building restrictions and zoning restrictions were lifted, and supply could meet demand, then rent control wouldn't be necessary, because the landlord wouldn't be able to get away with doubling rent.
Rent control is about housing security for existing tenants. Even a perennial 7% increase can be better than discovering your rent will jump 300% next month.
But rent control in the absence of housing supply increases will undoubtedly exacerbate the problem, and at a steady 7% inflation would also slowly price out existing tenants.
Many parts of California already had rent control that was based on building age. Theoretically this could have been the best of both worlds--improved housing security for the majority of existing tenants, but an incentive for new construction, which would be excluded from rent control. Of course, the price of housing security would be marginally higher rent prices up front, but in the real world that's a reasonable tradeoff. Security and predictability are at the top of most people's hierarchy of needs, whether they admit that or not, and regardless of whether they'd willing pay for it. (Healthcare being a great of example of people predictably making irrational decisions, requiring government intervention to mitigate the consequences.)
Unfortunately, new construction in California is extremely costly for entirely unrelated reasons. I think most developers in California would have bargained statewide rent control for development as-of-right. That California permitted rent control again without doing anything substantive about lowering the costs of development is inexcusable. I'm sure lawmakers told themselves that they were buying the acquiescence of NIMBYs and local control advocates regarding future development as-of-right legislation, but they're just lying to themselves.
I'm a renter in Oregon and I've been outspoken about this long before the laws were passed. From my experience, people who support heavy laws, regulations and taxes don't spend enough time considering potential side effects. They feel like with enough support, they can just force anything they want to happen, while completely disregarding the market.
I feel like an amount of the general public just wants Big Daddy government to come in and authoritatively force everyone into an unnatural framework, which is pure ignorance.
IMHO, there is nothing "natural" about land ownership. Land ownership in the USA isn't actually what most people think it is. It's not an inalienable right and is largely at the pleasure of the public by way of legislation that can be changed.
>> From my experience, people who support heavy laws, regulations and taxes don't spend enough time considering potential side effects.
This is basically everyone. On today of all days, we see what the PATRIOT ACT USA has done to this country decades later, and people are quick to point that out but not consider it for laws that have not yet passed.
I'm a renter in Oregon and I've been outspoken about this long before the laws were passed. From my experience, people who support heavy laws, regulations and taxes don't spend enough time considering potential side effects. They feel like with enough support, they can just force anything they want to happen, while completely disregarding the market.
You know I was neutral on this stuff, studied economics and some business law, have actually read Adam Smith rather than just little excerpts. When I was younger most of the 90s working as a tech in and around the financial sector, so while I don't consider myself an expert I do think I'm quite well informed. I spent about 25 years giving market economics and the investor class the benefit of the doubt.
The market is simply a tool. It's not infallible. It is a very powerful framework, and enables amazing things. However, left unchecked, it will also create undesirable outcomes or side effects. Negative externalities are a real thing.
In this specific case, perhaps you are right, I can't say.
But your wide-sweeping declarations and general tone reveal your own harmful ignorance.
We’re talking about rent control, a system designed to attempt to dictate that supply and demand doesn’t exist via a law. A system with no economic foundation that creates worse housing everywhere it’s implemented.
Well, i disagree with your opinion. Silicon Valley has been attracting a lot of people from lot of states, who all need housing. Remember , size of California is fixed. Housing in Silicon valley doesn't grow at the same rate as number of people coming here. Added to that, foreigners living in foreign countries ( who have never visited USA, who have no intention of living in USA) are able to own land/houses in silicon valley , and do that purely for monetary reasons, ie get more money out of the property , jacking up prices even more. An ordinary American who wants to live in California is suffering as a result of this. rent control or low income housing are essential tools to make ordinary Americans’ lives better.
Yeah, fixed at ~164 thousand square miles (~400,000 km^2). Are you for real? Los Angeles and New York City proper (not the metropolitan areas) are interestingly nearly identical in official area at around 468 square miles each. But LA has a density of around 8000/mi^2 while NYC is well over 27000/mi^2. If LA merely matched NYC that'd cover another 10 million or so population by itself. The size of freaking California is not remotely a limiting factor, the limiting factor is not enough high density buildings.
Housing in California is fixed because of zoning and construction regulations. Also, more people can't move here than can be supported...and how does putting arbitrary limits on maximum rent increase the amount of people that can live here if we're already dealing with the limitation of too many people wanting to live here? That will just increase the demand...
Otherwise, there is a natural equilibrium. Many people want to live here, housing scarcity goes up. Prices go up, less people want to live here (this is already happening). What you're left with is the price reflecting precisely the degree to which people are willing to pay to live here.
> Housing in Silicon valley doesn't grow at the same rate as number of people coming here
To be clear, the population is growing faster than the housing stock.
> Rent control or low income housing are essential tools to make ordinary Americans’ lives better.
How exactly does this address the problem that there are more people than housing? It addresses it for some (the select few low-income residents who were lucky enough to get a below-market rate unit and people already renting), but squeezes everyone else into even fewer units. It doesn't even help "ordinary" people; it helps two specific groups.
YMMV, but in my experience people who use phrases like “Big Daddy government” and accuse everyone else of “pure ignorance” are typically not arguing in good faith.
This is a fair criticism, but attacking his credibility is irrelevant. He had no credbility to start with, this is an anonymous forum and nobody knows who that guy is.
A strong counter here would include a counter-argument, and ideally even some support for that counter-argument.
I fear Portland is close to some kind of serious breakdown, and I feel like they're not going to learn anything from it, only blame others who don't vote for hyper-progressive laws.
Rent control is abused in SF. Every engineer I know, who has been living in SF for over 5 years is currently paying an absurd amount compared to their monthly income. I even sub-leased an apartment from a friend who took off a sabbatical, and he didn’t want to lose his rent control.
I don’t know who rent-control is supposed to benefit, but it seems broken. Eventually these places end up in the hands of people who know how to game the system. Just build more housing and the incentive will go away.
When I was interviewing for jobs in the Bay area I noticed entry level salaries (even at smaller shops) were in the range of 100-120k and rent was like 35-40% of your salary after taxes. Certainly higher than the recommended 30% but it's not that different from somewhere like LA or NYC, even Chicago and Miami aren't much cheaper.
Remember to factor in taxes. You will only see 6k a month cash on 120k a year after maxing our your 401k. A tiny studio will go from 2.5 to 3.5k last I checked.
Abused? When I moved here I heard horror stories of rent increasing suddenly. I did what any sane person would do. I looked only for rent controlled places before moving in.
Certainly it gets abused. People keep their apartments even though they're not living in them, because otherwise the rent would go up. I know someone who did that for 20 years with an apartment on Russian Hill. She would sublet the place for a year or two and then come back.
It's interesting that some people in this thread are claiming rent control hurts landlords, while others here are discussing how it helps landlords increase profits.
It will not help you find an affordable place to live, it will help those who already have existing leases hold on to them forever. Rent control does not create an abundance of housing, it just creates a constituency of people that gets a better deal than those who don't.
Except in practice people can't find affordable places with rent control because nobody is willing to leave their below market rate place. The real problem with it though is that it does not in any way fix the root cause of the problem, which is lack of supply.
> It’s here to ensure people can still find affordable places to live.
Rent control does the opposite. It radically reduces choices and increase on price on people looking for a place to live.
Rent control chooses a small handful of existing renters to be winners. And it makes everyone else a loser. Except it's also shitty renters, because it traps them in place. Sure it gives them a home somewhere. But it denies them opportunity to move to another city, or even the other side of time, to pursue opportunity.
Readit News
The real solution to a housing problem is to incentivize and facilitate the building of more housing. ADUs, relaxed zoning, reduced building regulations, reduced fees for permitting, etc. I fear rent control is actually going to do more damage to the housing market than good.
How often do you replace tenants? And what's your occupancy rate? If you're in a situation where you can reliably raise rent 7% YoY indefinitely without decreasing your occupancy rate, then you were severely underpriced for the market (and you should probably fire that management company for pricing you that absurdly low). 7% YoY after inflation is a big increase that outstrips average wage increases.
If you aren't severely underpriced, then what's going to happen is that when you increase by 7%, the tenants will choose to end the lease because they can find something cheaper (or they emmigrate from the city because nothing is affordable), and you'll struggle to replace them with wealthier tenants willing to pay what you think is market price, so you'll have to lower rent to attract a tenant. Once you get to the point where your price is roughly in line with what the market will bear, you'll only be able to squeeze one or two years of rent increases out of a tenant before the non-monetary costs of moving are outweighed by the cheaper rent, so constantly trying for 7% YoY post inflation will just mean a decrease in your occupancy rate, both because you'll be replacing tenants more frequently and because finding new ones will take longer.
- He may be socially responsible and not want to charge through the roof. E.g. likes the tenants, prefers stability etc.
- The whole point of the law is indeed to prevent large raises. But what if expenses suddenly skyrocket, or inflation does, and he has to increase more or go bankrupt? That’s the worry here. No, the law won’t react quickly enough. It’s preventing him from being socially responsible.
- You assume annual 7% would not work eventually because it will raise the price too much in the market. This assumes free market, but you don’t have it anymore, now you’re regulated. In particular, your missing that everybody else will adopt the same rational self-preserving policy. Approximately the entire market is going to grow 7% YoY now.
- nitpicking: 7% before, not after
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Similarly, i tell my tenants that they should expect the minimum increase yearly as i cannot make up for any lost increases nor can i make larger increases if something about the economics of the house changes.
The real issue here is the cost to provide housing, and the limited amount that exists. I wanted to finish a basement in one of my places, to do this legally, i owe the city $140k in fees alone. This is around 5-6years of rent. You can probably imagine why i opted to put this money in a bunch of index funds and do nothing instead...
The core issue is there is not enough good housing for everyone in California.
The real solution is to greatly loosen building regulation and make getting permits much faster and easier statewide. Then entrepreneurs will double or triple the housing supply and drop the costs of renting or buying a home by 80%. You could see rents go from $2500 per month in LA to $1000 a month or less.
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(1) Since rent control laws put limits on increases (and not decreases) every landlord understands that he/she should test the upper boundary at all times to avoid renting severly below market rates during boom years. With sufficient landlords undertaking this task, rents should go higher than without this limitation. Moreover, the cost of moving is higher for the tenant (who has to find a home and move his/her property) than the landlord (who has to find a new tenant).
(2) real estate becomes less attractive builders and buyers, given the mandated constraints on charging rent. See https://web.stanford.edu/~diamondr/DMQ.pd. For a counter, see https://www.housinghumanright.org/wp-content/uploads/2018/11... (you'll have to wade through ad hominem attacks).
(3) high-income earners tend to benefit the most on rent control over time. As market rates for rentals increase (i.e., property up for rent), only higher-income individuals can afford to move in. Over time that leads to the displacement of lower-income individuals. Anecdotally, I can attest how some of my high-income earning friends pay very little for housing in SF because they locked in rates before 2011.
Lastly, pro-rent-control reports/papers I read highlighted the need for a comprehensive housing strategy beyond rent control, like increasing rental supply by making it easier to build ("It is also critical to recognize that the need for reforms extends beyond rent control and housing policy more broadly ... This includes developing new funding sources for affordable housing development and addressing exclusionary zoning policies at the root of the displacement crisis, https://haasinstitute.berkeley.edu/opening-door-rent-control). As the article already mentions, Scott Wiener's bill to override local zoning laws was shelved. The CA legislature did not have the stomach to address the underlying cause.
A far more sensible solution (IMO) is: (1) override zoning laws / ordinances that prohibit building more homes (2) tie rent control to income.
Funnily enough though, I would say that Montreal has less of a supply problem, despite being on an island with no room to expand into an infinite suburban sprawl like the bay area has. Construction still seems to happen here. People are bitching that too many condos are being built, but I think more supply is good.
Anyway, I think rent control can work pretty well, as exemplified by this Canadian city. At the very least measures to prevent surprise rent tripling while someone is renting an apartment are very much a good thing. Sidenote: I think that rent control can also help prevent property price explosions. It makes no sense to buy an apartment for over a million dollars when its rental value is only 1000/month.
Give one moment's thought to the most likely side effect of that...
Most landlords already increase rents at the maximum rate that the market will bear. Capping annual increases at 7% just ensures that in a year when the market would allow landlords to get away with increasing rents by over 7%, they won't be able to do so.
I do not follow when you say that the strategy of increasing rents by the maximum amount permissible is necessary "because larger adjustments cannot be made if and when necessary due to market conditions". In what scenario would larger adjustments be necessary? If you made a viable investment in a property and are currently renting it out, wouldn't rent increases just need to equal inflation in order for you to maintain the same level of profitability? Sure, increasing by more than inflation allows you to increase profits, but I hardly see why maximizing profits should be seen as a necessity---especially when it comes at the cost of pushing people out onto the streets.
Price ceilings (even non-binding ones) can create market power for suppliers by providing a focal point for tacit collusion.
[0] Knittel and Stango (2003), Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cardshttps://pdfs.semanticscholar.org/3848/b5c04ae02c17c0b5135841...
[1] DeYoung and Phillips (2009), Payday Loan Pricinghttps://pdfs.semanticscholar.org/c587/58d243ad0653b052b1c77a...
If the market can support it, these laws guarantee the maximum increase. If the market cannot, well you are already at the top of the market aren’t you? So no benefit here.
Not necessarily - taxes on property owners don't follow inflation. They may go up greatly compared with inflation.
>>> I hardly see why maximizing profits should be seen as a necessity---especially when it comes at the cost of pushing people out onto the streets.
Because if don't allow it to be profitable people won't do it. Particularly in California it can be quite risky the rent out a property. It's an extremely tenant friendly location, so much so that evictions for major infractions can take several months, or in some cases years.
I was talking with a real estate agent in SF and he said it’s not unusual for landlords looking to sell their rent controlled building to just let units sit empty.
Why? Because it can increase the value of the building by hundreds of thousands of dollars. Losing out on $24k worth of rent each year is easy if you know it comes with an extra $300k in your pocket when you sell.
FWIW rent control advocates agree with you.[1] It’s a point in which the “PHIMBY” left[2] and the real estate lobby agree.
The reasoning is that it’s not actually a full rent control bill (it just stops the most extreme cases of gouging) which is why the California Apartment Association stopped opposing it. Thus it doesn’t go nearly far enough to stabilize rents.
I know there are a lot of supply siders on HN champing at the bit to dump on rent control, but this particular bill is a bit more nuanced.
[1] https://twitter.com/rcmoya84/status/1171972636294840320?s=21
[2] https://www.kqed.org/news/11731580/forget-yimby-vs-nimby-cou...
You need to have some degree of control. I live in a suburb close to a tech hub in WA. They built a lot of housing in the past 3 years. And I mean a lot. At least a couple of hundred of apartments on the market every year, after raising 3-4 buildings at the same time, in a town of 20k people.
One would think that the price would go down based on supply and demand, right? More than half of the apartments were empty while the management companies were not budging on the price. Nobody wanted to go below 2k/month for a one bedroom and they were sitting around with empty apartments. Finally they managed to reel in some suckers by offering 2-3 months free rent but again, no rent was going below 2k so the next year, you pay up or move out.
Right now, people are moving out and the apartment buildings aren't what you'd call full but again, the rent is not going down. It actually increased. Because what happens is that they're owned by large landlord corporations which can take the hit for a year or two to keep the prices up. I know this because I used to live in one. They increased my rent (years ago) from 1.2k to 1.7k and I moved out. The apartment was on the market afterwards for about a year and they didn't try too hard to get new tenants, they just posted it periodically on Craigslist. I tried to negotiate to bring it down to 1.4k and they said no. It was way profitable for anyone to keep the price up, although they lost a year of rent from it.
A big big problem is that we have underbuilt for decades, which has normalized underhousing for younger people.
Increasing supply simply ensures tomorrow's rent is lower than it would be otherwise.
With regard to the story before it, it sounds like they actually lowered rent to about $1600 (2 months free is a 17% reduction, which is pretty hefty. Sure, you’re betting on them staying after, but it switches to month to month usually after a year so it’s risky).
It shouldn't be a surprise that more landlord-friendly rent control measures get less resistance from landlords.
When the market will bear an increase less than rent control, it gives landlords something to point at as justification and help mitigate turn over. When the market will bear a greater increase, it is unfair and harmful to communities, etc. etc. etc.
Is the property management company collecting an extra commission each time a new tenant moves in? Because all this strategy is going to do is let tenants quit once the rent goes considerably above the market rate.
A much wiser strategy, IMO, would be to watch the market rates and keep the existing tenants' rate constant until the market rate climbs considerably higher (7% sounds like reasonable threshold) and then raising it to be marginally below the market, incentivizing the tenant to stay.
I've been tenant in France, with restrained rent increases. Every year my rent was increasing 20 euros or so.
I've been tenant in California without rent control. After one year, my rent went up 500 dollars.
But well, maybe that's because in France the allowed increase is calculated from a rent index in the area, not a fixed number like "7%" (no idea where it comes from).
Also, don't say "necessary due to market conditions" when the reality is just "can get away with it due to market conditions". It's not like the increase of the rent market causes you more fees or increase your mortgage.
When are "larger adjustments" necessary vs just opportunistically profitable?
The question I always see is "why shouldn't I have the right to make as much money as possible from my investment," but the answer seems pretty clear: because evictions and massive rent hikes have nasty social consequences, as does treating rent-seeking as an investment.
What will probably happen is that you'll have a hard time filling your property after 1-2 years at the latest, and everything goes back to normal.
In other words, it scares all the landlords at once, and they all raise prices a little because of it.
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Imagine two hypothetical cites, each with one million residents. The first one has half a million apartments, while the second one has ten million apartments.
Which city would have cheaper apartments?
Do rich people to afford that extra housing get created out of thin air?
Also, I assume there is some market pressure to consider, if your increases outpace supply and demand, then tenants would simply move, right?
Interestingly, my rent has remained stable ever since moving - guess it's possible to have much better luck with smaller landlords.
I'm in bumblefudge-nowhere-Midwest USA, and even we've averaged 10% yearly rent increases, for more than 5+ years now. Every top-20 metro area I've looked at, has had it worse than us on rental price increases.
There is a lot of knock on affects that rent control brings that are negative that I don’t have time to go into
In other words, it is totally permissible to increase the legal rent by the officially allowed 7%, but increase the effective rent paid by your tenants by only 2% (or whatever you want). There does not appear to be any restrictions about removing such incentives/concessions/discounts in the future.
It also appears that the California law resets as soon as the tenancy changes hands; so as soon as there is a vacancy the landlord is free to increase the rent by as much as they want. This is not the case for NYC rent stabilization; there the increase in the legal rent is a property of the unit, not of the tenancy.
I was simply thinking, Unintended Consequences in 5,4,3,2,1...but that's one I hadn't thought of. Of course people will push up against the limit in order to buffer out market values.
You could easily see rents above where they should be from a market standpoint simply because of the inertia in a system of annual increases.
It also makes me wonder if you are allowed to increase rents if you improve a dwelling. If not, nothing gets fixed beyond the bare minimum.
Same when a rent control unit opens up in SF, the goal is to push the rent as high as possible since it’s not going up much after that.
7 percent is a pretty high allowed increase. I suspect that it really doesn't do much except stop gouging in the case of someone who had really cheap rent in a place that gentrified suddenly.
This argument comes up here in Australia with regards to Sydney and Melbourne in particular -- the two largest cities.
Building more houses only makes more sprawl. Increasing density causes problems for current residents and puts enormous strain on existing infrastructure[1].
The only real solution is to get people to live in other places that have more and cheaper housing.
[1] Not just utility infrastructure like water, sewer, power, gas, (roads, sanitation, what the Romans did for us etc) but natural environment and leisure like sport and recreation areas, parks and bush land, and (particularly in Sydney) beaches. It's really hard making new beaches for the increased population.
This is the use-it-or-lose-it budget game, landlord style.
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2. Realize that not everybody in the world needs to or should live in the Bay Area/Hollywood.
3. Don't pass statewide laws catering primarily to the group of people aspiring to do so.
Take your "I've got mine so screw everyone else" attitude out of the bay area, we don't have room here for people with so little empathy for their neighbors.
Excluding people from work in productive areas perpetuates poverty.
Entitlement was never a core tenant (no pun intended) of the American dream.
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The difference with this law is that a 20% rent hike will take 3-4 years to be implemented instead of 30 or 60 days. That difference, while not enough to allow all families to remain in place, will allow families time to adjust or move within a reasonable time frame.
This law is different. If you want to complain about rent control in SF or NYC or elsewhere, have at it, but know that most of your complaints do not apply to this law.
Homes that are built for renting (mainly apartments and condos, but some houses, too) are built for profit. If you make it less profitable to build, fewer will be built. If fewer homes are built, the problem is compounded, not rectified.
If you want to make housing more affordable, make it as cheap and profitable as possible to build new homes. Get rid of the fees that can push over $100,000 for a single family home in some counties, before the builder even buys a nail or 2x4. In most states you can build a home for less than the price of permission to build a home in some California counties.
Our current environment of low interest rates means that borrowing is cheap - which has pushed up prices, as now people can now afford larger mortgages. This has come at the same time as a withdrawal of mortgage finance from first-time-buyers, so effectively people who have bought before can buy another house, while those who haven't can't get on 'the housing ladder'. This is according to economist Ian Mulheirn, and is very much based on the UK (although similar arguments might apply elsewhere). Supply is part of the problem, but according to him, the smallest part.
https://housingevidence.ac.uk/wp-content/uploads/2019/08/201...
Yes, but in the expensive parts of California the limiting supply factor isn't how much people want to build but how much they are allowed to build because of zoning and other constraints, so there is a fairly large range where reducing the incentive to build will have no effect on actual results.
But, anyway, does this really reduce incentives for new construction? It seems to me rent control and eviction restrictions of this type increases the expected profits for new construction, because it doesn't limit existing rents, and doesn't allow high-end demand to be met by bouncing tenants out of lower-end units and renovating them and raising the prices. So, it reduces the competition new units face from existing ones at the top of the market while leaving the rents that can be charged initially for those new units unrestricted. (And, by limiting the ability to bounce unprofitable tenants in favor of new ones, if it doesn't spur new rental-focussed unit construction and housing demand remains the same it creates a greater incentive to build for sale as owner-occupied housing where, again, prices are unrestricted.)
The real danger isn't lack of incentive to build, it's lack of incentive to maintain existing units instead of milking what remaining profits can be made in the short term, then letting them fail in isolated, judgement proof, limited liability business enterprises by not reinvesting because you can't recover reinvestment with rent increases, while reinvesting the extracted profits elsewhere.
.. and fewer will be speculated on, driving up the underlying price, which is then translated into rent.
this is my problem with simple smithian models of real estate - they ignore the wider capital market impacts.
not a fan of rent control, but also not a fan of fund fueled real estate bubbles, and both influence the cost of rent.
Also, AFAIK, these two areas (and surroundings) are very, very stressed in terms of traffic, and more housing means more people, and more cars. Can those cities deal with more traffic?
It depends on what outcome you wish to achieve. Single family zoning is backwards policy in urban environments.
https://www.citylab.com/equity/2018/11/single-family-zoning-...
Infrastructure around the builds also matter, which means just building denser isn’t a solution.
Complimentary services like schools, stores, pubs, churches, skate parks, parks etc change the value of a location as well, and change it differently for different demographics.
So making it cheap and profitable only makes it profitable to build - it does not solve the problem of affordable housing.
Arguments like this continue to be made for more and more aspects of our market: pharmaceuticals, heathcare services, elder care services, and now housing. Everywhere you look the markets seem ill equipped to handle the needs of people.
Maybe the problem is markets then? Maybe the problem is expecting our entire society to work based on profit motive? I don't deny it's served us fairly well for awhile, but it seems like we're hitting the wall a lot lately.
In NYC units that might be _actually cheap_, as in rent controlled and not stabilized, number roughly 17k units _in total_. And only about 1/3 of those are significantly below market or in desirable neighborhoods. It's almost insignificant and the number of rent controlled units has gone down by roughly HALF in the last 5 years, because the tenants in them are dying and income limits on any descendants usually kick the units out of being controlled into stabilized.
NYC has a much larger number of rent stabilized units, which is somewhere near 1/3 of all available units that are renting at or below $2700 (twice the national average, btw). The overwhelming majority of these are within a few hundred dollars of market rate.
There are about 4.2M housing units in NYC with roughly 30k being added every year. The "cheap" rent-controlled units are a rounding error.
That is not anything like the situation folks in SF are rightfully railing against.
Rent control doesn’t apply to new construction in SF. It also allows a regulated annual increase, and rent automatically jumps back up to market upon a number of different conditions - not the least of which is that the owner can push you out to renovate the building!
HN commenters are usually just repeating stuff they heard somewhere, and have no idea what the laws actually say.
Moreover, while there are indeed lots of publications on the theoretical impacts of rent control, few of those publications consider laws as they actually exist, or if they do, the scope of the impacts is rarely communicated when translated into HN talking points. Every study I’m aware of has shown, at worst, diffuse, long-term negative impacts to housing costs. Meanwhile, many of them do exactly what they set out to do: stabilize short-term prices for vulnerable populations.
These laws are simply not the boogeymen that comments here make them seem.
In fact, the CA, especially in bay area, the rent is already top among this country. 7% on top of that is still a quite sizable increase. And it is hilarious to see those (aspiring) landlords playing the blame-the-game-not-the-player rhetoric here to blame the government not allowing more houses to be built, while themselves being one of the biggest opponents to such initiative.
> Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them. [0]
The negative effects of price controls, especially when it comes to rents is the most unifying issue in economics. Rent control isn't a new idea, but there is agreement that it's a bad idea. It's not the landlords who say this, its the people who study this stuff. Paul Krugman wrote about this in 2000 [1].
Putting in arbitrary controls on prices to fight cost increases is about as effective as putting arbitrary controls on thermometers to fight global warming.
[0] http://www.igmchicago.org/surveys/rent-control
[1] https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...
Then you make an ad-hominem argument about landlords being hypocrites which isn't relevant. Landlords act in the best interest of landlords.
I don't yet know what I think about the bill so I'm reading the HN comments to form an opinion. The points you're making aren't very convincing.
My experience with SF rent control is that it's really only valuable if you've got limited resources. I lived there for 5 years, saw market rent double, and my landlady politely asked me to pay a "generous discount from market", which was about a 50% increase and I declined - it would have busted my budget.
Then eviction proceedings started: completely made up, and I lawyered up. I was threatened with OMI (there's no defense if they actually do move in), and I negotiated a settlement. Because if I'd won I'd have a super hostile situation ending in OMI, and if I'd lost I'd have killed a substantial portion of my savings.
If I'd had nothing to lose, I'd have hung on for dear life.
And of course only a fool would cling to certainty on issues this complex. It's very possible my views are wrong. And if they are then that's a great outcome. If they're not? Well the cost of this experiment is not going to be that big, and it can be reversed relatively easily.
The one thing I think both sides often fail to do though is to set falsifiable metrics before running such an experiment. Take a group of qualified individuals against the program, and those for the program. And have them sit down and work out their expectations of the program. So for instance homelessness. The pro side probably expects this will cause it to decline, the neg side probably does not expect it to have much of an effect. Why not convert those views to numbers collected in a mutually agreed upon fashion, which can then be regularly published - alongside results? And let's see who's right, with accurate data. Of course there are confounders. If we hit a major recession, homelessness will increase regardless. These factors could be mentioned alongside such data.
Instead without doing things beforehand both sides are simply going to spin arguments entirely in their favor, such as with the case of minimum wage increases. Did minimum wage increases collapse the economies? No. Did they cause some economic damage? Yes. Did they bring about a great life for low earners? No. Did they improve the quality of life of some low earners? Yes. And so both sides just create disingenuous arguments painting themselves as 100% correct, which informs nobody and divides everybody, since both sides come back with 'told ya so!'
It's not entirely unreasonable to think landlords somewhere in the state will take this "5% + inflation" as automatically what's called-for. Conceivably a few landlords who otherwise would have held the line will do this. But given this was more or less already standard for the large landlords and given the landlords who have been really, really gouging, this sad collateral.
As it is, they are using force to limit income while expecting the landlord to offer the same product and services and foot the bill on unlimited expenses.
How about legally limiting salary increases while requiring the same or more work? And, when you change jobs, you are only allowed to make 10% more. Oh, yes, but you have to spend thousands to renew your credentials.
And how about truly severe penalties for tenants who destroy or damage property?
Anyone who has been a landlord for with more than a handful of properties knows how much of a nightmare it can often be.
Try running 10, 20 or 100 units and see how quickly you are going to bug out once even this mild form of rent control rears it’s ugly head. Because you know, with almost absolute certainty, that this is the proverbial slippery slope. And nobody wants to be the guy waiting for the last seat out of the Titanic.
Oh, yeah, unintended consequences: If Airbnb is more profitable than conventional renting...
When people finally realize that, there will be hell to pay.
The example given is of a 500% increase in rent, by definition no rent control law should make such an increase possible in a short time frame.
Try - for a moment - to imagine you are living close to your maximum expenses and your landlord increases your rent by 20% next year.
Shortage is pain and rent control simply distributes that pain in a different way than the market would and does so in a way that reduces the ability of the market to gradually alleviate that pain.
The more the government intervenes in rental contracts to mandate that they be like a lifetime lease agreement, the less incentives and sustenance there is to build a rental property overall. Society is better off having more rental units that have prices that are not legislatively stabilized than have a smaller supply of rental units with mandatorily stabilize prices.
If someone wants stabilized rental prices and they should sign a lease agreement with the landlord that gives them that at the price of a slightly higher per month rental rate. These kinds of things should arranged by actors in the market rather than having the government ban all alternatives in order to force people into stabalized rent contracts.
Really? This is pretty common on HN. This is IMO one of its weaknesses.
There are certain topics that bring out political rants. One is regulation and another is housing prices in the bay area. This story brings out both.
HN is heavily focused on the Bay Area. This fervor seems like a persistent feature of that region's culture and not HN in particular.
New state law: 5% + inflation
SF: 60% of inflation. This has has never been over 2.9% a year since the law changed in 1992 from a fixed 4% [0].
I think one could sanely argue that allowing increases of up to 5% plus inflation is a suitable restriction, while limiting increases to significantly below inflation is not.
[0] https://sfrb.org/sites/default/files/Document/Form/571%20All...
Turnabout is fair play. If owners organize politically to control supply, tenants can organize politically to control prices.
The biggest myth is that this kind of stuff actually helps the less-powerful. In reality, it just means they are hurt twice: government artificially suppressing supply, and government manipulating prices which has bad side effects for mamy even if its good for a few.
Also, in reality, the powerful often don't get hurt, and arbitrary market manipulations just introduce new ways for them to get an advantage somehow.
There are way more renters than owners. Prices have been going up more than 5%. Owners are most definitely not the "less-powerful" here.
So in reality the gov't might be artificially surpressing supply (though it's mostly due to owner pushback), but the "manipulating prices" (trying to keep rent growth from getting out of control) is helping less-powerful.
I get the point about how this can default owners to just increase prices. Well they were going to be doing that anyways! Especially with surpressed supply!
Arguing that "overall price increases with this law" > "overall prices increase without this law" is non-intuitive and probably just not true.
(thought experiment: if raising 5% every year with the law made sense, why would it not make sense to raise it 5% every year without the law? This law doesn't prevent other owners from offering _lower_ rents, if the market calls for it)
It doesn't solve anything directly, but it's an attack on the prosperity of the people who are maintaining artificial restrictions on new construction.
A laissez-faire approach to both construction and rent would probably be a better option. But that's already not happening, and it's not going to happen without pressuring homeowners and landlords to stop opposing construction.
AKA ignore the entire foundation of the previous poster's point?
Edit: upon re-reading your comment I think maybe you don't know what the phrase 'Turnabout is fair play.' means.
https://en.wiktionary.org/wiki/turnabout_is_fair_play
Now, if we're talking about planned cities built in the 80s in orange county, maybe we have a point! Maybe.
SF has a similar story of sorts. Building code regulations were heavily relaxed after the 1906 earthquake in fear that people wouldn't rebuild otherwise.
Businesses will build whatever is most profitable. If it's more profitable to de-regulate and unzone everything, then they would be lobbying like hell to get that.
That's fine for existing renters, but think about people who would like to move there to pursue a job, or live in a state friendlier to gay people or for whatever reason. They're going to find it harder to find a place to live, in all likelihood.
Sometimes the system has to break down before progress happens.
So when over-regulation drives up prices, the appropriate response is to introduce new regulations to fight the other regulations? Because that’s exactly what this is. It won’t even improve the problem. The problem is that there are more people who want to live in California than there is housing. The reason for that is because regulations prohibit the market from increasing supply at a rate that comes anywhere near keeping up with demand.
Yes. The effort to reduce regulations on construction has failed. As such, retaliating against the beneficiaries of those regulations with counter-regulations is appropriate.
It's not pretty or efficient, this is a fight between different interests, not a group problem-solving effort.
Lack of profit incentives is NOT what is blocking housing construction in CA right now.
This very minor, way above inflation, rent cap will not affect housing supply.
In California, 25% of a new SFR is land. Another 25% easy goes to permits and municipal utility connections. 40% construction costs (including paying the boss a salary), and if you are lucky, 10% profit. Simply reducing permitting costs and streamlining the process to reduce holding costs (without even easing restrictions, just being more efficient/faster at the municipal level) could shave 20% off a new home price. That would drive down all home prices to some extent and open up a large number of people to get out of the renters pool.
So CA government is the major player to blame for housing costs, and these laws are in place of just doing their jobs well. This might drive prices down too, eventually, but not nearly as quickly or fairly as bureaucratic reform would.
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It's frequently renters talking about gentrification that oppose new housing around me.
Subsidize home loans Ban new construction Ban rent increases
It is no wonder why housing prices/rents continue to rise in these markets.
In software engineering sometimes conclude that a rewrite is necessary. How can we completely rewrite our regulations?
A currency collapse or a successful invasion perhaps.
Even 'freezing a moment of time' is kind of a suspicious thing. People don't understand the present time and they sure as heck don't understand previous ones.
While fixing the plane while it's in flight is hard, I'm trusting our upcoming robot overlords to understand tax or criminal law. Accreting everyone's good ideas for a century or two was bound to result in a hairball.
Don't forget crime and violence. Historically speaking those get laws changed quick. That said, I don't think rent control is going to have a very direct effect on crime and violence.
1. Land is a limited resource. 2. Property improvements last for a very long time, and are incrementally improved. 3. The buy-in price is relatively high, so only very interested parties get involved. 4. It's a home for goodness sake, why would you not call it an investment?
... like Idaho did with its regulatory reset.
It's how the market works ffs.
But rent control in the absence of housing supply increases will undoubtedly exacerbate the problem, and at a steady 7% inflation would also slowly price out existing tenants.
Many parts of California already had rent control that was based on building age. Theoretically this could have been the best of both worlds--improved housing security for the majority of existing tenants, but an incentive for new construction, which would be excluded from rent control. Of course, the price of housing security would be marginally higher rent prices up front, but in the real world that's a reasonable tradeoff. Security and predictability are at the top of most people's hierarchy of needs, whether they admit that or not, and regardless of whether they'd willing pay for it. (Healthcare being a great of example of people predictably making irrational decisions, requiring government intervention to mitigate the consequences.)
Unfortunately, new construction in California is extremely costly for entirely unrelated reasons. I think most developers in California would have bargained statewide rent control for development as-of-right. That California permitted rent control again without doing anything substantive about lowering the costs of development is inexcusable. I'm sure lawmakers told themselves that they were buying the acquiescence of NIMBYs and local control advocates regarding future development as-of-right legislation, but they're just lying to themselves.
In fact, that was more or less the deal—until Anthony Portantino torpedoed it.
You can virtually guarantee that rent control and NIMBYism go hand in hand.
I feel like an amount of the general public just wants Big Daddy government to come in and authoritatively force everyone into an unnatural framework, which is pure ignorance.
IMHO, there is nothing "natural" about land ownership. Land ownership in the USA isn't actually what most people think it is. It's not an inalienable right and is largely at the pleasure of the public by way of legislation that can be changed.
This is basically everyone. On today of all days, we see what the PATRIOT ACT USA has done to this country decades later, and people are quick to point that out but not consider it for laws that have not yet passed.
You know I was neutral on this stuff, studied economics and some business law, have actually read Adam Smith rather than just little excerpts. When I was younger most of the 90s working as a tech in and around the financial sector, so while I don't consider myself an expert I do think I'm quite well informed. I spent about 25 years giving market economics and the investor class the benefit of the doubt.
I've changed my mind.
In this specific case, perhaps you are right, I can't say.
But your wide-sweeping declarations and general tone reveal your own harmful ignorance.
Yeah, fixed at ~164 thousand square miles (~400,000 km^2). Are you for real? Los Angeles and New York City proper (not the metropolitan areas) are interestingly nearly identical in official area at around 468 square miles each. But LA has a density of around 8000/mi^2 while NYC is well over 27000/mi^2. If LA merely matched NYC that'd cover another 10 million or so population by itself. The size of freaking California is not remotely a limiting factor, the limiting factor is not enough high density buildings.
Otherwise, there is a natural equilibrium. Many people want to live here, housing scarcity goes up. Prices go up, less people want to live here (this is already happening). What you're left with is the price reflecting precisely the degree to which people are willing to pay to live here.
To be clear, the population is growing faster than the housing stock.
> Rent control or low income housing are essential tools to make ordinary Americans’ lives better.
How exactly does this address the problem that there are more people than housing? It addresses it for some (the select few low-income residents who were lucky enough to get a below-market rate unit and people already renting), but squeezes everyone else into even fewer units. It doesn't even help "ordinary" people; it helps two specific groups.
Bingo. And why not?
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A strong counter here would include a counter-argument, and ideally even some support for that counter-argument.
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I don’t know who rent-control is supposed to benefit, but it seems broken. Eventually these places end up in the hands of people who know how to game the system. Just build more housing and the incentive will go away.
Are my numbers just totally off?
Perhaps you don't realize how good you have it out there.
Rent control works for those already renting - and that is about it!
Everyone else suffers: those moving to the area, the landlords and those wanting to build more.
Actually, existing property owners benefit. So really is populism--the only people it hurts are landlords and people who don't live there yet.
It’s the same concept as free healthcare or free education. It’s here to ensure people can still find affordable places to live.
You can’t make everything an investment if you want a healthy society.
Rent control does the opposite. It radically reduces choices and increase on price on people looking for a place to live.
Rent control chooses a small handful of existing renters to be winners. And it makes everyone else a loser. Except it's also shitty renters, because it traps them in place. Sure it gives them a home somewhere. But it denies them opportunity to move to another city, or even the other side of time, to pursue opportunity.