The thing about rent control is: You cannot effectively implement it in a vacuum. By default or design, it creates an ecosystem in any large US city where it's attempted.
Rent control means less development of rentals subject to its control, so local government becomes a developer (i.e., housing authorities).
Rent control and public housing push market-rate housing out of neighborhoods, leading to suburban growth and sprawl, and away from infill densification -- at least for middle- and upper-class buyers/renters.
Once that dynamic is in place, your infrastructure costs rise immensely, which leads to higher taxes, more reliance on state and federal grants, or both.
It's funny, in areas I deal with daily these second order effects feel obvious and make me scream daily. I had to read your good comment 2x though. Perhaps I'm under slept, or perhaps this is a sadly durable failure of the human mind.
i'd happily get rid of rent control right after we get rid of prop 13, all the nimby-supported regulations, building codes, and zoning laws, and a whole raft of homeowner and real estate investor subsidies. rent control doesn't dampen new construction, because rent control laws typically exempt newer buildings (like 25-30 years) to allow investors to recoup their investments first.
so you're right, rent control doesn't exist in a vacuum, but exists in response to all the above advantage given to homeowners/investors. let's get rid of those advantages first, then we can unwind rent control.
My friends dealing with the scourge of market rate renting are in a world of pain right now.
I would have been priced out of my hometown a decade ago if this apartment which I found on Craigslist didn’t happen to be rent stabilized.
We have learned the hard way that trickle down economic arguments sound eminently reasonable on paper but don’t deliver on their promises if implemented. I don’t believe for a second that “this time it’s different!” when we apply it to real estate.
Presumably, there is even more pain in the world of rent control. By definition, a submarket rate apartment has a supply/demand imbalance.
There is someone who values the apartment more than you do who can't live there, perhaps denying them the chance to be closer to their job or family. Also, you have less economic incentive to take in a roommate, thus denying another category of potential occupant.
In a rent control system, there are winners and losers. I'm happy that it has worked out well for you, but the survivor bias needs to be pointed out.
You do realize trickle down economics and avoiding rent controls are completely different things right? If you're using the failure of trickle down theory to argue for rent control, you don't know what trickle down theory is.
How did you find said apartment? I'm assuming there was no dearth of applicants?
At least with market rate renting, there is always inventory. Hoping you are in a lucky enough minority to find an apartment doesn't seem like sound policy.
So, public housing is also a thing in the US. It has just never taken off at a large scale:
- The state does not own much land in US cities. So that means buying existing properties at great expense and demolishing/rebuilding at even greater expense.
- The "veto" ability for existing residents to oppose new projects in the US is incredibly strong. Even existing public housing residents will oppose new ones built near them.
- Construction costs are unnaturally high in the US for a variety of factors - municipal governments can't seem to get out of their own way when it comes to zoning requirements and etc.
For California, they ended up paying $1 million dollars per unit! Much more than they would have just buying existing properties for individuals.
I don't think it's a problem of "market ideology". I think it's easier to prescribe it as a general policy failure. Vienna has a set of favorable circumstances that are not easily duplicated to other urban areas, and places like China can just ignore legal rights of their citizens to build whatever they want.
good luck convincing property owners that city is going to build 5000 units every year in their neighborhoods. How does vienna defang homeowners from being toxic and selfish.
Their apartment has not been modernised or new fittings for 10 years.
Average rent increase this year for the area is 20%.
There has to be incentives introduced to rapidly build more affordable houses, but any policy that has a negative impact on house prices is a loser to many important voting bases.
Rent control in the short term might have to be done to reign in exploitative landlords.
High rents are the incentive to build more housing. What we need is federal legislation reigning in local district's abilities to block new housing from being built. Owning a home shouldn't give you the right to stop other people from building their's.
> High rents are the incentive to build more housing.
Except that doesn't seem to work, at least in my state. Housing rentals, like medical care, appears not to respond to "market forces" in a way that actually benefits people who aren't relatively affluent.
Maybe unpopular, but like socialism, I think rent control is a good idea. It's always the implementation that falls apart (because politicians). If you have a fixed income (disabled and/or over retirement age), fix away.
I've been assured by many that real capitalism has never been tried because people are afraid of how perfectly it will work, and that North Korea is the perfect example of the result of any kind of socialized anything.
The argument I've seen against rent control is that it limits supply and ends up driving up prices. I don't have a moral problem with rent control, but I wonder what the negative externalities are in terms of affordability to folks trying to enter a market.
The moral problem with rent control is that it prevents people discriminating on price, so they discriminate on other factors (colour? sexuality? Age!) instead.
There are others too, but that'd the most glaring...
That's my biggest problem with socialism in general, it replaces "This person is willing to pay me more" with "I just like this person better" or "This person has the right connections." Of course there are situations when "This person is willing to pay me more" isn't fair, but those other things are even more unfair.
The nice thing about the highest bidder gets it is that is creates an incentive and resources to make more of whatever "it" is. Capitalism isn't meant to be fair, it's meant to make more. That doesn't always work, housing is a good example of it struggling, but it at least tacitly tries to solve the core problem (shortage).
The owning class (Both single home owners that live in the house they own AND people who rent out units) already fight against the building of additional supply.
> The owning class, already fight against the building of additional supply.
I mean of course, but both are true, it limits supply in just the straightforward way that it means more people can compete in high desirability areas. (maybe it increases demand, not limits supply?) either way it drives prices up.
See Sowell's Basic Economics (the chapter on rent control) for why this doesn't work. It's not because of bad implementations, it's because it's a bad idea. There won't be a good implementation.
The goals and outcomes that this chapter describes far exceeds the goals I have described (maybe oversimplified). To clarify, the outcome desired is prolonging an established balance between fixed income (subsidy) and rent (market force) by artificial control for the specific case of the elderly indigent, which is necessarily capped by senescence.
Ironically, throughout the chapter, politics are mentioned in a myriad of contexts and even highlighted.
> since luxury housing is often exempt from rent control.
"Doesn't work" meaning "fails to achieve the stated objective".
Maybe you're asking why or how it doesn't work? It doesn't work because money is in some sense not what's really going on. Sowell's main point in the whole book is that in a free market economy, money is how we allocate scarce resources that have alternate uses. But the real action is the allocation of resources, not the money.
So if you institute rent control, you have not created any more housing. You have not increased the incentive for creating more housing. All you've done is allocate the existing housing a different way. (You've also created a disincentive to pay for proper maintenance on rent-controlled apartments.) You've moved the problem, helping those who are in the right position when rent control is enacted, at the expense of others. (Of course, those who are in the right position become major advocates of rent control, but that doesn't make it a good policy. It just makes it politically popular with the beneficiaries.)
[Edit: I don't have time to plow through the link you provided in your edit/update. But I think that for the specific issue you're trying to address, a pure subsidy might work better than rent control.]
> I don't have time to plow through the link you provided in your edit/update. But I think that for the specific issue you're trying to address, a pure subsidy might work better than rent control.
I agree with this. It could work better if only legislation could keep up with inflation, which it doesn't. Hence fixed income is best subsidized by fixed rents.
So rent control is better because the legislature won't keep paying attention? That's at least plausibly correct.
If you don't trust the legislature, though, you might not trust them to write the rent control legislation in a way where the cure isn't worse than the disease. But you could argue that they only have to get that right once, whereas the subsidy they have to keep getting right. (Though they could plausibly write an inflation escalator clause into the subsidy legislation...)
I still don't think that I agree with you. But you've made a case that made me think, which is about the highest praise I can give to an HN comment.
> If you don't trust the legislature, though, you might not trust them to write the rent control legislation in a way where the cure isn't worse than the disease
That was my initial assertion.
> It's always the implementation that falls apart (because politicians).
> how can politicians be directly to blame for everything bad
I didn't say this, ofc. I think you meant to say, how can they be to blame for the implementation. I think "the why" is obvious in that context. They craft the legislation and vote on it.
> Surely majority people are electing this person to do what he/she/they are doing.
Surely not. Elections are not physical handcuffs, where everything that an elected official is elected for is performed or all expectations are met. Voters largely have to make compromises based on all kinds of circumstantial conditions, like the range of candidates and their records and their sentiments on related issues. You probably know all this, but the phrasing makes me think you don't understand the way democracy works in a practical sense.
Rent control is a niche issue for most people. The result of a rent-control policy is usually nothing a voter can directly notice or measure over a relatively long time, say multiple election cycles. That's why most analyses of rent control are sampled over a years and large populations.
If you have a fixed income _and_ already have a lease somewhere you like and don't foresee any reason to move in the future then (and only then) rent control works in your favor, at the expense of anyone else who is looking to move into or within the area.
Rent control is a necessary "evil" because of absolute scumbag landlords who increase rents just because they can. They're vampires, sucking as much blood from people deemed lower class as they can. If their tenant gets a raise, they think they're entitled to just take that extra money by increasing rent.
And before someone says "Well they can just find another place!", yeah, no, that doesn't work. All the the other landlords are just as scummy.
They can only raise rents as high as they are because there is so little supply of housing. This is a result of car centric city planning and vast swaths of R1 zoning. With enough mixed zoning and an end to R1 we could cut the rents by huge amounts through sheer supply of housing.
However, what this means is that housing prices in suburban neighborhoods would drop like a rock, bankrupting the most powerful voting block and richest campaign donors for local and state elections. Such actions would be political suicide in most cities.
So it's not just the landlords squeezing renters, but the property owners who want to enshrine their property values as a right, above and beyond the rights of others to housing.
The way I see it, rent controls are a punishment to the landlords for fighting against the construction of additional housing.
Real estate investment is a cancer. It creates such horrible perverse incentives that prevents a large chunk of the population from every being able to own the place they live. They'll be paying rent their entire lives.
And before someone accuses me of just being a sour renter, no, I own my home. I paid $338K for it in 2015, and it's now estimated to be worth $650K, and I think that's just stupid and bonkers. Many homeowners would probably cheer about that, but all I think about is how expensive all the homes in my neighborhood have gotten. If I was still working the same job I was in 2015, and my salary had merely kept up with inflation, I wouldn't be able to afford the house I'm in now at today's price, and that's just ludicrous to me.
Rent control means less development of rentals subject to its control, so local government becomes a developer (i.e., housing authorities).
Rent control and public housing push market-rate housing out of neighborhoods, leading to suburban growth and sprawl, and away from infill densification -- at least for middle- and upper-class buyers/renters.
Once that dynamic is in place, your infrastructure costs rise immensely, which leads to higher taxes, more reliance on state and federal grants, or both.