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[entremet]

More than fifty years later, rents remained frozen at 1940 levels. It wasn’t until 1999 that the Act was modified slightly to lift controls on some new construction and to allow rent increases of 4% per year. After a fifty two year freeze, however, a 4% increase was a pittance. Thus, even today there are thousands of flats where tenants are paying rents of 400-500 rupees a month (that’s $6 to $8 a month!)–far, far below market rates.

The rent control law meant that there was virtually no construction of rental housing (WP) for decades and a slowly dilapidating housing stock. (Ironically, the only free market in rental housing is in the slums)

Rent controls in Mumbai may have initially benefited tenants at the expense of landlords, but over time everyone suffers. Rent controls cause landlords to forgo maintenance and neglect their properties, and tenants not only live in dilapidated buildings but die when they collapse in heavy rains. Even if tenants are willing to either pay higher rents or to maintain the building, each tries to not pay his share of the expense (free riding), especially if appropriate retrofitting involves structural changes to the entire residential structure and not to individual apartments. Tenants also may lack the legal authority to make changes to their building’s structure.

http://marginalrevolution.com/marginalrevolution/2017/04/twisted-tale-rent-control-maximum-city.html

As a fan of the free enterprise system, rent control seems to thrown a wrench in that system that causing more problems that it intends to solve.

Terrible zoning laws and NIMBYism is the real reason why rents are out of control in the bigger metros, forcing prices down by force has terrible second order effects.

 

[Prism Sentence]

"NIMBYism"?

 

[grumble]

Rent control is horrible. Rent stabilization is awesome. Stabilization protects tenants from large increases and provides them with some forecasting ability, much like homeowners. It also allows for rent increases and pass through of utility and tax increases. It also allows the landlord to reprice rent to market once a tenant leaves. Forecastingvabolity means investment in the community, career and economy.

 

[Byakuya769]

"NIMBYism"?

"Don't put modest housing near my gated community."

Which is a weak point. If the value of land is pumped up in a metro area, no one is going to forgo higher rent to build affordable housing unless there's an incentive to do so. You'll get luxury rentals and high rise condos that still leave most people priced out and serve to transfer more wealth to the wealthy developers and landlords who can afford real estate speculation.

But yea... an example of setting rents to virtually zero is VERY compelling evidence that any rent controls just do not work. : /

 

[Syriel]

Anyone who has lived in SF any time in the past 20 years could tell you that OP. Don't need a study of Mumbai to make the point.

"NIMBYism"?

(N)ot (I)n (M)y (B)ack (Y)ard = NIMBY

Otherwise known as "Fuck you, I've got mine!"

You see this in SF where people who have rent controlled apartments consistently protest against high density development because it would "change the character" of the neighborhood.

No, they're not against new housing, but they just think it should be somewhere else.

Can't have more people living in their neighborhood, creating congestion and new buildings blocking views.

Yes, this increases the cost of market rate housing, but they don't care because they've got their rent control units locked in. It's not their fault that those other people weren't smart enough to lease a rent control unit when they did.

Bootstraps and all that jazz.

 

[midramble]

Anyone who has lived in SF any time in the past 20 years could tell you that OP. Don't need a study of Mumbai to make the point.



(N)ot (I)n (M)y (B)ack (Y)ard = NIMBY

Otherwise known as "Fuck you, I've got mine!"

You see this in SF where people who have rent controlled apartments consistently protest against high density development because it would "change the character" of the neighborhood.

No, they're not against new housing, but they just think it should be somewhere else.

Can't have more people living in their neighborhood, creating congestion and new buildings blocking views.

Yes, this increases the cost of market rate housing, but they don't care because they've got their rent control units locked in. It's not their fault that those other people weren't smart enough to lease a rent control unit when they did.

Bootstraps and all that jazz.

Yeah this. I wouldn't losing my SF rent control if it meant there would be more options for housing to be built. As it stands I can never move because I'll never get my rate again. If only we could build towering complexes over the old Victorian stuff. Maybe some kind of arcade level on the 4th floor above the old housing. Complexes that span multiple blocks with bridges connecting blocks so you can avoid cars in the street.

 

[kirblar]

This is pretty much THE topic where there's no real dissent among economists.

 

[Steejee]

Rent control is horrible. Rent stabilization is awesome. Stabilization protects tenants from large increases and provides them with some forecasting ability, much like homeowners. It also allows for rent increases and pass through of utility and tax increases. It also allows the landlord to reprice rent to market once a tenant leaves. Forecastingvabolity means investment in the community, career and economy.

I agree with this.

Coincidentally, only place I knew anyone with rent control was SF, and there was really no reason for that person to have a cheap apartment over anyone else I knew, they just got lucky and had no reason to ever move out - why give up a place that's 1/5th the cost of any other nearby? Meanwhile, their landlord was stuck with what amounted to a money pit.

SF has other problems though - it never seems to build fast enough and being constrained by geography doesn't help. USA needs more smaller cities to boom and suck away some businesses from the big boys.

 

[Phrozenflame500]

Yeah this seem like there was pretty universal economic consensus that rent controls were one of "ur examples" of why price ceilings often don't work.

 

[Goro Majima]

I'm kinda ignorant but how do landlords keep up the maintenance and appeal of rent controlled apartments if they're being severely under compensated?

I vaguely recall reading that rent controlled apartments in NYC will only be a certain fraction of units in a building I think? Is that the case in cities like San Francisco, Seattle, Vancouver, etc?

 

[ZealousD]

Trying to regulate prices directly is always a recipe for disaster, not just in renting.

 

[Madness]

Trying to regulate prices directly is always a recipe for disaster, not just in renting.

No it isn't. How many cases of rent control causing dilapidated buildings and people suffering are there versus uncontrolled rent increases forcing people to be house/poor because more than 75% of their paycheque goes to rent.

In BC they just regulated foreign home purchases by adding a 15% tax and now soon in Toronto, they will do the same along with having rent control because even 2 adults making over 100k a year cannot even afford to rent a studio anymore etc.

 

[Guevara]

It's a lottery; a few people win big, most people lose relatively little.

 

[Syriel]

SF has other problems though - it never seems to build fast enough and being constrained by geography doesn't help. USA needs more smaller cities to boom and suck away some businesses from the big boys.

That's the NIMBY part of SF. Pretty much any new high density project, even those that include affordable housing, meet with "community opposition" a.k.a. current renters that don't want to see new construction in their neighborhood.

I'm kinda ignorant but how do landlords keep up the maintenance and appeal of rent controlled apartments if they're being severely under compensated?

I vaguely recall reading that rent controlled apartments in NYC will only be a certain fraction of units in a building I think? Is that the case in cities like San Francisco, Seattle, Vancouver, etc?

Any multi-unit housing built before 1980 is covered as far as SF is concerned.

Maintenance and appeal is an issue because there is little incentive for landlords. Especially when the allowable increase can be less than inflation.

A landlord's only hope in that case is for a current tenant to leave so they can bump up the rent to market. There is not such thing as "you have to leave when your lease is over" in SF if the building is rent controlled.

 

[kirblar]

No it isn't. How many cases of rent control causing dilapidated buildings and people suffering are there versus uncontrolled rent increases forcing people to be house/poor because more than 75% of their paycheque goes to rent.

In BC they just regulated foreign home purchases by adding a 15% tax and now soon in Toronto, they will do the same along with having rent control because even 2 adults making over 100k a year cannot even afford to rent a studio anymore etc.

BC was a special case due to property values going crazy due to foreign people using Canadian land as safe investments. That isn't what's going on in most places.

If housing costs are going out of control, there's a simple solution: build more housing! The problem is that local residents don't like this! In order to do this, you have to take zoning out of their hands and into those of regulators working at a much higher level (usually city/state/province) because they're less responsive to local NIMBYs.

 

[CrocMother]

Rent control is horrible. Rent stabilization is awesome. Stabilization protects tenants from large increases and provides them with some forecasting ability, much like homeowners. It also allows for rent increases and pass through of utility and tax increases. It also allows the landlord to reprice rent to market once a tenant leaves. Forecastingvabolity means investment in the community, career and economy.

This has resulted in many poor people being unofficially evicted from their homes.

NYC put a cap on the amount the rent can be raised and how often, I believe.

 

[pigeon]

"Don't put modest housing near my gated community."

Which is a weak point. If the value of land is pumped up in a metro area, no one is going to forgo higher rent to build affordable housing unless there's an incentive to do so. You'll get luxury rentals and high rise condos that still leave most people priced out and serve to transfer more wealth to the wealthy developers and landlords who can afford real estate speculation.

I mean, housing prices aren't arbitrary -- they depend on the availability of housing and the demand for it. If housing prices are high because of lack of supply, then adding supply will lower prices. Even if you're building "luxury rentals," those rentals will be taken by people who would otherwise be competing for lower-cost units, so more of those units will be available.

Rent control is potentially useful as a smoothing effect because people's real lives are dependent on housing and the fact that it works out economically in the long run isn't necessarily a solution. But in the long term the solution to housing being expensive is to...build a lot more housing until the market clears.

The Bay Area is showing the consequences right now of failing to do that, and they're bad.

 

[Syriel]

It's a lottery; a few people win big, most people lose relatively little.

This is also true.

Rent control in SF is not means tested. And the pro-Rent Control side won't even allow income data on renters in rent control units to be collected by the City goverment (just like GOP won't allow US gov to compile certain gun stats).

Can't officially state that about half of the rent control units in the City are rented by folks making more than 100k. If rent control were meant to focus on those that couldn't afford housing, it could be a lot more workable. As it is, it is nothing more than a lottery, like you say.

 

[smokeandmirrors]

housing is a right and i'll take whatever it takes to get housing as cheap as possible

 

[Syriel]

housing is a right and i'll take whatever it takes to get housing as cheap as possible

Cheap housing can be had across all of North America.

The problem isn't the price of housing.

The problem is allocating a limited resource.

How do you decide who gets to live in X spot, when 50+ people all want it?

 

[Infinite]

BC was a special case due to property values going crazy due to foreign people using Canadian land as safe investments. That isn't what's going on in most places.

If housing costs are going out of control, there's a simple solution: build more housing! The problem is that local residents don't like this! In order to do this, you have to take zoning out of their hands and into those of regulators working at a much higher level (usually city/state/province) because they're less responsive to local NIMBYs.

but muh view

I have a question though. Even if developers aren't restricted by zoning laws, what's stopping them to simply building luxury rentals and condos people can't afford all over the place in a metro area like NYC

 

[soco]

Let's pick off the worst case of this to make a claim that something I don't like is horrible!!!

 

[dramatis]

but muh view

I have a question though. Even if developers aren't restricted by zoning laws, what's stopping them to simply building luxury rentals and condos people can't afford all over the place in a metro area like NYC

They're still doing that even with zoning laws lol, they just have to spend a lot of time negotiating with the local/city government, with the neighborhood, with neighborhood organizations, etc.

 

[Infinite]

They're still doing that even with zoning laws lol, they just have to spend a lot of time negotiating with the local/city government, with the neighborhood, with neighborhood organizations, etc.

yeah i know

 

[kirblar]

but muh view

I have a question though. Even if developers aren't restricted by zoning laws, what's stopping them to simply building luxury rentals and condos people can't afford all over the place in a metro area like NYC

Nothing. But that behavior isn't being stopped right now, because the local boards approve those things! The ones who'd like to build the affordable housing don't get through the gates.

 

[spazchicken]

In my city it's cheaper to own a house than to rent an apartment.

Thanks Clinton.

 

[dramatis]

yeah i know

People who have been tracking sales of luxury housing in NYC have actually remarked that the market has plateaued in the past year (somewhat). At the most basic level, what stops developers from building too much luxury housing is the level of demand. In the end, there's only so many millionaires who want an expensive place in NYC. When many companies are building 40 condos each, suddenly supply > demand and the condos won't sell at the prices that they want.

 

[i3allistic]

BC was a special case due to property values going crazy due to foreign people using Canadian land as safe investments. That isn't what's going on in most places.

If housing costs are going out of control, there's a simple solution: build more housing! The problem is that local residents don't like this! In order to do this, you have to take zoning out of their hands and into those of regulators working at a much higher level (usually city/state/province) because they're less responsive to local NIMBYs.

lol, funny thing i was selected for jury duty for one of this ...lady sued her neighbor because the construction was blocking her view and lowering the value of her home or some kind of bullshit .....thank god i don't live in S.F. anymore, not the same city when i was growing up there....but Oakland getting just as bad but i own now sooo ....

 

[pigeon]

People who have been tracking sales of luxury housing in NYC have actually remarked that the market has plateaued in the past year (somewhat). At the most basic level, what stops developers from building too much luxury housing is the level of demand. In the end, there's only so many millionaires who want an expensive place in NYC. When many companies are building 40 condos each, suddenly supply > demand and the condos won't sell at the prices that they want.

It's almost like housing is a market and market prices are set by supply and demand and not arbitrarily by land developers to screw people!

 

[Infinite]

It's almost like housing is a market and market prices are set by supply and demand and not arbitrarily by land developers to screw people!

I mean we know how capitalism works. I personally feel there needs to be some type of regulation or people will suffer however. People are just gonna do whatever makes them the most money otherwise

 

[Syriel]

but muh view

I have a question though. Even if developers aren't restricted by zoning laws, what's stopping them to simply building luxury rentals and condos people can't afford all over the place in a metro area like NYC

The short version? Supply. Developers aren't going to keep building if they can't sell.

San Francisco had a record number of new units (mostly condos) come onto the market over the last year. Both average rents and sales prices have dipped because of it.

lol, funny thing i was selected for jury duty for one of this ...lady sued her neighbor because the construction was blocking her view and lowering the value of her home or some kind of bullshit .....thank god i don't live in S.F. anymore, not the same city when i was growing up there....but Oakland getting just as bad but i own now sooo ....

Perfect example of the NIMBY thing. And it's not just property owners suing over this.

In SF, if you are covered by rent control and a new building goes up, you can file a claim to force your landlord to reduce your rent because a new building blocked your view.

NIMBYism and the costs added by it are one of the reasons why building affordable housing in SF isn't easy.

In 2014 (and it's gone up since then, these were just the most easily cite-able numbers) the price per square foot to build affordable housing in downtown SF was nearly $600 sq/ft.

http://www.socketsite.com/archives/...dable-housing-sixth-street-690k-per-unit.html

http://www.spur.org/publications/urbanist-article/2014-02-11/real-costs-building-housing

When you're talking build costs of $500k -700k for a typical unit, there's no profit to be found to sell at an affordable price because the actual cost is already past the realm of what most would consider affordable.

And build costs have gone up in the last few years.

 

[Moral Panic]

It's almost like housing is a market and market prices are set by supply and demand and not arbitrarily by land developers to screw people!

If you can't afford to live or are spending 70%+ of your income on rent who cares if the bad effect comes from market forces and not malicious intent?

People act like it is such a simple problem but you just can't keep building houses everywhere. More houses increases pressures on roads, means more parking spaces needed, more traffic control. More houses increases the pressure on sewage and waste disposal. More houses increases the pressure on local schools, hospitals and GP surgeries.

Rent control stops houses being used as investment vehicles and instead frees up houses for people who actually want to live there. Rent control allows communities to thrive without being suddenly priced out. Rent control allows people to keep more money in their pocket so they can spend it on things that drive the economy. Rent control isn't a magic bullet, and can obviously cause problems if done badly (like pretty much any social policy), but acting as if "the free market" is this magical solution to all problems is silly also.

 

[kirblar]

If you can't afford to live or are spending 70%+ of your income on rent who cares if the bad effect comes from market forces and not malicious intent?

People act like it is such a simple problem but you just can't keep building houses everywhere. More houses increases pressures on roads, means more parking spaces needed, more traffic control. More houses increases the pressure on sewage and waste disposal. More houses increases the pressure on local schools, hospitals and GP surgeries.

Rent control stops houses being used as investment vehicles and instead frees up houses for people who actually want to live there. Rent control allows communities to thrive without being suddenly priced out. Rent control allows people to keep more money in their pocket so they can spend it on things that drive the economy. Rent control isn't a magic bullet, and can obviously cause problems if done badly (like pretty much any social policy), but acting as if "the free market" is this magical solution to all problems is silly also.

Rent control does absolutely none of these things.

 

[Byakuya769]

It's almost like housing is a market and market prices are set by supply and demand and not arbitrarily by land developers to screw people!

And new supply isn't coming however. And the reason is why? Is it because developers can't make profitable lower cost housing in those markets?

 

[Z..]

As a fan of the free enterprise system

Ah. I see.

 

[kirblar]

And new supply isn't coming however. And the reason is why? Is it because developers can't make profitable lower cost housing in those markets?

Largely, yes. They're forbidden from doing it by their upper-class residents.

 

[Quixzlizx]

And new supply isn't coming however. And the reason is why? Is it because developers can't make profitable lower cost housing in those markets?

If you have to spend a ton of money to get your hands on the property, you're going to want to make your investment back.

Generally, the lower-cost housing portion of a building is a deal with the local government in order to get your zoning approved. At least in NYC.

 

[Cynar]

If you can't afford to live or are spending 70%+ of your income on rent who cares if the bad effect comes from market forces and not malicious intent?

People act like it is such a simple problem but you just can't keep building houses everywhere. More houses increases pressures on roads, means more parking spaces needed, more traffic control. More houses increases the pressure on sewage and waste disposal. More houses increases the pressure on local schools, hospitals and GP surgeries.

Rent control stops houses being used as investment vehicles and instead frees up houses for people who actually want to live there. Rent control allows communities to thrive without being suddenly priced out. Rent control allows people to keep more money in their pocket so they can spend it on things that drive the economy. Rent control isn't a magic bullet, and can obviously cause problems if done badly (like pretty much any social policy), but acting as if "the free market" is this magical solution to all problems is silly also.

Well said.

 

[Gallbaro]

If you can't afford to live or are spending 70%+ of your income on rent who cares if the bad effect comes from market forces and not malicious intent?

People act like it is such a simple problem but you just can't keep building houses everywhere. More houses increases pressures on roads, means more parking spaces needed, more traffic control. More houses increases the pressure on sewage and waste disposal. More houses increases the pressure on local schools, hospitals and GP surgeries.

Rent control stops houses being used as investment vehicles and instead frees up houses for people who actually want to live there. Rent control allows communities to thrive without being suddenly priced out. Rent control allows people to keep more money in their pocket so they can spend it on things that drive the economy. Rent control isn't a magic bullet, and can obviously cause problems if done badly (like pretty much any social policy), but acting as if "the free market" is this magical solution to all problems is silly also.

You forget that adding more public goods capacity is more ECONOMICAL at scale (density). The problem at that end is blue cities in blue states tend to be horribly managed from a cost/revenue perspective. When you leave North America you can see that densities far more economical than supporting expanding suburbs.

A real liberal / humanist would want to expansion of section 8 rather than assigning housing subsidies to units.

 

[Barrage]

With Rent Control coming to Toront this year, it will be interesting what effect it has.

The uncertainty will probably lead to me staying in my current condo for another year and seeing how the market shakes out.

 

[Vanillalite]

Everyone wants to live in like 1 of 5 cities in the US or like 1 of 2 in Canada.

Put me in the camp that the best long term solution is to make it so people actually want to live in more cities across the country.

 

[ZealousD]

And new supply isn't coming however. And the reason is why? Is it because developers can't make profitable lower cost housing in those markets?

Low-income housing is generally unpopular, yes.

BC was a special case due to property values going crazy due to foreign people using Canadian land as safe investments. That isn't what's going on in most places.

Specially, that foreign investment is essentially the only way that some of the richer people in China can make investments to make their money grow. Communist China is so restrictive that real estate is one of the few avenues for people to invest. So again, this is partially a problem with restricted markets.

If housing costs are going out of control, there's a simple solution: build more housing! The problem is that local residents don't like this! In order to do this, you have to take zoning out of their hands and into those of regulators working at a much higher level (usually city/state/province) because they're less responsive to local NIMBYs.

I was actually in the Greater Vancouver area a few months ago, and something that actually surprised me was how much undeveloped land they had peppered all around. All sorts of pockets of unused flat land that people could theoretically build on outside of Vancouver Island. Literally right across the street from Surrey City Hall was this really shitty piece of land that had one really broken down house on it. How the hell does something like that happen?

 

[entremet]

Ah. I see.

Is that a controversial opinion?

 

[TyrantII]

If you can't afford to live or are spending 70%+ of your income on rent who cares if the bad effect comes from market forces and not malicious intent?

People act like it is such a simple problem but you just can't keep building houses everywhere. More houses increases pressures on roads, means more parking spaces needed, more traffic control. More houses increases the pressure on sewage and waste disposal. More houses increases the pressure on local schools, hospitals and GP surgeries.

Rent control stops houses being used as investment vehicles and instead frees up houses for people who actually want to live there. Rent control allows communities to thrive without being suddenly priced out. Rent control allows people to keep more money in their pocket so they can spend it on things that drive the economy. Rent control isn't a magic bullet, and can obviously cause problems if done badly (like pretty much any social policy), but acting as if "the free market" is this magical solution to all problems is silly also.

Most of this is totally wrong. Cost per additional widget tends to go down the more dense an area you go to.

Roads and public goods in the middle of nowhere cost a ton per capita. Dense cities tax bases can easily shoulder burdens and make them cheap.

 

[entremet]

If you can't afford to live or are spending 70%+ of your income on rent who cares if the bad effect comes from market forces and not malicious intent?

People act like it is such a simple problem but you just can't keep building houses everywhere. More houses increases pressures on roads, means more parking spaces needed, more traffic control. More houses increases the pressure on sewage and waste disposal. More houses increases the pressure on local schools, hospitals and GP surgeries.

Rent control stops houses being used as investment vehicles and instead frees up houses for people who actually want to live there. Rent control allows communities to thrive without being suddenly priced out. Rent control allows people to keep more money in their pocket so they can spend it on things that drive the economy. Rent control isn't a magic bullet, and can obviously cause problems if done badly (like pretty much any social policy), but acting as if "the free market" is this magical solution to all problems is silly also.

Stop thinking suburbs. They're incredibly wasteful and inefficient.

 

[Gallbaro]

With Rent Control coming to Toront this year, it will be interesting what effect it has.

The uncertainty will probably lead to me staying in my current condo for another year and seeing how the market shakes out.

You're correct, it will be a nice little experiment over the next decade.

But I have to ask where is the high rent? I am not really seeing it in an ancillary search. Seams like the problem is owning, not renting.

 

[Entropia]

I dunno, having a roof over your head is one of those simple rights.

I understand that, depending on the neighbourhood prices can increase, but no one should be subjected to an exorbitant increase which can potentially displace them.

 

[travisbickle]

"Rent control seems to create more problems that it solves."


There's only one problem, rent seekers want to bleed people dry, even Adam Smith knew this.

 

[Byakuya769]

If you have to spend a ton of money to get your hands on the property, you're going to want to make your investment back.

Generally, the lower-cost housing portion of a building is a deal with the local government in order to get your zoning approved. At least in NYC.

I understand this. I'm just pushing back at the idea that the high price of desirable metro real estate is something that can be fixed by purely market centric strategies.

 

[necrosis]

i'll agree that nimbyism & zoning laws heavily factor into the absurd cost of rent in certain metro areas

that being said: rent regulations implemented with a soft touch and some degree of flexibility absolutely can be successful

worth reading: https://medium.com/p/in-defense-of-rent-control-3cb453119116