Rent controls have split housing in Berlin into two distinct markets
bloomberg.com
bloomberg.com
Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply.
But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to enter the rental market is utterly SOL. The people that are really getting screwed are 10 years old today: when they try to move out of Mom and Dad's they will enter a market with vastly reduced supply since nobody has any incentive to move.
This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.
The supreme court will probably rule that the Mietendeckel is unconstitutional in November, which will lead to a nasty situation for many renters with old contracts. If the tenants are lucky the landlord will just ask for the money "saved" to be paid back, but the unlucky ones will be evicted, as being in arrears of more than one month is grounds for termination regardless if you pay it back the the debt or not.
(It's two months btw)
yes you're right, two months not one.
If you continue to be patient and repeat that humanity doesn't function according to algorithms, they'll eventually get the message or get bored and leave to work on the next disruption.
The rental amount agreed in the contract is to be owed by the tenant, this is not changed by the MietenWoG.
If you have a housing problem, and you want to solve it, you need to do two things.
1. Not kick people out of housing that they have. (Because it is incredibly disruptive to people's lives.)
2. Build new housing, until demand is met.
Rent control accomplishes #1, proper city planning accomplishes #2. If you're not doing #2, complaining about #1 isn't going to solve the problem.
If you are doing #2, then #1 isn't a problem.
In an all-owner-occupant suburb, this isn't so much of a problem: you're literally paying people lots of money to accept the disruption of having to move. However, in almost every other kind of housing arrangement, ownership over the building is separate from occupancy, and it's not the occupant's choice to make regarding increasing the housing supply. This is the left-NIMBY trap: any action to increase housing units necessarily displaces the most marginalized parts of society. If your pro-development policy doesn't include a plan to house people who are being displaced without increasing their expenses, then you're likely to make people start protesting the new buildings that need to be built in order to accommodate demand and actually cap rent growth.
Other than that, yes. Make housing printer go brrr.
Of course you can. The law can be that normally rent control applies, but if you are building a new building, that doubles the amount of housing supply on the land, you can kick out the existing residents if you pay them a large payout.
This would allow new housing to built in the obvious places where it should be, and the obvious cases where a huge amount of new housing is planned to be built.
Part of the problem I could see right off the bat would be the fact that owners and occupants are inherently antagonized to one another; as in, the more money you require to be given as a displacement subsidy; the less is available to actually incentivize land development. Of course, in places like SF the market rate for housing is so hilariously high that there might actually be enough money for both parties, at least for a little while.
But yeah, these sorts of things generally reduce the amount of money available to do the new development in the first place. But maybe that's ok too?
The question is how much should existing tenants be entitled to their apartments just because they lived there for a long time, balanced against the impact on investment in new real-estate because of lack of incentives due to earning caps.
> Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Even maintaining existing properties is discouraged because landlords see no return for their investment. Renters stay put in crumbling properties because controls often reset when tenants change. Who occupies housing ends up bearing little relation to who can make best use of it (ie, workers well-suited to local job opportunities). The mismatch reduces economy-wide productivity. The longer a tenant stays put, the bigger the disparity between the market rent and his payments, sharpening the incentive not to move.
[0] https://www.economist.com/leaders/2019/09/19/rent-control-wi...
Rent control tends to be adopted with the fairly explicit goal of prioritizing affordability for existing tenants in their current residences over either encouraging maintenance/updates or improving housing supply for people who aren't current tenants, so I don't think it's at all a policy that doesn't work.
A policy whose purposes are at odds with other, arguably more important, policy goals, sure, and possibly even with other more important, if less inmediate, interests of current tenants.
But saying it “doesn’t work” bases on it not encouraging things it is not meant to encourage is...not really useful.
It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'. Both are fundamentally unfair. Life, in general, isn't fair.
Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.
That's because it's a strawman that you've constructed. Real debates involve consideration of the needs of people who can't find housing in heavily-regulated areas. Existing tenants aren't the only people worth considering. They just happen to be the people with the votes and the political power, so it's no surprise that local government focuses on their needs at the expense of everyone else.
The entire purpose of this subthread is to tease the two apart. Rent control is a solution for the here and now. Building new housing stock is a solution for the future.
The two are largely orthogonal, and the causal relationship between rent control and construction of new housing stock is incredibly weak. There are a million factors that have a far bigger influence on the latter, compared to rent control. If you want to encourage development, relax zoning, cut the red tape for construction, stop letting NIMBY groups veto projects, raise property taxes, and actually start non-rent controlled property at market values.
If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors.
You have a wrong impression of who most local governments focus on. They don't focus on the needs of the tenants - they focus on the needs of landlords (mostly concerned with keeping rents high by preventing any new construction) and property developers (mostly concerned with getting concessions and hand-outs from their municipalities.) Most city councils are squarely in the pocketbook of the latter. Both of those groups have a lot more money to spend on influencing campaigns and elections, compared to unorganized groups of tenants.
>If rent control were eliminated tomorrow in San Francisco, it would continue to have a crippling housing shortage, because of those million factors.
Yes and as long as politicians don't get the dumb idea of reinstating rent control they would be forced to listen to all those angry voices instead of just giving them rent control to make them shut up. Rent control is a tool to reduce accountability. It's mostly abused to sweep problems under the rug.
This isn't true. If people are paying enough for the developer to build additional housing then everyone will win in the end.
>It's just that winners in market housing situations are always the people with the most money.
That is the price you have to pay for allocating resources in the most productive way possible and ensuring that everyone wins in the end. It's a small price compared to the benefits.
>It's difficult to make an argument that it's a more virtuous way to select winners, compared to 'the winners are the people who were here first'.
As I said, it's the path to everyone winning. If you fail to allocate resources efficiently then you will just get a lot of losers and some special interests who are not losing.
>Both are fundamentally unfair. Life, in general, isn't fair.
The difference is that one of them will stay unfair forever, while the other would have the potential to get fairer, year by year.
>Rent control doesn't exist to maximize overall virtue. It exists to minimize disruption and upheaval in people's lives. You're explicitly excluding that from your criteria for success.
They will have to move one day, since there isn't enough room for everyone and when they do, they leave for good with no second chance.
It's false to claim you need to kick people out of homes in order to have new developments. Though the notion of 'lack of investment in capped rentals' may be true, that has nothing to do with new housing.
The entirety of Ontario and Quebec (and I'm going to bet most of the rest of Canada) has a form of rent control, in that at least there are caps on the amount of rental increase.
I think a lot of this discussion may be around gentrification as much as anything.
Some nice neighbourhoods in Berlin were on the E. Side and they were kind of run down, but over the last couple of decades the hipsters moved in, now the professionals.
What I do know is that construction is vast and booming. Driving through Toronto over the last 20 years it seems there's a ton of new buildings every time I am there.
There's entire area of Montreal that has gone vertical over the last few years (formerly industrial area).
That said, there is a lot of immigration to Canada.
In SF the reason it's not quite as profitable is because of the byzantine planning process and the inevitable lawsuits a developer has to win before even breaking ground. This is part of the reason why nearly all new SF housing construction is fairly high-end and expensive to buy/rent.
[0] https://en.wikipedia.org/wiki/Costa%E2%80%93Hawkins_Rental_H...
At least in Berlin, the rent control doesn't apply to newly built apartments (leading to the "split" market the title refers to), so this argument shouldn't apply.
Well-off-techies who somehow stumbled into both getting a grandfathered rent controlled rate, and a job in the next city over might be a majority of posters on HN[1], but are a tiny minority of the population. You probably shouldn't be basing overall public policy around them.
[1] I personally think it's unlikely.
I'd be interested to know the actual numbers, but I doubt they happen to be 90%.
Even if there was rent control both places, you'd have to find a rent controlled apartment in the new place. And in reality, you can't, because nobody is willing to leave their rent controlled apartments in the next place either.
They aren't theirs. They're renters.
First-world jurisdictions (including all 50 US states) universally recognize that eviction is a big deal, and that it is not equivalent to forfeiting any old rented property. Accordingly, landlords cannot do whatever they please just because they own four walls, a floor and a roof.
Of all the things you could nit-pick, I can't even begin to understand why you would choose this. Your point is not only pedantic and cringe-inducing, it also betrays callousness beyond that of even American courts. This is truly an accomplishment. Bravo.
By renting you’re in a (heavily regulated) business relationship with an owner, and they own the property. Growing overly attached to something that you don’t own, and calling it yours is risky. I know that tons of people don’t have luxury of owning their places, but that’s how our capitalism world works - ownership is king.
A purpose built apartment building owned by a property company (of which there are many in European towns/cities) can easily be a home for large part of person (or families) life. There are also fairly strong renters rights in many European countries, unless the tenant wants to move they don't have to.
Renting a converted property or whole house from a small landlord could mean they decide they want it back with short notice, at least that is the situation in the UK. Assuming that will be a home long term is a bad idea.
It also has bad impact on the type of buildings that get built. If you have to build some rent-controlled housing as part of your development project, and some jurisdictions will force developers to do that, it pushes you to build the rest of your building to be as upscale as possible to attract higher paying customers (better margins).
And it also removes the incentives of ever upgrading the rent-controlled buildings more than the minimal legal maintenance. Because any dollar is better spent on the upscale offerings.
Edit: Wow, OR and CA recently capped rental price increases statewide:
https://www.oregonlive.com/business/2019/03/how-does-oregons...
https://www.nolo.com/legal-encyclopedia/statewide-rent-contr...
Meanwhile WA prohibits rent controls by any local government:
When a property is full of rent-controlled tenants paying far below market rate, it has a low value to most real estate investors. With the Ellis Act, however, the value of the property can actually go up as rents go out of sync with the market because it becomes an attractive investment to investors who would Ellis it.
If you Ellis Act you can re-rent the units are market rate but only after 5 years (or else you have to rent it back to the original tenants at their old rate or new tenants at the old rate).
Units that have been Ellised* or Owner Occupied* find it much more difficult to do a condo conversion, as there are laws about how long you need to wait and where you go in the lottery that determines if you get to condo or not. That lottery is itself a complex affair that involves giving more tickets to houses that failed in the past, and for all I know now, giving extra tickets based on victimhood points or something. Although right now I am hazy about the laws. SF housing laws are a labyrinth of absurdity, micromanagement, and graft. They are not even funny.
*updated for correction
Ellis Act, named after the law, was created as the govt can’t compel you to rent - you have the right to remove your home from the rental market.
” The Ellis Act (California Government Code Chapter 12.75)[1] is a 1985 California state law that allows landlords to evict residential tenants to "go out of the rental business" in spite of desires by local governments to compel them to continue providing rental housing.”
When a tenant moves out of a rent-controlled apartment, the owner raises the rent to market rates, not above market. They've lost out on cash they could either keep or invest in improving the property (which would command higher rents, if they were allowed to raise it).
The provision for some capital offset for improvements is not, in practice, sufficient justification for making the improvements as the offset is only partial, and you want to encourage the long term tenant to move out so you are not going to provide upgrades to the unit.
For example, in San Francisco, landlords can usually pass on some portion of the cost of capital improvements on to their tenants, but not all of it, and only until that portion is paid off, after which the rent reverts to the previous amount.
So yes, the landlord gets the improvement done at something of a discount, but still has to shell out cash, and for not much benefit since the rent will still revert to the previous level. So there's not much incentive to do it until after the tenant moves out, if at all.
And then, if the tenants sue because of course that is illegal, then the public court records can be and are used by all the landlords in town to avoid renting to them, who would dare to exercise their rights.
I happen to know this, not because I've ever lived there or had firsthand experience or anything, but I once happened to see a court document on the internet, in which the judge considered an emergency request from a plaintiff to not release information about their lawsuit at an early stage, because it would prevent them from having anywhere to live.
In other words, this corrupt system is well known enough that the housing courts acknowledge it as a matter of course.
In a world where wages aren't going up by that much, rent control is needed to protect workers from price gouging by scrupulous landlords taking advantage of a sellers market. I don't know why so many are against simple consumer side protections such as preventing price gouging on shelter; we make it (sensibly) illegal to price gouge on food and water and other essential goods, but shelter is somehow an investment.
The alternative - as in other cities - is that it's still hard to find an apartment that has a normal price. Of course this also attracts scammers.
The apartment situation in dense areas is bad, no matter if it's Berlin or not. At least the local government is working on a solution to not end up like Manhattan, both price- and concrete-wise. If they find a sustainable solution, then this would be a game-changer and other cities might adopt that.
I walked up to the landlord (who was a lawyer in his day job) and said... "I know you can't pick favorites, but I have a good salary and I'm not a student." ... he ended up making his top picks write an essay on why we wanted the apartment. I got the place and stayed there for 10 years.
Interestingly, during the last few years I was there, rent control ended and the landlord really wanted me out because he knew that he could make 2-3x more. He turned into a slumlord and refused to make any improvements and the ones he made were all half assed. The storage locker in the carport under the building got broken into as well.
Eventually, I left for SF and sublet the place to some friends illegally because they needed an inexpensive place. He eventually found out about that and I had to let the place go.
I guess my point is that I've seen first hand rent control and no rent control go through both phases. I really don't think there is a good solution. Someone always gets the short end of the stick.
I live in a city without rent control, and your experience is entirely foreign to me. Heck, my current landlord has offered to pay for things that I don't think are even really his responsibility. He's just happy to have good tenants paying market rate.
Switching tenants will probably cost a few thousand dollars in lost rent, and it won't earn him any more income, so he treats us well.
(Just as note about rent control in NYC—rent controlled apartments account for something like 1% of total apartments. The number is slowly going down, it was about 3% twenty years ago.)
The removal of rent control only applied to new tenants. He was limited to a city controlled yearly mandated increase, the entire time I was there. He also couldn't kick me out unless he moved into the apartment himself for some period of time.
He also had to put my deposit into an interest bearing account and was required to pay me that interest. The rental increase and payment was a ritual I went through yearly with him and he always delayed giving me the interest as long as he could by law.
2-3x+ more rent is enough reason for a landlord to want to push someone out in a competitive market like Berkeley. There is always a stream of new tenants because it is a college town and limited rental housing is available.
Even when rent control continues to be active, landlords have an incentive to want to get their tenants out, because (at least in SF), a new tenant can be charged market rate when they move in (and then that rate is locked in with limited yearly increases until they leave).
When rent control in Berkeley ended, but existing tenants grandfathered in, the landlords were incentivized even more than usual to do things to make a tenant want to leave, since then they'd have a completely non-rent-controlled unit again.
It's not only bad behavior on the landlords' side. Tenants are incentivized to hold onto the unit as long as possible, even if they want or need to move out for a while. They'll often illegally sublet the place and hope the landlord doesn't come by to check on them until after they move back in. But they're also in some ways trapped: they may want to move, but know that they'll face a huge rent increase in their new place, so they stay put.
Honestly I can't really blame landlords or tenants for their bad behavior under rent control; the rules around it only tend to provide one good outcome: rent stable and increases are predictable. Other outcomes are usually negative, and that's an inherent property of the system. But that one good outcome is often good enough to justify keeping rent control around.
Over the years, cost of living increases for whatever reasons and now the rent I'm paying seems low.
Maybe the solution is to allow landlords to have larger increases that match changes in COL, but that is effectively the same as getting rid of rent control.
Your proposed solution is now to get rid of rent control, which is what they had supposedly already done. But I agree. Seems like (actually) getting rid of rent control would have been a good move.
EDIT: changed word "defeated" to "changed"
The California Law called Costa-Hawkins phased out vacancy control in all cities from 1995 to 1999. After 1999, landlords have the right to set the initial rent, overriding local vacancy controls. (https://leginfo.legislature.ca.gov/faces/codes_displayText.x...)
In Nov 2018, California voters rejected Proposition 10 41%-59%, which would have repealed Costa-Hawkins and allowed vacancy controls again (https://ballotpedia.org/California_Proposition_10,_Local_Ren...). Berkeley, Richmond, and Santa Monica would immediately have imposed vacancy controls under their existing laws.
In Nov 2020, California voters again rejected Proposition 21 40%-60%, which would have allowed vacancy controls that limit rent increases to 15% per vacancy (https://ballotpedia.org/California_Proposition_21,_Local_Ren...).
In his defense, I don't think he was discriminating against minorities as much as he was just trying to find a good tenant, in a sea of applications, that wouldn't cause him a lot of headache.
One side bit of information is that he had had an accident and had lost part of one arm. He was very apt and that didn't hold him back at all, he was used to challenges.
Isn’t it already illegal to discriminate against minorities in renting housing?
And it's how most purchasing works! I go to rent a car, they have to rent me the car if it's available; they can't wait to see if a safer-looking driver is right behind me. Renting an apartment isn't a job interview.
I don’t think they have to rent you anything if they don’t feel like it. They can wait for safer looking driver just fine. It’s just they don’t, because it doesn’t make sense for them from business perspective, but they very much could do that.
That is not true of apartment renting; in fact, I'd argue, it's distinctively untrue of renting. Thus, my rebuttal to Rayiner.
This is less true of mom and pop rentals. This is probably less true of mom and pop anything.
I think you're right that intuition based decisions make it easier for racism to creep in and are harder to diagnose and fix than process based decisions.
But this problem with renting is probably more true of hiring and firing and more impactful. Should we apply the same rules to hiring and firing?
They're finally having better luck now that this time that they requested credit reports, actually exhaustively followed through on references, etc.
Don't know what the answer is -- maybe the regulations should selectively be applied to those who rent out multiple properties?
I think they do.
I concluded that I'm probably stuck renting from an impersonal corporate landlord that runs apartment complexes, but that seems more expensive.
At least in the US, I think people that are renting out part of the building they live in have, legally, a higher degree of latitude in terms of discrimination. It is kind of like a job interview. Or considering someone as a roommate.
There is a good solution - for outsiders like you to go away and not come back. That leaves more housing for long term residents who are the people it's protecting. It sounds nasty but people everywhere can't stand outsiders coming into their place. Xenophobia.
Why? Buildings will degrade. Fast forward some years and rents will not justify any building maintenance by landlords. History is full of examples that ideology recurrently ignores.
That gave him a durable advantage and helped him acquire assets that would further gain in value. Not to mention, as a renter and home owner, he was able to vote against new developments for years, further increasing scarcity and the value of his house.
And then bureaucrats complain about inequalities?
[1] https://www.immobilienwirtschaft.tu-berlin.de/fileadmin/fg28...
Typical YIMBY broken record here, but in the U.S. it's more or less illegal to build new housing on almost every inch of land (especially in the most expensive cities). We don't need to develop baroque incentives for developers to create housing; we need to stop making it illegal.
And then, yes, of course, there are some plots of land where it's legal to build one or more of the categories listed above.
The places where housing is scarce are in the former groups, by and large, not the latter, which is to say the problem where housing is scarce is indeed that it's illegal to build enough housing there. Those places don't need to incentivize development. They need to make it legal.
That is, globally applying a cap on rents would be a bad idea, since there would be no incentive to build new housing. However, when coupled with restrictions such as requiring only some fraction of new housing construction to be below market rate it can produce better results.
Imo we should just solve this issue once and for all by supplying government housing to anyone at a low price, but there seems to be little political will for that. It seems to me if you can reach the right people to pay for it they would gladly pay to solve homelessness (which, is admittedly more than just having available housing), but it's difficult to get that to happen.
Edit: Ah, I’m realizing now that you may have meant delivering it to the occupants at a low price out of their pocket, and not necessarily at a low cost overall.
Singapore does exactly this with the HDB flats.
Way cheaper than a private condo ($1M), but still a significant barrier to many people in Singapore especially since you can’t buy one if you’re single until you’re over 35.
Where would that end? If you always build more to accommodate any poor or homeless people, they'll come from other cities to enjoy the cheap housing.
If you applied that uniformly across the US, no one city or town would become hot spots for migration.
I don't think this is really a workable policy, however. Not even sure it'd be constitutional for the federal government to do this.
And public housing has a reputation for being lowest-common-denominator, poorly-built, and poorly-maintained. If you drive through the south of the Potrero Hill neighborhood in SF, you'll see a lot of public housing, and... frankly, it doesn't look particularly pleasant to live there. I'm sure there are much worse options, but the housing there doesn't look in great shape.
Vacant properties should be taxed at an increasing rate sufficient to force the owners hand to either lower rates (and realize the losses from the new valuation from their creditors) or liquidate the property. The proceeds of these taxes can go towards the building and maintenance of affordable housing in the district their collected from.
This should encourage liquidation of speculative properties in hot markets and allow those without capitol to compete against those living parasitically off of their "investments".
Obviously this isn't perfect, and I'm open to admitting it's a terrible plan. But can we at least try something FFS? So long as people are homeless and can't afford to buy homes near their jobs I don't think anyone is entitled to profiting off of renting property.
Also worth trying:
Eminent domain land and task the national guard or army engineers with building minimally viable affordable housing condos. Attach a jobs program to train the un/under-employed from the area and scale up to the size of the problem.
or
"Yeah my policy is toxic political poison that will ensure the defeat of any politician who runs on it outside SF and Manhattan but SO WHAT?"
In that case why have politicians at all?
You can advocate for Soviet style collectivization and liquidating all businesses in the US if you want but no one outside of SF is ever getting elected on it in our lifetime.
If you think taxing zombie landowners and forcing a more equitable evolution in the archaic property market is too extreme wait until you hear some other ideas like:
Nationwide rent and mortgage strikes
Renters unions
Actually collectizing housing by taking property, some people aren't even ashamed to say they'd be forceful about it if their positions continue to deteriorate.
We can keep debating solutions to these problems until the worst effected take matters into their own hands, and pay more to clean up the mess, or we can behave like rational humans and make sure that everyone has the basic necessities of life as a prophylactic against mob violence from those with nothing to lost but their miserable lives.
So please, take a stand and share with us what your solutions are and how you're so confident they're better than the ones I've mentioned. Casually calling ideas extreme and unserious without honest consideration is at minimum rude and at worse a disingenuous bad faith distraction from the merits of my statement.
[] https://www.theatlantic.com/ideas/archive/2020/02/great-affo...
These policies you mention are already everywhere. You just haven't been obviously effected by them. Perhaps you're even a beneficiary.
I would expect it to actually increase the market rate because setting aside some amount of the supply at below market rate / subsidized means that there is a smaller remaining supply than if they hadn’t done that.
1. There's no right to live somewhere. If you cannot afford it, it doesn't matter you grew up in the place or that you like the place a lot. 2. No place is inflatable. You can increase density, but only to some point. 3. Have you seen how housing built in this style looks like? Most of them are concrete cubes. You can find them anywhere in Eastern Europe. It's not desirable.
Let's imagine a beautiful town on a small island. Neat houses and everything. Place for 100 houses. But now, 1000 families decide to live here. So the politician replaces those 100 family houses with a five huge 100 unit buildings. Locals get units, living is more affordable for everyone. The place is destroyed. Nobody wants to live there anymore.
So those 1000 people find another beautiful island with 100 neat houses...
If you have free pricing in perpetuity, then you can build housing that might have a lower margin near term but an overall high NPV over its lifetime.
I don't disagree that they don't add much to the cost, but they are high-margin offerings - people pay more rent for places that offer these.
http://38doloressf.com/amenities/
Amenities: LEED Gold certified, butterfly garden, outdoor living room with fire pit
Compare that building with the 181 Fremont[2] in SOMA which has a several private lounges, a doorman, a building concierge, and valet parking. Several other building in that area, such as the Avery[3] do have pools. I'd consider that 181 Fremont would still be a luxury offering in a city like Chicago where the housing market isn't insane.
However, despite the range the building offerings, most units still rent out for $55-75/sqft.
[1] https://www.avaloncommunities.com/california/san-francisco-a... [2] https://181fremont.com/amenities/ [3] https://www.theaverysf.com/lifestyle
Contrast that with the more spartan apartment buildings building 30-40 years ago. Basic construction, laundry in the basement was the main amenity. These were clearly built for middle or lower class folks to live in.
Rather than contrasting it to living standards 30 years ago, it makes more sense to contrast it with living standards today in real estate markets that aren't insane. A comparable apartment to 38 Dolores, with similar amenities is Chicago's Jeff Jack apartments[1] which has much of the similar amenities at a fraction of the price (~$1,000/mo for 1bd) - still likely targeting yuppies but in a different tier than Chicago's high end offerings. However something like a building in Chicago's Gold Coast (which has pricing of around ~3,500/mo for bd) includes features that are in 181 Fremont - pool, lounges, concierge, dry cleaning and even larger floor plans than you would typically find [2].
Alternatively you could say that a lot of apartments in SF get away with charging luxury prices for what really should be standard fan-fare apartment because demand is so high. The GP mentioned more succinctly, a lot of units in SF are cheaply constructed building that are actually rented at luxury rates.
[1] https://jeffjackapartments.com/building/ [2] https://www.twowestdelaware.com/amenities-and-features/
It's not legally defined as anything so any developer can build a shoebox with a bathroom and a murphy bed throw in a nice countertop and call it "luxury".
It's also become a pejorative for ANY market-rate housing in cities by NIMBY anti-development types.
What do you mean by that? Rent control in SF only applies to buildings built before mid-1979. New buildings built today, whether low-end or high-end, will not be subject to rent control now, or in 15 years.
There was a 2020 ballot initiative to change that so buildings older than 15 years old could be subject to rent control on a rolling basis, but IIRC that failed. (And even if it had passed, that wouldn't explain the last 10+ years of predominately "luxury" building.)
New construction is exempt, though.
https://www.apartmentguide.com/blog/rent-control-vs-rent-sta...
https://rentguidelinesboard.cityofnewyork.us/resources/faqs/...
Yep, those are the definitions. It looks like rent stabilization policies are frequently mis-termed "rent control", though.
Luxury has many uses as a euphemism "No Karen, just because it is an apartment doesn't mean it will cause a flood of criminals!" NIMBY defense, "Sounds good so you will pay more." and the hillariously low bar to pass "Literally anything above neccessities to sell the place."
A HUGE portion of the city is just giant single family homes or 2-3 story buildings and you are absolutely forbidden from redeveloping them into dense, affordable housing.
Change the zoning laws and developers will gladly build affordable market-rate housing.
And it's not like people can easily find housing outside of SF and commute in, about 80% of the Bay Area is zoned for single-family housing as well. There was a damning report[2] from UC Berkeley on this just a few months ago.
[1] https://sfzoning.deapthoughts.com/
[2] https://belonging.berkeley.edu/single-family-zoning-san-fran...
1. Land zoned for more than a single-family home or just a few units is relatively scarce and thus expensive.
2. The planning process is ridiculously long, which means:
2a) They need to pay property taxes on the unimproved land for much longer without any income, and
2b) Investors expect a certain % return per year, so a longer amount of time between the investment and sale means you need higher prices.
3. Nearly every development project faces lawsuits from NIMBYs, and lawyers are expensive.
Remove rent control and we'd still have the same situation with new development.
The latter seems like it would be a workable system: incentivize new buildings by allowing the owners to charge whatever rents the market will bear for the first 10 or 20 years or so, then eventually they revert to rent control (presumably after the original construction costs have been repaid and then some).
Manhattan for example is about 7x as dense as Vienna. There just isn't the space for the government to be churning out cheap flats for the amount of people that want to live there.
SF is not nearly as dense and there is absolutely a lot of space to build there but unfortunately the zoning there is an absolute nightmare that doesn't seem to be getting better any time soon.
I beg your pardon? You can't possibly call rent prices in Vienna incredibly low and still keep a straight face. Maybe for the lucky Viennese that got grandfathered in some rent controlled flats, but last time I looked (pre-covid), rents there for new comers were insane compared to the next "biggest" cities like Graz or Linz, while Viennese working class wages were not much higher than those other two cities, if you exclude fancy lawyers, bankers, UN, IAEA and other diplomats.
Maybe rent prices have come down a bit recently due to covid disrupting AirBnBs but even telling Austrians that rents in Vienna are incredibly low is a guaranteed way of getting a few laughs out of them.
The measure I would apply is whether middle class people can live in the city, and that's definitely the case, in contrast to e.g. Munich.
Munich is the only city in Germany that I can think of that's comparable to Vienna in terms of wealth, demand and size though.
So I don't see how this is moving the goalposts.
That's exactly what I said. What's your point in the end?
>Munich is the only city in Germany that I can think of that's comparable to Vienna in terms of wealth, demand and size though.
"$EXPENSIVE_CITY in the country I live in, is less expensive than $EXPENSIVE_CITY with higher wages in another country I don't live in."
Great, how does that help me? I'm sure rent is even more expensive in SF or NY but I don't compete on the jobs or rental market with those over there. Whataboutism doesn't pay my rent or feed my kids.
Turning it around since I don't see your point. Comparing to smaller, and/or less in demand, less wealthy cities doesn't give a good comparison to whether rent control/social housing in Vienna works or not.
The fact that there are cities in Germany, or in any other country, that are even more expensive is irrelevant for the people here.
This strategy wouldn’t work out for a much faster growing city.
Along with anti nuclear, the belief that rent control is a remotely good idea is an example of scientific denialism on the left. There are some decent arguments to be made against nuclear but rent control has always always caused more harm than good everywhere it's been tried.
No, because “good idea” isn't an objective claim within the domain of science , it's a subjective value claim outside of the domain of science.
Now, it's possible that in some cases this belief could be supported by belief in an objective claim that is itself an example of science denialism, but it could just be that people who believe that rent control is an good idea have different values than you do.
Some policies are also bad enough that one can safely say that no reasonable mainstream set of values could endorse it without denying the actual facts of the matter - for instance, re-introducing lead and asbestos is just plain Not A Good Idea for any set of values worth discussing, despite the fact that there are most assuredly a few sociopaths out there who'd be happy to make a buck gutting those regulations.
I've no personal experience with "rent control" but I get the impression that the people saying it's a bad idea genuinely mean one of these two cases, not simply a difference of values. Whether the science actually agrees with them, however, is quite beyond my expertise :)
Its purpose is to prevent displacement, especially of the poor and elderly for whom displacement is a major negative. For that purpose, it has done very well as a policy.
Well...for those who are not actually displaced, yes. But the ones that are displaced are often essentially banished by a dysfunctional housing market.
Rent control is not targeted towards the poor and elderly, and there are many others who benefit in the short-term (but then, again, are unable to move because the market rate has skyrocketed, though of course not just because of rent control).
Yes, exactly.
| But the ones that are displaced are often essentially banished
Without it they would have been displaced even earlier. Speculative bubbles exist outside of rent control, especially in the US where rent control is never all that strong or comprehensive.
> Without it they would have been displaced even earlier
This is mostly hypothetical. In functioning housing markets that don't manipulate prices or limit new construction through policy, speculative bubbles make little sense -- why would housing become more expensive if it's easy to build lots of it?
The argument that removing just rent control would make folks worse off -- that I'm sympathetic to, of course. Obviously you also need to build. But rent control as practiced in most of the Bay Area causes lots of grief despite only helping a relative few of the desired beneficiaries.
That is, unless you define beneficiaries much more widely than you do -- to basically make it a benefit to seniority. Rent control, like Prop 13 and construction restrictions, work to allocate scarce resources based on seniority rather than wealth or ability/willingness to pay. The argument that it allocates based on need (i.e., poverty, inability to move house) is weak; that's a mild side effect, and policies that just straight up subsidize housing (i.e., vouchers, etc.) for those in need could be much better targeted, and could be funded in a way that doesn't also incentivize poor maintenance, harassment, and eviction.
Is allocating based on seniority better than wealth? For current residents--at least, until they're Ellis'd--sure. For their kids, who lack seniority? Almost never. Everyone needs a place to live. Right now, more people want to live here than we're allowing to (through construction limitations). So, sure, we could argue about how to allocate -- or we could just end the damn scarcity!
I don't know how useful an SFBA perspective is, given that area is dealing with factors that very, very few other places in America are: Namely, an historic single industry boom and a lack of expansion area. The only real comparable place in America is Manhattan.
Any place that caps both rents and housing supply through policy amid increasing demand (like Berlin, the titular locale), is going to have a ton of politics around rent control, density caps, etc., because they are choosing to allocate scarce resources by policy instead of market -- and the way to affect policy is politics.
We are more than you think. Rising rents due to speculation or just plain landlord greed have become an issue country-wide. Even in places like Peoria. Especially in relation to stagnant wages.
I advocate a combination of strong rent control, aggressively subsidized housing and consistent growth (especially vertically) where possible.
Well, you'd need both, not just one: landlord greed has a cap, average rents can't be much more than the cost of buying, though there will always be some folks who don't qualify for a mortgage for whatever reason. The only reason landlords can be greedy is the leverage they have because supply is constrained -- otherwise, their greed would be thwarted by developers' greed!
Speculation and landlord greed only really affect prices in a supply-constrained environment. In markets where housing is a commodity, and can actually be produced, the cost of housing tends towards the cost of land acquisition & construction. Not always smoothly, of course...if demand jumps very suddenly, the construction market needs time to adjust, etc.
> I advocate a combination of strong rent control, aggressively subsidized housing and consistent growth (especially vertically) where possible.
That assumes rational actors in local government, which strikes me as even more fanciful.
However, human needs have an expiration date and often cannot wait for the market to make sense.
| That assumes rational actors in local government
No it doesn't, if you can build enough power you can force local governments to enact these kinds of reforms.
All politicians can be pressured if you know where to push.
On the other hand, you could bet on "rational activity" from landlords and developers—aka greedy self-interest.
So, sure, you might get a conscientious grassroots group to apply political pressure for rent control when it's not in their own self-interest. But you can 100% count on developers and landlords to be greedy, and I'd much rather channel that group into the outcome I want while I wait and hope for the former.
Again, are you talking about SFBA? Because I thought we addressed that.
This is a very SFBA thing to say.
| Look who overwhelmingly applies pressure
Yeah, I'm not talking about those people.
Poor and working people have mobilized plenty of times before. That's been constant throughout modern history and only in the past few decades have we had an ahistorical low period of organizing activity. I expect that lull to end in the coming years. In many ways it already has.
I'm not sure how it's a very SFBA thing to point out that the people who have a voice in local politics are the people who haven't been displaced?
> Poor and working people have mobilized plenty of times before
This would require them working in their own rational self-interest too, though -- which (a) there isn't much evidence for, and (b) kinda negates your earlier argument about assuming rational actors.
Displacement far enough that they are outside of the local political jurisdiction is specific to there. In places like Peoria, it's just further economic immiseration within Peoria. Most of America is not being gentrified, rents are just rising. There's a difference.
| (a) there isn't much evidence for
There is plenty of evidence for that. You might just have a recency bias.
| negates your earlier argument about assuming rational actors
I don't put people mobilizing into the ideological framework of "the market". I don't put much faith into the ideological framework of markets generally. I find it only slightly more useful of a tool of understanding social forces than, say, astrology.
Importantly, I'm not talking about what will happen by virtue of some outside force or guarantee of history. I'm talking about we need to make happen by force of will.
Peoria has a 50%+ homeownership rate. Most of the people voting locally are not facing rising rents, let alone rents at all.
> There is plenty of evidence for that. You might just have a recency bias.
> I don't put people mobilizing into the ideological framework of "the market".
Ah, I see, you don’t actually care about whether people act in their own self-interest, you just don’t like capital-E Economics and are using this as an excuse to throw out all of our understanding that people respond to incentives.
“The market” is not the only ideological framework that assumes rational actors. Do you have an alternate model of non-rational humans that you are assuming when you’re talking about making things happen by “people mobilizing”? Are they somehow not considering their own self-interest?
> Importantly, I'm not talking about what will happen by virtue of some outside force or guarantee of history
Of course. But those who ignore history are condemned to repeat it.
Ha! Right back atcha, kid.
Rent control is a good tool for keeping existing tenants in their homes. That has a lot of value in itself but it must to be coupled with the construction of good quality, affordable public housing at or below the average rent controlled property in order to maintain the desired goals of keeping rents/property prices down for new entrants and increasing mobility.
The only issue with rent control is that it's applied as a band aid without also addressing the root causes.
However, I have seen some comments and articles that talk about how building more housing in the bay area will drive up demand, somehow ignoring that there is an overabundance of commercial real estate that is driving the demand in the first place. It also ignores housing pressure, namely the concept that people increasingly live with room mates or adult children keep living with their parents. These people are already in the city and are looking for an opportunity to move out. How is giving them a place to live a net loss? If anything parents might move to a smaller residence and thus free up supply for larger families that truly need a single house.
I don't know why people believe that the laws of supply and demand don't apply to the housing market. Maybe they are misapplying the idea of induced demand which is really poorly named or at least the name is not directly putting the spotlight on what is actually happening. It's basically the phenomenon that as you increase roads people will switch to their preferred mode of transport even if it is grossly inefficient. Cars carry fewer people than buses or subways so it basically has a neutral impact on traffic. The problem with applying this to the housing market is that developers actually control their plot of land. A street will just let any vehicle drive on it. A developer will instead focus on building the most efficient housing possible because he wants to optimize his bottom line. So no, he wouldn't buy a plot with a house for 2 million only to rent it out, he would try to upzone the plot and build a duplex or triplex since this will result in greater profits. The street on the other hand is fully subsidized for the people driving on it, so they end up using it wastefully.
Owners would rather let the land sit empty then deal with the nightmare it would create.
This is the same issue with Prop 13. The idea isn't bad; it's useful for people to have bounded future expenses. The problem is the bound is too low, and it distorts the market.
Nuclear power obviously has immense benefits, but there are also undeniable risks associated with it. It's entirely possible to be in favor or against it while considering the exact same scientific facts depending on which of these you consider more important, no "scientific denialism" required.
I also don't see how nuclear power is supposed to be related to the economic left/right spectrum.
Less than 20 people have died in Nuclear related accidents in the history of this technologies use. And almost every single one of those were unrelated to the nuclear technology itself (electrocution, other workplace accidents that could happen in any power plant)
If you want to lump in Chernobyl and Fukushima we are still only talking 3-4000 deaths in history. And there's zero reason to believe these accidents are likely to ever occur in the US.
So yes, there are "undeniable risks", but they are vastly vastly overstated.
Especially when the "undeniable risk" of climate change is many millions of deaths whilst climate change activists insist we can't use the only technology that can almost entirely eliminate cooking the planet via coal, oil and natural gas.
Leaving out the two most significant accidents in the history of the technology shouldn't be the default...
Literally the previous sentence I was talking about the danger in the US of fossil fuels, then I wrote about the danger of nuclear and then move on to worldwide.
Nothing I wrote was false at all. It's almost like you're intentionally trying to misread my argument to paint me as disingenuous.
I also don't understand why the number of people that have died in nuclear accidents only in the US is a remotely useful metric in the context of the discussion.
You're trying to ascribe malice and dishonesty because you happen to disagree with me. I don't know why the internet does this to people
Sigh. I made it clear in the first comment that I don't disagree with you. I would love to see wider adoption of nuclear power. The sentence that you wrote was inaccurate, and I felt that more accurate wording would improve the quality of the debate. I don't see the point in engaging any further on this.
The sentence devoid of context is misleading!!
But the thing is cherry-picking a single sentence without its proper context is misleading if not downright dishonest itself.
I was clearly talking about COAL/FF DEATHS IN THE US. Why would I then go on in the very next sentence to compare that to WORLDWIDE NUCLEAR DEATHS?
Then in the NEXT SENTENCE, I bring up Fukushima and Chernobyl and say basically "if you want to count them then...."
Nothing about my post was misleading.
Aviation for example has The Aviation Herald, where one can see that there's in fact quite many incidents that almost never result in accidents. There's lots of literature on safety engineering in aviation.
What's the equivalent for the nuclear industry? I was admittedly not very interested in this topic, so I'm only aware of the descriptions from Perrow's "Normal Accidents" book where he reported on several incidents which were actually published by the involved organizations. They didn't inspire confidence at all, on the contrary they were downright scary (and much scarier than one can find on the Av Herald).
Maybe the nuclear industry grew up, but it's absolutely necessary to have transparency here. Looking at global accidents is like trying to map a castle through a keyhole.
What annoys me is climate change activists that paint nuclear power as some terrible boogeyman we must never use lest we irradiate the entire United States.
They will never ever "show their work" and do the cost/benefit analysis of the ongoing thousands who die from coal and other carbon energy sources or the potential millions who will die from climate change.
No, no it's all just alarmist BS about nuclear being "dangerous" so let's just not use literally the only power generating technology that can replace almost every single fossil fuel plant in the US. Not even solar and wind can claim that!
So I think it's accurate to describe this view as "anti-science" at least for those who want to abolish the use of nuclear altogether (Green new deal types)
Rent control in crises makes sense. Rent control was applied in WW2 in NYC for example.
Just like rationing is a good response in a crisis, but not in "peacetime".
Economics is just a bunch of biased political arguments using different priors for assumptions. This is evident when you about different "schools" of economic thought. There are no irreconcilable "schools" of thought in the hard sciences with whole universities dedicated to only one school or another.
So, is astronomy not a science?
Now that's provably wrong, and outs you for not knowing anything about the literature.
Deny supply and demand? Always popular. We're 100 years past the marginal revolution, yet, both the practictioners of the discipline and outsiders (marxist sociologists) think this can be controlled.
> https://www.bbc.com/worklife/article/20160517-this-is-one-ci...
It's not as nice for young people or other newcomers without capital and a couple of decades in the apartment queue. They still have to pay market prices to rent, but have to make do with second or third hand renting where they have no protection and can be forced to move on a very short notice. Meanwhile, the difference in rents is pocketed by someone that is probably using it to pay down a mortgage on their actual home.
Seems like this way of defining natural laws is a bit silly.
Pick a duration upon which to re-evaluate the value of property. Distribute this roughly evenly over all the property everywhere so that it isn't all at once.
When a property's up for evaluation, offer it for 'sale' via a distributed dutch auction as part of a block with similar properties in the same jurisdiction (roughly, zipcodes, or maybe divided up should work).
The block is bid on as a whole, with up to 25% (rounded up) of any of it excluded from the bids (high or low) and with any 'inspection noted defects' (post sale) deducted from the transfer price of the property. Price for a given unit would be proportional to the previously evaluated (by market sale or bid) price of the property among the whole group. Any units not receiving sufficient bidding coverage to provide a fair price should be re-tried with the aim towards the median value of the next group of properties in that area.
The resulting offer is then forwarded to the residents as proof of their new property value and the basis for all taxes upon it. The resident has an option to accept that value anytime within 8 months, for a specified date of no more than 6 months from when they've accepted the offer.
There's a lot to be said for knowing that once you pick a place to live you can depend on it being there as long as you need it and can develop a community, take risks in other areas of life, etc.
This is to ensure a __fair evaluation__ of a property's value on a real market, rather than some random assessor's opinion.
How on earth to "divide" it fairly though?
This is exactly what the free market (attempts) to do, and might do better without rent control or overbearing zoning restrictions - allocate resources optimally according to demand.
Want to live in a super fancy place in the middle of the city? Pay lots because it's a luxury.
Can't afford that or don't want to? Live further out where there is plentiful cheap housing stock (I said no overbearing zoning restrictions remember!) and commute via a well resourced, publicly funded transport system (unfortunately the US doesn't do this well).
When you frame the motivations of individuals with such simplistic motivations as natural market forces being entirely driven by "greed", I have a hard time believing that you'll actually get to the bottom of things. In much the same way I don't think that workers/unions fighting for higher wages is "greed", I don't think that people that have invested in homes wanting to get the market rate for their homes is "greed".
From there it's just a matter of deciding what is and isn't allowed. I happen to be viscerally against the idea that a person's basic need -- a stable home -- should be overridden by another's desire to get more money out of an investment.
You seem to be of the opinion that people shouldn't have the right to a stable home if the owner of that home wants more money. I... guess that's ok? Not really big on compassion or empathy, but... it's an opinion, I suppose.
Your focus on "greed" completely lacks nuance. A landlord raising rent 30% just because demand is high (when the costs of being a landlord have not meaningfully increased; the concept of "market rate" is irrelevant here) is greed, absolutely, no question about it. A worker or union fighting for higher wages may or may not be greed, depending on the circumstances; usually it's not, because in general employers have much more power than employees (even when unions are involved), and worker pay has stagnated in recent decades, while executive pay has skyrocketed.
I mean, that's painting with a pretty broad brush. Nobody said anything about legalizing doing anything you want with land. You're never going to have a perfectly stable arrangement when renting someone else's property: I don't own a car or exercise equipment; if Uber or my local gym raise rates, I'll be bummed, but I don't begrudge them for doing it (even if it means I have to move to a less convenient gym.) I have empathy for those Uber drivers and workers at the gym.
I can absolutely empathize with those living through increases in rent, I just happen to believe that the solution to that problem is not to implement policies that make those renters beholden to their current landlords forever (even if their circumstances change and a new home would be more convenient). And just as I have empathy for those renters who want to stay in their homes, I have empathy for those renters who got a new job across town but can't afford to move, because they've lived in the same home for fifteen years and can't afford market rate at a new place.
As far as landlords go, I see no reason why they shouldn't be able to raise the cost of rent to keep up with cost-of-living just like anyone else. My current landlord own a house or two on my block, and they make their living off of the profits they earn by renting and maintaining these houses. Just like I want to get a bump in pay every year, it seems eminently reasonable (and not greedy of them) to grant that to them as well. I have empathy for the landlords who provide me with my home, and provide repairs and maintenance.
If the problem that we're talking about is that people can't afford their homes because the rate that others is willing to pay is higher than they can afford, the solution is not to form isolated bubbles that ignore what's going on in the rest of the market and create indentured renters. Just one of many better solutions would be subsidized rent assistance: give the renters the difference they need to make rent, straight up in cash. If costs in the city have gone up by 10%, that's just evidence of the fact that there's a ton of demand fighting for not enough supply. Artificially restricting supply even further is an unsustainable solution for the city as a whole, and far better solutions already exist for keeping people in their homes.
I guess my big point is that if you boil down a complex issue like this to good people vs. bad people, you're not being honest to the actual issues at hand. To assume that landlords increase rent solely out of greed, or to assume that being okay with rent increases implies a lack of compassion, or to assume that support for policies that lock-in rent are the only empathetic stance to hold don't seem to leave a lot of room for discussion or understanding.
That's... not really the same? Having to change gyms or pay more for transportation (or use public transit) is a lot less of a drastic life change than having to find a new home, possibly not even in the same neighborhood or city that you may have lived in for years.
> As far as landlords go, I see no reason why they shouldn't be able to raise the cost of rent to keep up with cost-of-living just like anyone else.
I agree, and most (all?) rent control laws account for that by allowing limited yearly increases. SF's rent control increases are indexed to inflation. That's not a perfect proxy for cost of living; maybe CPI would be better. But the point is that it can be done, and landlords can raise rent yearly.
But when we look at non-rent-controlled units in SF over the past 10-15 years, that's not what we see. We see double-digit increases, sometimes above 25%. The cost of living or cost of being a landlord has not magically jumped by that much in a single year. They are jacking up the rent because they can, because they want more money, and because they don't care about how that affects their current tenant. That's... pretty much the definition of greed.
> My current landlord own a house or two on my block, and they make their living off of the profits they earn by renting and maintaining these houses.
I don't entirely subscribe to this view, but I know people who are basically against this form of making a living. Consider that it's literally rent-seeking behavior. Is it good for society to allow people to get into a position where they may have to displace a family from their home because their financial system has changed?
> Just one of many better solutions would be subsidized rent assistance: give the renters the difference they need to make rent, straight up in cash.
What stops landlords from just jacking up rent further? If they know a portion of the rent is coming from the government, and the government will pay a fixed percentage of the rent, they can simply raise rents and demand more, and we're in the same spot all over again. It then becomes a transfer of wealth from taxpayers to landlords.
> If costs in the city have gone up by 10%, that's just evidence of the fact that there's a ton of demand fighting for not enough supply. Artificially restricting supply even further is an unsustainable solution for the city as a whole, and far better solutions already exist for keeping people in their homes.
I used to be against rent control for this reason, but the problem is that it ignores reality. Zoning can be restrictive. Political will for building can be difficult to come by. Planning processes can be lengthy and expensive. Incumbent landowners can lobby to restrict new housing from being built. If we eliminated rent control in SF tomorrow, without making any other changes, it wouldn't magically make rents reasonable across the board. Many (perhaps even most) people in those formerly-rent-controlled units would still become displaced. And that's the point, here: rent control is a way to keep rents affordable when it's not possible -- for whatever reason -- for supply to meet demand.
Also consider its importance when the rental market becomes extremely volatile. Sure, maybe you can say in some locale that over the span of 50 years rents on average only grew 3% per year, and on the face of it, that sounds pretty reasonable. But like in equity markets ("the market can stay irrational longer than you can stay solvent"), that doesn't matter if in that 50 year period, rent increases were 10% per year for 10 years (or 20% a year for 5 years, or whatever). Most people can't handle that sort of shock to their finances.
Berlin has more than enough people living there, they don't need the outsiders and its within their rights to discourage them from moving in. But this isn't even doing that as they're very welcoming, they merely want to protect the people already living there.
I am not privy to all the complications involved in this scheme, but how would anybody be forced to move?
Or a real estate broker who knows building owners willing to rent out the stabilized units (50 pct are stabilized, 50 free market more or less). Or you paid a broker fee to this broker. Or you sublet from a rent stabilized tenant who charges market rent..
No one talks about how easy corruption happens in these situations. The bifurcated market in NYC sucks - it should be all stabilized or all free market.
I don't think this is a function of rent control. The people who were renting 10-20 years ago will still need somewhere to live.
If there isn't sufficient new housing available, then this increases competition for existing housing, but kicking people out of their homes doesn't seem like a good solution either.
I live in Berlin, and my neighbours are in their 70's. Should they be forced to find a new flat way outside the city because the rent triples over the course of a few years so young tech workers relocating from London can have a place in the cool part of town?
The rental market is different in Germany than it is in other countries: less people own their homes, and getting a housing contract feels a lot more like a permanent thing than when I was living in the US. You pay 3 months rent up front as the security deposit, and most flats don't come with a fitted kitchen so you have to take care of it yourself.
Another possible solution would be to take money away from tenants and landlords both to give directly to construction companies. That's socialized housing. However in the long run it's not likely to be much cheaper, because it's not like landlords are making that much profit in the first place. The profit in renting is about the cost of capital, the government is not going to do much better.
> the best they could do would be to get rid of the (actually quite small) cut that landlords take for themselves
Again, I think this claim is easily contradicted by the success of Vienna's housing market. The thing is, if you took the market as it is today, and the government just bought all the housing properties at market rates, then yes you would only see savings in terms of the profit margin which is currently enjoyed by landlords. But if the government takes the role of providing housing as a public good, it can change the incentive structure of the market in a way which benefits renters.
For instance, if your goal is to maximize rent profits, you will make decisions to maximize the year-over-year increase in rent, and you will build more units in a way which maximizes the rental price per unit. That's how you end up with so many shoebox-sized luxury condos in Toronto that nobody really wants and an under-served affordable housing market. If you treat housing as a public good, you make decisions to keep rent prices stable, and you build more housing to serve the need rather than the profit motive.
This argument strikes me as the tail wagging the dog. Vienna has no motive to limit housing since they build such an enormous percentage of it. If rents go up because the government of Vienna doesn't build enough housing, they will be removed from office. Profit is profit. Developers will build anything and everything that they can. The issue lies in the extreme costs involved in building anything new at all, mostly in graft by local municipalities and residents. If a municipality with a broken real estate market allowed housing to be built with less effort, more housing would be built.
Forty percent of Manhattan's buildings could not be built today.
https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...
In Berlin, we have had laws on the books forever which prevent tall buildings and excess density, and I'm glad because if developers had their way, they would build high-rises where all the parks currently are, and this would not be a city I would want to live in.
In general I'm not a fan of over-regulation or excess government intervention, but when it comes to housing, I think it does make more sense to treat it as a public good. Government is not perfect, but people should have some voice in how their community develops, and this will not be the case if housing development is left only to private interests.
It's absurd to make certain individuals pay for others housing in a random way.
https://www.dss.gov.au/our-responsibilities/housing-support/...
The goal should be to make it easier and more orderly to transfer property ownership, while also providing protection to those making the sales.
The standard contacts should also include enumerations of inspection agencies and what type of inspections were performed (and when), and the various types of insurance which might also be optional and cover protection for buyer / seller / etc.
We just refinanced and I couldn't believe how burdensome and slow the process was. I don't understand why I had to talk to a person at all.
yes
why should they get to stay in berlin and have their housing subsidized?
In the end, the Senate of Berlin is looking out at least in theory for the people of Berlin, not nomad developers or other people looking to move there.
also, if people move to Berlin, they also become the people of Berlin.
We are not talking about getting tickets to an NBA playoff game, we are talking about housing. If someone has been living in a city for their entire life, it's not reasonable to expect that due to "market forces" they should have to pick up their entire life and move to an unfamiliar place because they can't continue to compete in the market into their golden years.
"I want to move to Berlin", on the other hand, is not a particularly legitimate reason to kick out a current resident for a newcomer.
If you could buy a house with zero percent interest rate, then any rent, no matter how tiny, is building you equity.
Then you have to conisder thay mant houses are bough as 'investment' and many owners literally dont bother renting them out, they just wait for price of the house to go up. This is a serious problem in london
Frankly it goes to show the hypocrisy of many of the cheerleaders for higher density housing, pushing for a future where as an individual you get discarded and banished to the hinterlands when your value declines.
The root issue in Berlin and SF and NYC is the demand far outstrips the supply. The only solution is to create more Berlins, but that’s not going to happen for myriad reasons.
And let's be reasonable here, rent control is not some handout. It's not a subsidy or a tax. The price you pay on your first year in a rent controlled apartment is market rate. Rent control simply says rents cannot go up say, beyond 4% a year. Perfectly reasonable in a world where wages for the working poor rarely go up beyond 4% a year. If landlords want to make more rental income per year, they should instead lobby their city council members to allow them to build more units per parcel, rather than lobby to artificially constrain housing supply with zoning and/or red tape in effort to raise real estate values.
Or, you know, New Jersey. Or some suburb. The same place younger people have to go because rent control destroyed the housing market in the city.
1. https://www.zillow.com/homedetails/20722-Pioneer-Blvd-Lakewo...
You’ve got it backwards. There’s not enough jobs in Manhattan for all the people who want to live there. The unemployment rate in NYC this time two years ago (before pandemic) was 4.2%. In Iowa it was 2.7%. In December 2020 NYC unemployment was over 11%. In the rest of NY it was 5.9%. In Iowa it was 3.1%.
Cities like NYC are a Mecca for yuppie jobs. For the most part, they are shitty places for normal people to find work.
> In some areas, like in CA, you really don't save very much at all going out to the suburbs.
That’s because California is the epicenter of bad ideas about housing policy: https://www.latimes.com/opinion/op-ed/la-oe-broughel-hamilto.... I live an hour outside DC and you can buy a 3BR family home for 3x median family income in the county. In CA it’s like 7-8x even in the suburbs.
I waited 6 months for an apartment here when I first moved. Pretty much everyone who doesn't want to spend insane prices on a unit has to.
And even then, I'm still paying 500-600 more than I should be. It's insanity.
The main problem is that there are immigrants (primarily from one country in particular, but that's less important) coming in and buying up all of the "houses" here (note that "House" in Berlin means a large apartment-complex-like house, not a single American Style, white picket fence house) and then increasing the prices slightly.
I'm not anti-immigration, clearly, but there are still concrete economic effects that haven't been solved yet. I don't think anyone knows what these measures will lead to, but at least it's something.
And on top of that germany has very strict laws about transparency of home ownership so there's no clear way to know the distribution of home ownership or who are the biggest landlords and where they got their money from. Which is bad because there's a lot of shady people buying whole complexes, but it's also working as intended as a lot of politicians are also big landlords.
Also, have you been to Berlin? Of course people don't own houses here. Unless you're outside the ring, there are very few houses to be bought. If you're talking about owning apartments within the large houses here, it makes sense that a lot of people don't want to own them - because not a lot of young people want to be tied down to a 40sqm unit in one part of the city for the rest of their lives, or deal with all of the hassle of subletting and the tenancy laws here unless they were serious about holding and nurturing those securities.
Sounds like it is a massive success? Those units don't magically disappear, they are bought - by homeowners. It seems like the landlords were artificially driving up the housing market while not adding any value.
The only problem here is that they limited it to pre-2014 apartments. Maybe they should just extend it to all apartments instead.
If you know more than others, that's great. If you're going to post about it, please share some of what you know so the rest of us can learn. Just putting the other person down doesn't help, and poisons the atmosphere.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
Whether or not you call that success or failure depends on what you're trying to achieve, but usually these sorts of actions are trying to create housing affordability. Taking most of the supply off the market for new renters (by selling to people who can afford to buy and by incentivizing those who were already renting to stay for as long as possible) definitely does not create an affordable situation for those who need it.
Without creating more supply, you end up with one of two problems for folks at the bottom. Either you don't regulate housing, and their prices go up too much for many to afford, or you do something like this and you keep the existing stock affordable but guarantee that there won't be nearly enough stock for all the people (at the bottom of the economic ladder, at least) who want it.
In this case, you're not helping poorer folks as a class, you're only helping the specific set of poorer folks who were already renters (and who don't need to move into a bigger place, since they can't leave their current rentals). If you want to move to Berlin and you're not rich, you're SOL.
That certainly doesn't seem to be the intended effect, so based on that I don't think it's fair to call it a massive success.
Edit: Not to criticize the profanity version, I prefer it, just offering an alternative that doesn't need to be censored.
You create an insane level amount of supply for homeownership on this market. An absolutely insane level.
Indeed, the vast majority of increase in housing prices is because rents are so high that 7% YoY returns are possible. Without these returns, then there is no way to justify inflation in housing prices for simple homeowners.
If somehow millions of people do buy houses in Berlin, then you build public housing to undercut the price of housing.
The idea that your scenario will happen is not really rooted in fact. To me, it seems like a way to rationalize the principle that rent control must always fail - whereas in the real world it doesn't, see Vienna.
Homeownership in Berlin is very low, at 17% or so. The absolute majority of the housing market is based on renting out units. Before saturation of homeownership happens, a gulf remains.
No, as we seen in north america that's not really true. Homes can go up on speculation alone.
>You create an insane level amount of supply for homeownership on this market. An absolutely insane level.
Is homeownership a necessary component of this? Creating a insane level of supply for apartment rental achieves the same thing. If there are more units then there are renters, prices have to fall to meet demand.
Not if it's so cheap to keep empty apartments around that you would rather not make money now, in the hope that you will be able to make more money in the future.
It's not exactly the same, but around here there is a huge oversupply of spaces for shops/restaurants. Owners prefer to keep them empty rather than have someone give them money.
EDIT: Well, maybe it's not actually oversupply. There might actually be a lot of demand, but not at the excessive prices landlords demand.
Ironically rent control laws that cause this. Accepting a lower rent now would mean locking in a lower monthly rate for the future, whereas if you left it empty you can hope that the rental market will recover and charge high rents in the future.
Pushing renters and speculators out of the housing markets in favor of people who actually want to settle in the city is probably the best you can do as a municipality.
AFAIK that's not due to government regulations, but due to how banks handle valuations. Leaving a property empty doesn't affect the valuation, but accepting a lower rent does. This has effects on the landlords, such as making it harder for them to get new loans, or triggering covenants on existing loans.
That being said, I live in a rent controlled city, and occupancy rates are upwards of 90%, so that doesn't check out.
Yes, homes can go up on speculation alone, but this is a bubble that will pop. In North America, rising rents act as a backstop that prevent the bubble from popping, because of guaranteed rental incomes that protect you.
It's not possible to create an insane level of supply for appartment rentals. There's two reasons for this. Firstly, there's the obvious limit to how much you can build within a reasonable commute time with reasonable infrastructure at a good quality of life. Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less. Coupled with 4% rent increases over inflation every year, it's just not feasible to rely on additional supply.
In the real world, free markets lead to rent increasing right up until the level where too many people are in poverty due to high rent. That's because the natural increase in rent is simply too high to be counterbalanced by supply.
That's why from the worst planned cities to the very densest like Hong Kong, housing stays more or less as expensive as it can be without people moving out due to poverty.
The only solution is to make real estate a barely profitable or depreciating asset. This is done here by aggressive rent control. As renting stops being so affordable, apartments are sold, homeownership increases, and renting becomes something you do to prevent depreciation, not to make profit.
Crucially though, here, building more apartments stays profitable, because they can go to homeowners or to people who buy housing as a stable asset (and then rent it out). Coupled with public housing, you can get the best possible trade-off.
but supply has dropped as well. Freezing food prices would also drop food prices, but won't stop bread lines.
>Yes, homes can go up on speculation alone, but this is a bubble that will pop. In North America, rising rents act as a backstop that prevent the bubble from popping, because of guaranteed rental incomes that protect you.
Not exactly. Price-to-rent ratios are above 30 in major north american cities, reaching as high as 50 in SF. While future cashflows might provide some backstop in terms of your investment, that's really not much of a consolation when you can be doubling your money roughly every 20 years with stocks.
>In the real world, free markets lead to rent increasing right up until the level where too many people are in poverty due to high rent. That's because the natural increase in rent is simply too high to be counterbalanced by supply.
>The only solution is to make real estate a barely profitable or depreciating asset. This is done here by aggressive rent control. As renting stops being so affordable, apartments are sold, homeownership increases, and renting becomes something you do to prevent depreciation, not to make profit.
I'm not sure how rent control fixes this. If you have 1M families but only 100,000 plots of land, they're going bid up the price until enough people can't afford it. This dynamic is in play regardless of whether there are landlords or not.
With housing, a poorly-capitalised speculator can get a mortgage to buy property, and pay it off using rental income, with a deposit of maybe 15-20% of the value of the property. This lets them capture the price increase on a multiple of their deposit.
It is much harder to do something similar with the stock market and loans. Amount loaned would be lower and interest rates higher.
The ability to rent is not the primary driver of speculation. But it drastically lowers downside risk, which gives less incentive for anyone to pop the bubble.
>I'm not sure how rent control fixes this. If you have 1M families but only 100,000 plots of land, they're going bid up the price until enough people can't afford it. This dynamic is in play regardless of whether there are landlords or not.
Well, empirically, it does fix it, doesn't it?
You wrongly assume that the landlord gets to make this choice. In this situation, the landlord does not - the tenant does. If renting is made more attractive by rent control, then fewer renters move out and supply is thus lessened.
Source?
This also hand waves the fact that a 1% decrease is still great in the face of say, a 4% increase, totaling a 5% spread — even more if factoring in inflation.
Sounds like increasing supply is still one of the best ways to keep prices in check.
Even with a 5% spread, to hold off real rent increases for ten years, you'd need to increase housing by 116%. Which is completely unrealistic. This rent control policy had the same effect as reversing 12 years of rent increases, which would require you to multiply supply by 2.5 over those twelve years.
Needless to say, this is not possible.
Increasing supply is assuredly important and necessary for keeping prices in check. But it will have a much smaller impact than rent control. The main purpose it will serve is to make sure mobility is still good.
One does not need to hold off rent increases for an arbitrary amount of time, they just have to stay inline with wages to remain affordable. With that in mind, it is certainly not impossible to build enough to keep up with job/wage growth.
I agree that no single policy can fix everything, but the current status quo of pitting the haves (rent control) vs. have-nots (newcomers/movers) is not working.
The average hourly US wage has not increased or barely so.
Therefore, the inflation adjustment done above corrects for it.
If you want rent increases to stay in line with wages, they will need to be held off entirely.
Wages in [U.S.] metropolitan areas have increased much more than what was referenced in your source [1], while housing in many of those areas has not kept up with that growth.
Just look at the wage growth at top metros, many of which have grown a lot recently, but have failed to increase housing supply to correspond with that growth.
Affordability crisis in these metros are the result of restrictive zoning policies that greatly restrict supply. The ones holding the bag are those that need to move, or had the unfortunate timing of being born more recently and are stuck paying recent market rates.
Rent control adds even more fuel to the fire by artificially constraining supply even further through reduced liquidity. People will stay longer than they otherwise would in their rent controlled unit because moving to a new one means paying market-rate on a different unit.
This is playing out similarly in Berlin.
[1] https://www.garnereconomics.com/images/reports/Metro_and_Non...
As far as I understand then, your entire argument is unfounded and contrary to the data.
FYI, the US urbanization rate is 86.4%.
- Cities/metros, not the entire US.
- I was also specific about cities/metros that are experiencing a housing crisis, and not making an argument that all metros are in a housing crisis.
- I then cited my sources, and once again was specific about wage growth in top metros and how many have failed to grow their housing supply along with wages. That 86% of the U.S. is urbanized and growing 1% faster than average is not the issue here, it's that where growth is happening, supply is not keeping up.
- I then argued that restrictive policies are constraining supply. In the case of this article pertaining to Berlin, it's rent control. Metros in the U.S. with supply constrains (Like the SF Bay) also use rent control and limit supply.
Despite being specific, you keep conflating my arguments, or steering away from my core argument: Constrained housing supply is not keeping up with demand. I'm also arguing that it isn't impossible to build enough supply to keep up with demand.
Go look at SF housing prices lately to see how the moderate increase in supply, from people moving out of the city lately, has caused an absolutely huge rent drop of around 30% .
This is technically true, but not for the reasons you list, and it isn't the case here.
You can always build up. 150 floor buildings are not possible - if rent goes high enough they are worth building. Nobody is going to build that if they don't expect a return on investment though.
It isn't a problem in reality because jobs face the same pressures. eventually some company will decide rent in those dense neighborhoods (sometimes cities as well) are too high, and move. That moves some housing demand with it.
Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less. Coupled with 4% rent increases over inflation every year, it's just not feasible to rely on additional supply.
That doesn't follow. To build more supply the question how much it costs to build vs how much you can rent for. A a landlord the total profit in rent for the city isn't my concern it is my marginal profit that matters. Even if we double the supply of apartments in the city, my building 100 more isn't going to make much a difference in that, but I get a larger share of that 10% decrease in price and so my profit is still higher building 100 apartments than zero.
I don't know what is going on in Berlin (I can guess). I know in San Francisco the city has for many years refused to allow building at anywhere close to demand. Thus more people want to live in the city than actually can get an apartment there. Plenty of builders are willing to build more supply, but they are not allowed to under reasonable terms so they don't. (as a result of this there is a lack of experienced people in construction and so even if SF allowed unlimited building in practice there would only be a gradual uptick in building over 10 years while the industry gets experienced people back)
That's more than enough to justify building an infinite amount of housing.
That demand will not simply go away, but newcomers will have to buy instead to rent. Or, there will be a huge black market. I've read an article about Stockholm were that seems to be what has happened.
A big irony is that the left who created the law has hurt some of their staunchest supporters, who did subsist by subletting their flats, which they had rented at old, low prices. That income is now also going away - it is not just "greedy rich speculators", but also transgender artists getting by on minimum income from subletting their flats whom they have hurt.
It is of course possible to lower prices by making the city less attractive. Socialism has succeeded in doing that already once, that is why Berlin was so cheap in the 90ies.
You're completely ignoring the fact that homeownership, even if prices aren't incredibly high, requires a large down payment that many people don't have, which is why they rent. Those people still can't afford to buy and are pushed out, and they're the ones you're supposed to be helping.
"If somehow millions of people do buy houses in Berlin, then you build public housing to undercut the price of housing."
This is where your argument totally loses steam. You can't just handwave and say you'll build public housing... that is an incredibly expensive and politically difficult thing to do. When your theoretical solution to the problem is something that is very much not guaranteed (or even likely), and you pretend it'll just be no problem at all, you're ignoring reality and not presenting a useful solution.
The economics are very simple. The price of housing if it's not profitable to rent and even less profitable to hold will drop until occupancy is high. Those that can't put down a down payment will rent, the others will buy. If not, the price will just continue to go down.
This argument isn't theoretical. It's an actual process that has been done and works.
Also don't forget about renters keeping tennancies vacant temporarily, to avoid losing their locked in rent control rate. I have heard many stories of affluent people keeping a "cheap" apartment in New York vacant for years on end.
Just issue municipal bonds, and use that money to build. Investors pay the German government to hold their money. Building is not expensive at all.
The market is constrained by supply, which is constrained by regulation. If you want to see how this works without any rental market, look at Oslo. The prices are truly something else.
Once you add rent control people might stay simply because of the low rent, even if they are fully capable of paying market rate rent. They might have to commute to the edge of town and it still is a better deal for them. You get a stagnant housing market where people rarely move. The vacancy rate goes down and instead of renters always being able to at least visit an apartment with the fair chance of competing with say 5 people at most you now have dozens of renters all looking at the same apartment. This gives the land lord more power to charge higher prices and since he has to cancel out the losses from existing rent controlled apartments he might not even have a choice and simply increases the rates when possible.
The problem is that the land lord is being put under more pressure to perform and thus he becomes more selective and only gets the "best" tenants which favors the wealthy.
Of course, all those people getting paying dirt cheap rent are happy since they benefit personally from an externality.
But the landlords who owned (often own many) them were also wealthy. So you are replacing landlords with people who actually live there.
...who are now saddled with decades of mortgage payments, and have a high percentage of their net worth being tied up in a not very well diversified asset class.
If land prices are increasing faster than inflation it is bad unless they can get out before the bubble pops. Obviously if they bought too high that is a bad investment. Lets ignore this and assume a sane market where values mostly are similar to inflation.
While property increases with inflation are not nearly as good an investment as investments that do better than inflation, it isn't as bad as it sounds. The whole point of buying property in this case is a place to live. So in 30 years you no longer have a rent payment at all, and in between your rent never goes up. This payment situation needs to be factored in to the calculation since you will be living someplace no matter what. (unless you would normally live in a cardboard box) As a result people who invest in property to live in need to invest a much smaller portion of their total portfolio into something else. And since this is a place to live it doesn't matter how well it performs overall since you are not selling (at least not until you go to a nursing home which you can/should insure for).
Let me point out that rent doesn't increase when you own property. So if you invest just the difference between market rent and your rent over the years you will have more money to invest. Now that money doesn't have as long to grow (since it isn't front loaded as much), but owning is still a good part of a long term portfolio.
Note that the above makes some assumptions that may not be true, or that could be true but you don't want to for lifestyle reasons. That is perfectly fine - there is no one size fits all. Every situation is different, you need to make your own decisions as best you can. The first assumption above is you live there for the rest of your life (some amount of trading is allowed, but be careful as each trade is costly), the second is you pay off the dwelling.
If you look at it in terms of portfolio construction, you would never want more than 10-20% of your net worth in your home, much less the 50+% many people have in practice. Owning your home is a pretty mixed bag, financially, and made worse in practice because people have far too much of their net worth in it. They'd benefit from renting much longer and buying much less home if it was a financial argument.
I've owned my current home for several years, and go back and forth between renting and owning. Even though I live in a "hot" property market and benefited from appreciation, I actually lost money versus renting the equivalent and investing the difference, and I do keep track.
I fully agree that 50% of net worth in a home is too much. Though I doubt that the people you are thinking of actually have that much net worth in a house - the house might be worth that much, but odds are they only own 5-10% of it, and the rest is net worth of the bank. By the time your house is 50% yours you should have seen enough decrease in carrying costs - compared to inflation - that you have more investments elsewhere to pay it off.
The analysis of lost money vs investing needs to compared over a lifetime not a shorter span. Your payoff comes at the end when you need much less invested in the first place to pay for the rent you no longer owe at all. If God hasn't told you the future in detail you can't know: how much will inflation be, when will you die, and other such things that affect how your lifetime investments play out.
That last also gets into life goals. if your plan is to live cheap and work for the rest of your life to leave a large sum of money to your heirs that means a different investment strategy vs someone who wants to retire early and leave nothing behind when they die. For the latter there is a difference between someone who wants to retire and spend all their time in the shop building something vs someone who wants to retire and travel the world.
Only you know your life goals today (and you don't know how they might change in the future!) so you need to make the right decisions for your. Renting and buying a dwelling both have pros and cons so there is no right decision for everyone.
That’s not success, that’s picking winners and losers. Same as with SF Bay Area, Santa Monica (in LA) and any other place with rent control - being in place early makes you a winner. Finding a vacant rent stabilized place is like winning a lottery. Problem is what do you do with young people that should be moving out, or moving to the city for school?
Only real answer to housing is to build more of it. Else, you force people to move, pay more and/or cram ever more bodies into the same space. The latter is also what makes poor much more vulnerable, and not just in the pandemic.
That was my experience, anyway. I eventually found a house share to get started, and after I arrived a hooked up with someone who happened to already have a place big enough for me to move into.
If I move within the city again, it will have to be by buying a place.
Isn't this just the housing market in general? Why should renters not benefit from the same dynamics that owners do?
There are owners of identical homes on the same block in San Francisco who pay 10x what their neighbors pay due only to when they bought (and the resultant purchase prices).
This is unlike saner places in the country which reassess property values regularly.
[1] https://en.wikipedia.org/wiki/1978_California_Proposition_13
EDIT: also, why prop 13 applies to non-residential real estate is another issue.
Buying land is essentially buying a monopoly (since land is in fixed supply), and getting access to its rents for perpetuity. Prop 13 gives you even more of the rents, but in places with Prop 13, property taxes are low enough that most of the rents still go to the landowner.
You can compare land to taxi medallions, and see that all the reasons taxi medallions are bad also apply to land. Allowing indefinite ownership of the rents from a scarce resource essentially gives a slice of the future productivity of the community to those who were lucky to buy early enough.
If the housing market is relatively flat (and the currency is stable), then owning still typically provides you with benefits, such as equity accumulation.
This law only benefits tenants who already have an apartment in Berlin, anyone else is completely out of luck.
Source: I live in Berlin.
In my case, yes I benefit from the lowered rent but it's even harder to move if I want to (which I would if it was easier), I might owe a pretty big amount if the law is overturned, my flat is now getting sold and the other tenants are writing on the walls and threatening 'war' over the sale (even though realistically nobody here can be kicked out for 10-11 years after the sale).
I think you're assuming that the units are bought by owner-occupants and not other investors who have higher risk tolerance or who are betting that the law won't survive review by higher courts.
This happened all the while time Berlin changed from being viewed as a forgotten backyard in Germany with few companies and high unemployment to the capital city of the dominant and richest country in Europe. Especially the great financial crisis accelerated this change of perception.
Consequently, many people moved to Berlin. For many years 100k people per year moved into a city of 4m. Stated in terms of economics, supply of apartments was very steady, and demand jumped up.
The sound response of a market is to signal that through price hikes. That should encourage investment in residential building. When this is being suppressed nothing can even get better. Only longtime renters are favored. People with already cheap and large apartments benefit. Losers are those young couples expecting a baby.
A solution that could potentially work would be to accept temporary pains from high prices, remove regulatory obstacles from new construction and let the industry find a new balance. Maybe accelerate the process by governmental subsidies, if you like that sort of policy.
But the current policy can't work in theory, it doesn't work in practice. And it only benefits old established interests who are privileged already.
For the first category, there are 2000+ applicants per day per apartment, making it impossible to actually have a chance to get the apartment. The odds getting that apartment as a foreigner that do not speak German is non existent, you actually have better odds on playing lottery and winning it, then buying a new apartment.
The second category is the overpriced apartments, the "landlords" (mostly the same three evil companies) are asking stupid amounts of rent for small apartments (1100 - 1200 cold rent for 50sqm ??). Those apartments are not accessible to 90% of the population. They are very happy to rent to the foreigners, since they can extract money from them, plus they do not know the local laws, so they can push newbies around.
Currently there are two categories of people living in the Berlin as well: The new comers, who are screwed and the old renters who rented for cheap, who landlords can not get rid of.
The first category are mostly expats, who are being screwed by landlords who do not want to rent to foreigners (especially if you are not from Europa), so they are pushed to new, non-rent capped apartments, making their lives even harder.
The second category is people rented huge apartments for 300 Euro per month 10 years ago, with 2% increases per year, who are not going to move soon.
Berlin wants to be the startup capital and an expat center, but it is not going to happen if they allow systematic exclusion* and abuse of expats that are trying to settle in the city.
I can go and rant for days but I think this post is already long enough.
* I did not want to use "racism" word here but it really feels like it is.
Which companies are these?
>"The first category are mostly expats, who are being screwed by landlords who do not want to rent to foreigners (especially if you are not from Europa),"
Unless I'm reading this incorrectly doesn't this contradict your earlier statment that they want to rent to expats "since they can extract money from them, plus they do not know the local laws, so they can push newbies around."?
I'm curious How did you ultimately end up finding a place?
Pretty sure they are talking about Vonovia [0], Degewo [1], Deutsche Wohnen [2].
[0]: https://www.vonovia.de/en [1]: https://www.degewo.de/ [2]: https://www.deutsche-wohnen.com/en/
1.5 years to find an apartment, that is not cheap but bordering the acceptable rent. Nobody should suffer this in their lifetimes.
I am not going to name the companies and get sued. Stuff like that are serious in Germany.
Curious - how far outside of the center of Berlin did your search extend, and what was your parameters for an acceptable place/rent?
For your second question, double of the rent cap, two rooms (or maybe 1.5), don't care if the building is old or new. Partly furnished is preferred but I do not mind unfurnished.
Please post with your main account if you are going to ask more personal questions.
From my anecdotal experience, if all listed rents were double the rent cap, all apartments would still be filled, but lots of people would be locked out of the market.
Classic gentrification problem. I don't know the solution.
I think for foreigners it just means paying a ton more, and just accepting that the value-for-money trade-off when seeing cheaper but more desirable places is not real - because they are mostly unattainable.
I don't think its deliberate exclusion/racism as you say.
When we looked we always found that there were other people more deserving than us. Like a pregnant couple with baby always needs more room more than us. If you are German, speak German, and are going to live here a long time, it makes more sense for landlord. If you don't earn a tech salary you will struggle to find anything within the city, so you are probably more deserving.
The tech foreigners usually can pay more, they just see cheaper rents that they can't get because of rent control and feel hard done-by.
If Berlin was your city, Germany your country, would you prioritize apartments for the wealthy tech people over the teachers for example?
> would you prioritize apartments for the wealthy tech people over the teachers
I am not German so I am not sure how to answer that. Logic says someone that earns extremely well, has unlimited working contract and is educated very well is a very good candidate, just as a public worker. But, for some reason, the applications that I have sent in German, even though the company representative (or very rarely the owner) is able to speak English, got 10 times more responses. Go figure.
The problem is not caused by these land lords or real estate owners, but broken USSR era govenrnment planning combined with extremely lazy and corrupt modern government. Berlin had higher population than today in 1938, and the city administration did not have any issues.
Wow that's cheap, London you'd pay double or triple that.
A good 1 bed ~50 sqm in a major city (read - jobs) would run close to $2,000 with a few exceptions.
Now that we got the alleged need for expats (which isn't) out of the way, let's address some of the other points:
* if you're a foreigner, especially from outside Europe you have less of a shared cultural background with the typical local landlord. Of course they're gonna like someone local more.
* if you don't even speak the local language, you're at a disadvantage in almost every imaginable situation in a foreign country. Some people are nice and make an effort to speak English - that's a courtesy, not something that is owed to you.
It looks like you were sold some fantasy start-up heaven which doesn't exist. Not everything revolves around software and nomad developers, shocking as that may be.
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
But the article is definitely skewed towards the landowners and huge renting companies.
Some facts for you:
Rate of home ownership among Berliners, Londoners, Parisans:
- Berlin: 17.5%
- London: 52%
- Paris: ~60%
The main problems is huge home-renting corporations. The article refers to a separate discussion about breaking up huge companies that own more than 3,000 apartments. As far as I know this criteria meets only a couple of huge companies such as Deutsche Wohnen that over the past couple of years have artificially created a sense of scarcity and caused the rent to increase without a proportionally increase to wages(Not only blue collar but also High Tech wages)
It is very ironic that companies such as Deutsche Wohnen were able to grab so many apartments when Berlin wall fell with dirt cheap prices. You can argue rushed privatisation caused this problem and something needs to be done if Berlin wants to avoid becoming SF.
- https://guthmann.estate/en/market-report/berlin/
- https://www.trustforlondon.org.uk/data/housing-tenure-over-t....
- https://tradingeconomics.com/france/home-ownership-rate#:~:t....
- https://www.dw.com/en/berlin-social-democrats-reject-expropr...
>"It is very ironic that companies such as Deutsche Wohnen were able to grab so many apartments when Berlin wall fell with dirt cheap prices. You can argue rushed privatisation caused this problem and something needs to be done if Berlin wants to avoid becoming SF."
Interesting. Is Deutsche Wohnen origins the old East Berlin then?
Not really, no. It was founded in 1998 and initially had no Berlin holdings at all. It then bought various entities with housing stock in Berlin, which also have complex histories - e.g. one example was founded as a city-owned company in the 1920s, lost its East German properties obviously but continued to operate in West Berlin, after reunification got the eastern bits back, and then was privatized in the 90s. But of course East German state ownership plays a role in how the situation overall came together.
The majority rent not because of a lifestyle choice but because they can't afford to buy anything so renting is their only choice. What else are they gonna do, be homeless? All mid-upper class German families I met owned their properties.
The solution, is that now landlords can only increase rent 7% (plus inflation) per year. This year, its something like 9%.
Apparently, someone forgot to figure out what >7% per year for 5 years is..... Its 40%, before the inflation numbers are added in.
Oregon figured out a level of increase that would be too disruptive for its appetite, and had the legislature cap the rate to below that level.
On average over the past five years, that cap would not have been reached, though it may have been reached in any one of those years.
Is this a self own or mistake of some kind? Are you inferring that landlords will now raise rents more than they would have in the uncapped situation?
For example, let's say the free market would raise rents 5% this year, and 8% next year. A cap of 7% means the rent will rise 7% this year, as the landlord won't want to have caps permanently reduce future rents.
Yes, right now, I'd risk fewer tenants with 7%, but balance that against what might happen next year when I'd be full and still lose money because of the cap that year.
For this to be true, they would have to either (1) under present conditions, not be raising the rent to maximize profit or (2) under the scenario, raise the rent past maximum profit
Neither of those seem likely to me.
They'll set it based on supply & demand. But caps increase the business risk to the landlord, and therefore increases the price as risk always translates to an increased price.
In the presence of a cap this strategy becomes riskier so it forces landlords to think about a shorter term horizon.
There's also a signalling effect of the cap which may mean tenant reactions to an increase at the cap are different.
In my experience, people don't have experience outside of their local bubble, so you can easily recycle policies from another city or slightly tweak them
Thats what they really mean by land of opportunity
I think we need to seriously reconsider the effect some building requirements and property taxes have on housing prices. It may not be ideal but very small apartments with shared commons and no parking for a few hundred dollars a month would be better than living in an RV or on the streets. This is a pretty common setup in Japan, not to mention college and military dorms. This isn't even that different from having roommates.
The market wants to supply more housing. We don't let it, based on laws that originally were created to keep black people out of neighborhoods. Those laws continue to be very effective at that goal.
Why does this continue to be such a problem in deep blue areas?
That is a pleasant breeding ground for justification for crime.
So there's the anti-poor angle that rich deep-blue neighbourhoods take and that ends up being racially discriminatory because of the underlying demographics.
That makes sense, but that just raises the question of why racial demographics are so regressive in those areas.
I genuinely asked because I don't know much about the inner workings of progressive coastal areas. It seems like if nearly all of the politicians and most of the population are committed to very progressive racial policies, you would expect to see... I don't know what exactly, but not this. I'd like to understand why things went so wrong.
Are there any US cities that are good examples wrt to racial demographics? Something that we could learn from?
Second and third order effects are also hard to control through publicly popular policy.
And I am not aware of any significantly sized US areas that don't have race-discrepancies in educational attainment. American society has very strong positive feedback loops and I think the strong economies of the coastal paradises amplify that. Take any uneven distribution of wealth and it will get worse in that environment.
The reason you don't see prices spike in inland cities is that they can expand outwards, and they don't have much economic opportunity. Cities on the coasts can only expand in one direction - and because of international trade, they have more economic opportunity, so more demand.
Downsides that come to mind (but that don't seem too serious):
* It incentivizes landlords to keep empty apartments on the market longer before lowering rents to the true market price.
* It might encourage landlords to regularly raise prices more than they otherwise would, lest they forego the limited opportunity.
I'm normally much more free-market oriented, but I ask with the understanding of how much work and expense is involved in suddenly needing to find a new apartment. Just patching the holes in the drywall can take a full day. Then there's credit check fees, truck rental fees, pet fees, admin fees, move-in fees, new couch because the old one doesn't fit in the new living room fees...
if they raise the price too much, they will not get tenants as long as there's competition between landlords. So all this is basically just another way of saying there's not enough supply for the demand. So policies should target the supply problem directly, such as subsidies for new buildings, or tax incentives, etc.
It didn’t help much. Landlords could circumvent it in many ways: by offering contracts to new renters that automatically increase each year, which then isn’t bound to the limits. For existing tenants they could do bullshit renovations that trigger a modernization clause, also killing the limit. Or put an Ikea couch in the apartment, then renting it as furnished, again circumventing some of the rent limits. Sure you could sue, but in many cases people were just happy to finally find something and ate up the higher prices.
Although I’m positively affected by the latest rent control laws in Berlin, I’m also not totally sure what to make of it. But I wanted to let you know that this is by far not the first law that was passed to try to curb price increase.
Well sure. But the total amount of people who have some bread is now greater, versus a select few wealthy people getting all the bread they want, as the wretched masses stare longingly. You can either increase total happiness, or concentrate it to the powerful. It's pretty clear by the tone of this article which side the writer lands on.
What if my nephew from another town moves in to live, it becomes tight… are they eligible too?
There are plenty of places in the world where real estate was/is rationed or distributed, and they all end up having very similar social distortions.
Or more likely divorce to get the apartment, but continue to live as if married except for purposes of that extra apartment. It isn't unheard of for couples to not legally marry today because of the tax difference even though for all social purposes they act as married. That is despite some social pressure to marry.
Rationing+Rent Control is useful to provide a baseline evetyone deserves, the free market is nest for luxury products
It's not hard to draw the comparison with housing. Let the rich buy the "luxury" apartments on the top floor (just an example), helping fund the building of large buildings which don't get built without cost-benefit and risk analyses squarely in the black.
Not regulating the price was tried for 30 years, and led to many families unable to afford housing, or spending 80%+ of post-tax income on housing.
That's not self-evident to me. Why not?
The most relevant law I can think of is that if you live outside the city limits you might not be able to send your kids to a school in Berlin.
Now going up to 200 floors is very expensive. However on a per unit area it is only a few times what the cheapest building style* is. So it does require more expensive rent, but not that much more expensive, and as rent gets expensive you expect apartment sizes to fall to balance some of it out.
* cheapest that can meet reasonable building codes. I'm ignoring the uninsulated, fire-prone shacks you see in poor countries which are cheaper by far.
[0] IIRC “if you come home to find your wife has changed her hair and redecorated, you went into the wrong apartment”, according to the DDR museum. I’m sure it lost something in the translation.
[0] DDR? I’m not actually sure who made the decision, now I think about it
Regulating the price to a point well below the free market supply/demand driven price causes a decrease in the amount of bread supplied to the market (and probably increase hoarding/decrease the breadth of distribution).
Think back to toilet paper shortages last spring. Rationing was arguably the best move (and was what local markets around me did).
In some countries like Egypt, bread (or another basic staple) is heavily subsidized below the free market price, but that doesn’t seem to meaningfully impact the market’s supply: any consumer able to pay that artificially low price can still eat all the bread he or she wants.
Still, supermarkets could have temporarily raised prices 10x and still sold their inventory. Why didn't more of them do it? Presumably, they made the rational calculation that the bad reputation they'd get from such a move would outweigh any short-term profits.
What I meant is: There was no reduction in overall toilet paper production, and people didn't suddenly start to shit more. The shortage was mostly a distribution/packaging issue in the form of "not available in packaging X at location Y". Markets tend to solve that kind of problem incredibly quickly.
Consumer form factor toilet paper is still being rationed for me right now (in Cambridge, MA-max 1). That's a year after the start of this.
Do you know if these are really meaningful shortages, or if businesses have just kept the signs up to make people feel taken care of?
It's a tricky problem.
Or we could just go ahead and find local governments to directly build houses like we used to (at least here in the UK). If you know what the desired result is then why not enact it directly rather than incentivising it. Markets are most useful when you don't what you (we) want.
These programs have a remarkable way of being sticky over time. For example, New York's current rent stabilization program has its origins in a World War 2 era program which never died (first a federal program, then taken over by the state).
Solution: Build more and build it higher. If you are looking for a different kind of short-time-horizon solution for the mom and her kids who are in a precarious situation due to housing costs, give them cash assistance! But in the long run give them more options and lower prices. There is no reason we cannot do both.
In a rent-control environment, people have incentive to hoard their rent-controlled apartment as well, especially if rents reset on turnover. If I have a rent-controlled apartment that's well below its replacement cost to me, I'm going to be more inclined to keep it when I initially move in with a significant other. If that relationship fails, I can move back. If it were a market rate apartment, I'd have much less to almost no incentive to do that.
And when I was looking for a place, I came across a couple people playing landlord and trying to sublet out their rent controlled place for more than they were paying the landlord.
It’s pretty broken, at least in NYC.
And there are also people who would be interested in an apartment in a different city. A favorite vacation destination. Near the in-laws so you can visit and yet get away. A short term job. The foreigner in an unstable country who wants every possible reason for customs to let him in if things get bad enough to flee. Hotels fill some of that, but if the price was right an apartment where you can leave spare things instead of packing starts to look nice.
Mostly it isn't economical, and I don't see that changing. However in the imagined world where it was very cheap you might be interested in a second flat just across town. It would change your lifestyle to use it.
Rationing for goods like bread, paper, milk, gasoline, etc. Can be a stand-in while the problem that is preventing the market from responding by increasing supply is fixed.
Housing is almost completely the opposite; supply of the underlying land is fixed and most cities cap density. We can, of course, uncap density; but that still requires we basically displace everyone living in the city eventually to make way for larger buildings that can house more people. The thing that really grinds my gears is that the solutions to housing scarcity effectively amount to building a wall around a city and making foreigners pay for it - and they're often championed by exactly the same kinds of people who otherwise are rightly opposed to immigration formalities.
In theory, this is true. In practicality, at least in America there's enough land with very little density, that a new building could be constructed while displacing basically no one (because the previous occupant of the land is already willing to move, it's just that the new seller isn't allowed to build anything).
Eventually, yes, we'll get to point where displacement is an issue, but right now it's not worth worrying about. Building dense really is a "free lunch" so to speak.
I probably agree with you overall, I just bring this up because a lot of NIMBY arguments use displacement as the boogeyman, and I'd rather not give them more support.
> The thing that really grinds my gears is that the solutions to housing scarcity effectively amount to building a wall around a city and making foreigners pay for it - and they're often championed by exactly the same kinds of people who otherwise are rightly opposed to immigration formalities.
Many of the arguments even go beyond that and sound like anti-immigration arguments: I've heard a lot of people say that techies/yuppies in SF should go back to the cities they came from.
That being said, displacement almost certainly shouldn't be used as an excuse not to build... but it is. I bring it up specifically to front-run certain left-NIMBY arguments against ever increasing housing supply. Equitable pro-growth city planning needs to assume that the short-term pain of growth will be borne on the backs of the poor; and then implement policies to ameliorate that pain while still promoting density. Just dismissing left-NIMBYs as crypto-Trumpist won't dismiss their otherwise valid concerns, as much as it really feels good to do so from behind a keyboard.
I think you misunderstood my point. What I meant is that are many empty/available lots ready for development in the city, which could be redeveloped with minimal to no displacement. The problem is that zoning laws (and in many places like SF, community reviews/objections) prevent building there.
For example, in Sunnyvale, a developer bought a empty mall, so they could redevelop it into housing/offices. However, that project took years to get started because of lawsuits and red tape. In New York City, a proposal to replace a parking lot with 300 units of housing in South Seaport was rejected for not fitting the character of the community. Why worry about displacement if projects without displacement take forever to build, or are not allowed?
More generally, most cities have plenty of neighbourhoods that are currently zoned for single family housing. Increasing density there would lead to minimal displacement, because the density is so low that you'd displace on the order of 10s of people per project, which is not a massive amount to deal with.
And if we redefine displacement as being forced to leave against your will (which I think is what left-NIMBYs and I really care about), you could probably get that number down to 0, because I'm sure there are many owner-occupiers who would be willing to sell their property to a developer and move out; they just can't because zoning law forbids increasing density.
> then implement policies to ameliorate that pain while still promoting density
Many efforts to increase density take this into account, and are designed to minimize displacement. For example, the upzoning bill in CA (SB 50) disallowed rebuilding properties that had renters occupying it for the past 5 years, which means that only owner occupied units would be rebuilt (and thus causing no displacement under the definition I used above).
Eventually, we'll run out of empty lots and owner occupied properties in cities to upzone, at which time, we'll have to decide how to make the hard tradeoffs around displacement. But right now, we're not close to that point, so there's no need to muddle the waters with future concerns. Let's just build.
> Just dismissing left-NIMBYs as crypto-Trumpist won't dismiss their otherwise valid concerns
I think left NIMBYs do have valid concerns, and I don't think they're "crypto-Trumpists". My opinion is that they're just "useful idiots" [0] for existing property owners and landlords, because they don't have a good understanding of land economics and how their proposed policies will interact in the real world, which just leads to homeowners and landlords getting richer at the expense of those without property.
[0] - Sorry for the harsh phrasing. I don't mean this in a super derogatory way, I just can't think of another word for this.
Maybe, maybe not. Depends on how you handle prices (or subsidies) along with the rationing.
>distributes the existing supply to people who don't need it.
A bit, but in the case of housing and food you can safely assume people all need it in about the same amounts. You will be wrong, but close enough. The black market might even by your friend in correcting some of your mistakes.
> Rationing assumes everyone has exactly the same need, which is nonsense and leads to gross inefficiencies.
yes and no. You don't have to assume the same needs. You can figure out rules. Families need more space - which can be used to encourage/discourage having kids depending on your goals. Overall it leads to inefficiencies I agree.
> Rationing inevitably leads to hoarding and a black market.
True or not based on how much trust there is in the ration plan. If people agree with the reasons and means there will be a lot less than if people disagree, or find they can't get even the minimum. WWII rationing in the US mostly worked from what I understand - people were proud to not use their entire ration of sugar, but there was overall enough food (including gardens) so it wasn't hard. That is probably the exception (and even then there was a black market!), but it does make the point.
It suffered from all the faults I mentioned. The black market in gas was extensive, and even included drive by shootings. In public, people proudly supported rationing, in private, they sold their extra gas to people who needed it at black market prices. Yes, the government did try in their blundering manner to give different rations based on need, but it inevitably grossly mismatched supply with demand.
I've talked to people who lived through it, and there was certainly two economies going on - the ration one, and the black market one. For example, one lived on a farm that wasn't doing much, but got a big gas allocation because "farm". They made a mint selling it under the table.
> You can figure out rules.
Yeah, like the byzantine vaccine rules, along with the confusion and fights over it. Politicians moved themselves to the front of the line, naturally. Just like in WW2, politicians got all the gas they wanted.
[0] Formal title is "An Act to Amend the Emergency Price Control Act of 1942, to Aid in Preventing Inflation, and for Other Purposes"
So using the focus you had on bread, so you lower the price of bread so more people can afford it. However you don't increase the bakers ability to create bread and they still only have the same amount of bread as before. Well for the most part you have only swapped who has the bread and the number without is basically the same as before. You have done nothing but reduce the profit of the bread maker, at most.
The right answer is to increase availability to where those who have the desire to have bread are satisfied and bread remains around that needs someone to buy it.
Almost all housing shortages are government created if not 100%. Either through direct changes to laws and regulation or through providing the means for other groups to contest the construction of new properties in the courts because enough loop holes exist to stop any new housing.
The nasty, invisible catch with price caps is that this outcome you've described is an idealized one. It's possible to get neither as you make whatever you're trying to regulate functionally unavailable to anyone.
How much bread do you think bakers will produce if a loaf costs $1.20 to make, but politics dictates they cannot sell for above $1 each? In such a scenario nobody gets any bread except what the bakers make for themselves.
It's also possible to try to increase total happiness and actually just wind up concentrating it to the powerful. This is what rent control has done in San Francisco. It's dangerously easy to confuse goal and outcome in policy-making.
Economics answers 2 questions:
1) Who gets what today?
2) What should people prepare for tomorrow?
Regulating an excessive focus on (1) will get bad results on (2) because it makes it less sensible to be come a baker.
I'm not writing software because I believe there is a philosophical shortage of software. I do it because there are decent odds that I'll be overpaid relative to the work I put need to put in. Those odds are resulting in a lot of software being written.
- Bakers will bake more bread - People from an area with cheaper bread will travel farther to sell bread where it's more expensive - Individuals will decide to bake bread for themselves - Companies that don't bake bread but that have the capability of baking bread (either directly, or with minor changes) will start baking bread.
All these activities happen in proportion to the price increase, increasing volume and putting pressure on prices to go back down. And this article describes the data showing that this happens.
Prices are signals; it's information that's embedded in the price that directs all actors, causing the flow of resources to be correctly placed.
After long, tiring search of 20+ places with 100+ people at each, through a friend of friend we got a place for 1400 because we were the only ones that looked at it. Then rent control happens and now we pay 1000.
And we would have paid 2000+...
---
If you find something you like, it doesn't matter because there would be 20 other people applying. Landlords want to rent for a long time, so they prefer Germans over foreigners/expats, and people with long-term stable jobs (government, teachers, etc.) instead of startup people, so we were at the back of the queue.
When we found a place we liked, we would have been prepared to pay way more than the asking rent, and put down multiple years of rent in advance just to get it - like happens in NYC for example. But no landlord/agent is interested in this in Berlin. I guess this is an example how well-paid tech ppl are driving rents up. Even though "well-paid tech" in Berlin is not that much.
Only at rent levels of 2200+ do you start to find places you really like in good areas, but there are lots of places advertised at ~1500 that were even more ideal but unattainable due to demand, which is frustrating.
I really don't know how anyone can get an apartment in Berlin now after rent-control.
When we move out, we will most certainly find a friend to hand over to.
---
Re: Rent control
Before it was impossible to find a place, now it must be insane. For existing tenants though, it's like an unexpected yearly bonus - but for us, completely unnecessary. It's like a middle-class handout.
I'd be interested to know for how many people it actually helps at the margins and how many its just a handout for.
But yeh - I can imagine a lot of middle-class folks saw its as virtue signalling and free money at the same time.
The answer is continuously increasing supply in a manner that outpaces population growth dramatically.
If we reorganized the market such that there were incentives to massively build new housing, this would be a solved problem. The price of housing could effectively be the marginal cost of construction as opposed to the market power driven pricing derived from scarcity.
Couple that with remote work and efficient high speed transit both within cities, to the suburbs, and to other cities, and we should be able to enable the demand to spread out (enabling more diverse supply to compete) and to add significantly more supply everywhere.
It is infuriating that a simple problem of supply and demand has not been able to be solved by developed governments. I recognize that it isn't as simple of a market problem as say a true commodity because location matters -- causing heterogeneity in the goods. But that location difference is alleviated by the increasing supply in high demand areas and by empowering more competition across areas through transit and remote work.
This honestly doesn't have to be that hard.
[1] https://www.ft.com/content/3173f19e-5fbc-11e4-8c27-00144feab...
Until people have two children or less population will always outpace housing. Anything else is wishful thinking.
And even with population growth at e^n, the constants matter in the analysis. l^3 growth may be enough until humans reach space faring.
the point is that human's growth is slowing, and the fact that space can open up means that as long as humanity reaches being a space faring species, it won't really be a problem.
Population growth is slowing worldwide and is below replacement in all major developed countries. Thus, your e^n is only applicable if n is between 0 and 1!
Sure, desirable cities can grow faster than the overall average, so let's put that at somewhere between linear and quadratic -- heavily towards the linear.
Even so, the ability to build at I^3 can easily outstrip that demand with the right policies.
Furthermore, remote work can spread out demand. We are seeing that right now with the pandemic. I believe that the pandemic will be one of the greatest accelerators of globalization due to it's enabling remote work.
As further proof of the slow pace of population growth in developed countries eventually causing an impact on the housing market, look at Japan.
"Government statistics as of 2018 consider 13.6 percent of properties in the country to be ghost houses. Put another way: By 2040, the total size of abandoned properties in Japan is estimated to equal the land size of Austria." [1]
[1] https://www.atlasobscura.com/articles/japanese-ghost-houses
To me that makes no sense. Cheaper than the midwest? The whole world would want to move there.
Sometimes I wonder if one possible solution would be a sort of kickstarter-type deal for bootstrapping new cities. In other words, find a large plot of cheap rural land big enough for a few tens of thousands of people that's close enough to another town to have access to basic necessities but not where it's going to become a suburb of some other city. Get a bunch of people who want to live there to put down an up-front deposit. Create a non-profit to manage the deposits and handle the logistics of buying the land, installing roads and utilities, creating lots, and so on. The people who put down deposits are given lots that they can build on. Leftover lots are sold over time to finance more infrastructure development. The non-profit is replaced by a city government once there's a sustainable population.
My assumption is that if you can buy rural land cheap (like a few thousand dollars an acre or something) and then convert it into residential lots that are still cheap by urban housing standards for a few tens of thousands per lot, maybe 3 or 4 per acre, that generates the necessary funds that can then pay for the infrastructure needed to turn that rural lot into a buildable city lot. Another assumption is that this is being done purely as a non-profit venture; I don't think it would work as a real-estate get rich quick scheme because the temptation to not put enough money back into the town would be too high.
Another necessary component is having at least a few employers who are willing to set up shop in this new city. (Perhaps a branch campus of a major university would be ideal.)
uh Chinese apartments are super expensive and you dont even get to own the land. Japan was super expensive but is now affordable since the bubble popped and the population started shrinking.
Berlin's population is growing quickly so doesn't have much to do with Japan.
Even if there were those lots of people unable to move, would that actually be a problem in various cases? Unlike many other European countries, where the countryside has emptied out and brain-drained as its young people move to the big city, Germany has managed to keep many of its small towns viable places to live and work.
In general though, maintenance on average only costs ~150-300$ a month, so it's not necessary.
Isn't that why landlords argue they should make profit, because they carry the risk?
Under rent control the situation goes from being extremely advantageous to the landlord to just being regular advantageous.
In Berlin, people that already have social relations and support structures are the one that get discounted rent, which is what we want! This is better than if wealthy people get to pay less for housing. It's not as if the alternative made it cheaper.
An important part of the regulation is that the landlord cannot raise the rent when a new tenant moves in - the rent is locked for the unit, not the tenant. This prevents situations like New York, where you are essentially unable to move.
Mumbai did this and it was a disaster: https://marginalrevolution.com/marginalrevolution/2017/04/tw...
Now of course this legislation "prevented that", by refusing owners do this while tenants are in the apartments. Except the net result seems to be when tenants do leave, the apartments are taken out of the housing market altogether, exacerbating the already pretty critical problems.
And in the German press you will find accounts of pressure tactics (such as schemes to force tenants into default, "using" things like a divorce to kick people out (man signed contract, woman stays in apartment, gets kicked out when man refuses to pay but woman is not allowed to sign contract in her own name), creating critical maintenance problems ...) to create that situation.
So no, that is a very, very bad thing.
are the apartments just kept locked up?
I know rental stock immediately opened up in Dublin when the pandemic started, for example, before such a large increase would have arisen from renters leaving the city for suburbs.
The key thing here is supply and demand. If there is no profit to be made in renting out the property, then there is little reason to buy them up, in actuality. The exception is large companies that buy up a large amount of properties to manipulate the markets, but this has already been thinked of.
The main result of this if the unoccupied tax is used when necessary is a fall in the value of properties. This is a good thing for everyone that doesn't own a property that is unoccupied. This is what is wanted.
Because rent could be considered affordable in Vancouver ? In which Canada do you live ?
Whatever is going on in Vancouver, it isn't effective (at controlling rent prices)
Remember that rents did increase ~300% or so over the last 15 years, but income maybe only 10 or 20%.
Even without these specific rent controls, most rental contracts have either "staffelmiete" or "indexmiete", that is, fixed points at which the rent will increase or an index against which rent is pegged. There are very strong laws supporting renters.
I live in a somewhat newer apartment, so it's not subject to the discussed changes. My rent increases were agreed with the landlord when we moved in, they are fixed in my contract, and after the built in increases are done, the rent won't go up anymore.
The issue with housing and prices is Berlin is not the same as other places in the world. For years Berlin was an economic wasteland. Just now it's become desirable to live here, and there are jobs and an economy to support it. The rent in Berlin is, despite increasing 5-10% per year every year for the past decade, still less than that in Munich or Hamburg. This isn't a case of a speculative bubble or outlier system, just a historically depressed economy returning to the mean, and fast.
Yes, it's unfortunate, that people cannot afford to live in Berlin as they did in 1996. But Berlin is not the city it was in 1996. To alleviate this price pressure, more housing needs to be built than demanded, and that has not been the case for a long time now; place is limited.
This is mischaracterizing what is going on. There is rampant speculation by multinationals buying up old housing stock and attempting to do the New York City model of hyperluxury renovations at the expense of existing residents.
This is the key statement to refute if you want to argue for rent control.
Even if you don't fully agree with this quote, claiming that only arguments by analogy can ever be valid arguments for rent control is... surprising.
People are going to starve either way, why not skip the whole "make the bakers filthy rich" part?
Also, this doesn't really apply to housing.
> Also, this doesn't really apply to housing. Correct, it's more complex there and some of the reasons are mentioned in the article.
If the bakers gets filthy rich, kudos on them !
Here are some arguments to refute if you want to oppose rent control, particularly the first one (copied and pasted directly from investopedia):
“Rental prices in many U.S. cities are rising far faster than wages for moderate-income jobs. [edit: note here that most of the US has banned rent control, and this is happening regardless]
“Rent control enables moderate-income families and elderly people on fixed incomes to live decently and without fear of a personally catastrophic rent hike.
“Neighborhoods are safer and more stable with a base of long-term residents in rent-controlled apartments.”
Edit: Not sure why I looked so far away, Paris is at 21,000. Like virtually every housing story, this is an example of the people who live in a place deciding they don't want anyone else to live there, and putting up economic walls that only the rich can surmount.
By whom? Ricchie McRich?
Every working class Hong Konger I talked to (even highly skilled ones) said living there is cramped and brutally expensive and would like to emigrate.
These numbers aren't comparable: The municipality of Paris is just the small urban core of a much larger metropolitan region. Berlin has about 3.7 million inhabitants on 890 square kilometers, Paris 2.2 million on 105 square kilometers.
A fairer comparison is with the Petite Couronne consisting of Paris + the innermost ring of its neighbors (https://en.wikipedia.org/wiki/%C3%8Ele-de-France#Petite_Cour...), which has 6.7 million people on 760 square kilometers. Still denser than Berlin! But the ratio is far less extreme than you made it look. For an alternative approach, take Berlin's densest districts: Friedrichshain-Kreuzberg, Mitte, and Neukölln add up to about 100 square kilometers (like Paris) and a bit over a million people. So about 2x less dense than Paris rather than 5x.
Where do you get that idea? It is false. New York? San Francisco? California has statewide rent control as of January 1 of last year. Many of the places where people want to move still do have rent control. Rent control is not a live issue in, e.g., Tulsa, OK or Amarillo, TX, whether it is legal or not.
> “Neighborhoods are safer and more stable with a base of long-term residents in rent-controlled apartments.”
If you have good evidence for this claim, I would like to see it. Moreover: "safer" and "more stable" relative to what? I guess your claim would be "safer and more stable than the counterfactual w/out rent control and with more housing." If you have good empirical evidence for that claim, I would love to see it.
From Wikipedia
"As of 2019, five states (California, New York, New Jersey, Maryland, Oregon) and the District of Columbia have localities in which some form of residential rent control is in effect (for normal structures, excluding mobile homes). Thirty-seven states either prohibit or preempt rent control, while eight states allow their cities to enact rent control, but have no cities that have implemented it."
https://en.wikipedia.org/wiki/Rent_control_in_the_United_Sta...
German construction industry used to be chronically overbooked, though. IDK how does the situation look now.
German bureaucracy probably does not help. When it comes to red tape, Germany is one of the most onerous countries to do anything new.
You mean... scarcity? That the argument specifically mentions as the thing that price controls doesn't fix? Are you _sure_ it doesn't address it?
Given the unmeasurable social costs of people starving and dying when there isn't enough food (you can say similarily for people not having houses and freezing to death when there's a blizzard, but also read the sidenote at the end), the capitalists involved in selling and distributing food should not be compensated equally in monetary terms (by selling at higher prices) when there is a shortage of food, since they are the ones at fault of not having reserve resources and prepare their production line from various disasters such as storms and droughts. Even people from the ancient times built and used granaries to store food for years and opened it up to their fellow villagers when storms/droughts happen (even without any profit motives, there wasn't even a notion of "profit" at all!) Capitalists in the current era should prepare far better than them, as our knowledge of biology, climate, and logistics are much more sophisticated than before; a shortage of food should be outright unimaginable given the advanced technology we have. Once there are empty food shelves, the disaster's already happened (at least in the short term you can't materialize food anymore by doing smart "economics"), and really at that dire point capitalists don't deserve the right to receive profit in the same way as normal times.
If the moral argument for this doesn't convince you - then there is a much more convincable political argument (of "dialectical materialism"), which basically goes as: once basic things like food and shelter aren't a given, and then capitalists gouge prices up creating an even bigger moral catastrophe among the poor, enough people would be fucking mad at them and band together wreck shit up, and some people would eventually have their heads cut off (as happened in many points in society, for example the French revolution). It's only that the current structures of power (the state & capital) are much more powerful than the past that this is more unlikely to happen, but if I were really in power I wouldn't dare try to steer closer to this event, as bloodshed doesn't really feel that good to participate. And that's the most uncontroversial center-wing take I can create.
Sidenote: I think your analogy of bread isn't really comparable to the housing problem though, since housing acts less of an ideal commodity than food in economic terms. Housing is far more troublesome if you approach it in a free-market lense, since it's far easier to create a natural monopoly on land than anything else, and thus it is hard for free markets to create a "fair" price that matches with the actual use-value. That's why even some libertarians in support of free markets also think economic rent from land is unfair business practice and should be controlled by heavy taxes (such as the economic ideology of Georgism: https://en.wikipedia.org/wiki/Georgism)
They point to the predictable drop in supply in the regulated market as if it was a bad thing, but they ignore where that supply is coming from. Those are not newly-built apartments, because the price controls don't apply for new construction.
When an old apartment becomes available, it's because the previous occupant moved out, e.g. because they could no longer make rent. So making rents more affordable leads to fewer people having to move for financial reasons, which I think is a good thing.
Disclaimer: I live in a regulated apartment and don't intend to move, so it's probably not surprising that I like this policy.
You're definitely one of the people this type of policy helps, but you're benefitting at the direct expense of less affluent people who want to move into bigger apartments and who want to move into your city from outside of it.
That's fine if it's what they intend with these policies, but they're almost always championed as helping poorer people, when that's too overbroad to be accurate, because they actually only help poorer people who are currently renters and don't need to move (and bear in mind they also help rich people who are currently renters and don't seem to move, which hardly seems to be the goal).
The most likely scenario is that they will find a place to move into in a year or so, which will fit their family planning.
Otherwise, if they have enough for a modest downpayment as the collapse of the renting market leads to increased supply in bought housing, they can also buy a condo.
If even that doesn't happen, they can also go into public housing.
I live in a rent controlled city. The scenario you are describing doesn't happen. When I was a kid, we moved 7 times. All we had to do was look for housing a few months in advance, and move as our lease was up.
I get the impression you didn't actually read the article. It points out very clearly that when apartments go vacant in Berlin, they're being sold, not re-rented. If that's what happens when a renter leaves, then there's no stock for new renters to move into.
And just throwing in public housing as though it's a magical solution is wildly unrealistic, especially when you're dealing with large numbers of people.
I'm sure you live somewhere nice, but it's not reflective of the world.
My experience is typical and backed by data. In my city, roughly 25% of the renting population moves every year.
Aren't you forgetting about the even less affluent people who wouldn't be able to afford a bigger apartment even at the same price per area as their current apartment and who'd be priced out of the market (a.k.a. forced to move out) by rising rents?
> and who want to move into your city from outside of it
I think not being able to move to your city of choice is less bad than being forced to leave it. The only way someone can move to Berlin without pushing others out is if the supply increases, which the rising prices for new apartments certainly incentivize. So the policy endures that the additional construction required to accommodate newcomers is paid for by them, rather than by all citizens.
What? No... the whole point is the answer is supply, not rent control. Supply keeps prices down, rent control pushes prices up (for those units that hit the market, which are the only ones that matter in this case). Having a lot of supply on the market is what those people need, and rent control is what drives them out.
"I think not being able to move to your city of choice is less bad than being forced to leave it."
Okay, that's a fair preference, but the problem is it's never what anyone says they're trying to achieve when they enact rent control. The reasoning is always to help people who aren't well off financially, not to keep outsiders out of your city. If xenophobia is the goal, then by all means rent control away.
Supply requires construction, which takes time, which limits the speed at which supply can be created. Meanwhile, demand has been growing much faster. So far, supply has not succeeded at keeping prices down, while rent control has.
> rent control pushes prices up (for those units that hit the market, which are the only ones that matter in this case)
First of all, units that hit the market are not the only ones that matter. There are already people living in those apartments who don't want them to hit the market because they'd like to continue living there, thankyouverymuch.
Secondly, the Bloomberg article shows that rent in rent-controlled apartments fell and the price for apartments that are sold, not rented, fell as well. The price increase is concentrated in the unregulated market for new construction, where it at least serves the useful purpose of incentivizing increasing supply, although still not quickly enough.
> Having a lot of supply on the market is what those people need, and rent control is what drives them out.
What? No... their landlords raising the rent to a level they can't afford is what drives them out, and rent control prevents that.
> The reasoning is always to help people who aren't well off financially, not to keep outsiders out of your city.
The reasoning is that poor people shouldn't get evicted from their apartments just because someone else is willing to pay more, and if that limits the ability of some outsiders to move there, that's an acceptable tradeoff. If those outsiders are willing to provide for their own supply by paying for the construction of new housing, they're very much welcome. I wouldn't call that xenophobia.
In contrast, the one thing all doctors have in common is that they try to keep people healthy. So we can expect the medical community to advocate for policies that accomplish that. Of course there are doctors who could potentially have a conflict of interest between getting more business and doing their job correctly. But then we can still expect both factors to play a role, i.e. very few doctors would focus purely on getting business. And many doctors don't even have that conflict, e.g. employed ones whose job is secure.
If vaccines harmed people's health while benefitting doctors' bottom lines, we'd see a split between employed or ethical doctors vs unethical self-employed ones. It's inconceivable that there's a consensus among doctors for a policy they believe is harmful.
Anyway, I doubt vaccines even do increase demand for doctors. Administering them is cheap (~5 minutes of a nurse's time), treating the diseases they prevent is not.
Why not get rid of greedy farmers so people can grow potatoes in their backyard? Why this longing to re-implement the failed policies of East Germany? Is it nostalgia for police states and shortages?
No, and it isn't what I am suggesting. The point is that just that it becomes uninteresting for investors, it isn't for people actually living there. That doesn't exclude the professional execution of housing projects. I seriously doubt that people can build their home with their own hands and comply with German regulations. Especially in cities.
Housing developers might expect a lower margin, and if the margin is too low for such a business, people can take on the risk themselves and contract professionals to execute a joined housing development. People are already doing that.
If your goal is to have more of something then you tax it less and impose fewer costs on it. If your goal is to create less of something, then you tax it more and impose more costs on it. People understand this with cigarette taxes and carbon taxes but suddenly when it comes to apartments the signs are reversed? No, getting the sign right is important. If you want more homes, then reduce the costs of building homes -- or in your parlance, make it "more interesting" for investors.
However, housing is not a consumable (a large part of the houses are over 100 years old). It is not movable (a house in Hamburg does not satisfy demand in Berlin, Potsdam only to a limited degree). And it is a basic need (everyone needs exactly one).
However, the demand side is driven not only by local demand for housing, but also but "external" demand using housing as a source for investment and rent seeking.
The prospective home owner and tenant has to compete with their local salary and capital against international capital buying mostly existing property.
But all that money does not make new space appear. There is no factory to build "space".
So, like the cigarettes, we want to have less "consumers" of property, and that's why I think it makes sense to lower the demand side by making it less attractive to buy housing for investment. For the people living there, it is a basic need, and that will keep the demand from going to zero.
The author clearly exposes his sentiment in their choice of words. There's lots of buzzwords thrown around and not much reporting from here. Was the author even in Berlin before writing?
Anyways, in Berlin it will now get even "worse" as an initiative is now starting to collect signatures to disown "Deutsche Wohnen" of hundrets of thousands of flats they own.
I can see that the market is "bad" from that article. My experience with renting a flat was different:
The law allowed me to reduce my rent to a price I indeed find reasonable. It's roughly 100€ less. I'm happy with that. And in case our supreme court overthrows the Berlin ruling, I've gotten read and saved the "shadow rent".
Hmm but didn't they indeed provide incentives for increasing supply, by exempting new construction from rent regulation? In fact the later argument saying that prices started going up in the unregulated market would support the notion that the policy is indeed providing a powerful incentive to new buildings. Sure, the article also laments that there still isn't enough supply, but can one argue that giving more rent money to owners of old properties would help fix this?
How did new construction change in Berlin? What about homelessness? I don't know but find it shady that the numbers aren't shown.
Not that I think you completely outlaw the practice, but why not start taxing after, I don't know, you own 20 units or something. Just figure out some sort of scheme that disincentivizes people from hoarding a resource required for life. I'd much rather rent from someone that lived in the building and actually cared for the place than some random LLC in Florida I mail checks to that can't be bothered with anything.
Rent seeking is hard to eliminate, there has to be some way for lazy aristocrats to feel safe in their complacency. Try to remove it and the sleeping dragon gets very angry.
The result was that (my relatives in Italy told me) it suddenly became impossible to find masks anywhere.
Most producers decided to keep stock unsold hoping that the regulations would change in the future, and some smaller producer actually stopped production altogether or went out of business because it was no longer viable (source, in Italian) https://www.ilsole24ore.com/art/mascherine-primi-espulsi-mer...
If I'm reading the graphs right, price controls in Berlin have slashed rent price growth by nearly 60% for almost all of the city's apartment stock.
Meanwhile, rent for the remainder, those apartments built since 2014, is only growing 10% faster than the baseline.
So if we're gonna do the math: [lots of apartments * -60% inflation], against [fewer apartments * +10% inflation], equals a presumed windfall for renters, versus the alternative history where this rent control policy doesn't get enacted.
If you project this trend forward 10 or 20 years, you end up with a situation where most affordable rentals are being used by an aging population and the young have nowhere to live.
This also explains why these policies become entrenched: before, the world was divided into rich vs poor; now it's divided into (rich + old and poor) vs young and poor.
Yes, compared to the next 13 largest cities there seems to be a difference. However, the difference in graphs existed even before the policy proposal+enactment. The margin is also relatively small and only for a small timespan.
There should also be comparison to more comparable big cities like Munich, Cologne, Hamburg, or Frankfurt. Other cities are substantially smaller or have no (or even negative) population growth. Of cause the rent in those cities grows differently compared to Berlin. Thereby shifting the average.
There were actually two types of Soviet blocks in general terms. The first type was based on community and had a lot of greenery, a lot of community shops in walking distance, and those are actually worth quite a lot of money nowadays.
The rest were those that were built in order to rapidly provide housing to workers as industrial capacity was being massively built up.
In any case, in my city, the most iconic and beautiful housing structure was public housing, so if done right it can be beautiful and amazing to live in.
Otherwise, the private housing market is always there as competition.
If there's anyone I'd trust to get it right, it would be the Berlin lefties. Hopefully they are successful and set a good example for others to follow.
Construction quality of said block living was notoriously shoddy. State of the buildings only improved when most of the units were sold into private hands (usually that of the tenants, no megacorps). After that, the tenants-turned-owners started investing into repairs and reconstructions.
- it doesn't apply to newer/new buildings
- it still hasn't been through the higher courts so it still can be overruled (and the tenants will owe the past rent retroactively)
Another way to read this article is "this rent control is bad because we real-state speculators are now focusing our greed on a smaller number of people, instead of focusing it on everyone else".
That being said, it is not clear from the plots that the overall amount of money that is being spent, city-wide, on housing has increased or decreased. I would argue this is the only valid metric to asses how effective this particular policy is.
OK.
> Thus, saying that policy X is responsible for a price hike is hilarious.
Not so fast. If inflation is close to 0, and policy X is introduced, and then price hikes show up in a category subject to policy X, why is it hilarious to say that policy X is responsible? Why is it not reasonable to at least suspect X?
This is a "not even wrong" attempt to connect inflation with supply and demand.
> If populism on the political right corrupts democracies, populism on the left ruins economies.
Might as well stamp "this article is written by a conservative fanatic, proceed with caution". Looking at the author his short bio says worked for Handelsblatt -- I peeked at wikipedia, why am I not at all surprised to find they printed a fake vaccine story recently?
Berlin is the SF of Europe at the moment. Unless you want to spend 6 months at a minimum hunting apartments I would avoid this city.
Once I get comfortable with German, I am thinking of moving to cheaper, smaller cities , probably in the south and working full time remote.
Berlin specifically wanted something more.
Am I reading this correctly? So, these tenants might find themselves in thousands (maybe dozen of thousands) of euros of debt to their landlord. And I assume they'll be required to pay it up overnight? In this case, the politicians really screwed these "poor" people in the most unimaginable way.
I guess if many of us find ourselves in debt here and can't rent because the debt means we cant ever pass the Schufa which every place checks then possibly that'll ironically help solve the housing crisis..
To complicate Berlin’s situation further, Germany’s constitutional court is expected in the coming months to decide whether these rent controls are even legal. If the judges nix the legislation, lots of tenants in the formerly regulated sector could get hit by huge and even retroactive increases in their rents. That would create yet more chaos.
The current Berlin housing market Situation has little definite insights on the effects of rent control, but all about risk aversion and maximization of profits.
The current shortage of supply is all about landlords withholding their vacant listings until that final court order. Or they are cashing out by selling them after fantastic interest rates averging above 10% year over the last decades.
If you feel you have like a 60% chance of getting double the rent, you avoid it at literally at all costs, below that threshold, to rent out on unlimited terms, if you can affor it in any way possible.
Where you're stuck on the long established mandated single digit rent increments, if the current pratice of shadow contracts should prove to be not enforcable.
There simply is just so much more uncertainty than actual rent control happening for the time being.
There is no offical data on this, since it's illegal to keep them vacant for more than 3 months. So they are under "maintenance" or the like.
https://web.de/magazine/politik/schattenmieten-leerstand-ber...
https://www.zeit.de/2020/37/mietendeckel-berlin-immobilienma...
Also, with Berlin, perhaps it's an issue of splitting the areas that's bad, and also perhaps the excessive nature of the controls.
Finally, this may be related to an issue of low interest rates.
Low interest rates give much leverage to landed/owners so rents to up even if all other economic issues don't change.
Meaning that there is a kind of 'hidden inflation' which simply favours one class (owners) over the other.
Here are the Ontario regs [1]
Economic benefits are probably the biggest reason for being stuck in those unlivable cities. However the downside might outweigh the upside: higher cost, long commute and lots of worries.
The only difference is new construction, are new buildings controlled as well or free to charge whatever?
You think we'd learn.
Sorry folks, the correct answer is: it’s a real estate bubble. And deregulation is not going to help with that.
We all lived through 2008, didn’t we? We’ve seen this before. It shouldn’t be a big mystery. Speculation drives real estate prices, real estate prices drive rents. Government intervention is necessary to break the cycle.
Every time we try to "improve" on the market "failures", we screw up. Because there is an universal law it seems: you f.ck with the free market, the free market f.cks with you.
Something about those who refuse to study history are doomed to repeat it.
However the real long term point is made at the end of the article.
>"The biggest question is whether this episode of left-wing populism has damaged confidence in Berlin’s real-estate market permanently. If investors fear that local property rights will be put at risk in every election, they might stop building houses in the city at all."
This isn't a disaster, this is what needs to happen. Drive down the property market, reclaim the housing stock, turn it into mixed income public housing, which is exactly what Vienna did when the Social Democrats took control of the city in the early 20th century. Today most of Vienna's housing is public housing, and it is considered one of the most livable cities on the planet. Driving the landlords and real estate companies out of the city is only a disaster for the professional rentier class. The only problem Berlin has right now is that it hasn't gone far enough.
Berlin's population has been growing by leaps and bounds. The only way for everyone to have enough housing is to create enough housing for everyone to live there, or to make it sufficiently unattractive to live in that people leave.
"As expected, rents in Berlin’s regulated market plummeted in relative terms." and "Newly built apartments have therefore become even more unaffordable for most people." They are not directly lying, but I'd count this as dishonesty by omission. Newly built apartments in Berlin's city center were already impossible to finance for most people before the regulation started. So their complaint is like saying "most people cannot afford a home in Pacific Heights" which is true, but irrelevant to the regulation.
"There was also an acceleration of apartments going up for sale, as landlords tried to cash out of their now less profitable investments." You know, for the families trying to live there, that is amazing news!
"the landlord tends to sell the unit rather than re-let it" Wasn't that the goal of the regulation, to increase home ownership by those living there?
"The biggest question is whether this episode of left-wing populism has damaged confidence in Berlin’s real-estate market permanently. If investors fear that local property rights will be put at risk in every election, they might stop building houses in the city at all." Oh wow. I'd wager that 99% of those living in Berlin won't mind if international investment corporations build their overly shiny and overpriced apartments somewhere else.
And lastly, this article appears to not mention one critical thing about Berlin at all, which is "Wohnungsbaugenossenschaft". Regular families joining a non-profit to construct apartment buildings for their own use together. One of the goals of this regulation was to boost that, and scaring away for-profit investors might just be the way to make space for non-profit investments.
I don't blame Bloomberg and Ifo Institute for delivering what their customer base wants to read. But it would be foolish to treat this as objective reporting.
Everybody you met had probably left because of so called "socialism", so you have quite a bias in your data. Have you heard of "Ostalagia"? There is still a not so small "communist" party in Russia by the way.
Sigh. Here's what the article actually says:
> The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction.
That's an alternative reform proposal, not going back to how things were before. I think it would work better than rent control, because increasing supply is better than haggling over fixed supply.
Edit: another possible solution is a land value tax. It's non-distortionary (doesn't lead landlords to reduce or increase supply) and prevents a lot of rent increase.
If you don't mind the other million, and only care about people already living in the city, you can make it honest by introducing a city-wide Tenant Permit issued only to current tenants. Rents stabilize due to fixed demand, people aren't tied to one apartment, and landlords are incentivized to offer better service. It has all the benefits of your plan and none of the drawbacks, right?
One of the problems is that when Berlin was partitioned it was a showcase for Eastern and Western Germany and lots of money flowed in for construction without really enough people to fill it. Now people are moving there and no one building.
Why does this never happen? Well, there are many areas of the United States where real estate prices are skyrocketing even though all the houses are vacant- because real estate is being used as a vehicle for speculation. And the same thing is happening in almost every city in the western world. It’s likely the same thing is happening in Berlin. The demand is not coming from renters so allowing the price to go up does not help renters, it’s all just a tidal wave of free money from central banks looking for somewhere to go.
Also the author of the article is an Ayn Rand free-market-as-magic-bullet ideologue with an axe to grind. He makes no pretense of trying to write a balanced analysis. He even appears to be framing things like rents and real estate prices falling as pure negatives when both those things are purely positive from the point of view of anyone but a real estate owner.
Berlin population 1950: 3,338,000
Berlin population 2021: 3,567,000
Germany birth rate: 9.5
Germany death rate: 11.5
Germany's population is increasing over time. In fact, 2020 was an all time high [1].
> Berlin population has been stagnant since 1950
Between 1980 and 2020, Berlin's population increased by half a million people [2]. In addition, it's population has increased every year since 2004 with an average of ~0.3% yearly increase.
[1] https://www.worldometers.info/world-population/germany-popul...
[2] https://www.macrotrends.net/cities/204296/berlin/population
edit: formatting
> If you’re going to argue that supply will only go up if you allow price to rise infinitely, you’re getting it backwards- the increase in supply is supposed to make the price go back down, that’s the whole idea. There is supposed to be a balance that develops that holds the price down to an affordable level.
The article argues that the people who construct apartment buildings operate on incentives. Their incentives are the revenue generated by the apartment over, say, 30 years and the cost of constructing the apartment (in materials, regulations, time, ...).
Decreasing the expected rents and/or increasing cost of construction should result in less new apartments (supply increase is slow or nonresistant).
Conversely, increasing the expected rents and/or decreasing cost of construction should result in more new apartments (supply increases quickly).
The article does not suggest: >supply will only go up if you allow price to rise infinitely
but instead: >> The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction.
This is a fair reasonable and response to the article. In essence you are arguing: the housing market can act irrationally and is seemingly disconnected from the underlying asset. Furthermore, people get hurt by these spikes in prices.
The reason I responded to your original comment was not to pick apart who is right but because you seemed to be attacking a point that the article didn't make.
Is physics "dismal" because we can't have free energy or perpetual motion machines (that can do work)?
> Carlyle attacked Mill, not for supporting Malthus’s predictions about the dire consequences of population growth, but for supporting the emancipation of slaves. It was this fact–that economics assumed that people were basically all the same, and thus all entitled to liberty–that led Carlyle to label economics “the dismal science.”
https://www.econlib.org/archives/2015/07/the_origins_of_1.ht...