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Comment by bhickey | Hacker News Reader

Rent control is screwing things up in the first place.

For example, without the option to end leases landlord's can't empty a building, demolish it and rebuild with more units. This imposes an artificial constraint on supply. Demand isn't particularly elastic so prices rise.

Meanwhile, the price ceiling encourages overconsumption amongst the rent control population. Kids are off to college -- why downgrade from a 3-bedroom? There's simply no incentive to do so. This further limits supply.

If you want to see rents fall, repeal rent control, repeal Prop 13 and allow construction.

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Do you really think the main constraint on supply comes from rent control and not zoning limitations? In SF there is a strong desire to preserve the historical character of the neighborhoods (agree or disagree as you like, but the political will is there) and I think that's the root reason why it's difficult to demolish buildings and rebuild them with more units, not the mechanics of rent control.

In any event, even in a rent controlled building, you absolutely can terminate all of your tenant's leases and kick them out, upgrade the property, condoize it, and sell the condos (Ellis Act.) The only restriction is that you must sell the units, not rent them.

(speaking as someone who, as a side project, is in fact building high density residential units in SF)

Zoning is primary, but without rent control, the Tenderloin would be a lot better (convert the SROs into reasonable rentals). Of course, getting rid of the enablers of homelessness would also be necessary.

It's not rent control that keeps SROs around - there are separate SRO controls. You're not allowed to eliminate SRO beds without building replacement beds in another part of the city (or paying into a fund to cover the cost of someone else doing it, and it's a significant fee.)

Many of the people in SROs have substance abuse or mental health problems or other disabilities, and most (?) SRO tenants are paying their rent in federal housing assistance vouchers (which is why SROs can be so profitable - the government pays you a high price to house people that otherwise wouldn't be welcomed on the rental market, housing discrimination laws notwithstanding.)

Any zoning plan has to make space for this population somewhere in the city. If you let people demolish SRO beds, you're just going to discover that you have to build new ones at public expense.

I should write more carefully.

I didn't mean 'allow construction' was a consequence of removing rent control. I meant it literally as 'remove absurd zoning restrictions that impede construction'.

That last bit is key. The problem here is not rent control by itself, it's the combination of rent control with prop 13 and extreme anti-development laws.

> If you want to see rents fall, repeal rent control, repeal Prop 13 and allow construction.

Prop 13 doesn't block construction.

Prop 13 keeps property tax revenues relatively stable.

Prop 13 does inhibit construction.

A landlord who has owned a building continuously since 1985 is paying tax on its assessed value as of 1985. A landlord entering the market today pays based on the value today. This is an obvious subsidy for the incumbent landlord. A building built or purchased today is strictly less valuable than an identical one held for years.

> A landlord who has owned a building continuously since 1985 is paying tax on its assessed value as of 1985.

Not true - Prop 13 allows small increases each year.

> A landlord entering the market today pays based on the value today. This is an obvious subsidy for the incumbent landlord.

Or, it's payment for the infrastructure that the "old landlord" paid for that the new landlord will use.

More to the point, that "subsidy" does not affect the demand for new housing, the supply of existing housing, or the cost of providing it. As a result, it can't affect whether building new housing is profitable.

Yes, prop 13 means that different landlords can have different profits on the "same" building, but so what? The fact that someone else can make $10 doing something doesn't affect my decision to do it for $1.

In fact, prop 13's "stable taxation" might actually encourage building in advance of need, to lock in the extra profit potential.

> The fact that someone else can make $10 doing something doesn't affect my decision to do it for $1.

No.

http://en.wikipedia.org/wiki/Comparative_advantage

We're talking about a situation where the guy making higher profits can't grow, so comparative advantage doesn't apply. In this situation, all new supply is the same - there's no comparative advantage.

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