Comment by mmmurf | Hacker News Reader

Comment by mmmurf | Hacker News Reader

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The point is that rent control (over time) drives up the price of rental dwellings, a phenomenon which greatly harms the poor. Here's why:

In many cities, new buildings are exempt from rent control if they are "luxury" buildings. So the supply of luxury housing increases. Meanwhile, the incentive to build non-luxury buildings is greatly diminished b/c those buildings fall under mandatory rent control. Also, there is a bigger incentive to turn buildings into condos, etc., to avoid having to deal with rent control. Not sure where you heard that new properties are exempt in most cases. This may be due to the fact that most are luxury buildings.

So there is a finite amount of rent-controlled housing, and since it's such a great deal, the landlords have little incentive to improve the fixtures, furnishings, etc. They will rent the place without improvements, so there is no reason to spend the money on them. Thus the places deteriorate over time and begin to become more and more slumlike.

Rent control also encourages over-consumption of housing space. My 3br apt example above explains one example.

Without rent control, supply and demand can function properly. Maybe this means that cheaper housing is located a bit further from the highest rent area of a city. More likely, if there is demand for cheaper housing, someone will figure out a way to build it. The huge number of condemned buildings in major cities is evidence of the resources that have been completely wasted b/c nobody had the incentive to improve the places enough to make them liveable!

If you rent, it's not a permanent home. This has many advantages -- if you get laid off you can easily move with a month's notice. You don't have to worry about long term upkeep, you don't have to worry about hiring a realtor or trying to recoup your investment if the market dips. The other side of the coin is that sometimes prices change to reflect other realities. An increasing price probably means that the area is thriving and (surprise) the space is actually worth more. Once you get into declaring that things should be priced by public officials rather than based on the market price (what they are actually worth to someone else who's willing to pay for them) you are stepping onto a very slippery slope.

New properties are exempt at least in NYC and SF, the main cities the article harps on. I don't know about elsewhere.

A place deteriorating over time happens, but from the POV of the tenant whose alternative is getting booted to the curb, this seems like a reasonable tradeoff, doesn't it?

The over-consumption of housing space is a pretty lame argument, and it's contradicted by the point that other people are making about a black-market rising up for illegal subletting & etc.

"Supply and demand functioning properly" is a bit heartless in this context, don't you think? I mean, we don't exist so that some theoretical system can work in a way we can easily describe. When people get kicked out of the place they live, that has a cost - even if we haven't figured out how to put a price tag on it yet. I'm more than happy to say "screw the newcomers" in favor of the established citizenry.

As for rent control being a slippery slope: this is bullshit (sorry). Despite free-market dogma to the contrary, reasonable government policy is not the enemy of the good. See: the recent credit crunch. What would something similar look like for a community? Let's see: an area of town becomes trendy, young folks with lots of disposable income bid up the prices like mad, all the old tenants leave, an economic downturn hits or the neighborhood loses its trendiness, all the young folks who have no real ties leave, and then...

I have no problem with a program designed to subsidize housing for people with tax dollars. If the democracy decides that people with attributes x, y, and z deserve a $2000/month housing subsidy, that's fine. It's no different than the subsidy given to mortgage debtors (tax breaks), parents (the child tax credit), electric car owners (tax credit), student loan debtors (student loan interest deduction), farmers (direct subsidy), etc., etc.

But consider how paternalistic any of these programs are compared to simply giving the person cash to spend on whatever he/she wants.

Also, the above programs are taxpayer subsidized so the burden is distributed across all taxpayers. Rent control, on the other hand, screws over the building owners only, effectively making a single building owner personally provide a $1000+ subsidy to a hundreds of people. Compared to a broad, taxpayer-subsidized program, this is equivalent to a 70% additional tax just on landlords, this is on top of that person's fair share of income and payroll tax already being paid!

The biggest problem, though, is the distortion caused by rent control... which causes all of the problems in my above post.

To make obvious the issue of price controls leading to shortages, consider this: During the 1970s when Nixon instituted price controls on gas at the pump, there were massive lines outside gas stations. This was not due to the "evil Arabs" withholding gas. It was due to the price controls: People who would have decided to carpool or walk if the price had been at market price decided to buy gas at Nixon's price. This led to huge lines.

That's a fair point, though I disagree about the parallel to gas prices (housing isn't a commodity, and rent control only applies to existing tenants). I've been in the position of defending 'rent control' on this thread, but really all I'm committed to are the ideas that the op was a terrible article that proved nothing, and that not displacing people from their homes is a worthy societal goal. If there are better ways to accomplish that than rent control, I'm all for them.

Fair enough. On a slightly tangential note, I think that the idea of "uprooting from homes" is a bit of an unfortunate cliche. In reality, it is home ownership that shackles people to jobs they hate, etc. If you rent, you can move whenever you want. If you own a home, you can't move if the job market declines or you find a better offer elsewhere unless you hire a Realtor and go through a major home sale project... and if the local economy is in decline, you're probably not the only person trying to sell your house and so you may end up selling it at a big loss (as was the case in post-industrial Flint, Michigan).

I realize that landlords have been vilified in the past, but who is really benefited by suppressing the mobility of the population? It's businesses (whose workers can't leave), it's politicians (who don't have to worry as much about people packing up and leaving in response to bad policies, corruption, etc.), and it's banks -- most people pay at least the value of their home in mortgage interest, and are effectively enslaved to the bank, an unrelenting landlord who can inflict the equivalent of modern-day debtors prison in the form of foreclosure credit destruction and confiscation of any equity earned since purchase.

How many people are tremendously afraid of losing their job because they might lose their house (their biggest investment)? How many people put up with unfulfilling, soul-sucking work just to make that house payment?

Consider how this has all changed -- how many more debt slaves were created -- when the housing market tanked. Home ownership is not the American dream, nor is being part of a community for the long term, nor is having the same job for 30 years and then retiring with a gold watch and a pension.

True freedom is in being able to take a better offer and being able to reinvent one's self whenever one wants. But our entire financial system, it seems, was based on the idea of encouraging long-term debt (mortgages) and the stasis that accompanies it.

So I think the ideal that you are striving for with not uprooting people from their rental apartments is not only illusory but destructive. Price changes contain information, and preventing price changes simply hides information, keeps people in the dark, etc.

Maybe being uprooted will (metaphorically) allow the plant to catch flight and land somewhere better... Maybe rental real-estate prices are so high because tons of rich people are moving in and they all plan on sending their kids to private school, leading to the destruction of the public schools -- this is the case in SF where most people with money would never send their kids to SF public schools even though it costs $2K/month to rent a dumpy 1BR apartment and so objectively it's a "rich" area.

I agree with basically everything you've said here, except the conclusion that all this means allowing people to avoid being uprooted from their homes is destructive. This is mainly because I don't think that the argument that "rent control traps renters in their low-rent apartments" holds any water - the alternative would have been displacement from the increased rent, and the tenant still wouldn't have been able to find a place in the same area (this terrible articles assertions aside). Also - price changes contain information, sure, but how is that information being hidden in a rent-control environment? With increase-on-vacate and no rent-control on newly constructed units, it seems like it's pretty rare that rent-controlled units would be so highly concentrated in an area to mask the true market value.

I agree that the item you mention is not a particularly strong argument, but I wanted to mention some examples of how rent control blocks a price signal that might even be useful for the beneficiary of rent control. I think it's uncontroversial that it blocks the price signal to renovate the buildings and to build new affordable housing as discussed above.

But if you agree on the major point that the social engineering geared at getting people to live/work in one place for a long time is on the wrong track, then our differences seem focused on rent control.

I should mention that in my last building in SF there was a guy who had lived there in a rent controlled apartment since the 1970s. After the first year I lived there, a letter arrived in the mail informing me that rent would increase by exactly 1.5%, the maximum increase allowed by law, and that the landlord was pushing for "utility cost pass-through", a rent-control exception that allows slightly bigger increases in cases of utility price jumps. So I was a beneficiary of rent control.

Back to the guy. His apartment had a view of the bay and golden gate bridge from every window, including the bathroom. It could probably be rented for $3500+/month because of the amazing views. He was a wealthy lawyer, arch-enemy of the landlord and heavily involved in the tenants union, and completely not in need of any help paying rent. With rent control he was probably paying under $1000/month for his apartment and had been for years. He will probably live there until the day he dies.

I'd have been far less skeptical of rent control if there had been an immigrant family living in that apartment or someone who worked at the local Walgreens.

Maybe I should have been more clear. I agree that social constructs designed to chain people to a given location are bad; I disagree that rent control is one of these constructs. It might be true that people tend to hang on to apartments that they otherwise wouldn't because they're getting a great deal, but this is a voluntary choice, not the company store. The bit about "allow[ing] the plant to catch flight and land somewhere better" seem like a little bit of movie logic. Many people do derive real value from being established in a community, and would be hurt by being forced to move.

Why does the debate always veer back to renovation of the buildings? Do you really think that adding stainless-steel appliances to an apartment is a more desirable goal than not displacing established residents?

As for your personal experience with the wealthy lawyer, here's the balancing anecdote: I live in the Mission, a part of town where rents are rapidly increasing (I'm sure I'm guilty of driving up prices). There are plenty of people down here who can only afford to stay in their homes because of rent control, and stories of tenant intimidation are plentiful.

For renovation, it's not just stainless steel appliances, it's little things over time. In 1 or 2 years it's not really noticeable but over 5-10 years it starts to take a toll. Even the building I used to live in used a large tarp on the roof rather than fixing some leaks that would drip through the ceiling of my apartment and cause bubbles in the drywall when we had heavy rain.

In the mission, I would prefer if a subsidy was just given to the poor via tax dollars. Say it's a $200 per household subsidy. Maybe it makes sense for that family to pay it to the landlord, but maybe it makes sense to find a cheaper apartment and spend it on a TV. If it turns out that the TV was the chosen decision, that helps drive down the price of rent b/c maybe the landlord will have a slightly harder time raising rent prices. If, on the other hand, the tenant chooses to allocate the money to housing, it will help drive up housing prices. The upside of driving up housing prices is that it now becomes more worthwhile for someone to convert their house into apartments, which in turn increases supply and would tend to help keep prices affordable.

Of course it's not just stainless steel appliances - the thrust of the argument is that it's silly to think of buildings as more important than the people inside them.

Direct payment like you're advocating is a political non-starter. As paternalistic as it is, taxpayers don't like the idea that their money could be spent on anything, they want it to go only to the things they approve of.

Well, the extreme case of non-upkeep is the vacant buildings in NYC, etc. When nobody can make a profit from a building, it gets abandoned. This isn't an overnight process. It starts by using a tarp on the roof instead of fixing the roof, and it ends when the building is abandoned and nobody has to pay any rent or fix any broken pipes, etc.

I agree that the public would rather "force evil landlords to do x" than achieve the social goal in a minimally economically distortionary way. It similar to how politicians give handouts to people who drive hybrid cars while at the same time fighting a hugely expensive war to prevent oil prices from increasing to the point where people would just buy electric cars because they were cheaper!

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