Recently I was in SF for the first time. I was pretty shocked to see the endless rows of tiny one story + garage houses separated by impossibly wide streets. No wonder housing is so expensive. The city could easily double its density by building more apartment buildings.
Yes, I'm inclined to believe that rent control is a symptom, not the cause. The cause appears to be ridiculous zoning and building restrictions. If more housing is available such that the price drops, then rent control isn't even needed.
I have lived in Brooklyn for a few years, it's largely the same here.
A while back there was a proposal to build a large apartment building in my neighborhood, which at the time did not have any tall buildings. Locals tried to stop it, literally putting "No Towers" signs in their windows and on their doors.
Thankfully they were not successful, so the neighborhood will soon be able to support hundreds of more people.
Just so people understand where I'm coming from with what I'm about to say, my family has worked and existed in the construction business for a long time. Houses to rent out were considered the safest income producing retirement asset to invest money. Then rent control was introduced.
Fast forward 20yrs later and rent had stayed the same but taxes and municipal fees had increased to the point where they dwarfed the legally allowable income. Add to this new mandates which stipulated how electricity and water could be billed to tenants requiring installation of new equipment in the buildings every few years. Then throw in rising insurance rates coupled with rising maintenance expenses.
So, we took at look at the figures and decided the best course of action was to either bulldoze a set of perfectly livable buildings, let the lots sit for the required minimum time, then rebuild a non-rent controlled property --OR-- sell to someone who could afford to do the same. There was no legal way to earn a profit otherwise. Turning into slum lords was not something we wanted to do. Welcome to being a landlord with rent controlled property.
SF allows rent increases, CPI adjusted, usually 1.5-2.5% a year. SF county use taxes have been ~8% for a couple of decades. Prop 13 has been in effect since the 70s.
4 out of 6 units in my building have flipped in 5 years, allowing rent increases. Resulting in at least $70-80K additional income for the landlord (at Prop 13 tax rates). This is more the norm than an outlier - many of the new techies aren't mad at grandma stealing their freedom fries, they're mad at techies who beat them here in 2012.
I'm all for giving up rent control when landlords give up Prop 13.
We have a standardized bundle of rights that shields the person that possesses that bundle from many (but not all) price increases in a living space. It's called ownership.
If a city thinks that certain people should be protected in that way, it should buy the proprieties and give them to those favored people. Trying to unbundle ownership and tenancy to mix and match them, at a city level with only acquiescence as opposed to enthusiastic collaboration from state and federal governments, as well as quasi-governmental institutions, is not going to work well.
I live in a San Francisco rent-controlled apartment. I only moved to San Francisco because of rent control. Otherwise I would not have been able to afford a place at all. New apartments in cities without rent control always seem to be expensive, and I couldn't afford those either. Rents on old apartments seem to be skyrocketing, too. I, for one, welcome rent control.
You certainly did not pay less to move in than you would have in a city without rent control. In SF, rent-controlled rents start at rates comparable to non-rent-controlled apartments. One might think they'd start higher, given that the landlord is agreeing to grant what amounts to an annuity along with providing a place to live, but that doesn't seem to happen. If you think rent control makes the prevailing market rates for new tenants lower, where do you suppose the money comes from to give senior tenants discounts of up to 100%?
I propose a new law that people with my SSN don't have to pay taxes. It would help me out a lot.
Every policy helps some people at the expense of others. Concentrated benefits, diffuse costs. You need to weigh both sides, not just the benefits.
(edited)
London housing still has a fair number of long-settled subsidized tenants who no longer need subsidized housing, but "council-homes-for-life" is in place and confers huge advantages to incumbents, which hardly seems fair. Basing access on need, this is not.
I have lived in various parts of Central London in mixed social housing, always as a market rate tenant (I am fortunate enough to afford it as a software engineer) and sympathize with the laments of poorer tenants who are occasionally booted out of their homes due to some housing development or other, complaining about the breakups of their communities and their families. But what about people who HAVE to leave their communities and families in order to make the most of opportunities when they arise? Is there an easy answer?
Incomes are, on average, rising a little. Which is partly why the stock market is freaking out; Wall Street hates it when income goes up, because they view it as money coming out of their pocket. Cities like New York and Boston and SF are expensive because there's a lot of money going through them; this creates high demand and high incomes for some. But companies like Facebook and Google and Apple could certainly afford to pay everyone who works for them in any capacity enough so that no one would have to live in a car. But the investor class would have a shit if that happened.
> The author thinks low-income people's incomes are rising and that is false.
The author doesn't specifically mention low-income people - she just says that 'incomes rise':
But then incomes rise, and rents don’t. People with higher incomes have more resources to pursue access to artificially cheap real estate: friends who work for management companies, “key fees” or simply incomes that promise landlords they won’t have to worry about collecting the rent.
Your observation that poor people's incomes are stagnant actually strengthens the authors point above, because a growing income gap gives rich people 'more resources to pursue access to artificially cheap real estate'.
> The rest of the article is fallacious because of this.
There are some points in the article that are not dependant on rising incomes. For example,
Meanwhile, price ceilings reduce the supply because they decrease the incentive to build, and can make it downright imperative to remove rental housing from the market and turn it to some other use -- condos, warehouses, anything that won’t trigger the rent controls.
There are various perspectives to take on income in which two people looking at the same data can come to two different conclusions. It goes much further than Simpsons paradox. Simply choosing your windows for comparison differently can cause this: one person chooses to compare 2014 with 2016, and the other chooses to compare 2001 with 2009.
One perspective that is almost universally true going back as far as we have data, is that incomes rise over the lifetime of the individual. Because the bottom 20% today are a completely different set of people as the bottom 20% of tomorrow. And because people strongly to earn more as they get older, the premises of the article hold up.
Lowest incomes, even inflation adjusted, certainly have been rising. Here's historical Census Data [1], Table H-1. Income Limits for Each Fifth and Top 5 Percent.
Maybe you have some large scale data you'd like to share?
"Rent control is one of the most effective ways to destroy a city’s housing stock."
The concept of 'housing stock' is generally a foreign one to the bay area. Residents mostly care about their own home value, rather than how having ample supply regionally benefits everyone.
>Serial experimentation with this policy has repeatedly shown the same result.
New York's two largest building booms took place during times of very strict rent controls - the 1920s and between 1947 and 1965.
>rent control looks like a victory for the poor over the landlord class. But the stifling of price signals leads to problems.
Except when it actually happened the price signals sent by the strictest rent controls still weren't enough to end the city's biggest housing booms.
Seriously, Megan McArdle telling you that price controls are "just going to hurt the poor" is a bit like Trump telling you that demolishing Mar a Lago will only hurt the immigrants.
Rent control is a dirty hack, for sure, but it's a dirty hack that shouldn't be removed until a proper fix is put in place - i.e. a land value tax.
I won't hold my breath for Megan McArdle to advocate for that.
Bloomberg should have her fired. She does absolutely no credit to their publication.
You may get downvoted to hell for, er, speaking the truth?
I'm afraid you're right and Miss McArdle is really nothing much more than a libertarian hack.
Case in point: Her book review fo Piketty's "Capital in the Twenty-First Century". While opinions may certainly differ about the tome this is a bit rich for a book review:
I apologize in advance, because I am going to talk about a book that I have not yet read. To be clear, I intend to read Thomas Piketty’s “Capital in the Twenty-First Century.” It is sitting on my (virtual) bedside with a big stack of other (digital) books that I intend to read. But it’s far down in the queue, and I’m afraid that I can’t wait to weigh in—not on the book itself, but on its topic.
Reviews a book she hasn't read and needless to say completely trashes it in the process.
I actually agree: Bloomberg really should have her fired.
I link to the Baffler article[1] since the original review is apparently only available to subscribers.
I love the part where you started out with a correlation (which is very weak evidence, especially without any citation) and then proceeded to some assertions (also without evidence or citations), ending in an ad-hominem
>So the promise of economic justice erodes over time, as lucky insiders come to dominate rent-controlled apartments, especially because having gotten their hands on an absurdly cheap apartment, said elites are loathe to move and free up space for others.
So Megan's response is just not to pursue economic justice at all? It doesn't make any sense, of course the powerful will try to erode justice for the powerless, that's just society, that doesn't mean we stop pursuing justice. It means we become even more vigilant about it.
I don't agree with the article, but I think your reasoning is dangerous. If a means is introduced to serve a noble purpose, but it does not serve that purpose, then the nobility of the purpose is not a defense of the means. Right now there's an article on the front page about the consequences of applying that reasoning to dubious forensic sciences that were introduced with the noble intention of ensuring justice but in fact undermine it.
If a means doesn't serve an end, then continuing to pursue it despite the perverse consequences doesn't prove your commitment to the to the desired result.
> If politicians actually want to make sure everyone who needs a place to rest their head has one, there’s only one way to do it: Build more housing. Which means, in turn, loosening the legal restrictions and community veto points that make it so hard to add supply. Because there’s no way to escape the fundamental math: Unless you build enough housing to shelter the people who want to live in your city, a whole lot of people will be left out in the cold.
Plain and simple: The way to have economic justice is to build enough housing to satisfy demand.
[+] [-] adrianN|8 years ago|reply
[+] [-] zip1234|8 years ago|reply
[+] [-] apeace|8 years ago|reply
A while back there was a proposal to build a large apartment building in my neighborhood, which at the time did not have any tall buildings. Locals tried to stop it, literally putting "No Towers" signs in their windows and on their doors.
Thankfully they were not successful, so the neighborhood will soon be able to support hundreds of more people.
[+] [-] codingdave|8 years ago|reply
[+] [-] raldi|8 years ago|reply
[+] [-] justherefortart|8 years ago|reply
[deleted]
[+] [-] wheaties|8 years ago|reply
Fast forward 20yrs later and rent had stayed the same but taxes and municipal fees had increased to the point where they dwarfed the legally allowable income. Add to this new mandates which stipulated how electricity and water could be billed to tenants requiring installation of new equipment in the buildings every few years. Then throw in rising insurance rates coupled with rising maintenance expenses.
So, we took at look at the figures and decided the best course of action was to either bulldoze a set of perfectly livable buildings, let the lots sit for the required minimum time, then rebuild a non-rent controlled property --OR-- sell to someone who could afford to do the same. There was no legal way to earn a profit otherwise. Turning into slum lords was not something we wanted to do. Welcome to being a landlord with rent controlled property.
[+] [-] hindsightbias|8 years ago|reply
SF allows rent increases, CPI adjusted, usually 1.5-2.5% a year. SF county use taxes have been ~8% for a couple of decades. Prop 13 has been in effect since the 70s.
4 out of 6 units in my building have flipped in 5 years, allowing rent increases. Resulting in at least $70-80K additional income for the landlord (at Prop 13 tax rates). This is more the norm than an outlier - many of the new techies aren't mad at grandma stealing their freedom fries, they're mad at techies who beat them here in 2012.
I'm all for giving up rent control when landlords give up Prop 13.
[+] [-] bradleyjg|8 years ago|reply
If a city thinks that certain people should be protected in that way, it should buy the proprieties and give them to those favored people. Trying to unbundle ownership and tenancy to mix and match them, at a city level with only acquiescence as opposed to enthusiastic collaboration from state and federal governments, as well as quasi-governmental institutions, is not going to work well.
[+] [-] irascible|8 years ago|reply
[deleted]
[+] [-] amorphid|8 years ago|reply
[+] [-] swsieber|8 years ago|reply
The real solution is building more housing. (I think)
[+] [-] arebop|8 years ago|reply
[+] [-] poke111|8 years ago|reply
Every policy helps some people at the expense of others. Concentrated benefits, diffuse costs. You need to weigh both sides, not just the benefits. (edited)
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] douglaswlance|8 years ago|reply
What downstream effects that might have, who knows, but rent control isn't the only solution.
[+] [-] vr46|8 years ago|reply
I have lived in various parts of Central London in mixed social housing, always as a market rate tenant (I am fortunate enough to afford it as a software engineer) and sympathize with the laments of poorer tenants who are occasionally booted out of their homes due to some housing development or other, complaining about the breakups of their communities and their families. But what about people who HAVE to leave their communities and families in order to make the most of opportunities when they arise? Is there an easy answer?
[+] [-] jacobsheehy|8 years ago|reply
[+] [-] Finnucane|8 years ago|reply
[+] [-] MarkMc|8 years ago|reply
The author doesn't specifically mention low-income people - she just says that 'incomes rise':
But then incomes rise, and rents don’t. People with higher incomes have more resources to pursue access to artificially cheap real estate: friends who work for management companies, “key fees” or simply incomes that promise landlords they won’t have to worry about collecting the rent.
Your observation that poor people's incomes are stagnant actually strengthens the authors point above, because a growing income gap gives rich people 'more resources to pursue access to artificially cheap real estate'.
> The rest of the article is fallacious because of this.
There are some points in the article that are not dependant on rising incomes. For example,
Meanwhile, price ceilings reduce the supply because they decrease the incentive to build, and can make it downright imperative to remove rental housing from the market and turn it to some other use -- condos, warehouses, anything that won’t trigger the rent controls.
[+] [-] saosebastiao|8 years ago|reply
One perspective that is almost universally true going back as far as we have data, is that incomes rise over the lifetime of the individual. Because the bottom 20% today are a completely different set of people as the bottom 20% of tomorrow. And because people strongly to earn more as they get older, the premises of the article hold up.
[+] [-] tylerhou|8 years ago|reply
[+] [-] pmarreck|8 years ago|reply
[+] [-] ChrisLomont|8 years ago|reply
Maybe you have some large scale data you'd like to share?
[1] https://www.census.gov/data/tables/time-series/demo/income-p...
[+] [-] skybrian|8 years ago|reply
[+] [-] purplezooey|8 years ago|reply
The concept of 'housing stock' is generally a foreign one to the bay area. Residents mostly care about their own home value, rather than how having ample supply regionally benefits everyone.
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] diogenescynic|8 years ago|reply
[+] [-] notyourday|8 years ago|reply
[+] [-] PeterMikhailov|8 years ago|reply
https://theoutline.com/post/2303/megan-mcardle-has-a-lot-of-...
http://exiledonline.com/megan-mcardles-hypocrisy-exposed-por...
https://twitter.com/asymmetricinfo/status/960546413582192641
https://www.splicetoday.com/politics-and-media/megan-mcardle...
https://www.bloomberg.com/amp/view/articles/2018-01-30/megan...
https://www.bloomberg.com/view/articles/2017-10-23/we-libert...
https://www.bloomberg.com/view/articles/2017-06-16/beware-of...
https://www.bloomberg.com/amp/view/articles/2017-09-18/we-di...
http://www.oregonlive.com/opinion/index.ssf/2017/06/why_not_...
https://twitter.com/asymmetricinfo/status/859101074501890048
http://web.archive.org/web/20120314140221/http://www.janegal...
https://www.theatlantic.com/business/archive/2007/10/defendi...
http://prospect.org/article/atlantics-mcardle-problem
http://firemeganmcardle.blogspot.com/2008/03/everybody-has-t...
http://nymag.com/daily/intelligencer/2012/12/newsweek-wins-w...
[+] [-] crdoconnor|8 years ago|reply
New York's two largest building booms took place during times of very strict rent controls - the 1920s and between 1947 and 1965.
>rent control looks like a victory for the poor over the landlord class. But the stifling of price signals leads to problems.
Except when it actually happened the price signals sent by the strictest rent controls still weren't enough to end the city's biggest housing booms.
Seriously, Megan McArdle telling you that price controls are "just going to hurt the poor" is a bit like Trump telling you that demolishing Mar a Lago will only hurt the immigrants.
Rent control is a dirty hack, for sure, but it's a dirty hack that shouldn't be removed until a proper fix is put in place - i.e. a land value tax.
I won't hold my breath for Megan McArdle to advocate for that.
Bloomberg should have her fired. She does absolutely no credit to their publication.
[+] [-] CaptainZapp|8 years ago|reply
I'm afraid you're right and Miss McArdle is really nothing much more than a libertarian hack.
Case in point: Her book review fo Piketty's "Capital in the Twenty-First Century". While opinions may certainly differ about the tome this is a bit rich for a book review:
Reviews a book she hasn't read and needless to say completely trashes it in the process.I actually agree: Bloomberg really should have her fired.
I link to the Baffler article[1] since the original review is apparently only available to subscribers.
[1] https://thebaffler.com/latest/what-pikettys-conservative-cri...
[+] [-] DangerousPie|8 years ago|reply
The entire US economy was booming after the war. So numbers from that period don't tell you much about what things would have been like in peace time.
[+] [-] RyanZAG|8 years ago|reply
I don't think calling for everyone you disagree with to be fired is the right way forward.
[+] [-] pmarreck|8 years ago|reply
https://fee.org/articles/the-case-against-rent-control/
[+] [-] frgtpsswrdlame|8 years ago|reply
So Megan's response is just not to pursue economic justice at all? It doesn't make any sense, of course the powerful will try to erode justice for the powerless, that's just society, that doesn't mean we stop pursuing justice. It means we become even more vigilant about it.
[+] [-] paulgb|8 years ago|reply
I think the argument here is more "not pursue short-term economic justice at the expense of long-term economic justice"
[+] [-] dkarl|8 years ago|reply
If a means doesn't serve an end, then continuing to pursue it despite the perverse consequences doesn't prove your commitment to the to the desired result.
[+] [-] gwbas1c|8 years ago|reply
Plain and simple: The way to have economic justice is to build enough housing to satisfy demand.