It seems to me that any building of new flats should lower the pressure on the rents of existing flats via basic economics of supply and demand. Whether or not the new flats are “affordable housing” prices should be lower if there more housing.
Are the people who favor those policies simply stupid and lack understanding of economics or is it possible to steelman their position?
Are the people who favor those policies simply stupid and lack understanding of economics or is it possible to steelman their position?
The steelman is that their actual position is that they live there, and do not want to to either not live there anymore, deal with more people living there, or have to pay more to live there. The more friction in the housing market, the less things change (and, of course, the more deadweight loss and inefficiencies there are).
The steelman is that their actual position is that they live there, and do not want to to either not live there anymore, deal with more people living there, or have to pay more to live there.
If there’s low supply of flats to rent it seems that prices rise and they will have to pay more to live there. I don’t see how the policy keeps rents down.
If there’s low supply of flats to rent it seems that prices rise and they will have to pay more to live there.
You dramatically overestimate the economic efficiency of California’s housing laws. San Francisco has rent control laws, and the rent increase allowed between 2015 and 2016 is 1.9%. Unless it’s changed since the last time I looked, California in general will only reassess the value of a home for tax purposes when the home is sold (or, perhaps like with rent control, they allow adjustments only for inflation).
Obviously, moving is strongly discouraged by this policy, since any change allows the prices to readjust to reflect the market rate (on the limited available supply, not the total supply).
Is the point to keep population density down?
Not just down, but the same. If the little old lady who’s lived on the same block since 1960 is forced out for some strangers, well, wouldn’t that be a shame?
(Also note the politics: if you build new luxury flats, and a bunch of techies move in, and they vote to get rid of rent control or allow people to vote where they work, then even more change will happen. So better cut it off at the source, and not let them live where they’ll be able to vote on those laws.)
It seems to me that someone with a rent controlled flat doesn’t really have to worry whether low cost flats or high cost flats are build in his neighborhood. Why does a luxury flat produce a problem for someone with a rent controlled flat?
Why does a luxury flat produce a problem for someone with a rent controlled flat?
The neighbors are now different; this will change the character of the neighborhood, partially by changing what shops are profitable and partly just by changing who is around to interact with.
The new neighbors vote, and probably have different political preferences. Among other things, they are unlikely to be sympathetic to rent control.
If every apartment in a region is required to be cheap, then there is no value for the landlord in trying to be tricky. If some apartments are cheap and some and expensive, there is value for the landlord in trying to turn cheap apartments into expensive apartments, possibly by driving out the current tenants to get around the rent control laws.
I’m sure there are more that I’ve missed; I’m not even touching on the moral intuitions around high prices.
If every apartment in a region is required to be cheap, then there is no value for the landlord in trying to be tricky. If some apartments are cheap and some and expensive, there is value for the landlord in trying to turn cheap apartments into expensive apartments, possibly by driving out the current tenants to get around the rent control laws.
If there are few apartments on the market because some people do move and high demand those apartments will fetch high prices.
Get enough luxury apartments in an area and all of a sudden the neighborhood becomes a lot more attractive to people with money. This puts pressure on landlords to renovate their buildings to cater to the new customers (and charge a lot more). Even with rent controls in place, there are loopholes to be exploited.
A neighborhood of San Francisco just put a moratorium on the building on “luxux flats” http://www.citylab.com/housing/2015/05/san-francisco-may-put-a-moratorium-on-new-development-in-the-mission/393857/
It seems to me that any building of new flats should lower the pressure on the rents of existing flats via basic economics of supply and demand. Whether or not the new flats are “affordable housing” prices should be lower if there more housing.
Are the people who favor those policies simply stupid and lack understanding of economics or is it possible to steelman their position?
The steelman is that their actual position is that they live there, and do not want to to either not live there anymore, deal with more people living there, or have to pay more to live there. The more friction in the housing market, the less things change (and, of course, the more deadweight loss and inefficiencies there are).
If there’s low supply of flats to rent it seems that prices rise and they will have to pay more to live there. I don’t see how the policy keeps rents down.
Is the point to keep population density down?
You dramatically overestimate the economic efficiency of California’s housing laws. San Francisco has rent control laws, and the rent increase allowed between 2015 and 2016 is 1.9%. Unless it’s changed since the last time I looked, California in general will only reassess the value of a home for tax purposes when the home is sold (or, perhaps like with rent control, they allow adjustments only for inflation).
Obviously, moving is strongly discouraged by this policy, since any change allows the prices to readjust to reflect the market rate (on the limited available supply, not the total supply).
Not just down, but the same. If the little old lady who’s lived on the same block since 1960 is forced out for some strangers, well, wouldn’t that be a shame?
(Also note the politics: if you build new luxury flats, and a bunch of techies move in, and they vote to get rid of rent control or allow people to vote where they work, then even more change will happen. So better cut it off at the source, and not let them live where they’ll be able to vote on those laws.)
It seems to me that someone with a rent controlled flat doesn’t really have to worry whether low cost flats or high cost flats are build in his neighborhood. Why does a luxury flat produce a problem for someone with a rent controlled flat?
The neighbors are now different; this will change the character of the neighborhood, partially by changing what shops are profitable and partly just by changing who is around to interact with.
The new neighbors vote, and probably have different political preferences. Among other things, they are unlikely to be sympathetic to rent control.
If every apartment in a region is required to be cheap, then there is no value for the landlord in trying to be tricky. If some apartments are cheap and some and expensive, there is value for the landlord in trying to turn cheap apartments into expensive apartments, possibly by driving out the current tenants to get around the rent control laws.
I’m sure there are more that I’ve missed; I’m not even touching on the moral intuitions around high prices.
If there are few apartments on the market because some people do move and high demand those apartments will fetch high prices.
Get enough luxury apartments in an area and all of a sudden the neighborhood becomes a lot more attractive to people with money. This puts pressure on landlords to renovate their buildings to cater to the new customers (and charge a lot more). Even with rent controls in place, there are loopholes to be exploited.