[HN Gopher] Rent Control Reduces New Development: Bug or Feature?
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Rent Control Reduces New Development: Bug or Feature?
Author : paulpauper
Score : 9 points
Date : 2024-07-28 19:15 UTC (3 hours ago)
(HTM) web link (marginalrevolution.com)
(TXT) w3m dump (marginalrevolution.com)
| pjkundert wrote:
| The Canadian province of British Columbia just recently enacted
| "rent control" on a massive scale, by making most AirBnB rentals
| illegal (thereby ostensibly "forcing" the owners of these units
| to rent these units to local long term renters).
|
| Of course, this immediately has these first-order effects:
|
| - Putting thousands of home owners into financial dire straights,
| by reducing their income at the same time that their refinanced
| mortgages are increasing by as much as 100%.
|
| - Eliminating thousands more rental units of coming onto the
| market, by eliminating the AirBnB income stream necessary to
| rationalize building or renovating those units into existence.
|
| These first-order effects are so obvious, that it cannot be an
| accident -- the assumption would assume such a low intelligence
| on the part of the politicians enacting this legislation as to be
| deeply insulting.
|
| But the alternative explanation; that this was an intentional
| result, also brings into question:
|
| Why would a politician want to simultaneously destroy both
| tourism (making short-term rental accommodations both less
| plentiful and more expensive), while also destroying thousands of
| rental units from being constructed, making long-term rentals
| both less plentiful and more expensive?
|
| The obvious alternative -- goosing the production of _all_ types
| of short- and long-term rental units by _encouraging_ the
| production of AirBnB units (increasing their supply, thereby
| decreasing their cost and profitability, encouraging the
| migration of existing AirBnB stock to long-term rentals) --
| appears to have bypassed the BC political elite.
|
| How (and why) would they not want that?
| franga2000 wrote:
| > Putting thousands of home owners into financial dire
|
| Not homeowners, short-term rental investors. Many probably are
| homeowners, but that's not relevant - many more homeowners saw
| absolutely no change, since they didn't invest into this
| particular industry.
|
| > Eliminating thousands more rental units of coming onto the
| market
|
| Thousands more short-term rental units, not real rental units.
| People who renovate/build for AirBnB will keep their units on
| AirBnB, not suddenly decide to put them up for real/long-term
| rental. The units that theoreticallt won't be built now
| wouldn't have helped the housing crisis even a little bit.
|
| Without regulatory intervention, tourism is so much more
| profitable, that anyone who wants to invest in realestate and
| optimise for profit would be foolish to deal in long-term
| rentals. By making the AirBnB business model less profitable,
| some investors might actually go "back" to investing in long-
| term rentals, increasing supply.
| pjkundert wrote:
| Is your hypothesis that supplying more rental units (even if
| they were mostly short-term) would _not_ reduce the both the
| price and profitability of that stock?
|
| And, that an increased supply and reduced profitability would
| _not_ drive some of that short-term rental stock into the
| long-term rental market?
|
| It appears to be the consensus opinion of HN that reducing
| supply increases availability and/or affordability.
|
| Howso??
| BenFranklin100 wrote:
| It's a feature in two ways.
|
| The first way, as the author point out, it directly
| disincentivizes developers from building new homes. The second
| way is more insidious: it gives politicians, typically
| progressive politicians, the needed cover to claim they are
| addressing high rents, while they continue to support the real
| driver of housing costs: restrictive zoning that bans new
| construction and leads to supply shortages.
|
| Inclusionary zoning operates in a similar manner.
| pydry wrote:
| The fastest level of homebuilding in NYC was in the 1950s.
| Strictest rent control? Also 1950s.
|
| Rent control also reduces property prices which reduces
| NIMBYism. People are less inclined to fight new development
| when they arent up to their eyeballs in debt and 60% of their
| net worth isnt on the line.
|
| It's not property supply that suffers most from rent control.
| It's the ever increasing streams of unearned income going
| towards largely the same people fighting new development.
| brigadier132 wrote:
| https://marginalrevolution.com/marginalrevolution/2024/07/re.
| ..
|
| The evidence is in the article. So please don't come in here
| with your cherry picked data to try to claim something that
| is already widely known to be false.
| pydry wrote:
| The "evidence" is a link to one paper stuck behind a
| paywall which is probably trash. Im not in the mood to
| thrown down money to read trash.
|
| He also references the theory that raising the minimum wage
| increases unemployment, which is very popular among
| neoliberal economists but has been comprehensively debunked
| (c.f. dube, lester, reich for the economically _literate_
| ).
|
| In both cases it's an economist from a neoliberal camp
| doing PR against a profit hostile policy. Thats just what
| they do.
| alephnerd wrote:
| > The fastest level of homebuilding in NYC was in the 1950s.
| Strictest rent control? Also 1950s
|
| NYC's (as well as those in other American cities like Boston,
| Detroit, and San Francisco) massive development push in the
| 1950s was also infamous for using eminent domain to do this
| mass construction at the expense of African American
| neighborhoods - and displaced African American residents were
| not resettled in these projects [0][1][2][3]
|
| It's easy to build fast if you're taking land away from
| disenfranchised communities who have no ability to push back.
|
| [0] - https://www.bostonreview.net/articles/brent-cebul-
| tearing-do...
|
| [1] -
| https://www.bloomberg.com/news/articles/2017-07-09/robert-
| mo...
|
| [2] - https://m.youtube.com/watch?v=MVcjHygDTLw
|
| [3] - https://m.youtube.com/watch?v=T8Abhj17kYU
| pydry wrote:
| >The minimum wage will tend to increase unemployment among low-
| skill workers, often minorities.
|
| Orthodox and neoliberal economists spent a good part of about 50
| years preaching that raising the minimum wage increased
| unemployment until Dube, Lester and Reich.
|
| After the study was replicated they still preached it.
|
| This happened in the 90s. Preaching this in 2024 basically puts
| you in the same camp as climate change skeptics.
|
| And now, theyre still preaching it, not because it's true but
| because it reduces profits.
|
| Exactly like rent control.
|
| Economics is a weird profession. It _pays_ a lot more than all
| other social sciences. Supply and demand certainly applies there.
| The reason is that there are a lot of plum think tank jobs paid
| for by some of the country 's largest corporations.
|
| Some university economics departments similarly also receive
| large donations with large strings attached.
|
| The question is, what was _really_ being demanded when David Koch
| piled a dumptruck of money on FSU econ department? And what is
| being supplied? The truth? Or neoliberal orthodoxy?
| diob wrote:
| Yep, people also still like to say minimum wage increases will
| cause inflation despite things inflating just fine without it.
|
| Sigh.
|
| Higher local wages means more money in the local economy versus
| money getting pulled out to somewhere else.
| snjsisi wrote:
| Not if the state funds housebuilding, for the common good, rather
| than relying on private developers who only have profit motive.
|
| Rent controls need to be combined with long-term social housing
| policy to be effective.
| bryanlarsen wrote:
| Rent control reduces development, state funded housebuilding
| increases development. So state funded housebuilding
| ameliorates the effect of rent control, it doesn't eliminate
| it.
|
| State funded housebuilding without rent control would maximize
| new development, and the additional housing would put downward
| pressure on rents providing much of the benefit of rent control
| without the drawbacks.
| pydry wrote:
| The effect is very very muted though, which is why the
| fastest rate of NYC homebuilding in the 1950s coincided with
| the strictest rent controls.
|
| Like raising the minimum wage it is a very profit hostile
| policy though. Thats probably why marginal revolution
| despises both policies so much.
|
| Tyler Cowen takes koch money and the laws of supply and
| demand work the same way for the market for faux academic
| legitimacy in economics as they do for housing: if you have
| the cash, it can be bought.
| alephnerd wrote:
| > Not if the state funds housebuilding
|
| Chicago, Detroit, and NYC all tried that and abandoned it due
| to cost overruns, corruption, high liabilities, and the
| limiting of eminent domain powers following the civil rights
| movement - most urban housing projects were built by
| demolishing historically African American neighborhoods, and
| the resulting structures were segregated (as James Baldwin
| eloquently pointed out in 1963 during the height of the civil
| rights movement)
|
| The same thing happened in Western Europe as well with France
| and the UK abandoning similar urban housing projects.
|
| Singapore and HK are unique in that the governments are
| authoritarian and can kick people out with minimal notice or
| recourse if they really want to.
|
| The biggest blocker is always going to be land acquisition -
| either we reject the entire notion that you have property
| rights and the right to recourse, or you accept that these
| basic civil liberties are a requirement for a democracy and
| thus building will have to be done by the private sector
| because unlocking public funds would take 3-5 years on top of
| 2-3 years of construction.
|
| For a more recent example, look at China's urban renewal
| projects in the 2000s and 2010s, and how local governments
| would use forced evictions as well as minimal compensation and
| occasionally shooting protesters [0][1][2] or the mass
| evictions in Beijing in 2017-18 [3] - this was how Housing
| Projects were built across America from the 1930s-1960s.
|
| Opposition to that policy was also a major reason why Xi
| Jinping was initially quite popular, because he was opposed to
| these kinds of projects at scale, and Fujian never saw the kind
| of mass demolitions that you'd see in other Chinese provinces.
|
| [0] - https://www.washingtonpost.com/wp-
| dyn/articles/A6968-2004Oct...
|
| [1] - http://news.bbc.co.uk/2/hi/asia-pacific/4507130.stm
|
| [2] - https://www.reuters.com/article/olympics-evictions-
| idUSPEK57...
|
| [3] - https://www.nytimes.com/2017/11/30/world/asia/china-
| beijing-...
| Agentus wrote:
| " The biggest blocker is always going to be land acquisition
| - either we reject the entire notion that you have property
| rights and the right to recourse, or you accept that these
| basic civil liberties are a requirement and thus building
| will have to be done by the private sector because unlocking
| public funds would take 3-5 years on top of 2-3 years of
| construction."
|
| Reflecting on the conflict of Israel and also in the show
| "yellowstone" basically originates from land ownership
| issues, i really think this human constructed abstraction and
| entitlement is fundamentally flawed. I really think it needs
| reworking and needs to be held as less sacred in America.
| Besides do people really own land when the government demands
| rent in the form of property taxes?
|
| So long as housing is so fundamentally stressful in current
| systems with resulting pervasive homelessness and rent
| seeking capitalism applied to shelter thats long paid for its
| investment yet still inflates in costs applying pressure on
| low income residents: i dont think mostly inalienable rights
| to property ownership in many cases is a public good.
| alephnerd wrote:
| If my family has owned this house for multiple generations,
| why should I give it up to at best be resettled in a 2
| bedroom apartment in the boonies?
|
| There is no good answer to that.
|
| Either you accept civil liberties of which property
| ownership is a critical part or you accept that civil
| liberties like ownership do not matter.
|
| Owning property is a right every human agrees with (it's
| literally article 17 of the UN Declaration of Human
| Rights). This is why you either need to compensate
| exhorbitantly or threaten to break a few legs and skulls in
| order to gain property.
|
| The mass urban housing projects of the 30s to 60s were
| literally built by mass demolishing black neighborhoods -
| look at Central Boston's redevelopment for example, as well
| as Cincinnati's.
|
| And that's why these projects ended once the Civil Rights
| movement succeeded - why should black residents lose their
| property and intergenerational wealth to urban projects
| built by governments that didn't care for them.
|
| Look at how the 1968 DC Riots and 1967 Detroit Riots were
| exacerbated by HUD plans to revitalize "slums" (black
| majority neighborhoods) like Capitol Hill and Lafayette
| Park
|
| > Besides do people really own land when the government
| demands rent in the form of property taxes
|
| In return for those taxes they get piped water, roads,
| police, local schools, sewers, garbage collection, and
| other basic services.
|
| > resulting pervasive homelessness and rent seeking
| capitalism applied to shelter
|
| Mass Eminent domain of land only leads to crony capitalism
| anyhow. Either way it's the same contractors and builders
| who are doing development - the difference is now instead
| of wooing voters you just woo the political class instead.
|
| Nor is there actually a need for mass development to
| alleviate homelessness - housing subsidies can and do help,
| as SLC and Houston have both shown as well as Section 8.
|
| That said, you will have to follow the law - meaning no
| substance abuse or criminal activity.
| Agentus wrote:
| According to traditional american propaganda yes civil
| liberties of property ownership is critical. According to
| a deep reflection on the indirect impact these civil
| liberties have in different scenarios, suddenly these
| civil liberties start imposing a staggering cost on
| others that becomes intolerable to pay. In less abstract
| wording it's like the one hold out property preventing
| the building of a dam.
|
| Civil liberties are just a human abstract construct which
| go at odds with reality and as such cause inevitable
| downstream problems no matter how the civil liberties or
| laws are constructed or fabricated. Like you said theres
| no good answer but as such (while fully cognizant of
| issues with all sides) im beginning to dislike the
| current state of the status quo thats really only a
| modern phenomenon (nation states and most pieces of land
| being claimed for ownership by individuals or worse:
| large stakes of land claimed by small groups).
| alephnerd wrote:
| > According to traditional american propaganda
|
| Literally every society holds ownership of land and
| property as a fundamental core value.
|
| > im beginning to dislike the current state of the status
| quo thats really only a modern phenomenon (nation states
| and most pieces of land being claimed for ownership by
| individuals or worse: large stakes of land claimed by
| small groups)
|
| People will not willingly give up their property without
| adequate compensation (and even then might not due to
| emotional attachment).
|
| If you want to back your words with threats of physical
| force, feel free to go ahead. There's a major reason most
| civil and criminal cases in both China and India revolve
| around land disputes and conflicting ownership.
|
| This has been the status quo of society for millenias -
| this is why you have folk stories like Hattefield McCoy,
| the biblical story of Zelophehad, the dishonest plowman
| of European folktales, the qissa of Dulla Bhatti's revolt
| against the Mughals, and the conflict between Der Shin
| and Der Yi in Chinese folklore.
|
| Private Land Ownership has literally been codified in the
| Hammurabi Code, the Arthashastra, the Bible, and the Book
| of Rites from the Zhou Dynasty.
| alisonatwork wrote:
| This comes across as bamboozlement, based on conflating
| the actually broadly-accepted right to own property with
| an imagined right to own land. There is nothing in the
| UNHDR that says people ought to be able to own land. As
| you already pointed out, any property that a person might
| own is at best just a temporary structure on land that in
| most countries also includes other structures provided by
| other entities. Land itself is widely understood to be a
| shared resource. If it wasn't, there wouldn't be any
| controversy over who gets to use it, and the right to
| freedom of movement wouldn't exist either.
|
| Of course it violates human rights to force people out of
| their homes, but that's because it's wrong to interfere
| with how people choose to live, not because people have
| some kind of intrinsic and exclusive right to the land
| they are currently occupying.
| alephnerd wrote:
| > There is nothing in the UNHDR that says people ought to
| be able to own land
|
| Article 17 [0]:
|
| 1. Everyone has the right to own property alone as well
| as in association with others.
|
| 2. No one shall be arbitrarily deprived of his property
|
| ---------
|
| Land is a form of property in every single definition
| used in literally every form of jurisprudence.
|
| [0] - https://www.un.org/en/about-us/universal-
| declaration-of-huma....
| BenFranklin100 wrote:
| In the United States, social housing is the least popular form
| of housing and faces the fiercest opposition from NIMBYs. It
| would also require trillions of tax dollars to do at scale. For
| this and other reasons, it is a political nonstarter.
|
| Yes, developers are profit driven and this a good thing. So are
| grocery store owners for that matter and that is also a good
| thing. Since developers (usually) turn a profit, they attract
| investment dollars, and in turn convert those dollars into new
| homes. These new homes, especially if built in desirable areas,
| give wealthier people options to buy, who are now less likely
| to bid up the price of older homes as they do now.
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