Is Rent Control a Necessary "Evil"?
Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
Is Rent Control a Necessary "Evil"?
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial.... a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go -- and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable. Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out -- what yesterday's article oddly described as ''free-market horror stories'' -- and constantly proliferating regulations designed to block those strategies? Predictable." - Paul Krugman.
Rent control simply does not help anyone but a tiny fraction of renters. It hurts however 100s of times more renters than it helps. Rent control leads to housing shortages. Rent control creates ghettos. Rent control causes rents to skyrocket. Im sure someone will come on here and try to defend it, but as Krugman insinuates, anyone who does does not even lack a year 1 college education in basic economics.
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- Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes6y
@Robert M. Excellent article. Thank you sharing it with us.
That does not work everywhere. The city I invest in has an abundant supply of inventory so their is little to no appreciation. What happens when you buy a property and tenant is $500 under market? You cannot raise nor can you end the lease you are stuck. And it makes it harder for seller to find a buyer.
Originally posted by @Account Closed:I’m a landlord in a rent control city and I am actually a fan of it. Our rents are among the highest in the nation because supply is limited - the below market tenants don’t move keeping overall supply low.
It also ensures we have rent growth which makes any so-so investment a great one eventually. I haven’t even mentioned the appreciation that we get as a by-product of keeping supply low.
Originally posted by @Chris Levarek:
@Russell Brazil I tend to agree. However, recently I had a discussion with a homeowner in Sedona, AZ, a now very tourist and popular spot for retirees or vacationers. Due to the high amount of short term rental growth opportunity and increased demand from out-of-state immigration, this homeowner explained how many families and long term renters are moving out of the city.
The current rising rents are changing the renter base to out of state landlords renting short-term rentals or vacationing retirees instead of families or standard wage earners. As a previous resident in my high school years, I can confirm a dramatic shift in the population as these changes have occurred. Education establishments such as the middle school and high school have merged even, possibly from a shrinking student base due to changing population type.
This was a argument from this homeowner that if rental control was in place, these residents would be able to stay local and their livelihoods or way of living would be protected.
The market should adjust right? If housing is too expensive there, people will move away. If this happens there will be a labor shortage, creating more demand for workers, and driving wages up for those who stay. There will also be less demand for that housing, driving prices down. Eventually the market should reach some equilibrium, at which point housing costs and wages will be more in line.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes6y
@Dan Heuschele your post encapsulates another hidden issues cities face: affluent suburbs restricting the free market of rental housing through their local govts and zoning boards whose residents then turn around and ***** about the entitlement of city govts when desperate cities try everything including rent control to help their constituents, many of whom are renters.
Want to help solve the housing supply issues? Remove the govt regulations limiting development in the suburbs. You won’t have a movement for rent control then.
- Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes6y
Here in Burlington, VT we have escalating rents because supply hasn’t kept up with demand. Burlington has also made it nearly impossible to build large multi-family complexes as historical rules seek to protect existing housing, most of which were single family turn-of-the-century houses that have turned into apartments in the same shell. This has led to a <3% vacancy - ripe for landlord blame and wish for rent control.
in this wonderfully progressive state, property taxes alone are 23% of my gross revenue. I’ve told the fledgling tenants union this and they simply don’t care. Landlords are bad. - Investor · Charleston, SC · Member since 2011 · 606 posts · 414 votes6y
@Chris Levarek
The laws intention is never the result. Most of these laws will result in bad outcomes for the people they’re trying to help. The big issue is the supply of affordable housing and that could be solved in many other ways. Government should put more time and energy into ways to increase the number of homes or apartments that are in line with the incomes of that area.
Originally posted by @Jonathan R McLaughlin:
@Dan Heuschele your post encapsulates another hidden issues cities face: affluent suburbs restricting the free market of rental housing through their local govts and zoning boards whose residents then turn around and ***** about the entitlement of city govts when desperate cities try everything including rent control to help their constituents, many of whom are renters.
Want to help solve the housing supply issues? Remove the govt regulations limiting development in the suburbs. You won’t have a movement for rent control then.
I have no issues with a suburb restricting housing whether it be wealthy or not. The low density area my father lives (Jamul) is less expensive than the average San Diego community. a local community should be allow to set its preferred density so that all density options are available to the populace. What entitles people to live anywhere they desire regardless of if they can afford to live there in a free market?
You refer to free market, but this is the opposite of free market as via regulations a larger jurisdiction is setting policy on smaller jurisdictions. Big government setting policy is less free market than local jurisdictions setting policy.
Local jurisdictions should establish their density requirements and the free market should determine the rental rates. The free market will eventually resolve the housing crisis either by construction of additional housing or due to an exodus due to people not being able to live there (or a combination of both).
Most of the time when the government attempts to mess with free enterprise, it does not accomplish the goals. So far in San Diego, the rent control regulation is resulting in the largest annual market rent increase in recent years. Today or tomorrow I will be sending out my first rent increases of the year. They will both be $150 increases. This is the highest rent increase on these 2 units since we have owned them. In addition, even with this large rent increase, these 2 units have rent rate that is below the market rent for these units. Market rents have increased that much in our area. I highly suspect the Market rental rate increase would not have been as severe without the rent control regulation.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes6y
@Dan H. all offered as spirited exchange of ideas not hostility: I think you are only embracing the free market when its negative affects don't involve you directly. Those density restrictions are govt regulations no less than rent control and with a much larger impact beyond the direct community that enacts them. And logically, shouldn't you support an individuals right to do what they want with their own property?
My point is that cities and areas who serve the constituents unable to purchase because of other govt. regulations are behaving rationally. Not saying they are correct, but they are rational. And why should they subsidize your ability to restrict zoning?
I'm not even disagreeing with your point. Just saying that if you don't want rent control, easing restrictions on density and opening up areas to a greater range of price points (thus allowing more "choice") will likely do that.
Everything's a trade off...
Originally posted by @Jonathan R McLaughlin:
@Dan H. all offered as spirited exchange of ideas not hostility: I think you are only embracing the free market when its negative affects don't involve you directly. Those density restrictions are govt regulations no less than rent control and with a much larger impact beyond the direct community that enacts them. And logically, shouldn't you support an individuals right to do what they want with their own property?
My point is that cities and areas who serve the constituents unable to purchase because of other govt. regulations are behaving rationally. Not saying they are correct, but they are rational. And why should they subsidize your ability to restrict zoning?
I'm not even disagreeing with your point. Just saying that if you don't want rent control, easing restrictions on density and opening up areas to a greater range of price points (thus allowing more "choice") will likely do that.
Everything's a trade off...
I do not agree about them being rationale nor that high density is likely to lead to no rent control.
I heard Senator Wiencowski make a similar argument about home owner freedom. The difference is the density/zoning rules were in place when virtually all the RE purchases were made. If the land owner purchased before density and zoning rules, I believe that only health and safety rules should apply to those few homeowners (so they should not be bound to zoning rules set after purchase). To everyone who purchased with the zoning and density rules in place, they made their choice when they purchased. If for some reason they have changed their mind then they are free to move somewhere that allows what they desire. Their change of mind should not impact their neighbors who purchased with certain expectations set forth by the rules and regulations in place at the time of the purchase. So I am against regulations being created and applied after the RE has been purchased. The reason whole communities need to have density requirements is because to maintain low density for each person that desires it, their neighbor must be restricted from using their property for a high density purpose. Without these restrictions, RE purchasers have no control on the density of where they purchase.
As for rent control. There are more tenants than LLs. Politically rent control is being done primarily to obtain votes. Why do I say this? It is because I believe most (certainly not all) politicians are not stupid. If they did any research on rent control, they would be challenged to find a credible study that is pro-rent control. So I assume most of the politicians that vote for rent control are aware of the negative consequences resulting from rent control. They vote for rent control because more of their constituents want rent control than do not want rent control. Tenants would desire rent control even if there was not as severe housing shortage. Why not? Would you reject to someone picking up some of your housing costs?
- Specialist · Raleigh, NC · Member since 2019 · 4 posts · 2 votes6y
@Cody L. Thank you for proving once again to an increasingly deluded populace that as soon as the government de-incentivizes business then investment suddenly dries up. Simply, the best economic stimulus program? A return to lassaiz fare. The best healthcare program? Eating right and exercising. The best socialism? Checking in on your neighbor. The best life philosophy? Objective and responsible individual free-will, not government imposed altruistic mysticism.
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