Rent control causes all kinds of bad effects.<p>As noted by others here, it discourages maintenance and property improvements to rent control units. The landlord has an incentive to create a terrible living situation to get the tenant to move out.<p>It also reduces tenant mobility. If you're a long time renter and have a great, but maybe just affordable to you, rate, and then have any life change where you'd normally want to move, you face a tough decision. Get a new job, want to move in with someone, have a baby, need to take care of a parent, sell or buy a car, etc... and when you would like to move, instead you're stuck.<p>Rent control also directly causes Ellis Act evictions, IMO. If your building has occupants who've been there for a while then you're getting much lower income than market rate. One way to retrieve the true value out of the property is to sell it someone who will convert to private residence, thus valuing the property much more than a landlord.<p>Rent control is a subsidy to renters paid by landlords. They bear almost all of the financial responsibility for this attempt to make housing affordable. Home owners don't, and employers and employees don't. And the subsidy is incredibly unevenly applied: You get more a subsidy the longer you've been in a rental, it's not dependent on how much you need the subsidy.<p>As long as the city deems it beneficial to have a rental subsidy, they should just go ahead and have a real subsidy paid by taxes, and get rid of rent control. There's a good argument that a diverse population is good for the the city, so a subsidy funded by income, sales, corporate, property, and hotel tax makes a lot of sense.
Tech kids don't vote. An informal poll of my coworkers reveals those that live in SF didn't vote last election, some because they thought you had to live here for over a year before you can vote. Tech companies don't seem to do anything to encourage people to register either.<p>I voted (especially for pro-building, pro-housing candidates). Maybe if everyone else did the same we could change a few things.
There is no way San Franciscans renters should give up rent control without landlords giving up Prop 13. Landlords can hold property for decades without seeing their taxes go up, yet they cry crocodile tears about rent control (which resets every time a tenant leaves).<p>Rent control and Prop 13 are two sides of the same coin.
This is literally economics 101. If some of the supply is tied up in below market prices to people who would not have bought at the market price, then you shift the supply curve more than the demand curve and the price of the free market bit will be higher.<p>Anyone who cares to know this, does. People who don't want to know this won't be convinced by a carefully reasoned toy example.<p>But if you really want to understand the problems with the housing crisis, <a href="http://techcrunch.com/2014/11/02/so-you-want-to-fix-the-housing-crisis/" rel="nofollow">http://techcrunch.com/2014/11/02/so-you-want-to-fix-the-hous...</a> is unusually good.
Supply/Demand imbalance raises rents. Rent control is one contributor.<p>Rent control is more than an economic issue, it's a class and moral issue. Why should only people with the means to buy property have the ability to live a stable life? Imagine if your child had to change schools every year because your one of the overwhelming number of people who cannot absorb rent increases.<p>I personally have zero or negative sympathy for landlords charging usurious rents while simultaneously crying proverty and getting all puffy about property rights. If you can't handle the regulatory environment, nobody put a gun to your head and made you a real estate speculator.
An explicit and anecdotal rent control inefficiency I was made aware of firsthand in SF:<p>A young man lived in a rent controlled apartment for many years. He eventually met a lovely woman and they began dating seriously. They moved into the apartment together and enjoyed several years there together.<p>Eventually, they were ready to have children and moved to the East Bay, but they decided to keep the rent controlled apartment for occasional weekends in the city. At this point, between both of their incomes, it was a drop in the bucket. That apartment to this day sits mostly empty, while a housing crisis dwells around us and rents keep going higher.<p>We talk about pushing people out of neighborhoods — this literally has taken a home away from someone that could be living and working in the city. No story is the same, but the inefficiency is clear.
I live in cambridge MA. We had rent control on some units, now we don't. It seems to have done little to stem the tide of expensive rental units.<p>I think building more adding more supply is the only way to help keep rents and sales prices at a reasonable level.<p>They charge higher taxes to non-resident owners, which is an interesting tactic. But rents have gone up enough that people who leave my building often opt to rent their units rather than sell them.<p>It doesn't help that my state doesn't seem to make public transit outside the city core a priority (Boston, Cambridge, Somerville, Brookline), meaning commutes into the city from outside can be painful.
The argument (or lack thereof) that the author is making is hardly based on sound economic analysis. This "thought experiment" ignores a few fundamental facets of SF's rent control ordinance. As a "second-generation" rent control ordinance, the economics surrounding the issue are less clear-cut.<p>For starters, the story doesn't account for the fact that new housing may be built without being rent-controlled. This allows new housing stock to be built without regard to whether it will be rented under rent-control.<p>Secondly, SF doesn't have a "rent control" ordinance per se. It has a rent stabilization ordinance. Landlords can indeed increase a tenant's rent, but there are restrictions on how much they can raise a tenant's rent. It's based on the Consumer Price Index (though I don't think this is a good choice of index to peg rental rates to).<p>What it basically boils down to is less about economics and more about social mobility. Between rent control and prop 13, the Bay Area is set up for social stability. It is intended to encourage people to stay where they are. Us techies, mostly being from elsewhere in the world, are more inclined to push for more mobility.
Price controls almost always lead to shortages, for the very reasons the author described. If rent control is used to keep prices down, it is self evident that the market clearing price must be higher for those units... otherwise you could just get rid of rent control all together and there would be no side effect.<p>I guess the real question in my mind is "cui bono?" Seems that this policy would greatly benefit any landlords with non-rent-controlled property, since the artificially low price would create an increase in demand... since the price of those units can't increase the effects would presumably be felt in the next best substitute(s), i.e. free market apartments and/or values in the surrounding areas. Seems like property developers in the both the city and the suburbs might have a strong interest in distorting the market in this way.
Prague had rent control for over two decades. Regulated rent was about 5x lower than commercial. Over time this lead to some interesting stuff:<p>- home owners would cut hot water and electricity, just to get tenants out.<p>- there was regular black market where one could buy contract for cheaper rent<p>- tenants with lower price would subrent apartments for commercial price<p>- in Prague it was highly discriminatory for students and other poor people, who had to live in Prague.<p>- It did not protected city center anyway, people eventually moved away.<p>- there was huge conflict of interest. Some PM, government members, town hall officials... lived in cheaper apartments.
Not to sound like a complete dick, but... duh? Is this a controversial opinion really from a finance perspective? I was under the impression that almost all arguments surrounding rent control are:<p>1) Moral/legal arguments<p>2) Whether rent control is the small problem and lack of housing development due to zoning laws or NIMBYism or conspiracy or whatever is the much bigger problem - i.e. rent control is one small facet of the housing issues in SF.
Rent control isn't the only problem. We don't have rent control in Boston/Cambridge but we also have skyrocketing rental prices. The fact is supply needs to at a minimum match demand or outpace it to suppress severe rent inflation. You can only get to that happy place if you make development easier; both San Francisco and Boston have very strong NIMBY groups in the various neighborhoods.
It's trivial to show out that rent control increases the cost of rent for new renters. It's been talked about in the academic literature since the 40's[0]. The harder question is, "is it worth it?" Do the people who build a community in a place, and contribute to it's value, deserve to be shielded from the price increase they helped create? Home owners are incentives to help build a valuable community, shouldn't renters?<p>[0] Friedman, Milton, and George Joseph Stigler. Roofs or Ceilings?: The Current Housing Problem. Foundation for Economic Education, 1946.
Here's what I don't get about rent control: how is it actually benefitting the renter? If a landlord has a few different units, some under rent control, some not, and some cash to spend on improvements, why would he spend it on improving the rent-controlled units? The Facebook post that was here yesterday even said so much:<p>> The few of us who still remain in San Francisco have no choice but to live in sub-par conditions like mold, windows that don't shut, rodents and countless other issues because there is no other choice, because the rents are so high you can't move so you don't.<p>This is what you get when you set the price artificially below market value: subpar product. Has anyone here seen Soviet-era apartments? They were exactly like this. So in the long run, the place will fall apart around the renter, and they will be pretty much powerless to do anything about it. And the bit about "can't move" because it's too expensive just means that the area is now too expensive for you and rent-control is the only thing allowing you to stay here.<p>If the excuse is that your job is here, well maybe your job is not paying you enough to live in SF. Perhaps founders should stop starting companies in this incredibly expensive area, and explore greener pastures.
Rent control is a case of the government forcing landlords to do something that is really the government's job.<p>If the government wants housing to be affordable, it can build more of it, or provide households with tax credits or vouchers to help them afford to pay rent. Vouchers are less desirable than increasing supply, but they cause fewer market distortions and bad incentives than rent control, which is a price ceiling, which we know for sure leads to shortages.<p>Instead of taking on this public policy responsibility, the government of San Francisco has decided to take the easy way out by capping rents on certain units, which unfairly forces landlords to shoulder the burden of a job the government ought to be doing. This incentivizes all kinds of crazy things, including removing housing stock from the market under the Ellis Act.
For me two of the biggest issues in the bay area, transportation and housing stock availability suffer from a lack of regional authority which could make decisions for the region as a whole. The Abag just does studies and isn't binding.<p>I wish we had some county/city mergers like miami-dade. I think a regional authority would weaken the nature of neighborhood politics which conflict with larger regional goals. We could have an integrated transit system as well as well planned -or at least better planned- housing policies and strategies.<p>Bay area nimbyism resulted in a fragmented Bart and uncoordinated transit system as well as wasteful low rise housing developments. I can only hope this changes. And also agree getting rid of rent control is a bitter but necessary pill. Build more and rent will go down.
This just seems very basic.<p>Rent control discourages investment in real estate. Less investment in real estate means lower quality and fewer apartments. There are some lucky winners who get cheap apartments, but the rest pay higher prices to live in worse places. The same thing happens in New York City.<p>The economically sound answer is to make it as easy as possible for builders to make large buildings with lots of apartments. Right now it is so hard to build that only luxury apartments are profitable.
And Prop 13 creates higher home prices in CA.<p>Both do little to protect their intended target (artists and elderly) both do a lot to protect the non-mobile (and in fact discourage mobility).
While you all are enjoying your high rents, I would like to brag about my hometown Memphis, TN. We just got some hype in the WSJ.<p>"In a nod to the youngsters, the survey found that the top markets offering “the right live/work/play environment” for millennials were Nashville, Brooklyn, Portland, and Memphis."[1]<p>In all seriousness, I think its a shame that SF can't keep up with housing. It's a tough problem. I don't envy the people in Government that have to balance all the different interests.<p>Then again, I would hate it if the majority of my paycheck went to my rent.<p>[1] <a href="http://blogs.wsj.com/moneybeat/2015/03/11/u-s-regained-top-spot-for-real-estate-investment-in-2014/" rel="nofollow">http://blogs.wsj.com/moneybeat/2015/03/11/u-s-regained-top-s...</a>
All of the arguments I have heard for rent control act like the vast majority of us who live in non-rent controlled areas are going through a Boschian nightmare hellhole of landlords jacking up our rents, driving us out of our ancestral homes, and sticking pitchforks in our collective asses.<p><checks cranium> nope, no screw-vices here.
I'm amused nobody brought the word Gentrification to the comments yet.<p>Yes, the arcticle does not mention that word. Neither the comments there or the comments here.<p>But this is what giving up rent control encourages: gentrification. And it's really bad.<p>I'm not a US citizen, I don't live there, but I've visited SF quite a few times. You can see gentrification happening yearly after every visit. It's sad.<p>Perhaps the discussion should not be "rent control" vs "no rent control" and really "how to effectivelly control rent prices".<p>In Brazil, landlords are allowed to raise the rent every year by the same ammount of one of the country's inflation indexes. It's not perfect, but people seem to be more or less happy with it.<p>Also the rent price can never be more than a small percentage of the property's declared value per month (if you want to change the declared value, your ownership taxes will change accordingly). This helps a bit.<p>This is just an example of my point: stop thinking binary - yes or no - and start thinking how.
One thing I've never understood (but would still like to) is where does the imperative to build more and faster come from? I live in Berkeley, am very nearly priced out at this point, but see no reason why the community is required to take in more people. Permitting snd process ensures a snail's pace for new construction here, but from the perspective of those that live here (and most have rent control) why should they rush to grow?<p>All I'm saying is, market prices reflect supply and demand, but they also balance the demand which would otherwise threaten to overwhelm the place. Who am I to say 'I want to live here! Make it happen!!' We could be building the city of our dreams, of the future, a mere 30 miles away.
Perhaps I'm misunderstanding basic economics here, but:<p><i>The 20 people who originally couldn't find houses in SF (who formerly would have needed to bid $4), can bid $2 on some of the formerly rent controlled houses. They get leases.</i><p>If the market rent is $4, and the control is $1, and the control disappears, why on earth wouldn't the landlords in possession of the formerly-controlled properties immediately raise their prices to the market price?
"The city needs people who make less than X to live here (teachers, social workers etc). We shouldn't have a homogenous city of software engineers and bankers."<p>This is mistaken. The cost of living is routinely taken into account when people are deciding what wages they will demand. If literally no teachers can afford to live in your city, and you wish your children to be educated, you'll have to pay a lot in order to import a teacher who can then afford to live there. That drives up wages to equilibrium.<p>Furthermore, if literally no teachers can afford to live in your city, and you wish your children to be educated, you might very well decide to move to somewhere with a lower cost of living. This drives down demand to equilibrium.<p>The only argument in favor of rent control is that it reduces short-term volatility of rent. This only makes sense if moving entails huge negative externalities. You do see people making this argument (they talk a lot about long-term community cohesion).
Eliminating rent control without also making it possible to build up (literally) to a degree that (afaik) is currently impossible due to building and zoning restrictions would do little to ease the problem. By my understanding, though, actually building new housing is about as unpopular with the locals than ending rent control. There's no point in 'signalling to developers that it's time to build,' as suggested in the article, if they literally can't build anything.<p>The annoying thing with the fixation on rent control over zoning is that at least rent control has some altruistic value to people who can't really afford their rents being raised. The zoning rules largely benefit property owners, I expect.
There seems to be an underlying thought in many answers here, something like "the markets should be allowed to function".<p>This is a very naive idea. The "market" exists only as a system protected by the state security apparatus. The state prohibits poor people to randomly capture property from rich people, in effect protecting landlords with the backing of violence. What do the poor get in return? Surely they must receive something to opt into the social contract? In general, that "something" is welfare. THAT is why welfare for poor renters is important, in the form of rent control or subsidies or whatever else they demand.<p>A market propped up on the spectre of state violence is not "free".
I support building new buildings - if we let them build new buildings, those buildings are exempt from rent control, too!<p>Also, let's not forget that SF also has a pretty large amount of subsidized housing stock in the form of BMR (below market rent) units and other things.<p>I don't see a problem with having the rent control stock transitioned to some sort of means-testing.<p>I'd love to see them building, building, building. The amount of fighting that went on to knock down a Walgreens in the mission that was right next to a BART stop though, leaves me wondering if that could ever happen.<p>Zoning protects owners, but remember that a tenant in rent control has a right not unlike an ownership right; it's a perpetual lease at a fixed price. They can sub-lease it, for instance. It is all but impossible for them to be evicted. So rising property values and quality-of-life in their area benefits them (the tenants) greatly; so opposing construction keeps the value and exclusivity of their position high. The tenants are accruing a large economic surplus that would normally accrue to the owner.<p>Anyway, I've heard of quite a few anecdotes that involve people making huge salaries and having incredibly cheap rent-controlled apartments, or even worse, sub-leases of one. Never mind the pied-a-terre accusations.<p>I have not seen any meaningful statistics, though.
You need more data. Just because 72% of apartments are under rent control doesn't mean that 72% of apartments are going for under market rate rent.<p>Even with rent control, San Francisco would benefit from being denser. There's a lack of all kinds of housing which is making it unaffordable. Manhattan is 70,000 people/mi2. Brooklyn is 35,000 people/mi2. SF is 17,000 people/mi2.
Rent Control is about enabling community through housing stability. Places where the housing costs have skyrocketed out of the reach of anyone but investors are also the places with the lowest community participation and highest Landlord rights. If you want to run a city where only the rich have rights then don't have any rent control. But if you rent to people who aren't rich, and then when housing goes up you try to throw them out to make more money, they're going to want to get together, contact their politicians, and secure their housing stability. Just because you want to piggyback on the poor and lower middle class to float your investment until it starts making real money doesn't give you the right to complain about the poor and lower middle class for still being there. If you consider housing in one of the densest cities in the planet to be solely for investment purposes I think you have something wrong with your moral compass.
This isn't a convincing argument. Regardless of the rates paid by the people in rent control apartments, unless they vacate, the supply doesn't increase, so the market isn't changed at all.<p>Since new buildings aren't rent controlled in SF, there is no discouragement to building due to rent control.<p>The real answer is just geometry. SF is geographically constrained in such a way that there isn't really a way to build more housing within commuting distance. A city like Omaha (or even Berlin) has the available land go up with the square of the commuting time. SF has the land available for development go up roughly linearly (the valley doesn't get much wider until all the way to San Jose)<p>The way to lower housing costs is to increase the available housing as a function of commuting time. The easiest way to do this is high speed rail.<p>It's not a coincidence that all the communities in the valley have fought tooth and nail against high speed rail.<p><a href="http://www.cahsrblog.com/2011/04/anti-hsr-activism-is-a-rich-mans-movement/" rel="nofollow">http://www.cahsrblog.com/2011/04/anti-hsr-activism-is-a-rich...</a><p>Once it becomes possible to get to SF from Gilroy in 40 minutes, tons of housing will be built far from the city, where land is available and cheap. People won't have to choose between paying a huge premium to avoid a long commute, or spending 3 hours of every day sitting in a car.<p>This is economics 101. The marginal property is south of San Jose, and the premium for living in SF is about 2 hours * 20 days of commute time a month, which if you are making $200k per year is about $4166 of lost time per month, assuming a 40 hour work week and ability to convert that time into salary (a bad assumption, but this is the actual analysis to figure out how much more prices should be in SF, it just doesn't factor everything in appropriately). It's not a coincidence that this is roughly the difference in rental costs between these two areas.
Simplistic model predicting major benefits, while none are likely.<p>Abolishing rent-control could never take effect immediately, but would be phased out slowly to protect current occupants. Hence, the number of apartments coming on the market would increase slowly, owners could rent this 'new' inventory out at "market rates" ($4, aka the max the market can bear right now and 'the norm') and the best we can hope for is a (temporary) drop or slowdown in rental rate increases.<p>With a more realistic ratio of people looking for apartments (250 for 100? 500?) there may be no slowdown or drop at all. End result: neighborhoods pulled apart as long-term residents are forced to leave, rents not affected measurably, $4 considered 'normal'.<p>PS I live in NYC, where local renters compete with people parking their money due to overly lax taxes on non-residents, making it worthwhile to own but not occupy. Many buildings are half empty as a result (many thousands of apartments). Rents meanwhile go through the roof.<p>A good way to affect housing stock in NYC would be to make non-residential ownership not longer interesting. I suspect the same is valid in SF. The suggestion below of increasing housing stock by allowing bigger buildings and improving commute times seems to be a much better long-term solution.
This article seems to miss a few important points. The people who have lived in a city make that city what it is and you can't just switch in new higher bidding tenets at every juncture and expect that community to remain. In particular, the people in the middle who could pay higher than rent control rates will still move away more frequently if you increase their rent by a couple thousand to get it to (somewhat reduced) market rates. For example, when they have kids and need more space then they won't be able to afford it but with rent control they could have already locked in housing costs. Just as their landlord was allowed to lock in property taxes so they wouldn't lose the property due to tax increases.
If the City needs teachers, social workers and others with traditionally lower wages, wouldn't it make sense that their wages would also go up (based on demand) if the rent control goes away?
Here's something rent control proponents also ignore: there are also other nice places in the Bay Area, that are way cheaper than SF, where you can live with good access to public transportation. Most public transportation in the Bay Area has good, cheap access to SF.
"A cost control normally afforded to the privilege of owning"<p>This is the most important line here. This article is about reserving rights to the already privileged. Nothing more, nothing less.
Is it possible to waive your rent control and eviction "rights"? Seems like one could negotiate a lower rent by giving the landlord some more optionality with their property.
I don't think there is much reason to believe that SF would have lower rents without rent control.<p>Obviously, many people want to live there.<p>Keyword: delusion.
A more constructive discussion would be regarding what % cap in rent increases best balances competing interests. Last year in SF rent-controlled housing (muti-unit, built before 1978) had a cap of 1.9%. <a href="http://www.sftu.org/annualincrease.html" rel="nofollow">http://www.sftu.org/annualincrease.html</a>
It's falicious to think demand is fixed in SF. Removing rent control does nothing to stem demand. Also arbitrary deeming '$2' affordable is made without any supporting evidence.
75% of the rental stock in SF is rent-controlled! Yet the city is "unaffordable." There are no statistics on how many of those people make salaries that can afford market rate... but in my experience as a property manager I more often than not saw people with totally middle-class jobs benefiting from it - not poor people.<p>Why should someone who banks 80k a year get to keep a $700 apartment in the Marina? <i>That</i> is the problem with rent control.
Also there's price inelasticity. If you reduce the supply availability by 5%, you don't just get a 5% price increase. For something like housing, gasoline, or illegal drugs (typical inelastic goods) prices could double. That's why San Francisco is so expensive: not desirability, but regulatory corruption pushing down supply of an extremely inelastic product.<p>I don't know if San Francisco has this problem, but New York has a lot of upper-middle-class, well-connected people who bought their way into rent control by paying "key money" and being named as family by a deceased beneficiary (who need not be related to them). They're now in an arrangement that is actually superior to ownership (because they don't pay property taxes). It's pretty disgusting. People actually used to follow obituaries as a way of finding available RC apartments.
The housing shortages are caused by politically induced scarcity through zoning density restrictions and overuse of historic landmark status. This has been explained by many including Harvard economist Edward Glaeser and recently referenced by Economics Nobelist Paul Krugman.
In microeconomics this polticially induced scarcity is called "rent seeking." Fix the "rent seeking" by overturning the zoning and landmark status laws that create the scarcity and your housing prices will drop.
This has little to do with rent control; It's all about development costs. New units get built with mortgage rates that are far above the standard rental rates. Buyers can't rent units significantly below their cost so they hit the market at the high rate. These units don't get rented, so they stay listed prominently.<p>Meanwhile, a tenant leaves an old building and the landlord starts looking at existing rental rates. What do you know, that one-bedroom I was renting for $1500 two years ago now goes for $3500. I guess I'll up the rate! It's not as nice as the new unit, but at least it's not stuck in BFE China Basin (people will pay a premium to be near food / park / Muni).<p>That's how rent rates got so high: development costs > listing rates > matching rates. Period.