However, this serves to illustrate: keeping rents high is rather a combination of being bad at mathematics, tacit collusion among landlords and protesting rent control.
But a dramatic drop in rent will result in someone locking in that rate and literally never leaving. Taking that apt off the market essentially forever.
I know a few people with rent controlled apartments in SF who have held them for decades so their rent is impossibly low. They'll never leave. At least one hasn't even lived in SF for many years now but the rent is so low it's worth it to them to keep it as an occasional weekend crash pad even though they live elsewhere.
These things are never as simple as they seem...
I’ve been renting for 8 years and I’m the shortest tenancy in my building (as an example).
And the math about keeping it empty doesn’t factor in the sales price. A realtor explained it to me - if you have a 3 unit building, the sales price can go up by several hundred thousand dollars if one of those units is empty. That could easily be 5+ years worth of rent, so keeping a unit empty for a couple years can be a financially smart move. The reason is because evicting a tenant (owner move in) is a very expensive and lengthy process that few buyers are willing to put up with.
People like to point out that sf rental market does not have very high rental mobility.
While it's not a good thing (people living in homes inappropriately sized because they can't afford to move), it's also not a bad thing (moving frequently sucks, and should be more at the behest of the tenant, rather than landlord).
A better description is that it makes rents get jacked up unfairly before you even move in. Property prices are about the same in Zurich and SF, but rent is about half in Zurich as in SF. So the effect of rent control is that everyone's rent is about doubled. I'd rather take my chances and move if my landlord doubles the rate after 2 years than be forced to pay double from the start as I'd have to in SF.
I also don't know how well correlated property prices and rent are, especially across countries. I think there are a number of confounding factors such that I'm not sold on how directly it translates.
The state-wide rent control allows CPI + 5% or 10%, whichever is lower, which doesn’t seem like much of a limit.
Just increasing it to CPI in SF seems like an improvement. Even pensioners get CPI adjustments.
"I asked how much rents have fallen and he responded with "30 percent." Why not rent the units out at the current market rate? "If you ever rent to someone in San Francisco," he replied, "you can never raise their rent more than about 2 percent per year after that. You're locked it at whatever rate you start with. So I am waiting until the shutdown ends, hoping that market rents will come back closer to what they were when I bought the building."
Tax property more when it's vacant.
Besides leaving properties vacant, rent control distorts the market in other ways. Because rent control also lowers the supply of rental unit, builders are more incentivized to sell to owner-occupants (since rent control depresses the value of rental units and thus a landlord's willingness to pay for a given unit). This increases the pool of housing available to richer people who can afford to buy a house, and decreases the pool of housing to people who can only afford the rent.
Rent control also incentivizes renters to stay in their current housing, even when moving would be more efficient. (Consider someone living in an rent-controlled below-market rate apartment in San Francisco who gets a new job in the South Bay. They would like to move, but that would cost them extra in rent.)
Even if you create policies that address these issues, there are likely more problems rent control creates. At what point do you give up and conclude that rent control is the issue?'
If you want to control gentrification and enable people to stay in the neighborhoods that they grew up in, there ways to achieve that which don't have the negative side effects of market-wide rent control, like below-market-rate housing for people who make less than a certain amount or have lived in an area for a certain amount of time.
Since builders do not want to build, then the State needs to provide leadership, take control, establish eminent domain, and send in the army, to build government backed buildings. Then rent these out to people that need them, at affordable rates.
The sacred market, is ultimately what is killing the quality of life in California.
Show me a builder that doesn’t want to build, and I’ll show you a city planning department that makes it impossible to do so.
Builders are like any business. They want a margin. If they can’t make a margin, they don’t build.
The only way government can build cheaper than a builder is to bypass its own regulatory morass. At which point one might ask, why not just let the builders operate on the same rule set.
All these regulations increase the cost of building, and decreases the builder’s profit margin.
The only solution here, is to roll back these burdensome regulations and environmental review policies.
I know landlords of rent controlled units in SF, and believe me, those tenants are making a huge tradeoff. Yes the rent is low, but forget about ever really liking the place you spend your life in. There is zero incentive to upgrade anything ever. If your toilet is leaking it will be fixed. But get ready to live with 30 year old fixtures, cabinets, carpets, etc. So sure, rent is low and that’s great. But it doesn’t come free. It’s definitely a major sacrifice to be making as a tenant.
Just pointing out that if you happen to get that $800/mo rate locked in, it's a pretty sweet deal, 30-year-old cabinets and all.
The parent comments made it look like it's not.
How can this be?
Of course they will charge more in rent to adjust for the fact that a percentage of their tenants will be long term, and therefore short term tenants end up subsidizing long term tenants, exactly as I claimed.
I get that you don't like landlords. But think this through and try to use reason rather than emotion.
Rent control is bad because over time it screws up supply and demand, and increases the the rent that the market can bear. Not because it gets in the way of the landlords' natural charitable instincts.
So you cannot argue that you will make a unit more valuable, thus increasing demand for the unit, but that a landlord who has market power will not be able to raise prices to fully capture that benefit.
Rent control is such a benefit that makes a unit more valuable, and landlords are able to charge more, fully capturing the benefit to the average renter.
This means long term renters underpay, short term renters overpay, the landlord does not pay any more, on average, given the mix of short and long term tenants, but the short term tenants subsidize the long term tenants.
So all of these plans to pass laws preventing or obligating landlords in some way will always result in higher rents to fully push the value of that benefit onto tenants, assuming that landlords have market power, which is a safe assumption in constrained areas like San Francisco.
Look, you are not going to cause rents to fall by adding more costs to landlords. To get rents to fall you will need to either build more units (increase supply) or make the city less desirable (decrease demand). For example, don't allow construction of office space in the city unless it's matched by construction of housing units.
Landlords will always charge the absolute highest rate that they can get away with, regardless of the taxes they have to pay.
So raising taxes on vacant units will not raise rents even one single penny, as they'll already be as high as it's possible for landlords to charge and rent in that market (or, in the case of vacant units, even higher).
Fortunes don’t magically rise and fall with the “market”, the market is merely an abstraction that represents the multitude of transactional choices that anywhere from thousands to billions of people make on a day to day basis.
I am not arguing that we need landlords to make more money. But until leftists overthrow our current capitalist system, we do need to incentivize capital owners to invest in rental properties to increase the supply of rental properties (which should decrease the cost with all else equal). (That last sentence is positive and not normative.)
They just have to ask voters nicely first, and if tenants really are fleeing in numbers and new tenants can’t or won’t move in at these prices, that’s not looking more likely to happen.
We could cut rent control, then landlords might want to rent out at a sane, well, saner, price again.
The one exception is if a tenant can’t afford the rent and the landlord decides to give a temporary hardship discount. There is a very strict procedure the landlord has to follow for that discounted rent to not become the new base rent.
I assume that tenants, if they are willing to put in the work, could very well force their landlord to keep the discount offered during Covid.
There could be many ways to enact rent control, every city is different, Covid is not always a thing, etc.
Maybe all possible implementation of rent control are always bad in all real world scenarios, but having a single example of a particular concrete implementation in a particularly odd set of circumstances doesn't prove that.
Making it more viable for him to sell the apartments outright would be a massive win. Why let this failed slumlord keep property he can't use productively?
When downvoted, the thing to do is to consider what in your comment might have legitimately attracted downvotes. If you notice something, make adjustments for next time; if you don't, chalk it up to the internet and move on. Don't forget that misclicks are also a thing.
Imagine if this happens in real-time conversations? When we talk to each other..as in face to face..what would happen to communication or civil discourse if we ‘verbally downvote’ before engaging or interacting?
Please consider eliminating drive-by downvotes as policy. Or at least institute a weighted system of voting wrt engagement level.
ETA: I can’t edit it now. But in my defense, English is not my first language. I don’t use any swear words in my language because that seems like it would be disrespectful/impolite but in a learned language, ‘fuck’ is just as potent as ‘lame’ because it’s all English to me. Not having come to an English speaking country until after adulthood, it’s a language whose colloquialism I picked from books and movies. Mostly books. So it kinda..flows. But will try to be mindful.
I certainly understand how internet comments can be frustrating and I think we all feel like responding this way sometimes, if not all the time. But it just means we all need to learn how to pause until the initial rush dies down. Then we have the freedom to either respond curiously, or not respond, which are the two modes that best fit the intended spirit of the site.
The Brotherhood of Locomotive Firemen who didn’t accept black people in their union created a mandate for minimum wage for all races. Davis-bacon act in 1931 for federal jobs and national industrial recovery act later for specific industries. And finally Roosevelt passed minimum wage act in 1938.
During all this time, black people no longer enjoyed the high employment rate but continued to be employed only in sectors that paid the lowest of the minimum wage tier.
Only industries not mandated by minimum wage assured upward economic mobility.
I could explain rent control too but I think the case has been made by me and others as to why it doesn’t work. With this in mind..what other word can I use other than ‘designed’ emphasized?
I hear you re: 2 and 3. I was annoyed. But when you literally had to write a thesis on a subject and dismissed by faceless disapproval, it makes a mockery of me suffering for an education. But..point taken.
Re:4..I wasn’t addressing anyone in particular. It looks like violent communication because acronym ‘FAANG’ sounds like I am baring my teeth. If so..a very legit form of onomatopoeia for rhetoric effect.
And it was a SF/FAANG issue when ..for example: Google employees from wherever chose to live in SF rent controlled apartments and bussed them to Mountain View, the glaring problem of lack of public transport and crumbling infrastructure of a city that couldn’t handle the influx of new residents was entirely paved over.
If I sat in front of you and I waved my hands a lot, would you ask me not to do it because it’s not acceptable to others? It’s emphasis. It’s for effect. It’s cultural. I roll my eyes and speak with my hands a lot..while typing, I use other effects. In order to punctuate communication. Surely, it is not a sin?
I'm not sure if I would consider my self a yuppie, but on the chance I am considered a yuppie, how do you suggest I stop being part of the problem? I moved into my apartment 3 years ago, and a year after I moved in the city passed regulations making it rent controlled. Should I move somewhere else and specifically try to avoid rent controlled apartments? I chose this apartment because at the time it was one of the cheapest.
Rent control, minimum wage are duct tape solutions that don’t work in the long term. It has broader implication on the general citizenry who are beyond the contract between renter and landlord.
It may be suitable for some institutions like university housing or sec 8 homes or govt built homes, but a blanket rent control for the whole state is alarming and should raise concerns about how the state is managing our tax dollars.
When the state starts interfering with rights of private property holders, that’s like breaking the legs of capitalism. It is a symptom of something else simmering and hidden.
Housing costs should adjust itself automatically to cost of living. It should be a well oiled machine where changes on end effects changes on the other and everywhere in between.
It doesn’t matter anymore if you are in California. After AB 1482 passed, the entire state of California is under rent control and building not older than 15 years is exempt. And that’s on a rolling basis. This kicked in 2019.
Obviously I didn’t mean that any single renter is responsible but the ways of said FAANG companies and their deals with the govt and the deals they make is troubling.
Expanded in points..please skip if you don’t want to delve into rabbithole :
1. It is incorrect that high density and building more will solve the issue of housing or affordability of it.
2. Infrastructure has to be improved before building. And it never gets done. Building costs are a pittance compared to capital expenditure and cost of infrastructure.
3. When Google comes in and says they will give money for affordable homes, what does it mean? They are making a fixed resource even more dear. And that is land. It is a kind of pay off because the thug(govt here) sees a well heeled traveler walking alone and decides to mug him.
4. You’d think that all the money new higher paying jobs will help improve infrastructure. But no. In the Bay Area, even during covid, they are not just charging tolls to go from one end of 880 and 680 but adding new toll roads.
5. The bloat in Sacramento is insane. They have sunk the California ship. And all tech companies are complicit. The govt should work FOR them and not the other way around. And they end up making unholy deals that affect people who are obviously not all employed by said tech companies.
6. On the flip side, they shouldn’t be in on the receiving end either ...Twitter..not decidedly a FAANG, but in the club.. is now lauded for getting out of SF due to covid and decentralizing it’s work force. Remote forever! The ‘Twitter Tax Break’ that saved companies millions of dollars for stock option sale and payroll tax breaks ended after a 8 year run on May 2019.
7. Let’s take the employees. Are they children walking down to school? It’s insane that grown men and women insist on living where they work. And in San Francisco too. This is why public transport exists. Building more isn’t a solution. I have lived in many parts of the world. Never have I seen such a coddled workforce that everyone considers so infantile that they can’t take care of themselves or their adult responsibilities.
8. The govt is playing a game not providing citizens with a basic infrastructure while blaming everyone else not involved in this mess.
9. So who pays? The citizenry who have/had invested in living in California cities, of course. It’s constant blood letting sessions for more taxes. And everything is for ‘affordable housing’. It’s a buzzword that relies on the empathy of any normal human being but aims to be a fuzzy term for state sponsored thuggery. Example below.
10. Apartment complex with 350 units ranging from 800k-1.2 million and legally required to set aside 10% affordable homes. Of course builders dont want to do that and they pay In-Lieu fees. This works for the govt because market rate homes pay more property taxes than affordable homes. And this is built into the cost of housing making it more affordable. Every increase in housing costs goes towards higher property taxes which goes who knows where because it’s not going to infrastructure.
11. In the same example, the builder also paid for a new school and the cost of the roads and money to Water Dept. All the while, the cost of living keeps multiplying exponentially as population increases. Making cities more and more unaffordable.
12. Meanwhile open spaces and non residential city lots are being auctioned off to builders. High density cities have no ingress/egress during fires etc(we experienced it this year and also in the past few years during fire season) and the law enforcement numbers doesn’t increase as much as the number of people, but crime increases. Homes multiply, but schools don’t.
Rent control is insanely complicated and differs from county to county...and city to city. Housing policies, rental control and transport are all connected in California.
The powers that be in CA have been constantly creating maze like regulations that seem to have two goals: 1. Increase property taxes 2. Avoid building a well networked public transport system.
The state is very invested in new buildings. But that begs the question: who bears the cost?
72 pages of the study paper: http://conference.nber.org/confer//2017/PEf17/Diamond_McQuad... :
[..] “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco,” Diamond and McQuade used public and private data to look at how often people moved out of rent-control units, how often landlords converted those units to new types of housing not covered under rent control, and how median rents changed since the 1990s.
The pair singled out SF specifically to “exploit a unique rent control expansion in San Francisco in 1994 that suddenly provided rent control protections for small multifamily housing built prior to 1980” so that renters in post-1980 homes form a natural control group with which to compare.
Here are some of their conclusions:
Rent controlled tenants are of course more likely to stay in their current homes. “Rent control increased the probability a renter stayed at their address by close to 20 percent,” note Diamond and McQuade, with younger renters more likely to leave the roost anyway than older ones.
And that in turn prevents flight from San Francisco itself. “We find that absent rent control essentially all of those incentivized to stay in their apartments would have otherwise moved out of San Francisco,” note the economists. Yikes.
However, in some the priciest neighborhoods, tenant turnover in rent-controlled apartments was actually higher. “This evidence suggests that landlords actively try to remove their tenants in those areas where the reward for resetting to market rents is greatest,” either by gamely buying out long term tenants or just evicting them.
Landlords of rent-controlled homes were more likely to convert them to the types of buildings not covered by the provisions. “Landlords whose properties were exogenously covered by rent control reduced their supply of available rental housing by 15 percent.”
Particularly via the old TIC trick. “Rent-controlled buildings were almost 10 percent more likely to convert to a condo or a Tenancy in Common (TIC) than buildings in the control group, representing a substantial reduction in the supply of rental housing.”
Even so, rent control is definitely good for the tenants who get it, even with the added risk of landlord shenanigans. “Rent control offered large benefits to impacted tenants during the 1995-2012 period, averaging between $2,300 and $6,600 per person each year, with aggregate benefits totaling over $390 million annually.”
But the loss of housing might drive up rents elsewhere. “We find that six percent decrease in housing supply led to seven percent increase in rental prices. These caused an aggregate welfare loss to renters of $5 Billion. This is almost as large as the benefits accrued by the lucky beneficiaries of rent control.”[..]
Is there a solution? I don’t know. Here is mine. The govt should build high density rent control apartments that families can rent on 99 year leases. This housing stock can have transfer rights making a mobile workforce move with the job. It makes housing stable as well infrastructure robust. It’s not a Red Queen situation or a drunken goat rodeo where chaos reign.
"you determine your own level of involvement" -fight club
explain this to me, please?
is it the hubris of our time that we imagine that our shallow disapproval has value even when we are faceless/anonymous. now this reminds me of that black mirror episode, nosedive.
now I understand more of where you're coming from. I humbly suggest that you assign less significance to the points on your comments. I've been on this site for about a year. I have some highly rated comments and some negative comments. looking at my comment history, I am more and more convinced that the points rating is a noisy signal and its harmful to consider the points as very significant, especially as pertains to specific comments.
Rent control/minimum wage impacts was part of my UG thesis and it was mind numbingly boring. And it stole my time. Being dismissed within seconds without engaging ...you know..said prized curiosity on HN...was personal. It is an entirely emotional reaction because this is one of the topics that is personal to me.
HN is supposed to be about the curious spirit...I have been told. Dismissal of comments/post by drive-by downvoting without engaging in a thread is the EXACT OPPOSITE of curiosity, I feel.
Usually I get mildly annoyed and/or brush off downvotes. But since I am constantly seeing the curious spirit of HN being dinned over and over..I am beginning to question..what is the value of a drive-by downvoting mechanism in a forum that values the curious spirit?
Comments that stay in the gray are not comments to be proud of. A very large community of intelligent people are saying they think you are wrong. That's generally a sign some introspection about one's comment is warranted.
I would say "sometimes"
> Comments that stay in the gray are not comments to be proud of. A very large community of intelligent people are saying they think you are wrong.
Its not correct to generalize over the entire community based on an unknown subset of people who happened to see the comment. And its true that this community is large and intelligent, and its also true that humans have their own individual and collective biases. If a large community of intelligent people think you're wrong and the comment in question is not obviously deficient (hostile, profane, or nonsensical), one might imagine that someone would take the time to post a reply correcting the parent.
> That's generally a sign some introspection about one's comment is warranted.
This is true.
My problem with drive-by downvoting is that it’s frustrating not know which part of the comment is rubbing someone the wrong way or is incorrect.
My 2c: downvotes can only be deployed by someone who participates in the comment thread.
I think the velocity that comments are read on HN would be surprising to a lot of people. I don’t have any particular inside knowledge but it stands to reason there are more readers than commenters. People viewing the Comments link will see comments, most recent first. I’ve noticed similar behavior with how quickly people can respond. If you’ve noticed quick downvotes on others’ comments, that means you’ve also viewed very recent comments, whether or not you’ve chosen to vote or respond.
Altho I would rather disable all drive-by downvotes if it were upto me.
> Altho I would rather disable all drive-by downvotes if it were upto me.
Then people would reply with low value comments in order to make their dv count.
You’re either lucky on the inside, or completely shit out of luck.
What annoys me about this is that you can do the research instead of relying on your a priori thoughts, which are wrong. There are 5x more empty units than there are homeless people pre-pandemic  and it's the case for all cities with rent control because landlords don't want to be stuck with submarket rents for decades.
Both of these systems are widely regarded as unfair by everyone other than their beneficiaries (e.g. long term property owners for Prop 13 and long term renters for rent control).
Both of these systems end up raising prices for newcomers, so that old timers are subsidized (newer home sales have Prop 13 benefits baked into higher asking prices, just as newer rental contracts have rent control benefits baked into much higher rents).
Nothing prevents a landlord and tenant signing a contract in which future rent increases are controlled for a long period of time while allowing the tenant to move out whenever they want. Obviously such a contract would require a higher asking rent than a contract in which the landlord had the option of raising the rent after 1 year. This is because the former contract has an embedded option value that the latter contract doesn't. Thus rents in rent control cities are always higher than the same rents would be without rent control.
That doesn't mean that there isn't a (small) population of incumbent renters who massively benefit from the option, even if a larger group of renters loses from the option. Like any lottery type system, those who end up being able to stay in the same place are winners and the other renters are losers.
This situation creates massive transfers from a majority of the renter population to a small minority of very long term renters, just as Prop 13 creates massive transfers from new home purchasers to long time owners.
The issue is why the city makes it illegal to have any other kind of contract. Most renters suspect they won't be living in the city for a long period of time, and don't look forward to paying twice as much in rent than their long term renter neighbors. I understand that some people are very risk averse, but why should everyone be forced to buy so much insurance?
Landlords, on the other hand, are subject to more volatility (the risk of having a very long term renter) and so demand higher rents in exchange for bearing this risk. Landlord are effectively selling insurance in this system together with housing services. Some landlords may want to sell this insurance and others won't. This forcing of selling insurance is why landlords don't like rent control, because some landlords are also risk averse.
If tomorrow, rent control would be eliminated, then rents would fall quite a lot and many people would be evicted. A small group of long term tenants wouldn't be able to pay the new (lower) market prices, but a larger pool of newer tenants would see their rents fall as they would get an unbundling of the rental price from the insurance price.
This may come as a shock, but no one has a right to live in Monaco, or the Upper East Side, or Nob Hill, etc. You live where you can afford to live. Housing is quite affordable in the US, but it is not affordable in the most expensive areas, which are very few.
Some areas are more expensive to live in than others, because if prices were lower there would be shortages -- more people would want to live in those areas than are available units. Thus prices increase until the number of people wanting to rent an apartment are equal to the number of apartments available.
Food works perfectly fine as a market, with out "food rent controls".
Nobody is going in to restaurants and telling them that they must sell a hamburger for less than 15$.
No one is going in to walmart and forcing them to sell cereal for less than 5$ a box.
Compared to rent and housing, it is way way way more free of a market, regardless of any negligible government regulations that you can find that are in no way on the same scale as rent control.
Also: farmers get 7.8c of every food dollar.
[..] Economists say those trends, coupled with low commodity prices, caused farmers’ share of consumer food spending to fall 1.2 cents in 2016, reaching the lowest point, adjusted for inflation, since USDA began the measure in 1993. (It's the latest year for which data is available).[..]
You agree that nobody is going in to restaurants and telling them that they must sell a hamburger for less than 15$?
That is the kind of thing that I am comparing it to.
Rent control does this, whereas the government is not forcing restaurants to sell a hamburger for less than 15$.
Just had to chime in re: food prices.
Im tired of seeing 'poor landlords arent making profits' comments.
And 'Support local businesses' everywhere. Why? Are they taking care of their workers? Are they paying them better for taking risks during the pandemic? Probably not. Restaurant/fast food chains still open are making a killing with a leaner workforce and collecting far more money, but no workers got a raise ir even sick leave.
Are they helping their communities? No. But at least they serve a purpose. Paying rent every month instead of to a mortgage to build someone else's wealth instead of your own.
At what point in society did building wealth become married to screwing over fellow humans?
A perverse incentive system for landlords locked in by governmental rent stabilization strategy? Perhaps a during the great reset which could dramatically shift the out of whack supply-demand curves due to work from home, which allows Twitter or FB workers freedom from being tethered to the physical offices and certain neighborhoods would allow a freer market wherein lower income workers could contribute to a vibrant streetscale of shops and restaurants to serve customers all along the economic stratum.
Behold better neighborhoods and communities by not locking out workers and families who contribute to the base resource needs of say the Tenderloin by allowing them a vested property interest in those communities. Sounds like a reasonable strategy to me and leads to Lee’s government interference and picking winners and losers based on solely economic factors such as maximizing rent.