Rent Controls

[Sir Robin Goodfellow]

I tend to tilt a bit to the right, so my first reaction toward the idea of rent control laws was that they're a bad idea. Maybe I'm wrong.


I'd like to hear from other posters about rent controls. Opinions, facts, anecdotes... I'd like to know more.

 

[BTMO]

Rent is controlled by demand. If there is a lot of rental space available, prices are low. If there are very few rental spaces available, prices are high.

Anything else is a short run to madness...

 

[Sir Robin Goodfellow]

Sounds logical to me, but there does seem to be some demand around here (Saskatchewan) for some sort of cap on rent. It's election time and the opposition is promising rent control laws if elected.

This town has a real housing shortage and rents are high, as you'd expect. I could probably charge somebody a thousand bucks a month to sleep in my bathtub.

 

[geni]

Modern capitalist economies require people at different levels on the income scale in order to function. It therefor facilitates the smooth running of the economy if those in lower paying jobs are able to live within a reasonable distance of their workplace.

There is also the issue of those that work in public utilities such as the police and fire service.

 

[BTMO]

Sounds logical to me, but there does seem to be some demand around here (Saskatchewan) for some sort of cap on rent. It's election time and the opposition is promising rent control laws if elected.

This town has a real housing shortage and rents are high, as you'd expect. I could probably charge somebody a thousand bucks a month to sleep in my bathtub.

Go for it!



Is there something that prevents new buildings / rental properties being released in Saskatchewan? Or some factor that has driven up renter numbers?

Bottom line is, if rental prices are artificially reduced by government action, it doesn't actually make more rentals available - it just slows down the whining a bit. You *need* high prices to encourage people to invest in new properties... which ultimately causes prices to adjust down again.

Supply and demand pretty much works until governments get their grubby little fingers in it (in fact, thinking about it, it was probably some unintended consequence of government fiddling that caused the issue in the first place!)

 

[Sir Robin Goodfellow]

What's happened here is that the economy is so strong (at least in this town), that so many workers have moved here from everywhere (there is now a large Filipino population). It's a city of 10 000 that is now nearly 14 000, and nowhere to house the 4000 newcomers. There is all kinds of new development; apartments, condominiums, houses, duplexes, but development just hasn't caught up to demand. Property values have skyrocketed. I bought at the right time, my sad little house has more than tripled in value, and it's nearly paid for. Really, it's just supply and demand at work.

 

[SezMe]

Rent is controlled by demand. If there is a lot of rental space available, prices are low. If there are very few rental spaces available, prices are high.

Anything else is a short run to madness...

What is "a short run" in your opinion? New York has had rent control for over 90 years. Is that still the short run? Is New York now engulfed by madness?

 

[KoihimeNakamura]

That doesn't make it neccesarily right. That said..

 

[BTMO]

What is "a short run" in your opinion? New York has had rent control for over 90 years. Is that still the short run? Is New York now engulfed by madness?

Pretty much, yes.

And New York is one of the few places in the US with such controls....

 

[The Don]

Rent control is something where my opinion has changed over the years and continues to change.

I used to be very much in favour of rent control and social housing as a way of providing key workers with affordable accommodation. I can now appreciate how such a system skews the local rental housing market by creating a huge gap between controlled rents and the free market.

An alternative to this would be to provide the subsidy directly to the individual (as a housing benefit) but I suspect that the outcome from this would be to raise rental costs (because there'd be more money chasing the same number of properties).

The "proper" way would be for local pay rates to more fairly represent local housing costs but employers would prefer for the state to subsidise them. At the moment this is what I think is the fairest way. That way the employee gets to chose whether to live in town and have less disposable income or out of town and have less disposable time.

None of these would address the case where demand has exploded.

 

[commandlinegamer]

If I understand correctly, the buy-to-let market thrived in the UK in recent years prior to the recession. I can see the potential for owners not being too keen to reduce/freeze rent if they themselves have difficulty paying the mortgage.

 

[Mojo]

The "proper" way would be for local pay rates to more fairly represent local housing costs...

That would still lead to higher rents, as a result of more money chasing the same number of properties.

The proper way is to build more affordable housing. But there's no money in that.

 

[WildCat]

Sounds logical to me, but there does seem to be some demand around here (Saskatchewan) for some sort of cap on rent. It's election time and the opposition is promising rent control laws if elected.

This town has a real housing shortage and rents are high, as you'd expect. I could probably charge somebody a thousand bucks a month to sleep in my bathtub.

That is something that rent control will make worse, not better. When you have a shortage, reducing the price is not going to increase supply. That's ECON 101.

What should happen is developers see high rents and build new housing. What is stopping new housing from being built?

 

[WildCat]

What is "a short run" in your opinion? New York has had rent control for over 90 years. Is that still the short run? Is New York now engulfed by madness?

NYC has been phasing that out for decades now.

 

[WildCat]

That would still lead to higher rents, as a result of more money chasing the same number of properties.

The proper way is to build more affordable housing. But there's no money in that.

Maybe there is, maybe there isn't. Depends on what the rents are.

Or maybe you build new luxury housing and the old stock becomes affordable housing.

 

[Mojo]

What should happen is developers see high rents and build new housing. What is stopping new housing from being built?

They can make better profit margins from luxury housing.

Or maybe you build new luxury housing and the old stock becomes affordable housing.

Doesn't seem to be working like that. Either the old stock gets demolished, or sits derelict.

 

[Sir Robin Goodfellow]

That is something that rent control will make worse, not better. When you have a shortage, reducing the price is not going to increase supply. That's ECON 101.

What should happen is developers see high rents and build new housing. What is stopping new housing from being built?

There's nothing stopping development. They're building like crazy. They're even renovating old houses that have sat abandoned for years. The problem is that there is only so many carpenters, plumbers and so on. You can only build so fast. I'm not sure why the New Democrats think rent control laws will make anything better.

 

[WildCat]

There's nothing stopping development. They're building like crazy. They're even renovating old houses that have sat abandoned for years. The problem is that there is only so many carpenters, plumbers and so on. You can only build so fast. I'm not sure why the New Democrats think rent control laws will make anything better.

Sounds like it will sort itself out soon enough if the pols don't start meddling.

 

[Miss_Kitt]

When rent control happens, it motivates people in controlled housing to STAY there, even if their needs change (ie, their job moves, they have more or fewer people in family now, etc) because they can't get as cheap a rent elsewhere. This means that the people who get into the price-controlled housing no longer respond to market pressure.

Generally, rent control regulations do NOT cover "luxury" housing, so the effect of rent control is to drive builders to make more expensive units, rather than lower-cost units, because they can charge profitable rents--and retain control of when and how they change rents--in luxury units. Building (or buying or renovating) low-rent units when the government controls what you can charge is a recipe for going broke. New York City has had many buildings literally abandoned by their owners because the rents allowed did not cover the cost of maintenance, renovation, etc. These buildings become slums, then squatter housing, then derelicts...

Seattle has a rental housing shortage laregly because the city forbids buying several adjacent houses and putting a small multi-unit rental complex on it. So there are miles of little old 40's and 50's houses with bad plumbing, poor insulation, large, eco-hostile yards, etc...owned by older couples who can't really maintain them. But since builders can't turn them into useable rental properties, there's not enough demand for them to make it worthwhile for the owners to sell. (And the cost of renovation is pretty large for a single family to afford.) If they permitted low-rise (3 story or less), limited-unit apartment structures, Seattle housing costs would drop dramatically within 6 years. But I'm not expecting there to be any change in my lifetime.

People think "Landlords" are these cartoon millionaires with limosines and diamonds, when most landlords are individuals that own a few buildings and are trying to fund their own retirement out of the proceeds. Villifying "the landlords" is a way to buy votes--but not to solve a housing crisis. Speeding up permitting processes, allowing limited multi-family dwellings in single-family neighborhoods, and legislating *against* rent control would help--but that's not going to happen. Logic is not the strong suit of voters, nor of politicians.

Just my thoughts, MK

 

[Sir Robin Goodfellow]

Sounds like it will sort itself out soon enough if the pols don't start meddling.

The New Democrats don't have much chance of winning the election, and I can't see the Saskatchewan Party fooling around with rent controls. Still, the "Occupy Regina" protesters (no, really) are upset about high rent costs, and if people make enough noise about something... politicians love those easy answer solutions to problems.