Post by High Priestess on Sept 21, 2015 1:53:05 GMT
Deborah3 months ago
Rent control, not home-sharing, makes housing more scarce and expensive
Too many uninformed people view homesharing as a significant cause of housing scarcity/affordability, fuming about Airbnb rentals "taking units off the rental market." Yet quite ironically, it's actually rent control that causes housing to be more scarce and expensive. I found Peter had posted about this on Homesharers of San Francisco group.
See this article in Watchdog:
bit.ly/1enV43h
The article states that in San Francisco, 31,000 units have been removed from the market by landlords who prefer to leave them vacant rather than deal with rent control and eviction control laws.
Quote from article:
"In San Francisco as well, a combination of rent control and strict eviction laws have caused landlords to abandon an estimated 31,000 units— one out of every twelve . When New York City began its rent-stabilization measure in the late 1960’s, it caused New York City landlords to abandon 300,000 units from (phone number hidden).In these cities, rent control has created a scenario for many landlords in which the only options are to risk going bankrupt, sell or abandon their property, or use it for short-term leases instead."
additional Quotes from the article
:"The problem is, there are already major distortions in the rental market – seemingly benevolent economic regulations in the form of rent control – that are making housing more scarce and prices more expensive.
Rent control is meant to protect renters from exorbitant rent prices. In doing so, it forces landlords to keep rent artificially low – below market price.
This significantly hinders a landlord’s ability to make a profit, or may even mean they lose money by renting out properties to residents. Without any economic incentive to put properties on the residential market, the market dries up.
Fewer properties means higher prices, worsening the issue that rent control seeks to solve in the first place."
"Hotel companies and their workers win from the new rules because it diminishes competition. Proponents of rent control win, too, simply because they get let off the hook by blaming the harmful effects of their policies on house-sharing. The winners also include the luxury condominium industry which, not subject to rent control, gets to take advantage of an influx of rental properties onto the market, which it can then buy, renovate and sell.
The losers are the thousands of vacationers and adventurers that use Airbnb, who are left with little to no options other than staying in one of the city’s notoriously expensive hotels. Those who can’t afford it are left with the option of not vacationing in Santa Monica at all. For that, the whole economy of Santa Monica loses."
Click here for Watchdog article.
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Julie2 months ago
So, basically, you are saying the small rent increases allowed by rent control are not keeping up with property taxes landlords pay? I rent my home and rentals newly on the market are so much more expensive than my home which I rented only 5 years ago, that I am extremely grateful for rent control. My landlord has not even taken advantage of his right to increase my rent at all. I don't think my situation is unique; there must be other situations where rent control works for the tenant AND landlord.
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Deborah
Deborah2 months ago
Did you read the article? The article was about the aggregate or sum total effect of rent control on any given municipality, as well as its effect across the nation. The article was not about any individual situation, and of course individual situations are unique. Of course those tenants who have rent controlled units where the rent is much lower than market rate will appreciate that, as I did for the many years I lived in rent controlled apartments.
So, the article isn't about the benefit to renters who remain in rent controlled apartments, but rather about the overall effect of rent control on a given region, as well as nationally. Here's another bit of info about that:
"In a 1992 stratified, random survey of 464 economists and economics graduate students in the US, 92.9% generally agreed or agreed with provisions that " ceiling on rents reduces the quantity and quality of housing available."
And:
"Most economists believe that a ceiling on rents reduces the quality and quantity of housing available. This view is based on analysis of empirical evidence as well as the understanding generated by theoretical models. Economists from differing sides of the political spectrum, such as Paul Krugman and Thomas Sowell, have criticized rent regulation as poor economics which, despite its good intentions, leads to the creation of less housing, raises prices, and increases urban blight. A survey of articles on EconLit regarding rent control finds that economists consistently and predominantly agree that rent control does more harm than good. The survey encompasses particular issues, such as housing availability, maintenance and housing quality, rental rates, political and administrative costs, and redistribution.
Price ceilings can create shortages and reduce quality when they are less than the equilibrium price. By capping the price of housing, rent control can increase demand and reduce available supply, causing a shortage. It is argued that rent control also reduces the quality of available housing, deters investment, and raises rents on tenants who are excluded from its protections (for example, in jurisdictions with vacancy decontrol, tenants who move or arrive later). When property owners are restricted in the rents they charge, they are less willing to construct more housing (a form of capital strike). Since supply is low, landlords worry less about tenants leaving and have little incentive to maintain the property. For example, unless owners can reasonably expect that punitive action will be taken against them, they might let building maintenance deteriorate in order to mitigate the lower rental income. People moving into the city have difficulty finding housing because of the shortage created by rent control"
Sources:
Alston, R. M.; Kearl, J. R.; Vaughan, M. B. (1992). "Is There a Consensus Among Economists in the 1990's?". The American Economic Review 82 (2): 203–209. doi:(phone number hidden) (inactive (phone number hidden)). edit
^ Jump up to: a b Jenkins, Blair. 2009. "Rent Control: Do Economists Agree?" Econ Journal Watch 6(1): 73–112.
Mankiw, Gregory. Principles of Economics. 4th ed. p. 31.
^ Jump up to: a b c Krugman, Paul (June 7, 2000). "Reckonings; A Rent Affair". The New York Times.
Jump up ^ Sowell, Thomas. 2008. Economic Facts and Fallacies. Basic Books, ISBN (phone number hidden)-
Reply Like Delete
Rent control, not home-sharing, makes housing more scarce and expensive
Too many uninformed people view homesharing as a significant cause of housing scarcity/affordability, fuming about Airbnb rentals "taking units off the rental market." Yet quite ironically, it's actually rent control that causes housing to be more scarce and expensive. I found Peter had posted about this on Homesharers of San Francisco group.
See this article in Watchdog:
bit.ly/1enV43h
The article states that in San Francisco, 31,000 units have been removed from the market by landlords who prefer to leave them vacant rather than deal with rent control and eviction control laws.
Quote from article:
"In San Francisco as well, a combination of rent control and strict eviction laws have caused landlords to abandon an estimated 31,000 units— one out of every twelve . When New York City began its rent-stabilization measure in the late 1960’s, it caused New York City landlords to abandon 300,000 units from (phone number hidden).In these cities, rent control has created a scenario for many landlords in which the only options are to risk going bankrupt, sell or abandon their property, or use it for short-term leases instead."
additional Quotes from the article
:"The problem is, there are already major distortions in the rental market – seemingly benevolent economic regulations in the form of rent control – that are making housing more scarce and prices more expensive.
Rent control is meant to protect renters from exorbitant rent prices. In doing so, it forces landlords to keep rent artificially low – below market price.
This significantly hinders a landlord’s ability to make a profit, or may even mean they lose money by renting out properties to residents. Without any economic incentive to put properties on the residential market, the market dries up.
Fewer properties means higher prices, worsening the issue that rent control seeks to solve in the first place."
"Hotel companies and their workers win from the new rules because it diminishes competition. Proponents of rent control win, too, simply because they get let off the hook by blaming the harmful effects of their policies on house-sharing. The winners also include the luxury condominium industry which, not subject to rent control, gets to take advantage of an influx of rental properties onto the market, which it can then buy, renovate and sell.
The losers are the thousands of vacationers and adventurers that use Airbnb, who are left with little to no options other than staying in one of the city’s notoriously expensive hotels. Those who can’t afford it are left with the option of not vacationing in Santa Monica at all. For that, the whole economy of Santa Monica loses."
Click here for Watchdog article.
3 comments•3 likes
Following
Like
Albena
Dan
Amy
Edit
Delete
Julie
Julie2 months ago
So, basically, you are saying the small rent increases allowed by rent control are not keeping up with property taxes landlords pay? I rent my home and rentals newly on the market are so much more expensive than my home which I rented only 5 years ago, that I am extremely grateful for rent control. My landlord has not even taken advantage of his right to increase my rent at all. I don't think my situation is unique; there must be other situations where rent control works for the tenant AND landlord.
Reply Like Delete
Deborah
Deborah2 months ago
Did you read the article? The article was about the aggregate or sum total effect of rent control on any given municipality, as well as its effect across the nation. The article was not about any individual situation, and of course individual situations are unique. Of course those tenants who have rent controlled units where the rent is much lower than market rate will appreciate that, as I did for the many years I lived in rent controlled apartments.
So, the article isn't about the benefit to renters who remain in rent controlled apartments, but rather about the overall effect of rent control on a given region, as well as nationally. Here's another bit of info about that:
"In a 1992 stratified, random survey of 464 economists and economics graduate students in the US, 92.9% generally agreed or agreed with provisions that " ceiling on rents reduces the quantity and quality of housing available."
And:
"Most economists believe that a ceiling on rents reduces the quality and quantity of housing available. This view is based on analysis of empirical evidence as well as the understanding generated by theoretical models. Economists from differing sides of the political spectrum, such as Paul Krugman and Thomas Sowell, have criticized rent regulation as poor economics which, despite its good intentions, leads to the creation of less housing, raises prices, and increases urban blight. A survey of articles on EconLit regarding rent control finds that economists consistently and predominantly agree that rent control does more harm than good. The survey encompasses particular issues, such as housing availability, maintenance and housing quality, rental rates, political and administrative costs, and redistribution.
Price ceilings can create shortages and reduce quality when they are less than the equilibrium price. By capping the price of housing, rent control can increase demand and reduce available supply, causing a shortage. It is argued that rent control also reduces the quality of available housing, deters investment, and raises rents on tenants who are excluded from its protections (for example, in jurisdictions with vacancy decontrol, tenants who move or arrive later). When property owners are restricted in the rents they charge, they are less willing to construct more housing (a form of capital strike). Since supply is low, landlords worry less about tenants leaving and have little incentive to maintain the property. For example, unless owners can reasonably expect that punitive action will be taken against them, they might let building maintenance deteriorate in order to mitigate the lower rental income. People moving into the city have difficulty finding housing because of the shortage created by rent control"
Sources:
Alston, R. M.; Kearl, J. R.; Vaughan, M. B. (1992). "Is There a Consensus Among Economists in the 1990's?". The American Economic Review 82 (2): 203–209. doi:(phone number hidden) (inactive (phone number hidden)). edit
^ Jump up to: a b Jenkins, Blair. 2009. "Rent Control: Do Economists Agree?" Econ Journal Watch 6(1): 73–112.
Mankiw, Gregory. Principles of Economics. 4th ed. p. 31.
^ Jump up to: a b c Krugman, Paul (June 7, 2000). "Reckonings; A Rent Affair". The New York Times.
Jump up ^ Sowell, Thomas. 2008. Economic Facts and Fallacies. Basic Books, ISBN (phone number hidden)-
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