Housing policy megathread

[Josquius]

Totally agreed on the it depends what you want to accomplish factor. This "liberal economists say price controls are bad so that's that" orthodoxy should be questioned.

A big one I see is with rent. Liberal economists say rent controls are bad... But when you look into why they say this you see it's based on some perfect theoretical where profits from rent are actually invested into building more housing (which is all interchangeable. No consideration of location and the cost of pricing the poor out of urban centres) thus a perfect natural equilibrium will be reached.
The reality is not this.

[garbon]

Rent control is bad.

[Tamas]

Totally agreed on the it depends what you want to accomplish factor. This "liberal economists say price controls are bad so that's that" orthodoxy should be questioned.

A big one I see is with rent. Liberal economists say rent controls are bad... But when you look into why they say this you see it's based on some perfect theoretical where profits from rent are actually invested into building more housing (which is all interchangeable. No consideration of location and the cost of pricing the poor out of urban centres) thus a perfect natural equilibrium will be reached.
The reality is not this.

No rent controls are bad because actual demand is the reality and rent control attempts to hide it.

[Josquius]

Totally agreed on the it depends what you want to accomplish factor. This "liberal economists say price controls are bad so that's that" orthodoxy should be questioned.

A big one I see is with rent. Liberal economists say rent controls are bad... But when you look into why they say this you see it's based on some perfect theoretical where profits from rent are actually invested into building more housing (which is all interchangeable. No consideration of location and the cost of pricing the poor out of urban centres) thus a perfect natural equilibrium will be reached.
The reality is not this.

No rent controls are bad because actual demand is the reality and rent control attempts to hide it.

No it doesn't.
It stops shortages being too painful for those who are suffering most and enables key but not spectacularly paid workers to continue to live in the centre of large cities where they're needed to keep the city running.

[The Brain]

Rent control is horrible. If you need a place to live in Stockholm you have to buy it or wait decades in line to rent.

[Josquius]

Rent control is horrible. If you need a place to live in Stockholm you have to buy it or wait decades in line to rent.

And if there was no rent control then things would be great for high earners moving into the city. They'd have little trouble just slapping down their crowns and getting a place.
But for the regular working class locals whose landlord sees all this foreign money on the table and the opportunity to quadruple rents?.... Yeah. They're out on the street.

[garbon]

San Francisco is not known as a cheap place to live.

[The Brain]

Rent control is horrible. If you need a place to live in Stockholm you have to buy it or wait decades in line to rent.

And if there was no rent control then things would be great for high earners moving into the city. They'd have little trouble just slapping down their crowns and getting a place.
But for the regular working class locals whose landlord sees all this foreign money on the table and the opportunity to quadruple rents?.... Yeah. They're out on the street.

The enormously inefficient housing market that rent control causes costs society a lot. Your idea that the haves (in this case those who sit on artifically advantageous rent contracts) are much more important to protect than the have nots (those who don't have enough money to buy and don't have decades of queue time) seems unattractive to me.

Finland is an example of a comparative country that reformed the housing market, and the positive effects this brought.

[Josquius]

The enormously inefficient housing market that rent control causes costs society a lot. Your idea that the haves (in this case those who sit on artifically advantageous rent contracts) are much more important to protect than the have nots (those who don't have enough money to buy and don't have decades of queue time) seems unattractive to me.

Finland is an example of a comparative country that reformed the housing market, and the positive effects this brought.

Yes. The have nots are the ones who need protecting the most.
If you're a key worker and you need to be at a site in the centre and you don't have access to a large pool of funds then your options are always going to be incredibly limited. You have to live in this central location and losing your property leaves you fucked.

If on the other hand you're some kind of professional and you do have a lot of money then your options are far more open. You can afford to live far from the centre and commute in 2 days a week. You can afford various short term options if you find yourself temporarily homeless.

If there's a housing shortage and one side needs to be protected then this absolutely should be those without the means to protect themselves.

But you know what a better option is than having to pick between the two? Build more homes.
Rent control stops a terrible situation from being even worse. Its not meant to fix the terrible situation. You have to actually build to do that. This is something I've noticed many people fail to consider.

San Francisco is not known as a cheap place to live.

Yes?

[The Brain]

One of the negative effects of rent control is that it limits supply. It makes it unattractive to build homes for renting, and it reduces the available housing on the renting market. More already existing homes reach the renting market if you don't have rent control. If I were to rent out my place for instance I wouldn't even be allowed to do it at cost. Not very attractive.

And I still fail to see why the people on the outside who can't get a place to live because of the rent control system should be disregarded.

[Sheilbh]

My understanding is that rent controls are something that basically 99% economists of all types and from all schools agree are bad and don't work/are counter-productive. It's the economics equivalent of climate change with abundant real-world examples of the dysfunctions it causes.

And yet...

[Josquius]

One of the negative effects of rent control is that it limits supply. It makes it unattractive to build homes for renting, and it reduces the available housing on the renting market. More already existing homes reach the renting market if you don't have rent control. If I were to rent out my place for instance I wouldn't even be allowed to do it at cost. Not very attractive.

And I still fail to see why the people on the outside who can't get a place to live because of the rent control system should be disregarded.

That'll explain London then. Clearly no housing shortage to be found there as the lack of rent controls has led to a massive boom in house building.

As said this is where the economists are doing the usual thing, like when they show libertarianism is a very good idea, of assuming a perfect green field setup with zero other factors at play like the fact that in many places its incredibly difficult to just build more properties and what you can charge in rent will have zero impact on whether this happens or not; especially when many of these rent payments are going to somebody who is never going to be in any position to build housing.

Even if we're thinking theoretically and being abstract from reality, if you're a landlord renting out properties and profiting big due to being able to charge whatever you want amidst a shortage then there's really no incentive to ever help solve the housing crisis. You might be able to get away with building a property or two extra without denting demand/what you can charge, but letting the profits roll in without having to invest in doing anything is great.

My understanding is that rent controls are something that basically 99% economists of all types and from all schools agree are bad and don't work/are counter-productive. It's the economics equivalent of climate change with abundant real-world examples of the dysfunctions it causes.

And yet...

99% of liberal economists agree rent control is bad because they're completely missing the point and see housing as a commodity.
Think of housing instead as a human right and a basic service necessary for the actual economy to operate and the picture looks very different.
https://neweconomics.org/2019/08/rent-control-your-questions-answered

Saying 99% of economists agree rent control is bad is like saying 99% of dieticians agree pizza is bad.

[Tamas]

If only a significant portion of the world's population and economic capacity would have spent 50 years trying to make a closely state-controlled economic model work, we could put these debates to rest.

[Admiral Yi]

Think of housing instead as a human right

A human right that the property owner has to pay for and not you, the taxpayer.

[Sheilbh]

99% of liberal economists agree rent control is bad because they're completely missing the point and see housing as a commodity.
Think of housing instead as a human right and a basic service necessary for the actual economy to operate and the picture looks very different.
https://neweconomics.org/2019/08/rent-control-your-questions-answered

It doesn't look different though. She basically concedes every point that mainstream economists say happens with rent controls. Of course I would also add that I'm not really convinced by "human rights" arguments on literally anything.

Her argument is rent controls can work IF you minimise exemptions to cover most properties, massively increase social housing, expand the benefits system, impose legal obligations on landlords to maintain or improve their properties. I'd also slightly query her point on landlords being willing to take a hit on rental income for the benefit of capital appreciation in property value while also saying that rent controls would help manage and could help dampen property prices (I feel like you can have one of those arguments, not both).

It's less an argument for rent controls than a socialist economy on housing. Which is fine. But I think it does mean that if you just have rent controls you'll get all of the dysfunctions observable in all the real world examples of rent controls. In part I think that's the mainstream economists argument is that rent controls as a policy does not work based on where it's been introduced because it is the solution. It is not part of a wider solution of massively increased social supply, stronger benefits etc - it is never part of moving housing to a planned economy.

It reminds me of the LSE academics argument that we don't need to build new homes because actually there is enough "space" in Britain's housing market, it's just distributed inequitably. The big example is a retired couple living in the family home that was big enough when they had kids but now more than they "need" and, if we reframe housing around "need" rather than as properties/assets, we have enough space.

Although it is on brand that British left-wing academics literally find it easier to envisage nationalising spare rooms and allocating demand based on "need" and a human rights perspective, than supply-side planning reform