On August 16 2025 22:42 RvB wrote:Show nested quote +On August 16 2025 18:34 Magic Powers wrote:On August 16 2025 18:09 RvB wrote:On August 16 2025 16:40 Magic Powers wrote:On August 16 2025 14:54 RvB wrote:On August 16 2025 07:13 Yurie wrote:
Isn't the problem with most mega cities the rules? All the best land is taken and it is VERY hard to buy, tear down and build something larger on a lot. Or even building something new in an area that doesn't have a building on it already.
So you end up with areas far out that are worth less, where you have to extend the public transport network and it thus becomes a mega project. And people don't want to live that far out of the city, meaning rent can't be high enough to finance the project. Perhaps letting the public transport network finance it as a total project might work, kind of how Japanese train networks are just enablers for their land ownership (a bit exaggerated).
This leaves you with a few options I can think of directly, likely there are more.
1- Assume that with the rules you have rents will never get high enough to fix the problem. This doesn't seem very nice to somebody living there since costs will keep climbing until rent is 50%+ of income. Thus a popular politician imposes rent control sooner or later.
2- Assume rent can climb high enough that it is worth it for people to add to the city housing. In that case doing nothing likely works out better.
3- Change the rules so the cost of a new project decreases and 2 becomes more likely.
4- Do it as the city, as you control the rules and have the problem you finance more housing until you hit the level you think is right for the city.
One factor is that a lot of construction in many countries is built for sale and not rent. That can offset high costs to a certain degree. But even that has a maximum it will support. It's both. Excessive zoning regulation and rent control increase rent. There's no real support for rent control amongst economists. See for example these polls. Some responses have comments as well. Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.
Strongly agree: 0%
Agree: 2%
Uncertain: 7%
Disagree: 49%
Strongly disagree: 32%
No opinion: 2%
Did not answer: 7%
Richard Thalers comment says it all: Disagree
Next questions: does the sun revolve around the earth. Question A:
Capping annual rent increases by corporate landlords at 5%, as proposed by President Biden, would make middle-income Americans substantially better off over the next ten years.
Strongly agree: 0%
Agree: 2%
Uncertain: 16%
Disagree: 58%
Strongly disagree: 16%
No opinion: 0%
Did not answer: 9%
Question B:
Capping annual rent increases at 5%, as proposed by President Biden, would substantially reduce the amount of available apartments for rent over the next ten years.
Strongly agree: 18%
Agree: 44%
Uncertain: 22%
Disagree: 4%
Strongly disagree: 2%
No opinion: 0%
Did not answer: 9%
Question C:
Capping annual rent increases at 5%, as proposed by President Biden, would substantially reduce US income inequality over the next ten years.
Strongly agree: 0%
Agree: 0%
Uncertain: 22%
Disagree: 53%
Strongly disagree: 13%
No opinion: 2%
Did not answer: 9% There is no consensus like that among economists. The overall benefit of rent control (in a vacuum) is inconclusive. 5. Conclusion
In this study, I examine a wide range of empirical studies on rent control published in referred journals between 1967 and 2023. I conclude that, although rent control appears to be very effective in achieving lower rents for families in controlled units, its primary goal, it also results in a number of undesired effects, including, among others, higher rents for uncontrolled units, lower mobility and reduced residential construction. These unintended effects counteract the desired effect, thus, diminishing the net benefit of rent control. Therefore, the overall impact of rent control policy on the welfare of society is not clear.
Moreover, the analysis is further complicated by the fact that rent control is not adopted in a vacuum. Simultaneously, other housing policies — such as the protection of tenants from eviction, housing rationing, housing allowances, and stimulation of residential construction (Kholodilin 2017; Kholodilin 2020; Kholodilin et al., 2021) — are implemented. Further, banking, climate, and fiscal policies can also affect the results of rent control regulations. https://www.sciencedirect.com/science/article/pii/S1051137724000020Especially the second sentence is key: I conclude that, although rent control appears to be very effective in achieving lower rents for families in controlled units, its primary goal, it also results in a number of undesired effects, including, among others, higher rents for uncontrolled units, lower mobility and reduced residential construction. The primary benefit is that of affordability in controlled housing. This finding is simply true and not in dispute. Drawbacks are: - Higher rent in uncontrolled housing If new housing is built for controlled rent, I don't see how this is an overall problem. I'll address this point a few more times. - Lower mobility This has pros and cons, and in a vacuum it would be an overall drawback. However, with good policy it becomes a non-issue. Families' needs can be met by continuously building new housing so they have incentive to move wherever they please. In Vienna this works just fine. Workers and the lower class have sufficient mobility. The middle class is fine, since they can afford more expensive housing. That's how things should work anyway. Goal accomplished. So this is a very simple problem with a very simple solution. - Reduced residential construction This reveals the stupidity of the simplistic claim that rent control is bad. Yes, in a vacuum it's bad. But good policy doesn't exist in a vacuum. Creation of new housing solves much if not the whole problem. So it's fairly obvious that nothing is obvious to the economists. If any economist claims that there's a clear consensus against rent control among their peers, they're lying. There is a consensus. I've just linked the polls to you. The study you quote has the same conclusions. I've you had actually read it you'd see that it cites no empirical literature on net welfare. The rest of your argument is basically that rent control is bad but if you build enough housing it's fine. You know what other problem more housing solves? Higher rents! Rent control is implemented to lower rents compared to the market price. The effects become worse the larger the difference between market rents and controlled rents. If you bring the market price more in line with controlled rents then the negative effects also become less. At the same time that also reduces the need for rent control in the first place. So yes, your conclusion that building more housing helps solve much of the issues of rent control is correct. It's also meaningless if we want to judge its effectiveness as a policy. More housing is generally a good idea, but it's especially good with rent control. The only part of the housing market that loses out is the private one, which becomes more expensive. I don't see why lower classes should care about that when there are enough homes they can move to at an affordable cost. That's what rent control does. It allows for the additional homes to be immediately affordable and to remain affordable. If the additional homes are privately owned, there is no rent control, and lower classes can't afford them. There are currently no known solutions for affordability other than rent control. It's literally one the best solutions out there. The fact that - in a vacuum - it introduces a problem is completely irrelevant. The main problem is solved with a continuous construction of homes, and other problems are solved with other policies. Many policies don't work in a vacuum but they do work in the right context. This is not a new revelation. No, the private part of the housing market is not the only one that loses out. As per your own source it reduces mobility and reduces housing quality. It's not even clear if renters benefit in the long term as they'll forgo better work opportunities if it does not raise their income enough to make the move out of a rent controlled appartment worth it. That will then mean forgoing additional promotions in the future. I can see how building more housing can solve some of the problems with mobility but you're introducing new ones at the same time. Since rent controlled housing has by definition a below market rate any renter would want one. So you either need to ration or build enough to house them all. Rationing means waiting lists with the state deciding who is lucky enough to live in rent controlled housing, building more subsidised housing is costly leaving less money for other spending. And then the state also needs to know where and what housing to build. The lower class should certainly care about rising prices in the private market. Poor people usually don't want to stay poor. As some of them escape poverty they'll have to compete in the same private housing market. The non-poor part of the population is also the part of the population that funds the welfare state. Without them there's no subsidised housing for the poor. There's a clear incentive to make sure they keep supporting said welfare state. Unnecessarily increasing their housing prices is not a good way to do that. That there is no other solution for affordability is completely false. The solution is to make it easier to build housing by reducing zoning constraints and decreasing housing subsidies that increase demand while doing nothing for supply like rent control and the mortgage interest rate deduction. Show nested quote +On August 16 2025 21:43 Magic Powers wrote:On August 16 2025 18:48 Gorsameth wrote:On August 16 2025 18:34 Magic Powers wrote:On August 16 2025 18:09 RvB wrote:On August 16 2025 16:40 Magic Powers wrote:On August 16 2025 14:54 RvB wrote:On August 16 2025 07:13 Yurie wrote:
Isn't the problem with most mega cities the rules? All the best land is taken and it is VERY hard to buy, tear down and build something larger on a lot. Or even building something new in an area that doesn't have a building on it already.
So you end up with areas far out that are worth less, where you have to extend the public transport network and it thus becomes a mega project. And people don't want to live that far out of the city, meaning rent can't be high enough to finance the project. Perhaps letting the public transport network finance it as a total project might work, kind of how Japanese train networks are just enablers for their land ownership (a bit exaggerated).
This leaves you with a few options I can think of directly, likely there are more.
1- Assume that with the rules you have rents will never get high enough to fix the problem. This doesn't seem very nice to somebody living there since costs will keep climbing until rent is 50%+ of income. Thus a popular politician imposes rent control sooner or later.
2- Assume rent can climb high enough that it is worth it for people to add to the city housing. In that case doing nothing likely works out better.
3- Change the rules so the cost of a new project decreases and 2 becomes more likely.
4- Do it as the city, as you control the rules and have the problem you finance more housing until you hit the level you think is right for the city.
One factor is that a lot of construction in many countries is built for sale and not rent. That can offset high costs to a certain degree. But even that has a maximum it will support. It's both. Excessive zoning regulation and rent control increase rent. There's no real support for rent control amongst economists. See for example these polls. Some responses have comments as well. Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.
Strongly agree: 0%
Agree: 2%
Uncertain: 7%
Disagree: 49%
Strongly disagree: 32%
No opinion: 2%
Did not answer: 7%
Richard Thalers comment says it all: Disagree
Next questions: does the sun revolve around the earth. Question A:
Capping annual rent increases by corporate landlords at 5%, as proposed by President Biden, would make middle-income Americans substantially better off over the next ten years.
Strongly agree: 0%
Agree: 2%
Uncertain: 16%
Disagree: 58%
Strongly disagree: 16%
No opinion: 0%
Did not answer: 9%
Question B:
Capping annual rent increases at 5%, as proposed by President Biden, would substantially reduce the amount of available apartments for rent over the next ten years.
Strongly agree: 18%
Agree: 44%
Uncertain: 22%
Disagree: 4%
Strongly disagree: 2%
No opinion: 0%
Did not answer: 9%
Question C:
Capping annual rent increases at 5%, as proposed by President Biden, would substantially reduce US income inequality over the next ten years.
Strongly agree: 0%
Agree: 0%
Uncertain: 22%
Disagree: 53%
Strongly disagree: 13%
No opinion: 2%
Did not answer: 9% There is no consensus like that among economists. The overall benefit of rent control (in a vacuum) is inconclusive. 5. Conclusion
In this study, I examine a wide range of empirical studies on rent control published in referred journals between 1967 and 2023. I conclude that, although rent control appears to be very effective in achieving lower rents for families in controlled units, its primary goal, it also results in a number of undesired effects, including, among others, higher rents for uncontrolled units, lower mobility and reduced residential construction. These unintended effects counteract the desired effect, thus, diminishing the net benefit of rent control. Therefore, the overall impact of rent control policy on the welfare of society is not clear.
Moreover, the analysis is further complicated by the fact that rent control is not adopted in a vacuum. Simultaneously, other housing policies — such as the protection of tenants from eviction, housing rationing, housing allowances, and stimulation of residential construction (Kholodilin 2017; Kholodilin 2020; Kholodilin et al., 2021) — are implemented. Further, banking, climate, and fiscal policies can also affect the results of rent control regulations. https://www.sciencedirect.com/science/article/pii/S1051137724000020Especially the second sentence is key: I conclude that, although rent control appears to be very effective in achieving lower rents for families in controlled units, its primary goal, it also results in a number of undesired effects, including, among others, higher rents for uncontrolled units, lower mobility and reduced residential construction. The primary benefit is that of affordability in controlled housing. This finding is simply true and not in dispute. Drawbacks are: - Higher rent in uncontrolled housing If new housing is built for controlled rent, I don't see how this is an overall problem. I'll address this point a few more times. - Lower mobility This has pros and cons, and in a vacuum it would be an overall drawback. However, with good policy it becomes a non-issue. Families' needs can be met by continuously building new housing so they have incentive to move wherever they please. In Vienna this works just fine. Workers and the lower class have sufficient mobility. The middle class is fine, since they can afford more expensive housing. That's how things should work anyway. Goal accomplished. So this is a very simple problem with a very simple solution. - Reduced residential construction This reveals the stupidity of the simplistic claim that rent control is bad. Yes, in a vacuum it's bad. But good policy doesn't exist in a vacuum. Creation of new housing solves much if not the whole problem. So it's fairly obvious that nothing is obvious to the economists. If any economist claims that there's a clear consensus against rent control among their peers, they're lying. There is a consensus. I've just linked the polls to you. The study you quote has the same conclusions. I've you had actually read it you'd see that it cites no empirical literature on net welfare. The rest of your argument is basically that rent control is bad but if you build enough housing it's fine. You know what other problem more housing solves? Higher rents! Rent control is implemented to lower rents compared to the market price. The effects become worse the larger the difference between market rents and controlled rents. If you bring the market price more in line with controlled rents then the negative effects also become less. At the same time that also reduces the need for rent control in the first place. So yes, your conclusion that building more housing helps solve much of the issues of rent control is correct. It's also meaningless if we want to judge its effectiveness as a policy. More housing is generally a good idea, but it's especially good with rent control. The only part of the housing market that loses out is the private one, which becomes more expensive. I don't see why lower classes should care about that when there are enough homes they can move to at an affordable cost. That's what rent control does. It allows for the additional homes to be immediately affordable and to remain affordable. If the additional homes are privately owned, there is no rent control, and lower classes can't afford them. There are currently no known solutions for affordability other than rent control. It's literally one the best solutions out there. The fact that - in a vacuum - it introduces a problem is completely irrelevant. The main problem is solved with a continuous construction of homes, and other problems are solved with other policies. Many policies don't work in a vacuum but they do work in the right context. This is not a new revelation. But then is the solution rent control or is it just market saturation? You say rent control works if there are so many houses on the market that anyone can find one. Wouldn't the normal housing market also self correct back into affordability if the market was flush with houses, naturally bringing prices down as supply exceeds demand? The problem in both cases is enticing companies to keep building houses when they make less profit off of them. That and not getting voted out of office by all the home owners who see the value of their house plummet. The latter might well be the entire core issue around the world, the haves (those who own homes) benefitting from ever increasing housing prices and not being willing to take a hit to help the have nots. Leaving housing construction to the free market drives up housing cost because it's a lot more profitable to raise rent than to build more homes, which also perversely orients the incentivize towards less construction and creates a feedback loop of rising rental cost. Building homes costs a large amount of money, it's more of a hassle due to construction guidelines, it's overall also a riskier investment, whereas raising rent for the next renter (even when including expensive refurbishment) costs much less money and carries much less risk. This can can even completely hyper-inflate the cost of homes depending on how greedy the owners are. And that's only the most obvious of the problems resulting from free market housing. There is a place for free market housing, but it can't serve the lower classes. People who argue that rent control is bad in the long run should research the impact of the free market in the long run. It's a lot worse. This makes no logical sense. The market value of a rental property is the discounted cash flow of the house. An increase in rent will increase that market value. It won't change the cost to build one. Increasing rents will then increase the incentive to build more housing since it'll push the market value above building costs (including the profit) at the margin. Often developers are not allowed to build these housing units though.
In NYC it costs around $350 USD per square foot to build one single apartment. A new apartment is around 700 square feet (65 m²). That means the construction of one apartment costs roughly 250 000 USD.
This is why raising rent is far more profitable than building new homes. The latter serves primarily the people, whereas landlords primarily benefit from increased rent and not from construction. They're happy to refurbish homes or remodel existing property. But they're not generally in the business of constructing new homes. This is especially true because construction of more homes = lower average rent, just as I explained. The incentive for homes to be built is almost exclusively in the hands of renters. You'll rarely see the point where additional construction for lower classes is beneficial for landlords. Lower classes don't have the assets to pay for expensive apartments and therefore there's very little profit to be made in construction. This is why the model of state-controlled construction exists to begin with. It's absolutely necessary so all the families have a place to live. Otherwise people would literally have to build their own homes because nobody else is going to do it for them. That's where the housing crisis stems from.
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