Rent Control Needs Retirement, Not a Comeback

https://www.bloomberg.com/view/articles/2018-02-07/rent-control-needs-retirement-not-a-comeback

by jseliger • 8 years ago

73 96 8 years ago

The author thinks low-income people's incomes are rising and that is false. The rest of the article is fallacious because of this.

tylerhou2• 8 years ago

https://rationalwiki.org/wiki/Fallacy_fallacy

andyjohnson0• 8 years ago

The "Falacy falacy" strictly applies to logical falacy. Its pretty clear that the grandparent is using "fallacious" in the informal sense of "mistaken belief".

Finnucane• 8 years ago

Incomes are, on average, rising a little. Which is partly why the stock market is freaking out; Wall Street hates it when income goes up, because they view it as money coming out of their pocket. Cities like New York and Boston and SF are expensive because there's a lot of money going through them; this creates high demand and high incomes for some. But companies like Facebook and Google and Apple could certainly afford to pay everyone who works for them in any capacity enough so that no one would have to live in a car. But the investor class would have a shit if that happened.

ChrisLomont5• 8 years ago

Lowest incomes, even inflation adjusted, certainly have been rising. Here's historical Census Data [1], Table H-1. Income Limits for Each Fifth and Top 5 Percent.

Maybe you have some large scale data you'd like to share?

[1] https://www.census.gov/data/tables/time-series/demo/income-p...

Retric5• 8 years ago

From the data you linked: lowest 5th

  2001: 24,361
  2016: 24,002

that's a net loss over the last 15 years. The numbers rise and fall but:

  1979: 21,594
  2014: 21,728

Is not what i would call meaningful progress.

frgtpsswrdlame3• 8 years ago

So when I take the median wage by state table, there are 11 states with negative wage growth between 2009 and 2016 and another 16 states where the total inflation adjusted wage growth is less than 5% between those years. That's more than half the country that is either not feeling a recovery at all or is feeling a pretty damn slow one.

Edit:

Actually looking at this a little more, take the year 2000 (all inflation adjusted numbers.)

The lowest fifth of workers have seen wages fall 8.6%. The second fifth of workers have seen wages fall 2.42% in that time, the third fifth has seen wages only rise 0.45%. This is not what I would call a strong time period for workers.

pmarreck2• 8 years ago

This comment and its replies are what happens when you refute an assertion without evidence

saosebastiao4• 8 years ago

There are various perspectives to take on income in which two people looking at the same data can come to two different conclusions. It goes much further than Simpsons paradox. Simply choosing your windows for comparison differently can cause this: one person chooses to compare 2014 with 2016, and the other chooses to compare 2001 with 2009.

One perspective that is almost universally true going back as far as we have data, is that incomes rise over the lifetime of the individual. Because the bottom 20% today are a completely different set of people as the bottom 20% of tomorrow. And because people strongly to earn more as they get older, the premises of the article hold up.

MarkMc4• 8 years ago

The author thinks low-income people's incomes are rising and that is false.

The author doesn't specifically mention low-income people - she just says that 'incomes rise':

But then incomes rise, and rents don’t. People with higher incomes have more resources to pursue access to artificially cheap real estate: friends who work for management companies, “key fees” or simply incomes that promise landlords they won’t have to worry about collecting the rent.

Your observation that poor people's incomes are stagnant actually strengthens the authors point above, because a growing income gap gives rich people 'more resources to pursue access to artificially cheap real estate'.

The rest of the article is fallacious because of this.

There are some points in the article that are not dependant on rising incomes. For example,

Meanwhile, price ceilings reduce the supply because they decrease the incentive to build, and can make it downright imperative to remove rental housing from the market and turn it to some other use -- condos, warehouses, anything that won’t trigger the rent controls.

diogenescynic• 8 years ago

Build more houses first—reduce the ridiculous zoning laws and permitting processes, especially in California. Then we can talk.

notyourday• 8 years ago

True, rent control needs retirement, but only with the retirement of restrictions on building of housing.

crdoconnor7• 8 years ago

Serial experimentation with this policy has repeatedly shown the same result.

New York's two largest building booms took place during times of very strict rent controls - the 1920s and between 1947 and 1965.

rent control looks like a victory for the poor over the landlord class. But the stifling of price signals leads to problems.

Except when it actually happened the price signals sent by the strictest rent controls still weren't enough to end the city's biggest housing booms.

Seriously, Megan McArdle telling you that price controls are "just going to hurt the poor" is a bit like Trump telling you that demolishing Mar a Lago will only hurt the immigrants.

Rent control is a dirty hack, for sure, but it's a dirty hack that shouldn't be removed until a proper fix is put in place - i.e. a land value tax.

I won't hold my breath for Megan McArdle to advocate for that.

Bloomberg should have her fired. She does absolutely no credit to their publication.

DangerousPie• 8 years ago

Both of those building booms were shortly after world war one and world war two. Can you really make any fair comparisons based on that?

The entire US economy was booming after the war. So numbers from that period don't tell you much about what things would have been like in peace time.

crdoconnor7• 8 years ago

Except I'm not claiming that the rent controls stimulated the boom. Just that the correlation posited by Megan McArdle absent any supporting data is imagined.

RyanZAG• 8 years ago

Bloomberg should have her fired. She does absolutely no credit to their publication.

I don't think calling for everyone you disagree with to be fired is the right way forward.

grasshopperpurp• 8 years ago

I don't think calling for everyone you disagree with to be fired is the right way forward.

I don't think conflating a specific person with everyone is a fair reading of the OP's statement.

KingMob• 8 years ago

Calling for the firing of a book reviewer who didn't read the book seems eminently reasonable to me.

pmarreck2• 8 years ago

I love the part where you started out with a correlation (which is very weak evidence, especially without any citation) and then proceeded to some assertions (also without evidence or citations), ending in an ad-hominem

https://fee.org/articles/the-case-against-rent-control/

crdoconnor7• 8 years ago

You did notice that neither her link nor yours contains any data whatsoever right?

I gave two data points that strongly indicated that the effect rent control has on construction is either absent or very, very weak. You wouldn't exactly get the highest rate of construction coinciding with the strictest rent controls otherwise now would you?

CaptainZapp• 8 years ago

You may get downvoted to hell for, er, speaking the truth?

I'm afraid you're right and Miss McArdle is really nothing much more than a libertarian hack.

Case in point: Her book review fo Piketty's "Capital in the Twenty-First Century". While opinions may certainly differ about the tome this is a bit rich for a book review:

  I apologize in advance, because I am going to talk about a book that I have not yet read. To be clear, I intend to read Thomas Piketty’s “Capital in the Twenty-First Century.” It is sitting on my (virtual) bedside with a big stack of other (digital) books that I intend to read. But it’s far down in the queue, and I’m afraid that I can’t wait to weigh in—not on the book itself, but on its topic.

Reviews a book she hasn't read and needless to say completely trashes it in the process.

I actually agree: Bloomberg really should have her fired.

I link to the Baffler article[1] since the original review is apparently only available to subscribers.

[1] https://thebaffler.com/latest/what-pikettys-conservative-cri...

sitkack2• 8 years ago

Talking about books that you haven't read. [1]

https://www.theguardian.com/books/2008/jan/06/fiction.societ...

Signaling that you haven't read it gives one a defensible position! You can't criticize my mischaracterization of the arguments of the book, I haven't read it! Her opinions can be her alternative facts known to none except her.

There is accidental fallacious logic, and then there is manufacturing bullshit.

hindsightbias2• 8 years ago

There were bloggers whose raison d'être was debunking her. IDK if they've moved to twitter or not:

https://inversesquare.wordpress.com/tag/mcardle/

The lesson is, glibertarians always fail up.

adrianN3• 8 years ago

Recently I was in SF for the first time. I was pretty shocked to see the endless rows of tiny one story + garage houses separated by impossibly wide streets. No wonder housing is so expensive. The city could easily double its density by building more apartment buildings.

codingdave• 8 years ago

True, but not everyone wants their city to be packed full or large brick cubes that block the views of everything else.

Retric5• 8 years ago

I am not sure why those people should have much say about what's going on. Most of the US already looks like you're describing.

Thriptic• 8 years ago

That's a perfectly fair stance to take, but then people will simply have to accept that rents will be sky high in cities like SF in perpetuity. The high prices are fundamentally a supply issue; build enough housing and prices will inevitably fall.

toss892625• 8 years ago

FUCKING HELL.

The rent is 2.5k * 12 = 30k a year. If someone makes $15/h * 2000 hours a year = 30k. 100% of income on a 1BR. Is your fucking view worth the costs you impose on others?

Enjoy your artificial restrictions on supply, as everyone with even one grain of common sense moves to Texas or Washington.

P.S. Rich software morons can afford it, but just because they can doesn't mean they want to get ripped off by (30k rent) + (20k state taxes) a year. Location is sticky, but once they get the equivalent job literally ANYWHERE else, they will take it, or an internal transfer.

Symmetry• 8 years ago

Surely Paris levels of density is something SF residents could learn to live with?

adrianN3• 8 years ago

I don't think you can see all that much from the first floor of one of those houses. Higher density doesn't have to be ugly. Compare this random small street in Berlin

https://goo.gl/maps/hvkzDG4u9Tp

with this random "small" street in SF

https://goo.gl/maps/dJzn86V9ers

It's even more stark when you compare larger streets. Berlin:

https://goo.gl/maps/hBg7aMA2Feu

SF:

https://goo.gl/maps/YFcVLSWHPzS2

I guess you can see why I thought the density in SF to be pretty ridiculous.

Low density wouldn't be so much of a problem, imho, if the zoning would be better. Why does a large fraction of the population have to commute downtown to the skyscrapers? Couldn't the offices be spread out a bit more? Why are supermarkets to far apart? I did a lot of walking while in SF and in many parts of the city I had the feeling that sidewalks were more decorative than meant for transportation, because there were no shops or small businesses for a kilometer or more around.

Broken_Hippo5• 8 years ago

You know, you can design for green spaces with densely packed housing so the views are better - and you can build walking spaces with this. You can design buildings so they aren't plain block houses - facades exist. You don't have to make every apartment tiny.

You can also move to another city. Get another job. If your concern is your view or lack thereof, you are probably well off enough to do such a thing - which is a freaking luxury. Lots of folks are too poor to afford housing, let along going to another city. Can't get a proper bank account without an address. No drivers license in some states, nor proper ID instead. I'm not even sure if you can register a car if you are homeless. These things make you more mobile.

bradleyjg3• 8 years ago

The whole rest of the country is out there and is exactly what you are looking for. Why should the nostalgia of a few be allowed to impede progress for a whole country? These decisions should be taken out of local, parochial hands and made at higher levels of government. That way they can be made for the benefit of all, instead for the benefit of a small group of incumbents.

As I understand it, that's how they do it in Japan. Zoning is done at the national level.

MarkMc4• 8 years ago

Would that necessarily be the outcome of greater housing density? Are the views of apartments in Paris or Singapore so bad?

zip1234• 8 years ago

Yes, I'm inclined to believe that rent control is a symptom, not the cause. The cause appears to be ridiculous zoning and building restrictions. If more housing is available such that the price drops, then rent control isn't even needed.

anaptdemise• 8 years ago

It also appears to reduce the amount of available rentals.

http://conference.nber.org/confer/2017/PEf17/Diamond_McQuade...

bpp• 8 years ago

100% agreed. There is no "by right" construction in San Francisco. If you want to build a building that fully within the intended zoning and use of the space as currently determined by the city, it is still subject to conditional approval and even environmental review. If someone in the neighborhood objects (100% odds of that happening), then they can tie you up for years, extracting concessions (often making the buildings smaller, and unfortunately often making them uglier).

I'm particularly excited about some of the new legislation that's just been passed that allows for by right construction if a city isn't meeting its housing needs, because it just may streamline the process of getting things built here.

shams93• 8 years ago

I have rent control in Los Angeles but they're demolishing my place to make way for luxury condos, most likely for absentee owners. You can't find an apartment for under 2,000 a month in LA anymore but the way in which they demolish perhaps run down yet affordable apartments to make way for high end condos is a huge factor in the utter lack of affordable housing here. Not like people get rich in LA there is not even the income potential you have in SF and no stock options outside of Snap. I was born here so I have been treading water for life here but its getting harder and harder for people on salary to even afford to live here at all.

crdoconnor7• 8 years ago

Ask a renter why rents are so high and they'll say a lack of rent control, because it brings their rent down.

Ask a property developer why rents are so high and they'll complain that ridiculous zoning and building restrictions are preventing them from building enough new supply (...and coincidentally reducing the amount of profit they will be making).

Ask a landlord why rents are so high and they'll complain that rent control is keeping the market from building enough housing (...and coincidentally reducing the amount of profit they will be making).

If you ask me, it's untaxed land - the costs of holding on to those tiny one story + garage houses were made artificially low - among other things, by prop 13. They impose a cost on others for monopolizing that land, but they aren't paying that cost, so the market signals that would fix the problem (getting them to sell up to somebody who would build denser housing to avoid a large tax bill) are severely restrained.

raldi• 8 years ago

We're working on it: https://extranewsfeed.com/my-transit-density-bill-sb-827-ans...

apeace• 8 years ago

I have lived in Brooklyn for a few years, it's largely the same here.

A while back there was a proposal to build a large apartment building in my neighborhood, which at the time did not have any tall buildings. Locals tried to stop it, literally putting "No Towers" signs in their windows and on their doors.

Thankfully they were not successful, so the neighborhood will soon be able to support hundreds of more people.

bradleyjg3• 8 years ago

It depends on the part of Brooklyn. Downtown, Williamsburg, and Greenpoint are all seeing significant new units added. After lagging behind for a long time, things are finally starting to happen in Brooklyn Heights. Park Slope is mostly stangnet, but out on fourth avenue (I guess that's called Gowanus?) new units are going up. There is still plenty of Brooklyn that is stagnant, it's a very large boro, but the overall picture is decent.

frgtpsswrdlame3• 8 years ago

So the promise of economic justice erodes over time, as lucky insiders come to dominate rent-controlled apartments, especially because having gotten their hands on an absurdly cheap apartment, said elites are loathe to move and free up space for others.

So Megan's response is just not to pursue economic justice at all? It doesn't make any sense, of course the powerful will try to erode justice for the powerless, that's just society, that doesn't mean we stop pursuing justice. It means we become even more vigilant about it.

paulgb• 8 years ago

Megan's response is just not to pursue economic justice at all?

I think the argument here is more "not pursue short-term economic justice at the expense of long-term economic justice"

AstralStorm• 8 years ago

And she tested that the long term justice materialized ever how? Any reference group at least?

dkarl2• 8 years ago

I don't agree with the article, but I think your reasoning is dangerous. If a means is introduced to serve a noble purpose, but it does not serve that purpose, then the nobility of the purpose is not a defense of the means. Right now there's an article on the front page about the consequences of applying that reasoning to dubious forensic sciences that were introduced with the noble intention of ensuring justice but in fact undermine it.

If a means doesn't serve an end, then continuing to pursue it despite the perverse consequences doesn't prove your commitment to the to the desired result.

closeparen2• 8 years ago

This statement right here is the entire philosophical disagreement between (liberal) YIMBYs and affordable housing activists: given that price controls (esp. affordability requirements for new construction) are well intentioned but don’t produce housing at a large enough scale to help, do we double down on them or back off?

One side is hammering on the noble purpose, saying that if price controls don’t work, we must take housing entirely out of the hands of the market. The other is hammering on the practicality and implementation detail of particular regulatory regimes, and we talk past each other for years.

gwbas1c• 8 years ago

If politicians actually want to make sure everyone who needs a place to rest their head has one, there’s only one way to do it: Build more housing. Which means, in turn, loosening the legal restrictions and community veto points that make it so hard to add supply. Because there’s no way to escape the fundamental math: Unless you build enough housing to shelter the people who want to live in your city, a whole lot of people will be left out in the cold.

Plain and simple: The way to have economic justice is to build enough housing to satisfy demand.

vr46• 8 years ago

London housing still has a fair number of long-settled subsidized tenants who no longer need subsidized housing, but "council-homes-for-life" is in place and confers huge advantages to incumbents, which hardly seems fair. Basing access on need, this is not.

I have lived in various parts of Central London in mixed social housing, always as a market rate tenant (I am fortunate enough to afford it as a software engineer) and sympathize with the laments of poorer tenants who are occasionally booted out of their homes due to some housing development or other, complaining about the breakups of their communities and their families. But what about people who HAVE to leave their communities and families in order to make the most of opportunities when they arise? Is there an easy answer?

bradleyjg3• 8 years ago

We have a standardized bundle of rights that shields the person that possesses that bundle from many (but not all) price increases in a living space. It's called ownership.

If a city thinks that certain people should be protected in that way, it should buy the proprieties and give them to those favored people. Trying to unbundle ownership and tenancy to mix and match them, at a city level with only acquiescence as opposed to enthusiastic collaboration from state and federal governments, as well as quasi-governmental institutions, is not going to work well.

amorphid• 8 years ago

I live in a San Francisco rent-controlled apartment. I only moved to San Francisco because of rent control. Otherwise I would not have been able to afford a place at all. New apartments in cities without rent control always seem to be expensive, and I couldn't afford those either. Rents on old apartments seem to be skyrocketing, too. I, for one, welcome rent control.

swsieber• 8 years ago

It's not that rent control doesn't help some people - it's just the wrong solution.

The real solution is building more housing. (I think)

Broken_Hippo5• 8 years ago

That's not the only solution I think we should be implementing, though. We could subsidize housing for people that can't afford it in other ways - giving people money to pay for their apartment through social programs after considering their income, rent, and expenses to get a grip on their actual ability to pay for available housing. All without having a hard-line income cutoff for this stuff (which doesn't help when the numbers are out of balance with the local situation). Building housing will hopefully help folks so long as there is a shortage, but it isn't a cure-all either.

douglaswlance• 8 years ago

You could've easily afforded to live there if there were zero restrictions on building.

What downstream effects that might have, who knows, but rent control isn't the only solution.

arebop• 8 years ago

You certainly did not pay less to move in than you would have in a city without rent control. In SF, rent-controlled rents start at rates comparable to non-rent-controlled apartments. One might think they'd start higher, given that the landlord is agreeing to grant what amounts to an annuity along with providing a place to live, but that doesn't seem to happen. If you think rent control makes the prevailing market rates for new tenants lower, where do you suppose the money comes from to give senior tenants discounts of up to 100%?

poke111• 8 years ago

I propose a new law that people with my SSN don't have to pay taxes. It would help me out a lot.

Every policy helps some people at the expense of others. Concentrated benefits, diffuse costs. You need to weigh both sides, not just the benefits. (edited)

wheaties• 8 years ago

Just so people understand where I'm coming from with what I'm about to say, my family has worked and existed in the construction business for a long time. Houses to rent out were considered the safest income producing retirement asset to invest money. Then rent control was introduced.

Fast forward 20yrs later and rent had stayed the same but taxes and municipal fees had increased to the point where they dwarfed the legally allowable income. Add to this new mandates which stipulated how electricity and water could be billed to tenants requiring installation of new equipment in the buildings every few years. Then throw in rising insurance rates coupled with rising maintenance expenses.

So, we took at look at the figures and decided the best course of action was to either bulldoze a set of perfectly livable buildings, let the lots sit for the required minimum time, then rebuild a non-rent controlled property --OR-- sell to someone who could afford to do the same. There was no legal way to earn a profit otherwise. Turning into slum lords was not something we wanted to do. Welcome to being a landlord with rent controlled property.

hindsightbias2• 8 years ago

rent had stayed the same

SF allows rent increases, CPI adjusted, usually 1.5-2.5% a year. SF county use taxes have been ~8% for a couple of decades. Prop 13 has been in effect since the 70s.

4 out of 6 units in my building have flipped in 5 years, allowing rent increases. Resulting in at least $70-80K additional income for the landlord (at Prop 13 tax rates). This is more the norm than an outlier - many of the new techies aren't mad at grandma stealing their freedom fries, they're mad at techies who beat them here in 2012.

I'm all for giving up rent control when landlords give up Prop 13.

skybrian• 8 years ago

A compromise that would please nobody: how about mild rent control, say a limit of a 5% increase a year, doubling in 15 years?

purplezooey• 8 years ago

"Rent control is one of the most effective ways to destroy a city’s housing stock."

The concept of 'housing stock' is generally a foreign one to the bay area. Residents mostly care about their own home value, rather than how having ample supply regionally benefits everyone.

PeterMikhailov2• 8 years ago

Please stop taking Megan McCardle seriously

https://theoutline.com/post/2303/megan-mcardle-has-a-lot-of-...

http://exiledonline.com/megan-mcardles-hypocrisy-exposed-por...

https://twitter.com/asymmetricinfo/status/960546413582192641

https://www.splicetoday.com/politics-and-media/megan-mcardle...

https://www.bloomberg.com/amp/view/articles/2018-01-30/megan...

https://www.bloomberg.com/view/articles/2017-10-23/we-libert...

https://www.bloomberg.com/view/articles/2017-06-16/beware-of...

https://www.bloomberg.com/amp/view/articles/2017-09-18/we-di...

http://www.oregonlive.com/opinion/index.ssf/2017/06/why_not_...

https://twitter.com/asymmetricinfo/status/859101074501890048