Re:Do rent controls work?
by thephyber on Tuesday September 01, 2015 @03:05AM
(#10151084)
yes, yes, no (San Jose, CA)
TL;DR: I think San Francisco rent control (1979) and (seemingly unrelated) California Prop 13 (1978?) are short term political stopgaps which are almost certainly doomed to fail the citizens they aim to protect in the long term.
Rent control in San Jose is weaker than San Francisco, but they both suffer from the same common problems. Ultimately they do nothing to reduce demand or increase supply, while rent control may actually increase demand somewhat (by allowing people who might otherwise be priced out of a high demand area to stay).
I've met many people who were interested in adopting a dog (I volunteer with local animal rescues), but couldn't/wouldn't because they were stuck in their rent controlled place with no leverage to negotiate a dog into their rental contract and didn't want to risk irritating their landlord. Shopping for a rent-controlled place is a cut-throat proposition so making two tiers of rental properties will necessarily lead to abuse of tenants in the more restrictive one.
San Francisco's rent control has giant loopholes which work against the tenants the law was designed to protect:
* Any property built after 1979 is exempt so there is a shrinking supply. Rent controlled tenants will be in progressively more cutt-throat competition.
* Apartments and rental rooms in single-family homes are categorized differently so someone converting an existing apartment building into a single family home to be able to jack up rents to market rates which effectively was an eviction notice (a HN article covered this scenario a few months ago).
* Your landlord may evict you in order to sell the property, whereby the new landlord can rebuild the property, eliminating the 1979 rent control grandfathering.
San Francisco also has some of the strongest tenant support laws in the nation. While they are beneficial to tenants, they are also a hidden tax on landlords which increase the risk associated with owning a rental property in SF.
San Francisco is at the middle of a perfect storm of multiple sources of housing demand:
* Large, established Asian immigrant community making it desirable for new Asian immigrants (including a current influx of Chinese real estate investment cash)
* Liberal politics which attract liberals fleeing rural red states in a self-sorting mechanism many sociologists have observed about US migration patterns (partially responsible for hyper-polarization)
* Tech (web and biotech) sectors
* City and state tax incentives for businesses to start up in certain districts
* Coastal population centers like LA, NYC, Miami have long attracted young adults leaving their boring small towns after school
My observation is that most municipalities which seek to enact some form of rent control do so as a short term political fix for some other systemic issue that voters & politicians are unwilling to address. San Francisco's rent control is an attempt to counter the shortage of housing you mentioned, but is entirely its own doing.
The supply of housing is restricted:
* San Francisco is nearly fully built and is surrounded by water on 3 sides.
* NIMBYs prevent rezoning for high density and/or 4+ stories in most parts of the city
* NIMBYs prevent alteration of the waterfront skyline
* NIMBYs prevent demolition of Victorians
Prop 13 (1978?, the California property tax growth cap) has loopholes. Prevent property tax is re-assessed at market rates if a property is transferred, but not if the transfer is between family members. Prop 13 also imposes a penalty on real estate transactions because to buy a new property would be to get your property tax set at current (IMHO inflated) rates. It is self-reinforcing because the existence of Prop 13 inflates real estate values by suppressing many property taxes. Prop 13 is also partly to blame for the housing shortage because it's possible that a long-time homeowner in San Francisco would rather leave a house vacant than sell it (because to sell and "take profits" would mean that another real estate purchase would come with a high recurring tax).
Ultimately California is very expensive to live in, especially if you are on a fixed income. I, personally, would rather not underfund schools, police, and fire departments for the sake of a politically powerful minority who are property-wealthy but cash poor. There are plenty of small towns that need investment and demand and could provide a vastly cheaper cost of living than a very high demand + low supply city.
TL;DR: I think San Francisco rent control (1979) and (seemingly unrelated) California Prop 13 (1978?) are short term political stopgaps which are almost certainly doomed to fail the citizens they aim to protect in the long term.
Rent control in San Jose is weaker than San Francisco, but they both suffer from the same common problems. Ultimately they do nothing to reduce demand or increase supply, while rent control may actually increase demand somewhat (by allowing people who might otherwise be priced out of a high demand area to stay).
I've met many people who were interested in adopting a dog (I volunteer with local animal rescues), but couldn't/wouldn't because they were stuck in their rent controlled place with no leverage to negotiate a dog into their rental contract and didn't want to risk irritating their landlord. Shopping for a rent-controlled place is a cut-throat proposition so making two tiers of rental properties will necessarily lead to abuse of tenants in the more restrictive one.
San Francisco's rent control has giant loopholes which work against the tenants the law was designed to protect:
* Any property built after 1979 is exempt so there is a shrinking supply. Rent controlled tenants will be in progressively more cutt-throat competition. * Apartments and rental rooms in single-family homes are categorized differently so someone converting an existing apartment building into a single family home to be able to jack up rents to market rates which effectively was an eviction notice (a HN article covered this scenario a few months ago). * Your landlord may evict you in order to sell the property, whereby the new landlord can rebuild the property, eliminating the 1979 rent control grandfathering.
San Francisco also has some of the strongest tenant support laws in the nation. While they are beneficial to tenants, they are also a hidden tax on landlords which increase the risk associated with owning a rental property in SF.
San Francisco is at the middle of a perfect storm of multiple sources of housing demand:
* Large, established Asian immigrant community making it desirable for new Asian immigrants (including a current influx of Chinese real estate investment cash) * Liberal politics which attract liberals fleeing rural red states in a self-sorting mechanism many sociologists have observed about US migration patterns (partially responsible for hyper-polarization) * Tech (web and biotech) sectors * City and state tax incentives for businesses to start up in certain districts * Coastal population centers like LA, NYC, Miami have long attracted young adults leaving their boring small towns after school
My observation is that most municipalities which seek to enact some form of rent control do so as a short term political fix for some other systemic issue that voters & politicians are unwilling to address. San Francisco's rent control is an attempt to counter the shortage of housing you mentioned, but is entirely its own doing.
The supply of housing is restricted:
* San Francisco is nearly fully built and is surrounded by water on 3 sides. * NIMBYs prevent rezoning for high density and/or 4+ stories in most parts of the city * NIMBYs prevent alteration of the waterfront skyline * NIMBYs prevent demolition of Victorians
Prop 13 (1978?, the California property tax growth cap) has loopholes. Prevent property tax is re-assessed at market rates if a property is transferred, but not if the transfer is between family members. Prop 13 also imposes a penalty on real estate transactions because to buy a new property would be to get your property tax set at current (IMHO inflated) rates. It is self-reinforcing because the existence of Prop 13 inflates real estate values by suppressing many property taxes. Prop 13 is also partly to blame for the housing shortage because it's possible that a long-time homeowner in San Francisco would rather leave a house vacant than sell it (because to sell and "take profits" would mean that another real estate purchase would come with a high recurring tax).
Ultimately California is very expensive to live in, especially if you are on a fixed income. I, personally, would rather not underfund schools, police, and fire departments for the sake of a politically powerful minority who are property-wealthy but cash poor. There are plenty of small towns that need investment and demand and could provide a vastly cheaper cost of living than a very high demand + low supply city.