SF-style widepsread rent control seems like part of the problem to me, in the sense that it hides the true extent of market distortions from many people living in the area (especially the demographics most likely to vote), while incentivizing weird and unethical behavior to circumvent it by developers who could probably be nudged into tenant-friendly density increases under more sane conditions.
You raise a good question. What would rent in SF look like without rent control?
Thinking through the process, I imagine something like:
1. Rent for everyone would have gone up over time
2. Renters would have been slowly forced out as rent increases exceeded their incomes
3. However, it's likely that there would have been a lot more units opening up over time. That likely would have slowed the increase in rent.
I'm certainly not saying that a "no rent control" situation would be ideal, but I'm wondering if it's just made the rent situation in SF much worse than it would have been otherwise.
Quoting Paul Krugman from 15 years ago:
"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand."
http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-...
I see you're from Brooklyn. Have familiarized yourself with the issues surrounding the anti-development sentiment and roadblocks to new development in San Francisco? There's a lot more to it than "[Some] voters don't want to increase the quantity of housing ... near them."
To speak directly to the Krugman quote: San Francisco's rent control is more correctly termed rent stabilization. Rent increases are slaved to the CPI for as long as a unit is occupied. When a unit is vacated, that unit's rent may be set to any rate the landlord desires. More importantly: unless special arrangements are negotiated, [0] rent stabilization does not apply to housing built or first occupied after mid-June 1979.
AIUI, at the time, existing landholders decided that they would make much more money by raising their rents to ludicrous levels than by increasing the density of the housing on their property. They could do this by taking advantage of high demand and limited supply. When most landholders won't allow a developer to build on their property because they make more money by restricting the supply of housing, Krugman's argument goes out the window.
Rent control and rent stabilization has no place in districts with healthy responses to increased demand for housing. It is a tool of last resort. San Francisco worked hard to balance the potential damage done by rent stabilization with the real damage done by astronomical rents. I would say that they largely succeeded. [1]
[0] As far as I know this has happened only once, with with Sangiacomo's Trinity Place on Market street. A special arrangement was reached to destroy existing rent-controlled units at the site, but have a 1:1 replacement in the new construction. All other units in the building are "market rate" units.
[1] But, -in retrospect- they erred too far in the landlord's favor. The "Vacated units reset to market rate" provision in the ordinance gives landlords ample incentive to harass and subtly force out long-term tenants, and -in times of radical rent inflation- behave as slumlords and neglect maintenance and upkeep. (Because, if they have a captive revenue source, why on earth would they spend more than the bare minimum that they can (legally or illegally) get away with to retain it?) [2]
[2] Naturally, if rent control was the situation in SF, there would need to be some flexibility in the law to encourage new development.
That said, if there was no rent control in SF, then slowly, over time, all low income folks would be forced to leave the city. That is likely an undesirable outcome for SF voters.
I feel that a good proxy for a world without rent stabilization is the condo market. Figure out how much the monthly payment for the low-end and the average condo is, and I suspect that that's where a city full of unstablized rental units would be.
musesum mentions:
> Am lucky to have rent control. Right now, if I move away, I wouldn't be able to afford moving back.
Everyone I speak to in my building [0] is very aware of the current ludicrously high rents in the city and how it limits their ability to keep a slumlord in line. I can't imagine the situation is substantially different in any other rent-controlled building in the city.
Also, be aware that SF's rent-control is more correctly termed rent-stabilization. Vacated units can have their rent set to any rate. Stabilization only kicks in once that unit is occupied.
> ...while incentivizing weird and unethical behavior to circumvent it by developers who could probably be nudged...
I honestly don't know what you're talking about here. Were you aware that rent control in SF doesn't apply to new construction [1]; only to housing built or occupied before June 13, 1979? [2]
If you were aware of that, would you be so kind as to tell me what you are referring to? :)
[0] Including the old lady who is afflicted with alzheimer's.
[1] Unless -as happened with Sangiacomo's Trinity Place on Market street- a special arrangement is reached to destroy existing rent-controlled units, but have a 1:1 replacement in the new construction.
Frankly, it seems that that most folks who speak in public forums (landlords and developers included) don't understand this. It drives me batshit. (No offence intended. :) )
> Glad to know there's a perk to this oven/icebox victorian.
From what I've seen and heard about those things, I bet it's just about the only perk, eh? :(
True. AIUI, it has been incredibly difficult to get anything new built in the city for a wide variety of reasons for a very long time.
However, I bring up the limits of rent stabilization because I often see people saying:
"More people would build in San Francisco if it wasn't for that damned Rent Control in the city."
or
"Rent Control is why noone builds in San Francisco."
It turns out that -not infrequently-, many of these folks don't understand that rent stabilization doesn't cover new construction. [0]
I hope that once one discovers that rent stabilization doesn't prevent a developer from building a new building full of 1000sf (or smaller!) units that -currently- rent for ~3k/month, and can be adjusted to "market rate" at any time the lease between the landlord and tenant permits, one starts digging around to discover more about the especially fucked up process of getting new construction approved in this town.
[0] Except when specially negotiated, as mentioned in my previous comment.
Homeowner associations organize the vote during off-election years, as per http://techcrunch.com/2014/11/02/so-you-want-to-fix-the-hous...
Removing rent-control would accelerate the displacement. A friend saw his rent nearly triple in 1999. So, he moved back to a more affordable Paris. He was developing a super cool visual-music platform. A neighbor is developing really cool music apps for the iPad. I am doing iOS based art tools. GAFFTA is in the neighborhood. There are advantages to encouraging a cultural mix.
You are (party to) using the state to withhold justly earned economic value from your landlord.
And anyone who benefits from the zoning laws in their district benefits from influential parties using the power of the state to -in many cases- artificially restrict the supply of one type of building or another. [0] Frankly, we can play the "No, you're using the power of the state to..." game all night long. :/
> "justly earned economic value"
My previous landlords did nothing to improve the value of their property. Indeed, my most recent landlord not-infrequently neglects even the bare minimum legally required maintenance and upkeep. They earned nothing. Force of law created a situation where progressively increasing housing pressure inflated the "market value" of their "asset".
[0] Note: I am not railing against zoning laws in general. Segregating heavy industry from residential zones is an obvious good.
I don't wish to defend zoning laws, nor humour a "tu quoque" contest. Not necessary for my point.
"My previous landlords did nothing to improve the value of their property."
That's also beside the point. They made an investment in buying and improving the land. They are not permitted to realize the market value that their investment (foresight / risk-taking) had earned.
Awful sly of you to indirectly make the claim that I was calling you a hypocrite. I'm not. I'm declaring that everyone who lives in a governed district is a beneficiary of the state's ability to restrict supply of one thing or another. This includes landlords who might have the "value" of their "investment" inflated due to restricted supply.
> They made an investment in buying [the land]...
Yes. Agreed.
> ...and improving the land.
No. No, they did not.
They paid someone else to get access to the revenue stream that comes from the people living in the building that was constructed roughly one hundred years before they made the purchase. Additionally, the building was constructed more than fifty years before $CURRENT_LANDLORD-2 made his purchase. Neither of them fronted the money and took on the risk to build the only improvement on the land.
What's more, $CURRENT_LANDLORD's negligence is lowering the value of the property they purchased. Vermin infestation throughout the building and trash accumulation in public areas [0] are now not-uncommon sights. Essential building services are unreliable and not-infrequently unavailable due to failure to perform regular preventative maintenance.
Are you using some definition of "$CURRENT_LANDLORD is improving the land." that remains true when the actions that the landowner takes both damage the pre-existing building on the property and lower its value, actual or otherwise?
> Not necessary for my point.
It really seems like your point is not valid, for the situation that a renter not-infrequently finds himself in in San Francisco. [1] Because the demand for rental housing is so high, landlords can often get away with failing to perform even the legally required maintenance and upkeep and still have people breaking down their doors to rent their vacant apartments.
I don't see how one can -with a straight face- make the claim that a property owner is adding value to a property when they aren't even performing the maintenance required to adequately counteract the natural forces of entropy.
Do you now understand what I mean when I say "$CURRENT_LANDLORD has done nothing to improve the value of their property."?
[0] Due to not-infrequent failure of building management to swap out the full garbage, recycling, and composting bins with empty ones.
[1] Your argument may be (and probably is) totally valid in other situations. San Francisco's housing market (rental or otherwise) is a special bucket of suck.
The property's mere continued existence is adding that value.
"Do you now understand what I mean when I say "$CURRENT_LANDLORD has done nothing to improve the value of their property."?"
Sure (in a hands-getting-dirty sense), and it is unfortunate. On the other hand, the landlord is a commercial beast. Come to think of it, if stuck with suppressed income, it's hard to see much incentive (never mind available $) to improve the property on an ongoing basis. This too can be yet another unintended consequence of rent control.
> The property's mere continued existence is adding that value.
And did you keep a straight face while you were typing those words?
Let's say that I own a car.
I purchased this car as a new car some time ago. I regularly fail to perform maintenance of any kind. I frequently operate the car when it is critically low on lubricants and coolants. I regularly strike deep potholes and large rocks during my travels.
I frequently eat inside the vehicle. It is littered with food wrappers and decomposing partially-eaten meals from months and years gone by. I also frequently transport unwell animals inside my car. These animals often vomit, urinate, and defecate inside the car. I have never cleaned the interior of the vehicle.
Because of my failure to maintain the vehicle, its engine and suspension are a wreck. They are dangerously unsafe. Because of my failure to clean the interior of the vehicle, it is -at best- a horrifying, ungodly, malodorous mess, and -more likely- a serious health hazard.
My wilful negligence has significantly decreased the value of the car.
Why does your assessment of the situation change when the durable good changes from an automobile to a multi-family dwelling? Is it because the on-paper value of the building has dramatically increased over the past couple of decades?
If it is, then you must understand that the credit for that on-paper increase in value is to be completely given to the local government, because of its zoning laws which have resulted in a dramatic undersupply of housing in the area.
The landlord in this situation is -like our negligent car owner- failing to maintain (let alone improve) his durable good. In a sane market, this would cause the on-paper value of his durable good to decrease.
I say again. $CURRENT_LANDLORD has done nothing to improve the value of his property. To this I add: The City is the one who drives the value of his property up and hides the deleterious effects of his negligence.
Now do you understand how you misunderstand the rather special situation in this city?
No. The value assessments are made by potential customers and suppliers in the area. Sure governmental actions have been one part of the causal chain, but only one of many. The fact that the building stands ready, not decrepit enough to bring down the general attractiveness of the area, is partial credit to the landlord and her choice of tenant.
"because of its zoning laws which have resulted in a dramatic undersupply of housing in the area."
Might the rent-control laws have had something to do with it too? (After all, zoning laws aren't easily effectively changed on an area that's already filled in.)
In San Francisco, government action has been the sole source of increase in the on-paper value of rental properties for at least the past five years. Every other action taken by any landlord has -in comparison- so little effect as to be unnoticeable. Because of this, many landlords make the entirely rational business decision to do absolutely nothing to increase or maintain the value of their property. It's not like they need to compete for tenants.
> The fact that the building stands ready, not decrepit enough to bring down the general attractiveness of the area, is partial credit to the landlord and her choice of tenant.
You don't seem to understand two things:
1) The rental market in San Francisco. In the past five years, SF's population has increased by ~50,000 people, but only ~7,500 new housing units have been built. [0]
2) The fact that any landlord can recover 100% of the damage done to their property from a tenant.
> Might the rent-control laws have had something to do with it too?
In San Francisco? No. New construction is not covered by rent stabilization regulation. [1] In regards to temporary demolition of rent controlled housing to make way for denser housing, the Trinity Place project has set a really good precedent. [2]
> (After all, zoning laws aren't easily effectively changed on an area that's already filled in.)
The major zoning issue in SF that blocks new construction is building height limits. So much of SF is not permitted to have buildings higher than three or five stories. Note: This is not because of seismic concerns, this is because of "neighborhood character" concerns. [3] We're not talking about constructing heavy industry in a residential zone. We're talking about building taller residential buildings in a residential zone of a thoroughly urban environment.
[0] http://sf.curbed.com/archives/2015/02/04/sfs_population_is_g...
[1] https://news.ycombinator.com/item?id=10371695
[2] https://news.ycombinator.com/item?id=10161813 (See footnote zero attached to that comment.)
[3] Neighborhood character concerns are very valid. However, at some point you have to ask yourself, "Which does more violence to the character of my neighborhood? Requiring someone to pay at least $36,000/year to rent a slowly decaying "one-bedroom" apartment, or installing several carefully planned and architected ten-story apartment buildings?".
The state is what allows a landlord to be a landlord in the first place, by making a society stable enough that property ownership is a matter of laws and contracts as opposed to guns and groups with guns.
Therefore you owe your life to the State and they can demand anything at all from you and you shouldn't complain. Right?
That is a fundamentally dishonest argument.
There are honest discussions of exactly where the boundaries on government power should lie, but this isn't one of them.
Looks like East bay is falling behind schedule.
Here's housing prices since crash peek:http://west.stanford.edu/sites/default/files/hugolefebvre-ch...
I live several doors down from the old KFC. I miss the old Sugoi Sushi that was there - but am fine with the new construction. Am lucky to have rent control. Right now, if I move away, I wouldn't be able to afford moving back.