Exactly. It surprises me how many people don't understand the basic economics of scarcity. There has to be some rationing factor. In a free market this is price. If you remove price, it will be something else besides price, such as a lottery, how politically connected you are, or something else. The only real solution that doesn't result in shortages is to increase supply (build more housing).

Or, reduce demand by spreading out jobs to other cities and states where their more needed. (not ideal, i know, but it is a secondary option)

> Or, reduce demand by spreading out jobs to other cities and states where their more needed.

This does not happen, nor is it remotely desirable. Having a life involves much more than having a decent job. It entails living where the person chooses to live according to their personal tastes and desires.

If you force the decision on where to live based on a single constraint that in theory is only a major part of your life so that you can fund your personal life and personal interests then this leads to poor quality of living for all (including spouces, offsprings and immediatr family) just to cater to a company's bottom line.

I'd wager that many more people are moving to the cities that have housing problems for the jobs than because they genuinely want to live there.

It only matters where the people with money want to live, and in my experience they overwhelmingly choose to live in high cost of living cities. The rest have to follow, if they want high paying, upward mobility jobs.

> [people with money] overwhelmingly choose to live in high cost of living cities.

You're confounding your observations. People with money choose to live in areas that maximize their quality of life, and they don't mind paying a premium for that.

Quality of life matters to all, whether rich or poor. Poor people aren't masochists.

You keep thinking people move places and then find jobs. This is not correct in the USA. Also, the quality of life is not higher in these expensive cities.

I have seen it argued in gentrifying neighborhoods that we should reject all projects which make those neighborhoods nicer to live in, to discourage new residents. This is a pretty direct way of reducing demand: making your neighborhood shittier.

Behold the devaluation kit (German): wife beaters, satellite dishes, discount supermarket plastic bags, ... https://www.esregnetkaviar.de/relaunch/abwertungskit.html

Invite me to live there, I'll bring down the the tone.

> If you remove price, it will be something else besides price, such as a lottery, how politically connected you are, or something else.

The main driver of price is not "demand" imagined as how much people willing to pay for a particular house but demand as how much people are capable of paying, which is mediated by access to debt. If access to debt is clamed down on across the board, then prices will fall accross the board. People will still compete on price but as a society a smaller fraction of income will be spent on housing.

That is true for existing, middle class and below housing for sure. Whenever interest rates go up, we see the exact effect you are describing.

it's not the whole story however. In order to increase Supply, it has to be profitable to build new homes. If building new homes is not profitable, none will be built, and the price of existing homes will be forced upward until it matches the cost of new construction.

So I agree with you that access to debt is a very important factor, but I disagree that it is more important than demand when you look at the whole picture.

Rent control prevents people who currently have homes from being displaced. It also limits the degree to which housing is a commodity investors can profit off of & the degree to which they can exploit their tenants. It is obviously not a complete solution to the housing crisis (and no housing advocate claims this) -- a complete solution means rent control and building more housing, especially high quality public housing.

As long as rent control prices existing homes above the cost of new construction, then there won't be a problem. However if rent controls cap the price at below the cost of new construction, nobody is going to build. They would be losing money if they do that.

The state can build housing then if it's not profitable. Housing is a public good and a right, it should not be a product or investment.

Are you kidding? Do you know how much housing is bought but no one is living in it?

But the kind of people who can get an apartment would be normalized. Window cleaners would have a similar chance of getting an apartment as their boss. I think that would be better for the health of the city and a better solution until either demand lowers or supply grows than just excluding low income workers from the city.

Unpredictability is a major cause of economic dysfunction. If no one can reliably/predictably obtain housing even if it’s cheap, I’d be surprised if the economy didn’t go haywire and then those low income workers you speak of will be no-income non-workers.

> Window cleaners would have a similar chance of getting an apartment as their boss.

No they wouldn't. I lived in an european city with a socialist municipal government who enforced social housing programs which, on the brochure, meant that window cleaners would have a similar chance of getting an apartment as their boss, and when the program was put to practice... Surprise, surprise: the apartments were distributed throught the party's ranks and through minions in the local and national media.

In the end the municipality started dismantling the program due to the backlash and their solution was to sell the apartments to the current tenants at a firesale price (1/5th to 1/10th of the market value) which,again, led to some amusing anecdotes.

Rent control doesn't work in the long run.

Sweden has had rent control since the 1940's, and as a result the rental housing market is completely dysfunctional by international standards.

In Stockholm, demand for central inner city apartments is way, way, way higher than supply. The rationing method used is a queue administered by the city, and the queue time for the most sought-after areas is on average 17 years. Even the most remote areas have a queue-time of at least a year.

SEVENTEEN YEARS. GOOD LUCK, COMRADE.

This means that if you want to move to Stockholm from outside the city or outside the country, you will not get a rental apartment, unless you rent one second-hand or third-hand, unless you buy a rental apartment under the table, unless you have "contacts", or unless you buy a condo on the perfectly functional condo market.

Since there's a functioning market for condos, but a dysfunctional market for rental complexes, the ROI on building a condo complex is decent, but the ROI on building a rental complex is abysmal. You're better off setting your pile of money on fire than invest in building rental apartments. No private for-profit company will voluntarily build new rental apartments. So the only actors left that could do that is the city itself. However, the city government changes politically every four years, and even if there's a left-wing majority, there is absolutely no budget to increase supply meaningfully.

In addition, there's political and economical pressure to convert the city's housing stock to condos. Current renters love it, because it means they can realize the value of their rental into cold hard cash, and the city council loves it because they get a temporary cash infusion. It's zero-sum for the housing stock, and the long-term effects are shit, because the rental supply diminishes, making the queues worse.

The net result is that it is incredibly hard for companies to attract outside talent, because finding a place to live if you don't already live in Stockholm, is incredibly hard. If you're a transient worker or simply doesn't want to buy an apartment, and if you don't have a decade of accumulated queue time, you have to rent from the much more expensive second-hand weird market, which means that companies have to pay you much more than they would have to pay a local for the same job.

Compare this with SF, or any other large city with a functional housing market, where every company has to pay their employees a wage that covers the housing market rate, which means that there's no difference between local workers and outside workers, and it means that the city has a much easier time attracting new people who want to come there and live there. Because anyone can live there, if they just show up with enough cash to pay the market rate.

Yes, market rates means you get a host of problems, gentrification most of them, but that's a positive problem compared to all the horrible problems that rent control bring.

It largely worked until it was dismantled. It is only 17 years because the market largely doesn’t exists. There are maybe a couple of hundred rent controlled apartments being distributed each year in central Stockholm. Which isn’t unique, many countries don’t have a rent controlled market at all.

What is pretty unique is the 100 year mortgages with no default.

> SEVENTEEN YEARS. GOOD LUCK, COMRADE.

You fail to show how that's worse than the version in other places. All you have is an "appeal to anti-communism"(1). Not having to fear that you loose your living space because some investor decided to price you out of it seems valuable and something that should be weighted against the hardships of being able to rent something easily in Stockholm.

(1) Is there a fallacy name for that? I think there should be, it's one of the most popular fallacies here in any financial discussion.

Anecdotal, but:

When I moved from Stockholm to SF and told my friends, the first question every single one of them asked was "But how will you find somewhere to live?"

Because if you've only ever lived in Sweden and experienced its rent-controlled market, it's really hard to envision a different system, an actual free rent market, so all of my friends were really surprised that my answer was "I'm just gonna open craigslist and pick something."

I don't disagree that the situation is bad. But you can just go on "blocket" and rent an apartment in a similar manner. Software developers are paid at least €3k after taxes, unless you are just out of school. For €1k to €2k you can rent an apartment. That isn't great, but it isn't extremely bad either. Unless you compare it to previous times in Sweden.

In Sweden things are getting deregulated, income taxes are lowered and the social safety net is made less generous. The housing market is now mainly competitive. But for some reason people think they aren't the ones that are going to be affected, (partly because they aren't). If you don't have wealth or are willing to pay up your are a bit fucked, like myself. It is of course hard overstate how bad it is overall, especially for a smaller city. But the market itself isn't uniquely bad. It is mostly like everywhere else.

> But you can just go on "blocket" and rent an apartment in a similar manner.

Yes, but these are not rent-controlled apartments! These are second-hand apartments or houses that you rent from someone who either owns the place, or is already renting it from someone else. You are paying market rates for these, not rent-controlled rates.

Deregulation that allows people to rent out homes they own or rent is what has allowed this market to grow in the past few years, this is the very opposite of rent control!

I started this subthread to argue that rent control is shit, it has shit consequences, it has shit second-order consequences, it has shit third-order consequences. Maybe Stockholm isn't a shining example of how shit it is these days since deregulation and condo-conversions have effectively removed a lot of rent controlled stock, but that just proves my point!

No one should expect the rent controlled part of the Stockholm housing market to work as it is essentially defunct.

1. Subsidies for building rent controlled units were removed. 2. Publicly owned apartments were sold at below market value. Meaning those who already owned apartments got a discount in the market. 3. The profits weren't used to build new apartments, but to lower taxes. 4. Co-ops were favored by keeping deductions for mortgages, creating new ones for renovations. 5. Property taxes were removed for co-ops. 6. Credit remained largely unregulated and was then regulated to a hundred years. 7. Interest rates are being kept low by the central bank. 8. Taxes were lowered in general.

Of course this new market will never be able to produce affordable housing, so the rent controlled market doesn't "work". The whole thing is set to implode though. Already if you bought an apartment ~"two years ago" you have now lost your down payment.

I explicitly talked about how the job market is affected. If your only real options are to buy or to queue for a decade, that requires you to commit to a long-term plan if you want to move to Stockholm for work.

This means you can't grab quick opportunities, you can't move to Stockholm on a whim to try your luck, so local companies and the local economy suffers. Fewer people move to Stockholm than who otherwise would, which means the city misses out on potential growth. It's an inefficient allocation of the work force on a national level.

There might be some social good to artificially restricting the growth of your most important economical urban centers, but I highly doubt it.

The supposed benefit of rent control is that attractive inner-city apartments are cheap. Sure. But since rents are based on utility value instead of location or attractiveness or market value, this means that unattractive apartments two hours from the inner city cost as much to rent as comparable ones in the inner city. It's impossible to save money by renting in a less attractive area. Normal cities have some sort of parity between cost-to-own and cost-to-rent, regardless of area. In Stockholm instead, this parity changes dramatically depending on your distance from the inner city!

Another second-order effect from rent control is that having an attractive rental apartment in Stockholm suddenly has value. This makes people reluctant to let go of an apartment once they have it, which makes them reluctant to move away to pursue other opportunities elsewhere, even if that would be the better choice. Still, if you have one, you can rent it out on the second-hand rental market, so now you've created a class of rentiers, the people that have gone through the Soviet bread-queue can now cash in on that scarcity. But I thought rent control was about fairness?