I think all my points are covered so far in this thread, except insurance … what the OP sees as an important housing resource for low-income folks is seen as a death-trap to your typical insurance agent … because the existing heating system isn’t quite up to the task, tenant can and do use speaker wire to run their 2500W portable electric heaters … and it’ll be the insurance company who writes the check for the wrongful death lawsuits that result …
The OP also seems to presume that tearing down an old house and building an upscale one will be bought by some homeless person … far more likely the buyer is currently living in a house which will become empty … so there’s no net loss of housing availability … rents go up but that only hurts tenants, and who cares about tenants? …
Do we redevelop the mudflats or clear cut the forests? … or just simply tell the poor they don’t belong in Palo Alto, CA … plenty of cheap housing in rural South Dakota …
The problem of a just solution to the relocation of vulnerable, long-time, low-to-moderate-income residents isn’t going to be solved by the free market.
If there are plenty of high-paying jobs in the area, then wealthy people are going to want or need to live close-in to those jobs. In that case, local governments can and should take ownership of the question of assisting poorer residents to stay in their homes, or at least very nearby. And local gov’t. should not build blocs of “Section 8” housing. Sadly, a significant number of the poor have mental health problems, drug or addiction problems, or have become mixed up in gangs and other criminal activities. Although 90% of the poor are decent, stable, hard-working people who just want a good life, that small percentage of trouble-makers, if concentrated among a concentration of poor folks can make life hell-on-earth for everybody.
I’d like to see local gov’ts VET applicants who appy for Section 8 or affordable housing that’s made available thru local gov’t, and weed out the bad apples (yes, background checks, etc.) Let the really bad apples figure out someplace else to go. And let the decent, working poor and retirees take advantage of newer, nicer places to live intermixed in small batches among the gentrified areas, and paid for by local govt taxes.
For economically depressed areas with a very insubstantial tax base, I suppose the poor will have to relocate, just as middle class folk have to. They did this during the Great Depression, which was awful, and I suppose people will have to relocate during the 21st century, too, just as they did back then.
it’s a long speech and I’m not going to expect people to watch the whole thing, the article gives a pretty good summary. Part of it is stipulations to well-heeled developers like Dan Gilbert and Ilitch Holdings that residential developments must have X% “affordable” units available. Another one is the Joe Louis Greenway which is meant to help un-do a lot of the de facto segregation from city and federal policies up through the 1960s. Right now the (“revitalizing”) downtown is largely cut off from the neighborhoods thanks to the deliberate decisions made when laying out the freeways and interstates- not least of which was razing thriving black neighborhoods to build a borderline pointless 1 mile of freeway.
Yes that’s true if you suddenly removed a system of control and did nothing else. However again, virtually every other city in the country (I live in a smaller one that happens to have rent control too, but nationally it’s quite rare besides NY and SF) doesn’t have it and it doesn’t cause that much more of a ‘crisis’ everywhere else. And of course there is a big problem in NY of affordability if you’re not lucky enough to have a rent stabilized/controlled place, as newcomers almost never do. That’s one of other economic penalties of making it harder for employees to get the new people they need, but the prevailing mentality in NY is it’s ‘the capital of the world’ and employers just have to suck up the disadvantages. But it’s one reason for the hollowing out of the City’s economy beside Wall Street, but again prevailing political complacency that that will never come back to bite. And some people even, hilariously, complain about ‘income inequality’ in NY with conscious municipal policies that make it the home of rich and poor and fewer and fewer in between.
That I agree with. Other regulation often greatly exacerbates the issue.
Also in general to point about the costs of price controls like rent controls, there always are but some people pretend they don’t exist, isn’t to imply it’s realistic that for example NY would vote to scrap rent stabilization in one swoop. Of course that’s not going to happen.
I lived in Bakersfield for a short time. It’s kinda nice, and it’s not very gentrified as they can keep spreading out. But the air quality and climate is horrible. It doesnt really have a downtown or urban area, it’s one great spread of suburbs. The small downtown area near oildale is kinda slumish.
If the number of RS units in NY was shrinking at a significant clip in % terms but not disappearing all at once (which would cause big dislocations obviously see above), I’m not sure that would be bad given the distortions and costs this policy imposes. Anyway that would be a matter of opinion. However it’s not actually true that the number is shrinking rapidly, much at all lately.
1+ million units, first link has graph from 2003-2014, was decreasing around 6,000 units per year on average from 2003-2010, 0.6%, per year, but actually increased slightly in some years after that. In 2016 the net decrease was 677 units see second link.
And I can’t imagine why anyone would consider it ‘bizarre’ that rent stabilized units should be reserved for people making less than $200k. A decent RS place might be $800, market in the neighborhood for only moderately renovated places might be three times that. People who happen to have lucked into RS and worked/lucked their way to $199k/y (God or whoever bless them) should keep that apartment but people coming to the City to start new decent jobs at $80k should have to pay $2400? That’s bizarre IMO. If the system were closer to rational the means testing would be much tighter.
On ability to raise rents by making improvements, again would the ideal be a system of no improvements and no increases? Back to the beginning of the thread, the real big picture issue is how collectivized society should be. Private capital will not be invested in improvements which yield no return, in housing or anything else. To have a system of big upgrades with no rent increases you have to socialize housing, not just put price controls on rent.
Besides which practically there are two categories of improvement to NY apartment buildings. A ‘Major Capital Improvement’ has to apply to common areas of the building. The rent can be increased, permanently, enough to give landlord back their money after 7 years (in small buildings, longer for big ones) with no profit, obviously profit after that because the increase is permanent but that’s not terribly attractive in itself. The landlord doesn’t need tenants’ permission (though they can protest). The more significant ‘Individual Apartment Improvement’ for renovating within a unit allows a permanent increase that gets the landlord back their money with no profit after 3-1/3 yrs, those numbers are more likely to be attractive. But in that case the tenant has to agree, which low rent RS tenants basically just don’t. So really upgrading RS apts basically relies on getting people to move by paying them buy outs, or if they happen to move anyway. And whether you believe it or not, even immigrant tenants with poor command of English have resources to help them negotiate buy out prices where it’s only a reasonably attractive business proposition for landlord; profits (sadly, see below) do not ‘go through the roof’.
I hope these explanations at least help make it clearer why in fact the stock of RS apts in NY is not declining rapidly. Similarly for ‘but landlords illegally harass masses of people to leave RS’…the numbers say not. Mainly people hang on for dear life when allowed to pay 1/3 of market. So would anybody, it’s not a personal blame thing. It’s just a price control system with large (not even so) hidden costs, as is typical. And it’s not rapidly declining, whether or not it should be.
For further full disclosure I’m a NY landlord. The system isn’t going away no matter what I think. I’m just pointing out certain facts, and opinions of mine on which others may differ, but all should start with the actual facts.
12 cities in California have rent control, including Los Angeles, San Jose, and Oakland. But my point about SF is that it’s absurdly expensive. Rent control is a relatively small contributor to SF’s high rents. There’s no crisis everywhere else because everywhere else isn’t as expensive as San Francisco. SF isn’t going to turn into Columbus anytime soon. Rent control, for all its flaws, at least keeps some portion of the population in lower cost units. Get rid of rent control and you’ll bring down the median rent, but not enough for those many thousands of people to be able to continue living in San Francisco. It would be a mess.
Politically speaking, rent control in California cities is somewhat intertwined with Prop 13. Prop 13 is essentially “rent control” for property taxes. When you buy a house – or, you know, apartment complex – your property tax is fixed based on the purchase price and can only go up by a small regulated amount each year. I’m not aware of other states having a similar property tax structure. Since rent for new tenants isn’t regulated, vacant units can be rented out at market rate, but there is no corresponding fractional reassessment of property tax. Therefore, under the twins of Prop 13 and rent control, landlords still come out ahead. Unless they haven’t had a single vacancy in decades.
I argued briefly above that it’s a negative because it lays the stress and trauma of forced relocation on people who are in the worst position to be able to handle forced relocation. What are your thoughts about that?
And this really only affects renters right? Because if the people had been there for years that would sort of imply that they owned a house in the neighborhood and they would certainly be selling at a much higher price (and thus be eased into the move)
You might be surprised how many tenants live a lifestyle of forced relocation … it’s part and parcel to being financially irresponsible … that’s some …
Others of the tenantry who have lived a long time in the neighborhood would have seen the gentrification coming, assuming their rents have stayed the same then they have the finances to relocate … so there’s some more …
Kearsen covers the home-owners well enough … the forced relocation sucks but these people would have a big pile o’ cash to do so …
So really we’re down to folks who don’t understand the system, they rent a place thinking they can live there the rest of their lives … no rent increase, no re-development, landlord never retires, etc etc etc … and the forced relocation is bad for them, but they’re used to it, it’s happened a few times before and they’ll get over it, move into a different rental and once again not understand the system …
Thanks, I guess I’m east coast oriented. However, LA’s control as I read it resets to market every time a tenant moves out. NY’s doesn’t (unless enough money is put into a renovation under the formula I belabored already above). That’s a big difference. Lots of difference in detail. Which is not a criticism of LA for ‘not real rent control compared to NY’. I can see possible benefit for transitional policies of this kind. But long term higher restrictive price controls cause distortions in markets which are contrary to the public good, almost always, popular as they might be on a knee jerk basis.
Also not to get into the weeds on CA’s other unusual laws like Prop 13 but more in general I think your argument exhibits a common missing of the point which portrays rent controls, or price controls generally, on a narrow basis of the buyer and seller of the good and service in a particular transaction, not the people who have to pay more for market rents because of the controls. And there’s no way that latter negative effect is ‘minor’ if it’s an expensive area with a significant % of places held well below market. The ‘market’ places must then be well above what the real market would be without the controls, lots of opportunity cost there, not a zero sum question between rent controlled tenant and landlord’s pockets.
And it also IMO implies a common fallacy that ad hoc govt regulation like that, as opposed to wholesale collectivizing of assets, is going to change the return on capital. ‘If we have X regulation, the profits of capitalists will be reduced to what’s more reasonable from the current unreasonably high level’. That’s almost never true for a regulation below national level if even those. The amount of capital deployed yes, proportional return no. Return on capital is like water finding its own level with all kinds of things to invest in, in all kinds of regulatory domains.
IOW though I again think it’s getting too far off point, your contention that Prop 13 over its long life has continuously lifted the return on capital deploying in rental housing in CA is highly doubtful. That’s not to say Prop 13 is a wise policy. In general I think the CA idea of voting complicated bills as blunt instrument public referendums is a bad policy.
The relatively much less inefficient way to do this would be tax some people to give others who can’t afford to live in NY, say, the money to pay their rent and avoid all the confused price signals and misallocations caused by rent stabilization. But obviously that can’t be done nationally because it would expose the absurdity of why anyone who lived in Columbus should pay tax so somebody else can afford to live in NY, similarly upstate NY v the City. And it’s not feasible politically to do just in the already very heavily (local, state, federal) taxed City. So it’s politically naturally to do it with price controls, but very inefficient. What the cities with really restrictive rent control have in common is complacency about being able to afford large scale economic inefficiency in their housing sectors. Although up to a point that has a foundation in reality: NY isn’t about to lose its place as a national/world, commercial/financial capital.
Back to the earlier post I responded to, IMO the real world optimum situation in NY would be if a) Rent Stabilized apartments were going market at say several % a year, (that poster contended they are ‘rapidly’ disappearing, not so) so in a generation or so it was basically market, not next week, and b) a thorough overall of policies which otherwise restrict the provision of new housing. It wouldn’t be eliminating it tomorrow, which isn’t going to happen anyway. And it wouldn’t be to think it’s an efficient or necessary policy, which it just isn’t as plenty of other cities in the US (and all over the world) show it isn’t.
As you get older, you realize that the saying “the only constant is change” remains true. It would be great (for some people, some of the time) to be able to freeze frame a moment in time and make sure that nothing ever changes, ever, it will never happen.
I feel bad for people who have to leave their homes because the neighborhood changes, but what is the alternative? No progress ever happens so that the buggy whip makers aren’t out of jobs?
I have no objection to means testing for rent-stabilized apartments. What strikes me as bizarre is that the apartment itself becomes deregulated if the tenant’s income exceeds a certain level. That is, the apartment becomes free-market. The high-income tenant will pay a higher (free-market) rent, but when he or she moves out, the apartment does not return to the regulated rent.
What is to stop a landlord from gaming the system to get out of rent control? Say, “rent” the apartment in a straw transaction to someone above the income level, get the cap removed, and then “dissolve” the lease with the rich person and then put it on the market at free market, non-rent control rates?
There are plenty of ways a landlord can game the system. It is far from unknown that a landlord will intimidate tenants into leaving their apartment, and that gives the landlord an automatic increase in the regulated rent. The landlord will move undesirables into the building (drug dealers, for example), or refuse to deal with a rat problem, or to fix leaks, or to supply heat, or he/she will outright threaten tenants. There have been instances of landlords actually killing tenants (very few – only two I can think of in my lifetime).
Or a landlord will simply not tell a prospective tenant that the apartment is rent-regulated, and give the tenant a lease that doesn’t disclose this information, or contain the required clauses, like the right to renew the lease.
But getting a rich person to move in, then vacate, seems excessively complicated. And the rich don’t have much motivation to participate in such a scheme.
However, LA’s control as I read it resets to market every time a tenant moves out. NY’s doesn’t (unless enough money is put into a renovation under the formula I belabored already above). That’s a big difference. Lots of difference in detail. Which is not a criticism of LA for ‘not real rent control compared to NY’. I can see possible benefit for transitional policies of this kind. But long term higher restrictive price controls cause distortions in markets which are contrary to the public good, almost always, popular as they might be on a knee jerk basis.