Huh ? How does that follow ? Why would a low vacancy rate be a bad thing ? More people get housed, more people get paid than anywhere else, isn’t this the ideal ?
(real question - I’m not trying to be a bitch or nothing)
In a free market, without arbitrary restrictions by local zoning boards, the following would happen:
a. Rents are high
b. Developers would purchase land with low density, old structures on it.
c. Developers would demolish the old, low density structures
d. Developers would construct a higher density building with lots of units to collect that high rent
The vacancies…I think a healthy market will have a certain percentage of units being vacant at any given time. Vacancies tend to bring prices downwards - the landlords owning vacant units are going to gradually reduce the rent demanded over time in order to find a tenant. Then, this prevents other landlords from charging too much, because if they do, tenants will just move into the vacant units instead.
The invisible hand is extremely coercive. Everyone is being maximally greedy. The landlords would charge infinite rent if they could, the tenants would pay nothing if they could. But market dynamics limit what prices either party can actually charge.
The invisible hand is extremely imaginary.
Is it? Technically, gravitational fields are imaginary, there’s no way to see one directly, yet they have a strong effect regardless. Evolution doesn’t even have a tangible expression of it’s existence like gravity does, it’s just a series of mathematical rules that end up working out to net information and complexity gains.
What I am saying it, market dynamics are real. They happen every time there are more than a single competing provider of a good or service and some mechanism for exchanging units of value. (whether it be barter or currency)
Come to think of it, market dynamics apply even without anything resembling commerce at all. If tribe A has 10 attractive women and 20 reasonably attractive men, the way relationships go will be very different than tribe B with 20 women/10 men.
You can easily think of the “good” up for sale being affection and intimacy and even things like emotional support, and in each case, the side with more leverage needs to invest less in their relationships to find a mate while the side with less leverage needs to invest more.
No currency exchanged and technically any individual isn’t subject to anyone centrally forcing them to take any given action. (but everyone is acting out of self interest. The “10” group wants the best mates, so they are going to be choosy who they pick from the “20” group. The “20” group just wants to mate at all, so they will work very hard to get the affection from anyone in the “10” group. Assume for the sake of this example that only 1:1 pairings are happening. You can see that the “market price” of the individuals in the “10” group is much higher than the market rate for the 20 - they can demand a lot more. Even though there’s no organized currency being exchanged, what they can demand are far less tangible things like their mate being more attractive, having a better voice, singing sweet sonets to them in the morning…)
Yet I’ve never lived in a rent-controlled apartment in my life. If you’re suggesting something else was controlling the price, we’re all ears.
It’s indicative of lack of supply of housing. Rent control (among other bad policies) not only dissuades the construction of new units, but generally the longer someone stays in rent controlled housing, the better deal they have on the place, so they are strongly disinclined to move and end up staying for a very long time, reducing the fluidity of the market. (Think about how younger workers complain about old-timers who just will never retire to open up better jobs - it’s exactly like that but with housing.)
A better situation for any market is to have a balance where both those who are looking to buy and looking to sell have more choices on what suits their needs. If supply is tight, buyers will have to settle for things that aren’t really what they want and at a higher price, because sellers aren’t having to compete on price or quality.
Broad surveys of economists of all stripes show a consensus that rent control measures lower the quality and availability of affordable housing.
Except with old-timers and jobs, that’s the lump of labor fallacy. The difference is that the volume of jobs is far less static than the volume of housing.
I don’t think he’s saying market forces don’t exist. To me (and I expect, to him too, but my crystal ball’s in the shop so he’ll have to confirm), “the invisible hand” is shorthand for the idea that market forces, in and of themselves, always reach an optimum distribution where everybody’s happy, or at least relatively equally unhappy.
And that’s bollocks.
And we also know that interventions into the market, in and of themselves, do not always reach an optimum distribution where everybody’s happy, or at least relatively equally unhappy.
Sure. Is that an argument for total laissez faire ? Or for better interventions ?
I suspect, now this is only a WAG now, dont quote me- **the landlord. **
Exactly. Market forces certainly are there but consumers and producers make stupid decisions.
I was consulting with the rent Control board during one of the great dot-com booms in Silicon Valley. Rents were skyrocketing. Some landlords doubled their rents- and were getting it. The Landlord members of the board (not the tenant members, the landlords) went out to meet with some of them and tell them how foolish that was, that the boom was temporary, and pricing out your good long term tenants in favor or temporarily rich short term tenants was a bad idea. Especially as many of them couldnt afford the new rent once the boom stopped- or bought a house with boom $.
And if the landlord charges too much, the unit stays empty. None of them charged infinite rent because they couldn’t make money by doing so, not because any law prevented them. That’s the invisible hand at work.
Not unlimited no, but they can certainly charge over market and still get a tenant.
My response isn’t actually a policy recommendation. It was meant as a subtle criticism of your strawman that “the other side” is against any and all regulations because the term “invisible hand” was used.
But the fact remains that rent control policies By definition make the housing situation worse for nearly everyone and benefit just a few, as economists from across the spectrum agree.
As I said before the mild rent controls of San Jose are universally agreed upon- even by the landlords and owners- to be a good idea.
And raising the rent on a long term great tenant so that they cant afford the unit, so that you get a crappy new tenant- is just bad business.
It costs a lot to fix up a unit for renting and then advertise then go thru the tenants, and then you have a month or two without rents, and then you might get a tenant that looks good, but is a tenant from hell you have to actually hire a lawyer to evict, costing you lawyer fees and usually six months to a year of lost rent.
Yes, but on average it will take longer to fill the unit. And landlords also have landlords. Either they own the property outright, and are paying indirectly in the interest they could have gotten on the same capital elsewhere, or they are paying a mortgage. Also, the government with it’s property taxes can be also thought of as just another landlord.
This is part of discovery - I’ve noticed that the large apartment complex near me will price it’s vacant units at different prices. Even apartments that have identical descriptions. And if they have more than a certain target number of vacant units, you notice rents begin to diminish for the vacant ones, coming down a few dollars every few days. And vice versa, as the vacants fill you see rates ratchet their way upward.
You can see the “invisible hand” at work in just the pricing of a single complex in a single place.
I doubt this is true. Bay area rent control has opponents on both sides, some thinking it’s too little, and others not enough. Most new housing legislation has failed in the state legislature, and while new rent control is still possible, it’s facing stiff opposition. Certainly lots of folk are in favor of it, but the support is not universal.
All the rent control does is slow down the rate which the free market can operate. This might actually be a good thing, in real life control systems it prevents oscillations. But it doesn’t solve the fundamental problem.
Each tech company benefits from that location, or they would put their offices anywhere else that is cheaper and offers similar city amenities. But the hyper-specialists who are maximally skilled are all there, and the financiers who provide all the funding for startups are most available there.
So either prices rise until no one can live there who isn’t a specialized tech worker, or they rise until even the poorer tech companies have to move. Both of which has probably already happened. All the service workers are going to either have to live in very crowded conditions, on the streets in an RV, or commute in. Which is already true also.
This can be “fixed” - you could relax all the restrictions and make the place look like Hong Kong. Or another competing tech hub (Austin, maybe?) might instead grow to look like Hong Kong instead and silicon valley would lose it’s status.
So if the rent control system was working so well, why did San Jose lower the allowable annual rent increase from 8%, which was established in 1979, to 5% as of 2016? Was it maybe because there was both a shortage of rental units and costs were going up? Because everyone was satisfied three years ago that the rent control law was kickin’ ass and fixing problems? By the way, it sounds like the city council is starting to question whether its rent control laws are backfiring, as the “mayor said he’s heard of developers not moving forward with housing projects potentially because of” an aspect of the rent control law that may be discouraging building new units to replace/expand units that are currently rent controlled.
I mean, there’s no economist in the world who could possibly predict that price caps would result in shortages. I mean, that’s just totally crazy talk. It’s not like every econ 101 textbook has a graph in it showing supply and demand and what happens if price controls are instituted – people just don’t study this sort of stuff at all. Next someone is going to say that if people don’t practice good hygiene, then disease may spread! Can we just agree that science has no place in public policy?
That’s a decision that ought to be dealt with by landlords and tenants, not public policy. It also has nothing to do with the question here, since nobody is propounding a law that landlords MUST raise rents on good tenants. But consider the reverse: a building that has 50 great tenants and one bad one. A good landlord may try to drive the bad guy away by raising rents steeply. That can’t be done in rent controlled cities, so the 50 good tenants have to live with the one guy who is a PITA because the good-hearted landlord in this scenario can do nothing about it.