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The_4th_Little_Pig t1_ja9ii5n wrote

Reply to comment by mimaiwa in D.C. Tenants in Rent-Controlled Units Could See as Much as 8.9 Percent Increases by rennbrig

That’s a great idea.

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Fert1eTurt1e t1_ja9o4v4 wrote

It’s not. Rent control is detrimental to new housing development which further exacerbates our already in dismal housing crisis.

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mimaiwa t1_ja9osfm wrote

That’s why more effective rent control regimes only come into place after X number of years. To lessen the negative impact on new construction.

What really hinders building is our overly restrictive zoning and insane permitting processes.

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ShimbyHimbo t1_jaabnad wrote

The data is very mixed on that, no conclusive study has shown that rent control on its own reduces housing starts. Not to mention that multifamily properties are rarely held from construction through the period when rent control schemes kick in (typically no sooner than 15 years). In fact, standard property development pro formas typically factor for a sale of the property at year 15. Not to mention that while rent control does increase the tenure of tenants (which is a good thing!), very few rent control schemes actually have vacancy control, meaning that when the units do change over, the units can reset to whatever price the landlord deems reasonable. Many rent control schemes even provide allowances for landlords to make upgrades and increase rent accordingly.

At best, "rent control" in the US can at best be called stabilization, and often allow for above market increases. For example, under California's rent stabilization policies, which allows for up to a 10% increase per year, rent stabilized tenants sometimes receive a higher increase in rent than comparable non-stabilized units.

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The_4th_Little_Pig t1_ja9s1oy wrote

Rent control is not detrimental to builders, only to owners of the buildings who can continue to control high rent with inferior products. If their building is going to go into disrepair or the amenities are inferior they don’t deserve to be part of the current market. I know with current rent control, rent prices can rise higher than the current inflationary raises through capital investments and that should continue.

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WhiskeyTesticles t1_jaa1gqw wrote

> Rent control is not detrimental to builders

If you limit the profit developers can make, there's less incentive for them to build more housing. That's the primary downside to rent control.

edit: Not sure why this is being downvoted. You can be for rent control while also acknowledging its effect on limiting supply. Go try price controlling any other product and you'll get the same.

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ShimbyHimbo t1_jaaosza wrote

Developer-owners are the exception. Most develop to sell immediately, or after 5-15 years. Their selling price is largely dictated by the cost of debt, land, labor, and materials, and projected NOI. Then of course, there are developers fees and market fluctuations. Of those factors, only NOI has any direct connection with rent control.

If rent control doesn't take effect until year 15-20, allows for inflationary increases + an additional x% buffer + and generally includes vacancy decontrol, which is basically every rent control/stabilization plan in the country, then there is functionally no connection with profitability to develop. Rents are unrestricted for years and minimally constrained with opportunities to increase infinitely in the future.

Rent control does have a strong connection with is developer/landlord fear mongering. What arguments like yours do is take developers at their own word rather than recognizing that they are inherently regulation averse entities that will always argue that anything that stops them from making the maximum possible profit isn't just bad for business, it's bad for society. There's some nuggets of truth there among the lies and as we do primarily rely on private market rate developers and landlords to produce and sell us housing, incentivising their profit motives can be useful. But we don't have to be rubes about it or let them walk all over us.

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ShimbyHimbo t1_jaaszpy wrote

Just want to reply to your edit. There is limited evidence that shows a direct effect on limiting supply. See the UMN study on Minneapolis Rent Stabilization.

https://www.cura.umn.edu/research/minneapolis-rent-stabilization-study

Additionally it's silly to say "price control any other product" when housing operates very differently from consumer goods. Housing is particularly unique due to it's fixed location, the lack of standardization (units can have significant differences) its status as a basic necessity, the barriers to entry for creating it, the local market effects, the cultural norms, and all of the factors around the financing of housing. The United States has had limited interventions in price ceilings that mostly relate to emergency situations, so most of what we have to go off of are functionally economic thought experiments where we set "all else equal" and even the most adherent followers of classical economics would tell you that models do not map accurately to the real world.

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