Even if a case is shown to be baseless, just being sued can hurt a tenant’s ability to rent a new apartment.
We have this list, we have credit score lists, CLUE, and even sex offenders lists... How about one more:
The "I'm a cartoon villain" list. If you, for example, evict a little old lady in your greed for more rent even though your net worth exceeds some given amount, you get added straight to the list. Because that's cartoon level villainy right there. That should follow you for life.
if the property is owned by a REIT, which is itself owned largely by retirees, who exactly goes on the list?
(i just looked up a bunch of major REITs, and only EQR, Equity Residential, has >1% ownership by insiders. despite that, it has ~96% institutional ownership, with vanguard at 14.4%.)
As tempting as it is to just completely diffuse the blame and claim its "nobody" or "the system", there are humans at the tip of the spear. Even if its just the lawyers who choose to take the case or the muscle who shows up to do the eviction.
"I'm just doing my job" when you're obviously taking a helpless old lady's home factors out to "I knew it was wrong, I just did it for the money".
Our loss of shame as a society and as individuals is truly dumbfounding.
Evictions destabilize neighborhoods and ruin lives.
Evicted by Matthew Desmond is a great book on this issue. It is infuriating some of the predatory, senseless, ruthless, scumbag business practices that slum lords use and crazy to discover that this is a recent development starting from the 60s.
Also shout out to Justfix.nyc, a startup using tech to tackle this issue. One of their projects is this website they made to help.
Word of advice to anyone who picks it up. Read the final chapter or two first. It's where he gets into the weeds of the data and such. If you start at the beginning and get bored, get distracted, give up, etc. before the end you're going to miss the best part.
Don't get me wrong, the stories are great. But just the same it gets disheartening, if not depressing.
I read this over christmas and was completely engrossed (to the extent of being borderline antisocial).
I can certainly understand how you might find it disheartening and depressing, but I don't know I could quite see bored. The retelling of the situations was captivating, and the descriptions of how the system fails those most in need was harrowing at times. I've been recommending it to anyone who will listen.
However, the truth is, plenty of books get started and are never finished. Since the bit at the end was so factually important to the discussion of the issue, I didn't want that to be missed.
I'm certainly guilty of getting partway through books and never returning, but I don't know that if I'd jumped into the data first I would have been so engrossed.
(Obviously this is entirely a personal perspective.)
Engrossed? Maybe not. But a lot of myths would have been busted. For me, it's about trying to understand an issue, bumping into some ignorant ahole, and being able to say "read this book...read __this chapter__."
Few enjoy such books. But more need to be more aware of the (data) truths that define the issue.
The data on the number of deaths from domestic violence in cities/states that have a law for penalizing landlords with properties with too many police calls was infuriating.
I would advise the opposite of this. Many of his solutions listed at the end are ineffective, poorly researched and/or totally impractical ("more rent control!", "socialize all housing!"). It's telling that he doesn't seem to have spoken to any economists about any of the things he proposes.
The real value of that book is in the stories and descriptions of the inner workings of how evictions work in the two cities he profiles, which it does an excellent job telling throughout the rest of the book, and because of that I would highly recommend it.
The main predatory business practice detailed in Evicted is selective tolerance of nonpayment. Let a tenant get behind on rent, then evict them for it if they become inconvenient in some other way (like invoking their rights).
It’s not clear what would be better. Should landlords always evict at the first missed check? That seems even more cruel. Or never? That has a certain appeal as a revolutionary-socialist redistribution of all apartments to their current occupants, but also means no more rental market going forward, or least higher prices on honest payers to cover the risk of deadbeats.
My takeaway from Evicted was that rents are too high and wages are too low, and regulation is a hopelessly ineffective way to paper over those structural problems.
The biggest problem I saw in Evicted were slum lords renting out homes that are legally unfit to live in because they were preying on the desperate...
There was a story later in the book about a slum lord's property that burned down because she cheaped out on fire detectors. Her tenant lost her baby but the slum lord walked away with even more money from insurance to buy 3 more properties.
The same slum lord took advantage of government housing incentives too by renting her dilapidated apartments at artificially higher rents to those lucky enough to be in a government program. Not to even mention how most of the tenants that are evicted can't even afford to literally get to the court house for the hearing.
On the other hand, bad neighbors ARE a thing. There are tenants who play loud music day and night. Tenants who smoke in non-smoking units. Tenants whose dogs bark at everyone walking by. It seems like management has their hands tied and it's already quite difficult to evict, at least in cities where I've lived.
Fun fact he was known as "Mr Broadway" in his early career he performed in numerous shows. Completely off topic but that really was the golden era of law and order
The truth is, big real estate companies have the resources and the incentive to be aggressive.
But perhaps that's the root of the problem? With so many units at below market rates, the current new to the market units get priced to cover the "loss" of the controlled units? And then of course there's the incentive.
I'm not defending the practice. But I am suggesting - similar to housing and a college edu - that "government intervention" often has unintended consequences.
The government intervenes on behalf of Global Capital in the housing market all the time, allowing them to turn a basic necessity (shelter) into a vehicle for things like international money-laundering and finacialized speculation.
These are the circumstances that have created the housing crisis we have now and previously took down the entire economy. I’m confused as to why you single out trying to intervene on behalf of the average person over the wealthy as the source of the problem when the “free market” term setting has caused the massive distortions and unaffordablity.
Common myth of the 'free market' - the reality is the market is totally constrained in many ways by the political and legal system.
There is definitely something very 'i am very smart'-like about tech nerds defending 'the market' against any attempts of humanizing life. "um, actually the free market will..."
Governments exist to provide super-market force. Safety regulation being kind of a prime example, especially for employees. OSHA is anti-free market -- there should be no safety regulations, and let employees the freedom to choose safety or pay and let the free market work it out.
The market is very good at allocating resources, setting prices, and meeting demand.
Countries with freer economies like Switzerland and Hong Kong have higher standard of living on average. Countries which free up their economies have higher relative standards of living after doing so. Countries which oppress their economies have lower relative standards of living after doing so. (By relative, I mean relative to the growth rates of neighboring countries and before the changes, as standards of living rarely decrease absolutely).
That said, those economies have some weird aspects to them. Both are small states. Both have much lower proportions of their population in poverty than larger states. Both are centers of global commerce.
In general I agree with you that markets allocate resources far better than the most earnest central authorities. That said, market failures often happen without regulation from governments.
Could you be more specific about to what you’re assigning responsibility? Your original post was somewhat vague and I’m not following your variable analogy without you outlining specific values being assigned to X, Y, and Z.
The gov set out to artificially control housing costs.
Now there are so many units under market value that:
1) there is an incentive for landlords to be aggressive.
2) any unit that comes off rent control is driven up in value; to make up for the "loss" of control units; and control keeps units off the market which also drives up price.
Long to short, yesterday'price fix is today's mega-cost __and__ shady biz / landlord practices.
Does that help? I wasn't trying to be vague. I honestly thought the gist of the situation was fairly obvious. Sorry?
> similar to housing and a college edu - that "government intervention" often has unintended consequences.
There's good and bad to everything and every policy, but this statement is meaningless. How many people have been educated in government-owned colleges, which includes ever public university in the U.S.? Whatever the unintended consequences, it seems to have done an enormous amount of good.
I really wish the approach to making university education more affordable was by subsidizing the universities more instead of subsidizing loans. I don't know if hand-outs to banks was the only way that the left could get enough support from the right to get any legislation passed or what, but it's terrible both for those who do take out loans and those who just cough up more of their own or their family's money.
For those interested in the actual policy rather than a rant: Giving loans to students is a 'market-based' approach; it allows the market to pick winners and allocate resources, via students choice of school, rather than the government. How does the government pick which schools get the funds?
That doesn't make it a perfect policy, of course. I think grants to students or simply free education at public universities may be the best options. But that costs more money than loans.
Thanks for the clarification. I stand by my point about good and bad in everything. Doing nothing because there might be some bad consequences is unwise.
On this specific point: I have yet to see much consensus in research that the loans drove up the cost of college; last I knew there was one paper. AFAIK, it's a story started by the partisan 'shrink-goverment-at-all-costs' crowd, and the repeated.
> The truth is, big real estate companies have the resources and the incentive to be aggressive.
Those are the people who can afford to weaponize the courts. Us little guys still have to play by the rules as we don't have deep pockets and lawyers on retainer.
True. But it's also a function of the upside for those companies. That is, price fixing has created a massive incentive / reward. The risk (e.g., 3rd rate lawyer's salary) is relatively low while the reward is now VERY high.
The gov grabbed a balloon and now that bubble is bursting, just in a different way.
Again. Not saying it's right. Only that it's really not a surprise. Not at all.
> Rent-regulated apartments, often the only homes in New York that people of modest means can afford, are vanishing as gentrification surges inexorably through the city’s neighborhoods
Rent regulation in NYC is easily the least effective way to make housing affordable for people of "modest means". It's criticized even by advocates of affordable housing for this reason. The only reason it still exists is because there are a large number of tenants grandfathered into the system (over a third of all NYC tenants) and that makes for a formidable voting bloc.
Rent control is all-but-gone - only a very small number of units are still eligible, and that's because the tenant has lived there continuously since 1975. Rent stabilization is less broken, but still horribly broken. Anybody can live in a rent-stabilized unit, regardless of whether or not they'd be able to afford the market rents, and there's no effort made to make those units available to people who can't afford market rents.
There are plenty of other programs in NYC, like Mitchell-Lama, which are much more effective at providing affordable housing. Rent regulation is not one of them.
> Anybody can live in a rent-stabilized unit, regardless of whether or not they'd be able to afford the market rents, and there's no effort made to make those units available to people who can't afford market rents.
But there is a strong effort to eliminate these units. Most of the rent stabilized inventory is not in desirable places to live. The rent can be increased every two years.
The rent guidelines board has voted for a freeze only one time in its 49 year history. On average the increase is 2% every vote and two increases of about 7.5% in the last 5 years. This interest compounds, obviously and also scales up MCI rent increases for capital improvements.
Once your rent hits $2700/mo, you are no longer stabilized. If you actually work out some examples, you'll find from this chart that rent stabilized tenants have had their rent increased _at minimum_ by roughly 34% for two-year leases in the last decade. If your landlord is anything like mine, it's probably close to 45%.
> Once your rent hits $2700/mo, you are no longer stabilized.
That's actually not true. At $2700, landlords have the option to petition for deregulation, but there's no guarantee that they'll succeed.
Under $2700, they can't petition for a high rent deregulation. The income threshold also only kicks in at this threshold, so a unit rented for $2000 can be occupied by a person who makes $500,000/year, and there's nothing that the landlord can do about it.
In addition, I'd have to check, but I believe the increase for the two years before DeBlasio was reelected was 0% for single-year leases.
They don't have to bother with that, they just don't renew your lease or use the court to evict you and the apartment automatically becomes unregulated.
I've seen this happen in building after building going on 20 years now. Usually they just wait for a few tenants to hit around 2500/mo and then stop renewing leases and let the vacancy rate pull the rents over the threshold for them. It's really easy.
(Note: they also lowered the tenant's personal income threshold in 2015 to ~200k/yr for two consecutive years)
> They don't have to bother with that, they just don't renew your lease
They are required to renew the leases of stabilized tenants.
> or use the court to evict you and the apartment automatically becomes unregulated.
Nope, the apartment is still regulated even if they re-rent it. They have to go through the deregulation process through the courts if they want to take it off rent regulations.
> They are required to renew the leases of stabilized tenants.
Most public benefit programs in NYC require you keep on-file a current lease agreement. Withholding a paper lease is a deliberate tactic to make people choose between keeping their apartment and keeping their benefits.
I mean, we can keep doing this back and forth about where we agree on how things should work and I'll agree with you, but then I can tell you about how my family or I have been going to court with our landlord at least every other year since the late 80s.
I am a rent controlled tenant in a 95% rent stabilized building and the landlord does incredibly shady shit to try and get myself and others out. In fact we're going through the regular "didn't pay rent" routine right now that will bring me to court again probably this August or September -- the bank checks that I send certified mail every month are being refused delivery by the management company again.
The European way of paying rent, e.g. recurring wires, has the benefit that the recipient can't just refuse the physical object. And for legally binding documents the tenant has to deliver within a deadline, he can, if it's that bad (at least in Germany), pay a court bailiff to deliver the document and certify this delivery. That is legally binding on the date it is put in the mailbox.
I agree wholeheartedly and it seems like it would be nice to live in a civilized part of the world like Germany instead of my city and country of origin.
Move here. It's not that difficult if you want it, and have the skill needed to find someone to marry. The legal system here is (almost) still 'rule of law', and the constitutional court has a history of voiding the police state laws that crop up. Well, unless you are in Bavaria. I'd advise against setting foot on that state. The arrest laws there are about as bad as civil forfeiture, except that they can at worst lock up what you have on you, instead of being able to turn it into funds.
Also you, once you are a citizen, don't have to worry about your employer firing you or so, if you can sit that out in a frugal lifestyle.
Landlords here actually like non-agressive social-benefits tenants, as the rent get's wired directly by the state and the benefits won't pay for an apartment in an expensive area anyway, which, combined with the apparently rather liberal zoning, as far as high-rise buildings are concerned, makes the situation rather bearable.
> And for legally binding documents the tenant has to deliver within a deadline, he can, if it's that bad (at least in Germany), pay a court bailiff to deliver the document and certify this delivery.
That's true in the US as well, but again, the point is that a landlord who wants to make your life hell and drag you through the court system has plenty of opportunities to do so.
> I mean, we can keep doing this back and forth about where we agree on how things should work and I'll agree with you, but then I can tell you about how my family or I have been going to court with our landlord at least every other year since the late 80s
We could keep doing this back and forth, and I'd encourage you to do so, because you're just proving mu original point: rent control and rent stabilization are terrible at serving their stated purpose of providing affordable rent for people of modest means.
I think the debate about rent control has been sadly twisted and misdirected. I don't think rent control was ever originally about affordable rent. That's just the modern narrative. Affordability is an artifact that happens years later, and as you say it's inconsistent and haphazard.
Rent control is about providing stability. I think 80%+ of home mortgages in the U.S. are fixed-rate. People pay a premium because stability in housing expenditure is extremely important to individuals, couples, and especially families. It provides an anchor point with which to organize their economic life, but mostly I think its human nature to prefer and need that stability. As a practical matter, though, there's no such thing as a 30-year, fixed-rate, residential lease. (Or more similar, a fixed-rate life estate as after paying off a mortgage nobody can kick you out.) It's possible but for historic reasons it's simply uncommon, and because such terms lack the ubiquity of the 30-year fixed-rate mortgage, you'd doubtless be paying a huge premium.
Ultimately, providing this stability to renters is a collective action problem. In order to the minimize the cost (and obviously there is a significant cost to property owners that should be fairly internalized by renters) you want a way to quickly channel a large segment of the market into using something like a fixed-rate perpetual lease. Ergo, rent control.
Affordability for low-income renters (or any renter) is a different matter and it's a shame that we've conflated these things. But we live in exceptionally conservative times such that the only way to publicly justify any manner of government regulation--even in liberal cities--is to sell it as a way to improve the lot of the most impoverished. The working- and middle-class have been utterly relegated to the vicissitudes of private markets and we no longer even have a vocabulary to discuss public policies targeting the larger population.
There are only 45000 of these left in the city. 30,000 of these are co-ops. If you discount the co-ops that leaves you with just above half of the inventory of rent-controlled units.
My single-mother sat on the waiting list for over 20 years before giving up and we were really poor.
> There are only 45000 of these left in the city. 30,000 of these are co-ops. If you discount the co-ops that leaves you with just above half of the inventory of rent-controlled units.
Why discount coops? They're units too.
In any case, I didn't say Mitchell-Lama as it exists today is sufficient, but it's a thousand times better at achieving the stated goal.
Because the same way rent-controlled units trend towards deregulation as a result of death, Mitchell-Lama co-ops trend towards privatization and no longer being a part of the Mitchell-Lama system.
"Nobody said freedom and Democracy were easy. You don't get to coast, enjoying the fruits of all the hard labor that brought us to this point. You have to maintain your institutions lest criminal elements in the corporate world or elsewhere gain power."
> random property owners must provide the safety net ...
Whenever someone says 'it's unfair that I must provide these social benefits', let's recall the enormous amount of social benefits that each of us receives, especially in developed countries: Security, safety, a system of laws, roads, education, food supply, healthcare, sanitation, infrastructure built by generations, rights, research on everything from health to history to gas fracking to something once called APRAnet, etc etc. And then there are the benefits each industry and many private companies obtain from government, licitly and otherwise.
We all benefit more than we ever can repay. So yes, optimally the costs should be distributed in a very systematic, fair way. But at the same time my general response is: stop whining when asked to pull your weight a little.
Presumably the point is that the government should be providing the safety net and leveraging economies of scale to do so, and have commensurate taxes, rather than requiring individual landlords to handle the details themselves.
> We all benefit more than we ever can repay. So yes, optimally the costs should be distributed in a very systematic, fair way. But at the same time my general response is: stop whining when asked to pull your weight a little.
That's not really how this works. You don't arbitrarily force property owners to bear the full cost of supporting these people. If society deems them worthy of support, then society should support them. If we collectively think these people shouldn't be forced from their homes, then great. Let's pay the delta between what we think their rent ought to be and what the market price for that rent is. Let's all pay it together. Randomly and capriciously forcing whoever happens to own that property at the time to foot the bill is short sighted and silly.
And what if majority of society believes that those who own property are more capable of the burden of the poor, and thus, they should shoulder it instead of the entirety of society?
There are plenty of people who can shoulder that burden. Why not doctors and lawyers? A-list actors? What possible justification is there for putting that burden on property owners? And not, mind you, all property owners. Just the ones who happen to have been housing low-income people at the wrong time.
they already do - presumably they aren't dodging taxes, and is in a progressive tax system. This is about housing, and property owners might not reach an income level where the progressive system taxed them enough to produce a surplus to cater for the poor, and if so, making property specific taxes is one such way to force the burden on to them.
> they already do - presumably they aren't dodging taxes, and is in a progressive tax system.
You mean the same progressive tax system inhabited by those property owners?
> This is about housing, and property owners might not reach an income level where the progressive system taxed them enough to produce a surplus to cater for the poor and if so, making property specific taxes is one such way to force the burden on to them.
...seriously? My point is that it's arbitrary and unfair, and you respond by saying, well, it might be that by chance some of these people escaped paying their fair share? How is that a response?
They do, in their own fields. Lawyers provide pro bono representation to the indigent, help charities and others who couldn't afford them, develop law to address problems, etc. Doctors do similar things, helping the ill regardless of their ability to pay. A-list actors use their status to draw attention to issues. Etc.
Those things are voluntary. I've known landlords who've given cheaper than market rate rent to people or were sympathetic to their situation. Those are similar to what you've listed.
> A-list actors use their status to draw attention to issues
Doctors treating patients is not voluntary; in many cases the doctor cannot turn away the patient. Lawyers' pro bono services aren't always voluntary AFAIK; sometimes the court appoints them. And it if it wasn't done sufficiently in a voluntary fashion, it would be required.
Only if you beleive the exchange to somehow be zero or negative sum, which is of course absurd because there would be no point in civlization existing in the first place if that was the case.
Why not? It's accumulated benefits of millennia. Consider only the capital accumulated by prior taxpayers. Or consider all the science and technology that was developed - how much would it cost to rediscover Newton, Galileo, the space program, the Manhattan Project, written language, plumbing, all of mathematics, information theory, transistors, the wheel ...? You can't afford it.
Why do a seemingly random 2% of people in NYC get cheap apartments for life? Greatly subsidizing 2% of people's rents with payments from the other 98% seems a little arbitrary. Why not mildly subsidize 50% of peoples rents instead?
Those 'random property owners' bought the properties with a crystal-clear understanding that many of the units in them were rent-controlled, and of the laws that govern such units.
They then proceeded to harass their tenants, and to break the law, in an incredibly blatant and disproportionate manner.
If you don't want to follow tenancy laws, don't be a landlord. You have a choice in the matter, your tenants don't.
That's exactly the problem. "Outsourcing" affordable housing is always going to lead to abuse. Slumlords are going to be slumlords as long as it's profitable. You can't legislate that away.
You can't legislate murder away, but that doesn't mean we should throw our hands up in the air, sigh, and let predators run loose among us (After all, killing is in their nature!)
We need to make tenant abuse as ruinous to the landlord as it is to their tenants.
What we need is to consider the incentives that laws create. If you're a landlord with rent-controlled units, there is no benefit in doing anything beyond the legally required minimum, and a large benefit in getting the tenants to leave. You can say they shouldn't do that, and you'd even be right, but that's about as useful as saying "people shouldn't sell drugs".
The problem isn't that the landlord is doing the legally required minimum. The problem is that the landlord isn't even meeting the legally required minimum.
When we catch people selling drugs, we take their drugs, and their money, and throw them into prison. When we catch landlords doing this, we should take their properties. They aren't operating some secret underground criminal enterprise here - many of these abuses are well-documented.
I assure you, if you make an example out of a few landlords, the rest will stop with the frivolous evictions. The reason they are playing these games is that they have a lot less to lose then their tenants.
> I assure you, if you make an example out of a few landlords, the rest will stop with the frivolous evictions.
I suspect the landlords would up their aggressiveness to collect a higher risk premium on account of having a higher rate of getting busted. In expectation, it would likely be a wash.
Lawsuits or stricter laws have a cost too - even good landlords need to calculate that into their cost of doing business (of getting sued). Once the cost becomes too high, if landlords cannot sell their buildings, they simply abandon them.
The incentive to evict is created by vacancy decontrol, a concession made to free-marketers. I’d guess most rent control proponents want rents set by fiat at all parts of the lifecycle (allocating apartments by chance instead of income) which has some problems, but not this one.
Why would slumlords choose to be slumlords, if they had the choice to own high end luxury units, where the tenants were generally more on-time with their payments and they turned a bigger profit?
Not sure - but a question is who would buy a building that barely makes any profit due to a large portion of rent controlled units there? Possibly the type of person who thinks they could make a profit where others wouldn't - ie try an eviction. Others just look past the idea.
Laws that “lock up” value and create impossible-to-terminate relationships discourage people with potentially rentable units (especially ADUs, in laws, spare rooms, etc) from putting them on the market. Extracting concessions in this way may be worthwhile, but it isn’t free. Each time you add risk or take away return, self-interested actors become less interested in the activity. This is a problem of the activity is something you need and aren’t prepared to replace.
>random property owners must provide the safety net
Doing business (which renting out property is) is not a given right. The cost of doing business (taxes and regulations) is what makes possible the existence of the state at all - far from being a 'dysfunctional' concept.
progressive taxation for a safety net is great. let's just apply it equally across income/wealth bands. why should our laws give a few lucky poor people hugely valuable rental subsidies and give many other equally poor people nothing. why should some capital owners (property) pay for the above and while other types of capital (large financial and corporate assets) can pay nothing.
narrow rent control law is a capricious policy in general, not just for property owners. a bunch of semi-corrupt political lotteries don't make a good government or just society.
Doing business -- freely associating and voluntarily contracting with other people to exchange goods and services -- is in fact a natural right. The state is largely a parasite on top of this activity.
That’s sometimes true, but I don’t think it must be. The state provides an incredibly valuable service to those exercise that natural right: enforcement and conflict resolution. It makes sense to fund the state to perform this functions, and possibly others.
Actually, it kinda is. To have property rights means to have the right to use it. That means the right to sell it (and, correspondingly, to buy property so you can enjoy owning it). It means the right to loan it. It means the right to rent it.
The same goes for your own time and labor. You can't be a free person (as opposed to a slave) if you can't own your own time and labor -- if you can't sell your labor.
As with much else, the state gets to impose taxes and regulations. No argument there. But if those taxes or regulations prevent you from enjoying your ownership of property or self, then they are confiscatory and make you un-free. At the very least unreasonable tax/regulatory burdens make for a dysfunctional / distorted market, though as long as you can freely vote with your feet you're not so un-free as to be a slave. Still, just because you can move to some freer locality doesn't mean it's a good thing that the locality your leaving has high tax/regulatory burdens.
If the cost of doing one business is to pay the social safety net out of pocket and the cost of doing another business isn’t, all else being equal, a rational actor will choose the latter. You impose disproportionate tax and regulatory burdens on the things you want less of.
The worst aspect of high rent costs in cities is that it forces a long commute on the poorest residents. Those are the people who could benefit the most from extra time in their day. These blue collar workers, who basically run their city, have to live outside it and spend hours each day commuting into it after a short night’s sleep. The long term health effects of such a routine are terrible, and even worse for families.
This is by design. You can't keep a class of people poor if you give them the time in their day and resources to think about how to not be poor. And somebody must be poor for society to function.
(If you're reading this and are hitting that downvote button, I hope you realize that nobody could seriously be advocating that this is the way things should be. But if this statement makes you that uncomfortable, I did my job.)
I mean, if you can show me any significant society in human history without a servant/working/slave class though, I'll buy you a cookie. A really big cookie.
If soceity must have poor for it to function, as you claim. Nobody should feel bad about opressive actions towards poor people, or be concerned about making their lot better.
What I'm saying is that somebody will always be 'less-than' in our society because of a base human instinct to feel like 'more-than' our peers. That need is an inevitability.
We are a greedy, stupid and spiteful species.
Any amount of compassion you have for the downtrodden is not enough (and has never been enough) to overcome this circumstance. Given that there has always been impoverished people, this likely holds true.
The best thing that you can do is to engineer systems that spread the misery around a bit and make it a little bit worse for you and a lot better for them.
I downvoted for the ridiculous claim that this is by design.
Like, we could have plenty of affordable housing in urban centers for the poor, but we don’t, not because of the financial and political cost, but because we’re worried about those people then having too much time to think about escaping poverty, which we just can’t have. Ergo, to the exurbs with them!
Hard to imagine a dumber argument for why poverty exists.
In order to build public housing on Central Park the effective value of the subsidy to each of the families that receive housing there would be hundreds of thousands of dollars a year. That’s like buying Ferraris for people that can’t afford public transport. It’s a bad idea for two reasons - one is that it basically minimizes as opposes to maximizes the public dollars spent, and two public transfers are not supposed to be lottery tickets but rather safety nets.
I don't like the fact that you are getting downvoted for having a different opinion. But also you are making a "strong claim" and not just an opinion from the way you wrote it.
> And somebody must be poor for society to function.
You are making a claim that this is correct. You should have decorated it with "I believe". People then can show you how this is wrong.
A poor person adds to dysfunctionality in a society. These poor people cost more to society than they provide (subsided transport, social housing, social health care, subsided food stamps, etc...). The reason for that is that we allow big sprawling corps like McDonalds and such to pay low wages so they can profit on the top.
I'm not saying this people are not giving a valuable service to this city. In fact, they are giving some of the most valuable services to the city. (Like feeding, cleaning and taking care for the rest of us).
I'm just saying that they are getting paid below what suffice to self-sustain a person. So their pay is being subsidized by the state for the benefit of the big corps.
When you have a government where corruption and dysfunction is is tolerated or expected in some parts (police and MTA come to mind) that dysfunction inevitably seeps in everywhere else given the time.
As another commenter said the big real estate companies have the resources to work the system until they get what they want so as long as the system supports sloppy decision making and incompetence they can just work the system until they get the desired result.
Sure this is bad but it's not gonna change until the politicans apply pressure. They won't do that unless someone with connections gets screwed and makes it their mission to right the wrongs or something thrusts the issue into the public eye. It will probably take someone going postal for this to be thrust into the public eye because the people being screwed are mostly poor and nobody cares about what poor people do unless there's violence involved.
Without the politicians to applying pressure no change will happen and they won't apply pressure unless this affects people with connections or provokes outrage. Unfortunately that's just how these sorts of governments usually work.
I'm curious, and maybe this is not the right forum for this kind of discussion, but it seems to me at some level there's going to be a tradeoff between the ability of current tenants to afford their current housing and newcomers to afford housing. In markets like NYC, where demand is ever-increasing and for various reasons supply cannot keep up with demand, maintaining rent-controlled apartments necessarily drives prices higher overall. This prices a large group of people (especially the working-class young) out of the market. At the same time, were landlords allowed to adjust to market at-will, people who potentially have lived in a community for decades could be displaced without notice. Both situations are undesirable, since it would seem that someone gets screwed either way.
I've been wondering this for a while, but haven't come up with a satisfying answer: to what extent do people have the right to live in a given community? Does this depend on if people have lived in a community for some time? Does it only depend on whether they can afford to live there? I feel like these questions aren't black and white, but there's also no clear middle part I feel comfortable committing to.
I'd ask a slightly different question: why is so much of our economic policy centered around new and higher paying jobs in a certain area, in disconnect with the current residents preferences for housing policy? It seems like these things are controlled by very different interests that end up fighting in ways that treat the non-high-income/wealthy existing residents as collateral damage.
We want housing to be more affordable in LA, [a different but still local] we also want Amazon to come to town and bring in a bunch of new workers from out of town. Those two goals seems hard to reconcile.
Economic growth without a civic plan creates huge bubbles. The second growth slows in Seattle I can’t help but think the market will be flooded with units from people wanting to finally get out at the peak.
You say this like it’s a drawback. “Flooded with units” would be amazing and it’s exactly the condition YIMBYs are trying to engineer, because being “flooded with units” (relative to current population) is affordability.
I remember driving through the Bronx with my dad in the 80s when he worked there. It looked like a war zone. Bubbles tend to pop, and bankrupt buildings get boarded up, not cheaper.
And then get picked up cheap and renovated by the young in the next cycle amid condemnation of the tragic gentrification destroying a working-class haven.
That was also a time of insane crime rates in NYC. People left to survive.
This discussion reminds me of people who dare not go to the gym because they're afraid of getting unsightly muscles. We're so very far from what you fear!
The challenge is 'we' is not a homogenous group within a city such as LA. In fact they are very much heterogenous groups lumped together.
We want affordable housing = existing residents who want to rent their affordable apartments or continue to own their single family house without additional traffic/school overcrowding and their network of friends to have that opportunity too, politicians who want to represent these folks
We want tech jobs, more office space, more apartments = real estate developers, young tech professionals who want job options, incoming residents who aren't aware of how uncrowded these neighborhoods used to be, politicians who want to represent these folks
So is there a way we can have those two sides hash things out in a more controlled manner? As well as the people not represented by either group? Right now we get the jobs, and we get the neighborhood protections and development restrictions, and in some ways everybody else loses.
Cities that can grow outwards, like Houston or Dallas, can punt on this problem for a lot longer than LA or SF or NY can, but I'm very interested in seeing what that looks like long-term. Maybe Dallas hits a continuing density-vs-sprawl equilibrium that results in mostly-reasonable prices w/ mostly-reasonable commute lengths (people seem pretty tolerant up to 45-min one direction, IME) just over a wider and wider footprint without ever needing to densify - not many natural barriers for a while. But maybe it doesn't.
Personally, I think the best option is to encourage the high growth companies in tech/finance/media to create secondary headquarters in nearby secondary cities that are ready to handle higher density growth (i.e high density residential and light rail systems, etc.).
SF/SV -> Sacramento
NYC -> Newark
LA -> San Diego
High level management can day trip it via 1-2 hour train/car/shuttle ride to the secondary headquarters without the expense/complexity of plane rides and overbite hotels, or conversely the employees can day trip it to primary headquarters. Plus there is no timezone difference for conference calls. And most importantly the employees can still be within driving distance of their social network and have a very similar quality of life (climate, outdoor recreation, etc.) but not all of their paycheck is spent on housing.
I’d love we’re this to happen, but it seems like the trend is to cram everyone in the same space - the ambiguous “network benefit” seems to be trumping economics a lot of the time.
> Personally, I think the best option is to encourage the high growth companies in tech/finance/media to create secondary headquarters in nearby secondary cities that are ready to handle higher density growth (i.e high density residential and light rail systems, etc.).
We already tried that. Google, Apple, etc. located themselves in the small orchard towns of Mountain View and Cupertino instead of the big San Francisco. San Jose responded by building up its downtown, anchored by Adobe, and investing in light rail. A similar story played out in L.A., with media companies moving to Burbank.
This didn't solve the problem. There's really no way around building housing.
The answer for software companies in particular seems obvious to me: remote work. I think that for the kind of work we do, in-person communication and synchronous collaboration are over-rated. I hope that the next generation of programmers will all have the freedom to stay in their home towns rather than having to congregate in a few cities, thus driving up costs. I know that this change requires a major culture shift, though.
Execs don’t go for it. That’s the primary reason it’s not been done at large scale companies - you do get better control and coordination in person, but not so much better that it outweighs the economics (IMO)
Remote work is harder for entry-level workers just out of university who haven't yet learned the communication skills needed to be effective working remotely.
At least, this is my own particular experience. It took me years to learn how to ask good questions. Before, I would either:
1) When I ran into something that seemed frustrating or inefficient, I would assume that the task was just difficult and I needed to put my head down and slog through it.
2) Ask broad questions to try and build a mental model that would let me work more efficiently and know what to focus on, hear the feedback "you're trying to understand the universe", and think that meant I should stop asking questions and just keep punching. It was only at my current employer (where everyone is in the same office and my tech lead and I could have in-person 1-on-1s) that I got feedback on how to be more specific and contextual in my questions.
Do you think it matters that they were in-person? The fact that you called them 1-on-1s implies dedicated chunks of time for direct communication. Would they not have worked just as well over VoIP? Did you have to schedule time for 1-on-1s in the office, or was it more spontaneous?
FWIW, I'm visually impaired, and I spent most of my career so far on a distributed team where the same was true of my boss and most of my coworkers. So maybe there's some aspect of in-person communication that we're just used to doing without. Edit: Then again, remote work _is_ on the rise in the wider software industry.
Meanwhile Intel is in Bend OR Folsom CA Tacoma WA and a ton of other “smaller” towns in addition to Santa Clara. The only reason it seems for modern tech companies to put a satellite office up is so they can poach from the players that are already there, it’s seemed. Hoping amazon HQ2 can become a model.
I disagree that San Diego can handle the sprawl. It is sandwiched between seashore and mountains. LA is already naturally expanding to the Inland Empire, which is essentially flat plain.
Not to mention the border to the south and Camp Pendleton to the north. It really is boxed in.
San Diego is already a nightmare for commuters with the growth of tech in north county. I think major mass transit would have to go in first before additional growth would be feasible.
In most companies, the decision on headquarters relocation is primarily based on where the senior executives want to live. Actual economics are secondary.
I think the point was that if you are so sprawled out it's easy to build more houses without bothering people, so it does not become a political issue. (This thought is only based on pop density and without knowing anything about the political stances of e.g. Dallas and SF, and how that affects new projects in dense areas.)
The areas around SF are not dense at all. About half are nature preserves. That is, political decisions have been made to not build any more housing there.
"We" are heterogeneous, but we are also united by our membership in the working class. We can't ignore our brothers and sisters that share your class interests and should fight for them together.
> why is so much of our economic policy centered around new and higher paying jobs in a certain area
There are certainly hot spots in places like NY and SF, but it's not just one area. Lots of cities are growing. And it's not all due to evil corporations running amok, at a certain level it's just capitalism itself that requires growth - the GDP has to keep growing year over year, and the population probably has to grow slightly to provide for that growth. Immigrants move in, and children grow up and need somewhere to live. Add in the generational effect of baby boomers, i.e. that older people retiring and staying in their homes mean that we need more housing for the same number of jobs.
Specific booms like tech in SF may exacerbate the problem even more, but fundamentally our way of life just requires continual growth. This is at odds with the NIMBY attitude that I have a right for not just my home, but every building in my neighborhood, to stay exactly the same as the day I moved in. It's not at odds with affordable market rate housing, that just requires supply keeping up with demand.
There is a LOT of room in the country for growth, as you mention, and most of it has more room to expand and is starting from a much cheaper price point.
So fighting residential development locally to try to push companies to other areas may be a rational strategy for some.
I'm not convinced that perpetual population growth will always be required for economic growth.
> There is a LOT of room in the country for growth
No there isn't. All the places with viable logistics and water supply are pretty much full up. Urban areas need barge transport, good rail grades, aqueducts, and rivers to carry away waste. You can't plop a city down in the middle of nowhere. The energy economics mean it will never work. All the sites worth building on have been built on. A lot of the places supplied mostly by truck are of questionable viability in coming years.
Probably the only area of the country that could long term sustain a much higher population density is the great lakes region.
I’m sorry but the US is one of the least densely populated developed countries with abundant fresh water, energy and arable land.
If Oklahoma had the population density of the Netherlands it would have an additional 72 million people living in it...and oh by the way it’s got huge oil and gas reserves and some pretty enormous inland ports...
Your comparison illustrates my point. Oklahoma is not crisscrossed with efficient water transport and reliable annual fresh water. Oklahoma is probably overpopulated as it is.
The Netherlands is, too, in the long run. But for now it's economically sustainable.
> US is one of the least densely populated developed countries
None of the other developed countries have vast interior deserts. The east and west coasts and some parts of the Mississippi and Great Lakes watersheds are plenty overpopulated.
This is typical "flyover state" bull. The Midwest has tons of water, tons of space, easy travel, great amenities, and a business friendly environment. Colleges are affordable, housing is affordable, and crime is relatively low. But the in crowd has decided that the East and West coast are all that exists, and that everything else is a "vast interior desert."
The state has does have pretty significant water transport (look up the port of Muskogee and Catoosa), not to mention a great deal of rail and pipeline as well, no idea about the aquifers etc.
I wouldn’t want to live there, but seems like a lot of bulk commodities, and products come in and out of Oklahoma and there is still plenty of room...
Water transport is comparatively cheap. Urban areas throughout American history have been able to reliably source enough water for their needs. It gets difficult in deserts, but the US was blessed with many, many rivers and abundant rainfall, it's a crucial reason why we rose to prominence in the first place.
There are a few interesting studies in this area, California's agricultural section's tug-of-war with its residents for water is the biggest one that comes to mind, and the lesson you get is that industry uses up the lion's share of the water out of greed and sloth, but enough pressure will force them to curtail usage.
All the places with viable logistics have ALWAYS been full. Nobody sane overbuilds infrastructure by much: you can't afford it. Instead civilization is constantly in a cycle of upgrade as required. It has been this way for thousands of years.
"Real estate people" have virtually zero political power in the San Francisco Bay Area. Nobody has sympathy for them, not even the nonprofit ones. (Go look at how the anti-development left pillories Mercy Housing, of all organizations, in SF for daring to impose reasonable means testing at Midtown.)
Have you looked at what it takes to make housing pencil out in the city? Developers are not "printing money". Construction costs are incredibly high, especially with inclusionary zoning.
I don’t live in SFO, but real estate and local politics are like white on rice. Developers are just one variant of real estate industry player. It’s often an old money game.
Historically, cities responded to this by building more housing, thus reducing the tension. In the 1970s, in certain locales like the West Coast, they stopped doing that. Forty to fifty years later, a massive housing crisis resulted.
We could start by acknowledging our mistakes and working to correct them.
Cities are the greatest economic drivers of societies the world over. Worldwide, people clamor to cities to improve their opportunities. Cities that don't manage this growth achieve congestion; cities that outright block growth experience longtime residents being priced out. Why wouldn't economic policy address one of the major challenges to improved opportunity?
Also, wouldn't you want your kids to be able to afford living in their hometown?
Many interests paint this as an all- or nothing- problem: "the developers just want to pave over Golden Gate Park!" "The NIMBYs just want their property values to increase!"
In reality, nobody credibly advocates this. Building high-density apartments in previously single-family home tracts is one solution. Paris is an excellent example of housing that is both beautiful and functional. Apartments are limited to six stories, and have good public transit available, so congestion isn't like Jakarta.
In reality, they do credibly advocate this and San Francisco is a key example:
> At the meeting, one woman fretted that the tall building would violate the privacy of a nearby public school.
> When Tillman said he saw his project as necessary so people like his daughter could afford to come back and live in the city, one particularly motivated activist said she wished his daughter was killed in a terrorist attack.
> Parroting many of the Mission activists' concerns, Commissioner Rich Hillis complained that the design was "bulky, and a bit out of character" with the neighborhood, while Commissioner Kathrin Moore said that erecting an 84-foot tall building would be like "plopping a foreign object into this area and not thinking about the consequences." Commissioner Dennis Richards said, "I think a project absolutely belongs here. The question is what kind of project."
We are started an a startup (Openland, W18) to find a way to product more housing and during initial research i found that there are a lot of empty lots in LA that costs about $10k-50k. Tried to search in different states and found same lots at Long Island.
So why people are not trying to buy land and build something on it instead? Buying a house will cost magnitude more than buying land and building your own house. Building will take time and resources, but... paying for a loan for 30 years? I think i can spend two years building my own home for the fraction of a cost of buying existing one.
People are doing it, but building a home is a lot of work and usually ends up costing far more than anticipated unless you really know what you are doing.
May be the solution is simplifying building instead of dealing with existing one?
Even in SF there are a lot of land for housing! For example, there are hundreds of body repair/tyre shops in SF. Why city ever need them in the city where Uber wins over owning your own car? But you can't just buy them and build more housing - in most cases you need to wait several years to "clean up" the soil.
"Even in SF there are a lot of land for housing! For example, there are hundreds of body repair/tyre shops in SF."
Yeah, well...those places are already in use. And if you want to change that use, you first have to buy the land from the people who are already using it. And that's expensive, because people know what the land is worth. In other words: those auto repair shops are there for a reason. You can't just ignore the reason(s) and pretend that the land is vacant.
It's not as if every SF landowner is behaving in an economically suboptimal way because they're all stupid.
This is exactly what i am saying - it is economically suboptimal. They will be there until they are profitable.
But problem not in the land price itself, but also waiting for 3 years until you will be able to start new construction, this delay will increase actual price of this piece of land up to 30%.
"This is exactly what i am saying - it is economically suboptimal. They will be there until they are profitable."
No, you believe they're economically suboptimal, and you're making up excuses why reality disagrees with your theory.
"But problem not in the land price itself, but also waiting for 3 years until you will be able to start new construction, this delay will increase actual price of this piece of land up to 30%."
Proof of work required. You're going to have to prove that three years is a typical delay; that this results in the stated 30% price increases; and that this is the actual reason that your hypothetical auto-repair shops aren't all apartment complexes.
There's a simpler explanation: just as commercial rents are higher than residential rents, commercial uses of land are typically far more valuable than apartment buildings. If a redevelopment doesn't pay landowners a significant multiple of their current (commercial) revenue, they're not going to do it. Most apartment projects can't come close.
> this is the actual reason that your hypothetical auto-repair shops aren't all apartment complexes.
Sorry, i am not native speaker, but isn't it the same as "economically suboptional"?
> There's a simpler explanation
This neighbourhoods are mostly commercial districts that requires the first story to be commercial and other stories to be residential. Building up doesn't change commercial use of this buildings but just add more housing.
> No, you believe they're economically suboptimal, and you're making up excuses why reality disagrees with your theory.
I am not "believing", this is just a one hypothesis. I could be wrong, of course.
"Sorry, i am not native speaker, but isn't it the same as 'economically suboptional'?"
I'm saying that on average, whatever you observe in the world is already "economically optimal". You may believe that there's a better way to use land, but if reality doesn't agree with your beliefs, there's usually a good reason.
"This neighbourhoods are mostly commercial districts that requires the first story to be commercial and other stories to be residential. Building up doesn't change commercial use of this buildings but just add more housing."
It doesn't matter. If the trade doesn't benefit the current owner, it won't happen. Someone has to pay for the redevelopment, and I'd wager that in most cases, owners have to take on debt in order to finance redevelopment. So they go from having an annuity (fixed cash flow), to payments on debt, for a (possible) future gain. Maybe this is attractive for some owners. For many others, probably not.
So what about selling? Couldn't an enterprising developer buy the land and re-develop it for them?
Sure! Except: the current owner is making significant income from the business right now. That will go away, and they're going to want to be compensated for the loss. They're also not stupid, and know that the buyer is going to redevelop the land and charge more for it. Thus, they will (logically) ask for the buyer to pay them now for many years of future cashflow under the new use of the land.
In other words: owners know what the land is worth, and they're going to ask for it. The buyer is going to be paying not just for years of lost business income, but also, a significant percentage of her future revenue. And she's going to pay for redevelopment. And maybe that pays off, but it certainly doesn't pay off quickly -- and it isn't necessarily obvious that an apartment building is worth more than an auto repair shop. It depends on the health of the business!
This is why you can't just look at an auto-repair shop and say that it "should be" an apartment complex. It has nothing to do with regulation.
> I'm saying that on average, whatever you observe in the world is already "economically optimal". You may believe that there's a better way to use land, but if reality doesn't agree with your beliefs, there's usually a good reason.
I got it, this is just misunderstanding. I meant that upbuilding is "econimically suboptimal", but current situation is optimal.
> In other words: owners know what the land is worth
Actually, no. Some of developers told us that the problem with market is that most of the land is not for sale because owners just don't know that they can sell on a good price, they are not thinking about this at all. Developers are willing to buy land up to x10 more that they are currently buying.
> It has nothing to do with regulation.
In regions where there are a huge crisis in housing local government can introduce a new type of a Tax - Underdevelopment Tax. This will reduce margins of the owners that hold their land for "investing" opportunity and force them to sell their land to developers. Even if this tax will be low, they will start to think about selling their land right now and this help to the market a lot.
A. It’s very easy to go over budget building a house, and therefore a riskier proposition for low-income people
B. It can be much harder (higher down payment/harder to qualify) to get a land loan and a construction loan, Vs. a mortgage + more expensive as you need to pay for all of that for the time the house is being constructed and also pay for a place to live...
C. Often times lot values imply the highest density development e.g. in order for the purchase price of a lot to make sense you can’t just build a single family home but need to build 3 town homes for the economics to workout
All non-market pricing options (like rent control) are inherently arbitrary.
Also frequently it’s property taxes that force people out of neighborhoods (eg their families own a place for years, and then the property values go up making it too expensive for them to live in). If property taxes were eliminated, this would displace fewer people. Naturally you don’t see any politicians talking about this since they don’t want to eliminate a source of revenue for the state — they’d rather blame Airbnb!
All market interventions have some cost. The idea is that the benefits exceed the costs. The notion that benefits can never exceed costs is wrong on its face but somehow its what everybody assumes. We live in very cynical times.
Prop 13 wouldn't be so damaging if it were easier to build. Unfortunately Prop 13 incentives and/or minimizes the consequences of communities restricting development, so it had this weird feedback effect. Regulations have unintended consequences and so we should be rightly wary of them. But that reality shouldn't be dispositive on whether we should attempt them.
Market dynamics are like gravity: you can't ignore gravity but gravity doesn't make human flight impossible, it just constrains the solution space. Arguing that we shouldn't attempt market interventions is like arguing that we shouldn't have attempted human flight because God didn't equip us with wings or that we should've waited around until we evolved wings.
Property taxes are one of the few ways you can concretely tax the wealth of people that hold large amounts of property for speculative purposes, its far too easy to play shell games with liquid money.
If you eliminate property tax, or prevent it from rising, you make the absentee owner who only cares about a payoff 20 years from now leaving perfectly livable homes empty many magnitudes worse. (as evidenced by california)
It’s not only speculative wealth or property that get’s taxed, ask yourself how many low-income senior citizen’s who are home owners now living in gentrified communities are put into a position where they need to sell their home due to property taxes.
That's the purpose of property taxes. If they hadn't prevented construction of residential real estate then they wouldn't have to pay these high taxes.
> eliminating property tax only incentives blocking all new development to drive up property values and encourage rent seeking
I'm quite interested to see your reasoning behind that statement. Don't people still want their property values to go up even with property taxes? Except in a no property tax scenario, people who own their homes outright would still be able to stay if they wanted to. Perhaps no property taxes would more highly encourage local owners to restrict newcomers. Isn't the government also interested in increasing property values so they can receive more revenue? In that case I suppose they would in a sense be "earning" the taxes they levy.
>Perhaps no property taxes would more highly encourage local owners to restrict newcomers
Bingo. Rampant NIMBYism. Also growing the local economy should be the priority for local governments not creating a housing bubble
There is an argument that can be made that people who cannot afford to live in prime real estate in an economic powerhouse should sell their house and move somewhere else to enable growth or allow more housing to be built. But picking neither is not a productive outcome
No, as a property owner who doesn't plan to sell in the near future I want my properties values low: I pay taxes on the value of the land, so the lower that value the lower my costs. When I decide to sell I want low property taxes because I know the future buyers of my land will consider property taxes, I just want high property values.
Sure, that's the ideal situation. Paying no tax and having high property values. Ultimately I'd assume you still want the property to be worth more than what you paid for it. You and the government's incentives are aligned in that sense. Of course you still are moderately adversarial since they are taxing you.
I was just trying to point at that local governments are also encouraged to have high property values for tax revenue. They also tend to have a bit more power to be able to affect large areas property values by force. If people cannot/don't utilize the government to enact policies to force people out, it seems to me that it would be pretty difficult for people to enact those policies without governmental power.
What we see in places like San Francisco are property owners and governments teaming up to drive property values up in a mutually beneficial relationship.
Edit - It could be said that the government itself is rent-seeking in such an arrangement.
This is actually a key problem with using rent control as a primary means to achieve housing affordability. Rent control works as a way to soften the blow of large rent increases (like the kind you might see after a major building renovation), but it really only works as long as there are plenty of other units on the market so that when eviction inevitably does happen, the tenant has somewhere else to go that they can afford.
The problem is, many cities like NYC and San Francisco are trying to have their cake and eat it to. Liberal residents want to keep their suburban-style single family neighborhoods while simultaneously appearing to care about skyrocketing rents. You simply cannot have it both ways. The ONLY viable solution is to relax the rules blocking the construction of new housing. SB827 in California, which would have overridden local zoning to legalize the construction of higher density buildings within walking distance of transit stops, was a valiant effort to do the right thing, but it failed because of a strong anti-development sentiment from anti-capitalist tenants rights groups and pro-housing-appreciation single family home owners (in a particularly absurd moment, the mayor of ultra-tony Beverly Hills, which has built almost no new housing in the last few years, claimed to be against the bill because he was concerned about all of the "luxury housing" it would build in his town).
> cities like NYC and San Francisco are trying to have their cake and eat it to. Liberal residents want to keep their suburban-style single family neighborhoods while simultaneously appearing to care about skyrocketing rents.
Those two cites are not the same at all. NYC has few suburban style neighborhoods and the ones we do have aren't that relevant to these discussions.
New York is at least somewhat functional as a large city, and can and does permit the building of massive amounts of high rise residential development. From where I stand in downtown Brooklyn, the skyline has become nearly unrecognizable in recent years. And predictably, rents are starting to fall noticeably.
New York is nowhere near as bad as San Francisco when it comes to permitting, and it does have more parcels where height is not significantly limited, but it still builds far less housing than it needs to, and overly restrictive zoning is still basically the reason.
Do you have any basis for this claim? NYC really doesn't appear to be all that limited by zoning, and has been bringing an incredible amount of new construction housing to market every year for awhile now.
What right do owners of buildings have to dictate that long term renters move out or pay higher prices? The answer to this question, and to yours, is that rights are defined by laws, and laws are defined by the community.
Yes, rent control exacerbates an already existing problem, but it doesn't create it. The same landlords who profit from the high prices of housing in our urban cores actively oppose new development because of that same reason.
We can't solve this problem by banning rent control. The only way to solve a capacity problem: adjust supply or demand. I don't see demand changing anytime soon.
Is there a country that has tried "regular property rights, except for real-estate, which is owned entirely by the state and leased directly to its current tenants with no subleasing"? So e.g. an "apartment building" would be a building owned by the state, segmented into units, each of which would be rented from the state to individual tenants; and a "house" would be a building owned by the state with the whole thing rented to one tenant.
In such a situation, there'd be no real real-estate speculation, and levels of rent-extraction above cost would be controlled by municipal bylaw (as they'd effectively be a tax.) Property development companies would all either be nationalized, or would be private government-exclusive subcontractors.
Basically: imagine China, but instead of privatizing every industry all at once, they had kept construction and property management state-run. How would that look?
"Last Wednesday, Premier Li Keqiang said a real estate protection provision that would ensure individual’s access to property under a 70-year lease would be renewed unconditionally is being drafted.
This will help to quell ongoing fears that wealth garnered from one generation will be removed after the 70-year lease ends by the government. And while this does not address the fate of 20-year leases, the precedent set in Wenzhou may be replicated in other areas."
In Malaysia, Singapore, and Hong Kong (all common law jurisdictions) leaseholds are more common, I think, than freeholds, at least until very recently. Leasehold estates are commonly 99 years or less (50, 60, 75, etc).
I don't know how well this works (I only have a superficial knowledge of the property market from my travels and relations) but I imagine it becomes a problem when you have major improvements. For example, imagine a condominium. As a political matter the government isn't going to kick out 100 tenants just because the leasehold on the land terminated. So I suspect that in terms of revenue the governments are no better off than relying on property taxes. In the few cases I'm personally familiar with the typical scenario seems to be that the government offers renewal terms at a highly discounted rate a couple of decades before the lease expires. It seems like a pointless contrivance.
Certainly freeholds are nicer from the perspective of efficient markets because you don't have arbitrary dates to contend with. Imagine trying to sell land with only 10 years remaining on the leasehold. The seller can expect very little, which is to be expected and not per se problematic. But more importantly 10 years limits the types of things you can use the land for, especially if you're risk averse. In general buyers will find it difficult to find land with a remaining term long enough to recapture the value of improvements, so liquidity would suffer significantly. Seems to me property taxes are a much simpler, more consistent, and theoretically fairer way for governments to capture the value of land. And that's ignoring Henry George-style land-value taxes.
I suppose leaseholds may make it easier for governments to actually kick people off land if they're committed to doing so. The end of the lease is a nice, neutral date to implement some difficult policy objective.
What is the typical term length on mortgages there? If someone needs to refi when there are too few years on the lease than the person can come up with in principal for that many years, there's going to be some serious pain all around.
"And when the flat reaches 69 years, CPF savings cannot be used to finance the mortgages."
CPF is the mandatory savings program, sort of like Social Security and Medicare, except you can borrow against it. So basically if there's only 30 years left on a leasehold you can't borrow against your CPF account. My guess is that as the leasehold nears expiry your ability to securitize simply goes down to nothing, probably long before termination. And even before then you probably start paying a premium because if you default the bank is stuck with a rapidly depreciating asset.
From what little I've gleaned from my travels and from the academic literature, I think Americans enjoy an exceptionally liquid property market and efficient financing market, particularly for residential property.
Only until the law gets changed to remove the perpetuity of real property rights. Real estate (and airwaves, and any limited resource) should be auctioned by the state for limited periods of time.
This happens to some extent in some places - e.g., a large amount of private apartments in Singapore are built in 99 year ground leases. The problem is that you end up with a 50 year old building that is falling apart and should be redeveloped, but it's not worth it on a 50 year lease, or you need to negotiate a complicated and expensive lease top-up.
Lots of important land uses like airports, factories, train stations require huge investment with returns spread over decades or centuries, it would be harder to get people to make these investments on leased land.
Wow that's full blown communism 2.0. Why do you assume politicians rigging auctions and controlling all property would produce a more stable or honest system for allocating scarce resources?
Airwaves are not owned. They are leased. Real property is core to human freedom since the Magna Carta at least. You have no idea what unintended consequences you're stirring up by overturning this.
We don't live in the 13th Century anymore, and we don't live under a monarch anymore. Laws that make sense in the monarchy frontier don't make sense in a crowded finite space.
It seems you have no idea what unintended consequences you're preserving by staying beholden to an ancient status quo.
Even in politically-conservative parts of the US where rent control is an unthinkable idea, there are plenty of situations where a tenant's rights "win" against the property owner's rights.
The law generally -- and correctly -- recognizes that making someone homeless is a very serious thing, and should not be done on a mere whim, no matter how much someone might want to argue that as a property owner their whims are sacred.
I'd suggest that a solution to the demand problem is basic income. Let those who can and want to move out to the sticks and live on UBI. There are a nearly unlimited number of places with low cost of living and ample or potentially ample housing. Why does everyone want to move to SF and NY? It's not the poop on the sidewalk, it's mostly the jobs. Fewer people having to move to big cities for work (especially those who prefer the country) means less housing pressure.
I think UBI would significantly help relieve housing pressure in large metro areas and perhaps help revitalize some currently-dying small towns and rural areas, which after all will need more services with increased population.
You vastly underestimate most people's desire to stay in the same place. Most Americans don't relocate after they have children. Imagine yourself being retired, and learning that you have to move away from your friends and family due to a change in market conditions.
Even places that are economically barren see people just go onto Social Security disability (perhaps a form of UBI) instead of moving to regions with jobs.
There are plenty of people who move to large cities for better jobs, these people could just remain in the town they already live in instead. The problem you point out then becomes a benefit.
There are also people who move when they retire, or when they have kids. This could facilitate that happening earlier which would also reduce the pressure on housing in cities.
> In markets like NYC, where demand is ever-increasing and for various reasons supply cannot keep up with demand, maintaining rent-controlled apartments necessarily drives prices higher overall.
It's because of zoning. Allow more high rise to be built and allow more expansion and demand can be met.
It's not some mystery. It's local laws that prevent people increasing height of buildings and prevent expanding the area.
It's a problem that can be seen around the world due to similar planning laws in many places. See the Demographia report below:
In our platform (Openland, W18) we have identified a LOT of buildings that can be built up in SF and current laws allows this. This is not high rises, but you can upgrade from 1 story to 3-4 stories easily. But why this buildings are still single story?
I suppose there are other problems like lengthy process of permitting (basically at least 1 year for issuing building permit) and entitlement (unpredictable). This huge delays reduces margins of a projects and in some cases they became unprofitable.
That is the entire problem. The entire problem of building more dense housing - even 3-4 stories in SF is negotiating every single thing besides the literal physical feasibility of construction.
If your startup doesn't think this is the key problem to solve, I'm not sure you have a complete grasp of what you're trying to do here.
Unfortunately I think this only goes so far. You are correct that adding supply via changing zoning would definitely mitigate the effect that high-demand has on prices in the aggregate, but there are a couple issues that aren't resolved.
1) There's a major time delay here. Most rent-controlled apartments have rent increases tied to inflation. Had zoning and land development policy over the last 50 years kept up, maybe in aggregate affordability within communities could have been preserved. As it stands, we are so far behind what would have been needed to keep things affordable that it's basically unworkable in the short to medium term (10-20 years) to expect changing zoning laws to solve our problems now. NYC would need an insane capital infusion, and any economic downturn would make the building market freeze up (as we saw in 2008).
2) New development in price-controlled neighborhoods doesn't solve the issue for people paying significantly under market. That's exactly what happens now, in fact: new development once a neighborhood is rezoned allows developers to buy up old properties and build luxury high rises. There is SO much demand for luxury (i.e. Manhattan yuppie) housing that, again, in the short-medium term, long-time residents are still necessarily displaced without protection.
3) To what degree should a community be able to resist change? Other than the fear of being displaced, renters also fear their communities being torn apart by gentrification, slowly dissolved by a changing demographic and rising prices. Now, I lean more on the side that communities don't necessarily have a right to exist (i.e. NIMBYism in CA), but there's definitely some leeway here, especially when those communities are classically disadvantaged (socioeconomically, racially, etc.). Rezoning a neighborhood that is fragile can have majorly negative impacts on the communities, and make things even more dire for the most vulnerable segments of the population.
4) It's unclear how much remaining demand is unsatisfied because of housing prices in NYC. Think of the surplus of people commuting in on major rail lines each day. Surely some fraction of them live in the suburbs for lifestyle reasons, but I'm sure a large fraction of them are simply priced out of the city. So demand for housing may increase if prices are lowered substantially. Depending on this unknown demand, rezoning could have little to no effect on the populations we're discussing here.
Rezoning is an extremely important part of the solution here, and the city should DEFINITELY be making aggressive moves to rezone in various places. But it's not a silver bullet, and in the short-medium term doesn't solve most of the problems that rent control have attempted to solve.
Yup - in all seriousness, I would have thought most retired folks would just naturally gravitate toward lower cost areas with more pleasant climates such as Boca Raton. Or maybe Myrtle Beach if you still want to visit friends living in NYC...
I think in this case contemplating preferences might be more important than rights.
How much do tenants actually value a guaranteed right to live in a given community? When we look at anywhere in the U.S. that isn't rent controlled, we figure out, it's not much at all.
There is nothing illegal about signing a very long lease with a landlord. Commercial real estate contracts routinely include a a clause which allows tenants to extend a lease at a very similar price for many years in the future.
Landlord would absolutely love to do leases like this. But the reason this doesn't exist in the non-commercial settings is because no one cares enough about living in a place long enough to actually pay for that option.
Rent control only exists because its a a popular transfer of wealth, and is emotionally appealing, not because it actually makes people better off.
It’s only a transfer of wealth and the time it is enacted. The landlords that owned NYC real estate in 1974 lost the then net present value of the difference between the units they owned under a market rate regime and under the rate stabilization regime. Any landlord that acquired his property since then has lost nothing, and indeed would garner a windfall if rent stabilization were to be abolished.
I’ve never seen such a landlord, ever, other than a few individual landlords worried more about the next tenant more than losing money.
Tenants with kids value continuity of school districts. It’s a major reason why buying a house is so important. Tenants don’t seem to care because most tenants are high-income-no kids, old, or poor.
Most people don't look forward to instability. You don't want your kids bounced from school to school, and moving sucks. For older folks, moving literally kills them.
Usually bigger developments require no-negotiation, ironclad leases to make sales and financing easier. Smaller landlords and public housing are sometimes more flexible.
That's why they are no-negotiation. But if there was significant demand for 5 years leases they would offer them. Turnover is one of the largest controllable expenses in real estate.
Prosaically, the elderly have higher voting rates than the young so they win this fight.
Philosophically, I don't like placing two sympathetic groups on opposite sides of a scale and weighing them, because that's usually a false choice and there is some external factors unaccounted for that make the choice less normative. In the case of rent control, this externality is clearly that it depresses new unit construction, exacerbating the problem. So I oppose rent control.
My simple and possibly harsh viewpoint is that if you want to live somewhere forever, you better own the property you live on.
I find measures to limit the amount that property tax can increase on a property you own and occupy much easier to stomach than measures like rent control.
I don’t understand this rejoinder. Are you suggesting that it’s impossible to be a responsible and law-abiding landlord?
This city is full of landlords who got rich with the existing rent control system. It’s just preventing some of them from getting mega buck wild rich. So sad.
When you disincentivize something, you get less of it. Cities are also full of condo conversions and units left empty because their owners responded rationally to society’s cry of “if you don’t like it, don’t be a landlord.” Not all, obviously, but every unit suppresssed costs something, and those costs have to be weighed against the benefits of the regulation.
You're not considering an important subset of renters. Consider the elderly, those who have lived in a given community for many years. They may not be driving anymore, everyone they know is around that neighborhood, their doctors, family, and their whole life. It'd be very heartless if it was possible for landlords to displace the old since they are unable to keep up with the market forces which demand 5% rent increases yearly.
More generally: When you give the government more power, you can expect the powerful to try to use it.
What? You thought that power was going to be used on behalf of the powerless? That may have been the stated intent. But the powerful tend to know how to use power better than the powerless do...
Not at all - the gov often concentrates power because they make the laws. This is what happens in regulatory capture - a company can ensure themselves a monopoly / advantages through the right laws in a way they could never guarantee in the free market.
This is what happens when you have rent control in your city. Residents who are lucky enough to live in under market housing become reluctant to move as they will be unlikely to receive another apartment at the rate they currently pay. Landlords have no reason to invest money back into buildings if they cannot recoup the investment. Rent control is bad public policy and should go the way of the dodo.[0]
The data in NY shows pretty clearly that buildings with significant amount of stabilized and controlled units get an outsized share of Major Capital Improvements because that is the way you get your units to cross the stabilization threshold.
Your statement is not inconsistent with mine. This is economics 101, price controls act the same way with housing as they do with oil. If those apartments could not be converted to the market rate, the investment would not be made. Market rate housing invests money over a longer period of time instead of a short burst.
Land-Value tax first, abolish rent control second. Why don't the anti-rent-control advocates support land-value tax. Perhaps because they actually prefer distortions that favor themselves?
The issues of taxation and rent control are orthogonal. You don't have to own a rent controlled building to be an anti rent control advocate. In fact, owners of market rate buildings benefit from the existence of rent control and I know many of them dislike it.
I'm very well aware of Georgism. In fact I agree that LVT is likely the least bad tax. However, there are challenges to implementation; mainly how to fairly assess the value of the land and what to do with capital improvements to it.
There are absolutely challenges to it, but the same goes for removing rent control. How do you make sure there is no discriminatory pricing for example.
We can't just say no to everything that doesn't work perfectly if it adds a lot of value to society.
A lot of people ignore the cost of discrimination to the person who is discriminating. When you discriminate against someone you are eliminating the profits you would gain from doing business with them. In highly competitive markets with low profits you have limited ability to discriminate as your company will go out of business if it chooses to do so. In less competitive markets (monopolies) you are more likely to see discrimination since there is less of a cost paid by the discriminator.
There is no magic wand to end discrimination entirely, but encouraging highly competitive markets is the best way to bridge the gap.
If you want more detailed information about market discrimination, I suggest you read "Product Market Structure And Labor Market Discrimination"[0] The same principles apply to the housing market.
I agree, but some things we aren't comfortable making into highly competitive markets. To make housing more competitive for everyone, both tenants and landlords, we would have to do something about the notice of eviction (because if the tenant gets a notice that's time without any revenue and no good way to market the home since it's occupied) and with the contracts (because to make it highly competitive you need flexibility). Also, the zoning laws are a nuisance because they limit how much supply of housing we can do, same thing with environmental regulations on building processes and materials.
As long as the choice of tenant is a risk people will act as people and use superficial traits to infer suitability as a tenant. They will use past, unchallenged experiences which are more commonly called prejudices.
When it comes to soda however, a highly competitive market, things change completely. You can raise supply much quicker and you receive payment right away, and the customers ability to not honor the commitment is very limited since they consume the soda. Even if you believe all kinds of things about a black man's ability to keep a steady job, what types of people come over and visit him, his recreational activities and his family situation it doesn't matter, he's got the money for soda and you've got the soda, what happens after the transaction is of no concern to you. Even if you're a straight up racist it would be foolish not the take the black man's money and give him a soda. However, when the purchase is him signing the dotted line and you getting money every week or month you get more reserved about who you do business with.
High cost of rent in NYC (where I live) but also SF, LA, Boston, DC, London is because of rent-seeking -- in this case zoning density restrictions which makes land scarce. Rent-seeking in this case is using politics to shift wealth toward special interests such as wealthy landlords, Donald Trump as a Prime example. Ironically, it is a Democratic City council in NYC which helped DT become so wealthy.
Japan fixed the problem with federal housing policy that doesn't allow local jurisdictions to create rent-seeking zoning density restrictions.
This entire problem can be explained with one line from the above essay:
>Punishable conduct is rarely punished.
As long as judges allow landlords to break the law without facing serious sanctions, they will continue to do so. Its the same behavior that encourages police officers to perjure themselves constantly on the stand and prosecutors to hide evidence and perform other misconduct in the pursuit of criminal convictions. In many cases throughout society, unfortunately, the law has become nothing more than a tool for the wealthy and powerful to punish and control the poor and powerless. Anyone interested in reading an excellent book on this subject should check out Glenn Greenwald's With Liberty and Justice for Some: How the Law Is Used to Destroy Equality and Protect the Powerful.
The Tenancy Tribunal exists to mediate disputes between the landlord and tenants, both the landlord and the tenant can bring cases. For example, landlords can use it to get tenants to pay for damage caused, and tenants can use it to get the landlord to fix something they are legally obliged to fix. The tribunal is non-biased, and the decisions they make tend to be fair.
The problem though is that all tenancy tribunal case are public. With the names of the tenants and landlords published, as well as the case and the outcome.
A lot of rental applications ask if you have ever been to the tenancy tribunal, and a lot of real estate agents will search the tribunal records (which go back 5 years) when you apply for a rental. It doesn't matter if you were in the right or wrong, or if you won or lost. Landlords are reluctant to rent to anybody that has been to the tribunal, as they are considered troublemakers.
Because of this, tenants are scared to go to the tribunal, even for justified cases, where they are in the right and would win. The opposite doesn't occur for landlords because there is more demand than supply for tenants, and also tenants often don't know that they can search the tribunal records.
Not mentioned here - the imputed cost of easy eviction on rental prices/ability to rent. I’ve lived in tenant friendly cities (NYC) and landlord friendly cities (HOU). And guess what, its way easier to rent an apartment in a state where it’s easier to get evicted. Perversely making it hard to evict a tennat can make the hurdles to be being able to qualify for an apartment to high for many people. I’m not saying that there should be no protections, and as a renter i would prefer to have stronger protections, but with those stronger protections come costs....
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[ 2.4 ms ] story [ 287 ms ] threadWe have this list, we have credit score lists, CLUE, and even sex offenders lists... How about one more:
The "I'm a cartoon villain" list. If you, for example, evict a little old lady in your greed for more rent even though your net worth exceeds some given amount, you get added straight to the list. Because that's cartoon level villainy right there. That should follow you for life.
(i just looked up a bunch of major REITs, and only EQR, Equity Residential, has >1% ownership by insiders. despite that, it has ~96% institutional ownership, with vanguard at 14.4%.)
The real work has gotten very complex indeed.
"I'm just doing my job" when you're obviously taking a helpless old lady's home factors out to "I knew it was wrong, I just did it for the money".
Our loss of shame as a society and as individuals is truly dumbfounding.
To me, it's just tilting at windmills, but that seems to be becoming more popular these days.
Evicted by Matthew Desmond is a great book on this issue. It is infuriating some of the predatory, senseless, ruthless, scumbag business practices that slum lords use and crazy to discover that this is a recent development starting from the 60s.
Also shout out to Justfix.nyc, a startup using tech to tackle this issue. One of their projects is this website they made to help.
https://www.evictionfreenyc.org
Word of advice to anyone who picks it up. Read the final chapter or two first. It's where he gets into the weeds of the data and such. If you start at the beginning and get bored, get distracted, give up, etc. before the end you're going to miss the best part.
Don't get me wrong, the stories are great. But just the same it gets disheartening, if not depressing.
I can certainly understand how you might find it disheartening and depressing, but I don't know I could quite see bored. The retelling of the situations was captivating, and the descriptions of how the system fails those most in need was harrowing at times. I've been recommending it to anyone who will listen.
However, the truth is, plenty of books get started and are never finished. Since the bit at the end was so factually important to the discussion of the issue, I didn't want that to be missed.
Imho, he should have started there.
(Obviously this is entirely a personal perspective.)
Few enjoy such books. But more need to be more aware of the (data) truths that define the issue.
The real value of that book is in the stories and descriptions of the inner workings of how evictions work in the two cities he profiles, which it does an excellent job telling throughout the rest of the book, and because of that I would highly recommend it.
It’s not clear what would be better. Should landlords always evict at the first missed check? That seems even more cruel. Or never? That has a certain appeal as a revolutionary-socialist redistribution of all apartments to their current occupants, but also means no more rental market going forward, or least higher prices on honest payers to cover the risk of deadbeats.
My takeaway from Evicted was that rents are too high and wages are too low, and regulation is a hopelessly ineffective way to paper over those structural problems.
There was a story later in the book about a slum lord's property that burned down because she cheaped out on fire detectors. Her tenant lost her baby but the slum lord walked away with even more money from insurance to buy 3 more properties.
The same slum lord took advantage of government housing incentives too by renting her dilapidated apartments at artificially higher rents to those lucky enough to be in a government program. Not to even mention how most of the tenants that are evicted can't even afford to literally get to the court house for the hearing.
But perhaps that's the root of the problem? With so many units at below market rates, the current new to the market units get priced to cover the "loss" of the controlled units? And then of course there's the incentive.
I'm not defending the practice. But I am suggesting - similar to housing and a college edu - that "government intervention" often has unintended consequences.
These are the circumstances that have created the housing crisis we have now and previously took down the entire economy. I’m confused as to why you single out trying to intervene on behalf of the average person over the wealthy as the source of the problem when the “free market” term setting has caused the massive distortions and unaffordablity.
There is definitely something very 'i am very smart'-like about tech nerds defending 'the market' against any attempts of humanizing life. "um, actually the free market will..."
Governments exist to provide super-market force. Safety regulation being kind of a prime example, especially for employees. OSHA is anti-free market -- there should be no safety regulations, and let employees the freedom to choose safety or pay and let the free market work it out.
Right?
Countries with freer economies like Switzerland and Hong Kong have higher standard of living on average. Countries which free up their economies have higher relative standards of living after doing so. Countries which oppress their economies have lower relative standards of living after doing so. (By relative, I mean relative to the growth rates of neighboring countries and before the changes, as standards of living rarely decrease absolutely).
In general I agree with you that markets allocate resources far better than the most earnest central authorities. That said, market failures often happen without regulation from governments.
That's not the case. I'm only pointing out that X years ago the gov set out to Y and now X has become Z and is eating X alive.
Now there are so many units under market value that:
1) there is an incentive for landlords to be aggressive.
2) any unit that comes off rent control is driven up in value; to make up for the "loss" of control units; and control keeps units off the market which also drives up price.
Long to short, yesterday'price fix is today's mega-cost __and__ shady biz / landlord practices.
Does that help? I wasn't trying to be vague. I honestly thought the gist of the situation was fairly obvious. Sorry?
There's good and bad to everything and every policy, but this statement is meaningless. How many people have been educated in government-owned colleges, which includes ever public university in the U.S.? Whatever the unintended consequences, it seems to have done an enormous amount of good.
They created artificial demand - for housing and for higher edu - and as we all know that drives prices up.
I hope this clears things up.
The point is, when you squeeze a balloon...shit happens.
That doesn't make it a perfect policy, of course. I think grants to students or simply free education at public universities may be the best options. But that costs more money than loans.
On this specific point: I have yet to see much consensus in research that the loans drove up the cost of college; last I knew there was one paper. AFAIK, it's a story started by the partisan 'shrink-goverment-at-all-costs' crowd, and the repeated.
Demand drives up price.
Loans also increased the price the market can bear.
A study for Ecom 101 just feels like more gov excess.
Those are the people who can afford to weaponize the courts. Us little guys still have to play by the rules as we don't have deep pockets and lawyers on retainer.
The gov grabbed a balloon and now that bubble is bursting, just in a different way.
Again. Not saying it's right. Only that it's really not a surprise. Not at all.
Rent regulation in NYC is easily the least effective way to make housing affordable for people of "modest means". It's criticized even by advocates of affordable housing for this reason. The only reason it still exists is because there are a large number of tenants grandfathered into the system (over a third of all NYC tenants) and that makes for a formidable voting bloc.
Rent control is all-but-gone - only a very small number of units are still eligible, and that's because the tenant has lived there continuously since 1975. Rent stabilization is less broken, but still horribly broken. Anybody can live in a rent-stabilized unit, regardless of whether or not they'd be able to afford the market rents, and there's no effort made to make those units available to people who can't afford market rents.
There are plenty of other programs in NYC, like Mitchell-Lama, which are much more effective at providing affordable housing. Rent regulation is not one of them.
Early 1970, actually.
> Anybody can live in a rent-stabilized unit, regardless of whether or not they'd be able to afford the market rents, and there's no effort made to make those units available to people who can't afford market rents.
But there is a strong effort to eliminate these units. Most of the rent stabilized inventory is not in desirable places to live. The rent can be increased every two years.
The rent guidelines board has voted for a freeze only one time in its 49 year history. On average the increase is 2% every vote and two increases of about 7.5% in the last 5 years. This interest compounds, obviously and also scales up MCI rent increases for capital improvements.
Once your rent hits $2700/mo, you are no longer stabilized. If you actually work out some examples, you'll find from this chart that rent stabilized tenants have had their rent increased _at minimum_ by roughly 34% for two-year leases in the last decade. If your landlord is anything like mine, it's probably close to 45%.
http://www1.nyc.gov/assets/rentguidelinesboard/pdf/guideline...
That's actually not true. At $2700, landlords have the option to petition for deregulation, but there's no guarantee that they'll succeed.
Under $2700, they can't petition for a high rent deregulation. The income threshold also only kicks in at this threshold, so a unit rented for $2000 can be occupied by a person who makes $500,000/year, and there's nothing that the landlord can do about it.
In addition, I'd have to check, but I believe the increase for the two years before DeBlasio was reelected was 0% for single-year leases.
I've seen this happen in building after building going on 20 years now. Usually they just wait for a few tenants to hit around 2500/mo and then stop renewing leases and let the vacancy rate pull the rents over the threshold for them. It's really easy.
(Note: they also lowered the tenant's personal income threshold in 2015 to ~200k/yr for two consecutive years)
They are required to renew the leases of stabilized tenants.
> or use the court to evict you and the apartment automatically becomes unregulated.
Nope, the apartment is still regulated even if they re-rent it. They have to go through the deregulation process through the courts if they want to take it off rent regulations.
Most public benefit programs in NYC require you keep on-file a current lease agreement. Withholding a paper lease is a deliberate tactic to make people choose between keeping their apartment and keeping their benefits.
I mean, we can keep doing this back and forth about where we agree on how things should work and I'll agree with you, but then I can tell you about how my family or I have been going to court with our landlord at least every other year since the late 80s.
I am a rent controlled tenant in a 95% rent stabilized building and the landlord does incredibly shady shit to try and get myself and others out. In fact we're going through the regular "didn't pay rent" routine right now that will bring me to court again probably this August or September -- the bank checks that I send certified mail every month are being refused delivery by the management company again.
Landlords here actually like non-agressive social-benefits tenants, as the rent get's wired directly by the state and the benefits won't pay for an apartment in an expensive area anyway, which, combined with the apparently rather liberal zoning, as far as high-rise buildings are concerned, makes the situation rather bearable.
That's true in the US as well, but again, the point is that a landlord who wants to make your life hell and drag you through the court system has plenty of opportunities to do so.
We could keep doing this back and forth, and I'd encourage you to do so, because you're just proving mu original point: rent control and rent stabilization are terrible at serving their stated purpose of providing affordable rent for people of modest means.
Rent control is about providing stability. I think 80%+ of home mortgages in the U.S. are fixed-rate. People pay a premium because stability in housing expenditure is extremely important to individuals, couples, and especially families. It provides an anchor point with which to organize their economic life, but mostly I think its human nature to prefer and need that stability. As a practical matter, though, there's no such thing as a 30-year, fixed-rate, residential lease. (Or more similar, a fixed-rate life estate as after paying off a mortgage nobody can kick you out.) It's possible but for historic reasons it's simply uncommon, and because such terms lack the ubiquity of the 30-year fixed-rate mortgage, you'd doubtless be paying a huge premium.
Ultimately, providing this stability to renters is a collective action problem. In order to the minimize the cost (and obviously there is a significant cost to property owners that should be fairly internalized by renters) you want a way to quickly channel a large segment of the market into using something like a fixed-rate perpetual lease. Ergo, rent control.
Affordability for low-income renters (or any renter) is a different matter and it's a shame that we've conflated these things. But we live in exceptionally conservative times such that the only way to publicly justify any manner of government regulation--even in liberal cities--is to sell it as a way to improve the lot of the most impoverished. The working- and middle-class have been utterly relegated to the vicissitudes of private markets and we no longer even have a vocabulary to discuss public policies targeting the larger population.
There are only 45000 of these left in the city. 30,000 of these are co-ops. If you discount the co-ops that leaves you with just above half of the inventory of rent-controlled units.
My single-mother sat on the waiting list for over 20 years before giving up and we were really poor.
Why discount coops? They're units too.
In any case, I didn't say Mitchell-Lama as it exists today is sufficient, but it's a thousand times better at achieving the stated goal.
Who are we quoting again?
Meanwhile the vacancy rate on rent-stabilized apartments over $2000/mo is 7.42%...
Whenever someone says 'it's unfair that I must provide these social benefits', let's recall the enormous amount of social benefits that each of us receives, especially in developed countries: Security, safety, a system of laws, roads, education, food supply, healthcare, sanitation, infrastructure built by generations, rights, research on everything from health to history to gas fracking to something once called APRAnet, etc etc. And then there are the benefits each industry and many private companies obtain from government, licitly and otherwise.
We all benefit more than we ever can repay. So yes, optimally the costs should be distributed in a very systematic, fair way. But at the same time my general response is: stop whining when asked to pull your weight a little.
That's not really how this works. You don't arbitrarily force property owners to bear the full cost of supporting these people. If society deems them worthy of support, then society should support them. If we collectively think these people shouldn't be forced from their homes, then great. Let's pay the delta between what we think their rent ought to be and what the market price for that rent is. Let's all pay it together. Randomly and capriciously forcing whoever happens to own that property at the time to foot the bill is short sighted and silly.
they already do - presumably they aren't dodging taxes, and is in a progressive tax system. This is about housing, and property owners might not reach an income level where the progressive system taxed them enough to produce a surplus to cater for the poor, and if so, making property specific taxes is one such way to force the burden on to them.
You mean the same progressive tax system inhabited by those property owners?
> This is about housing, and property owners might not reach an income level where the progressive system taxed them enough to produce a surplus to cater for the poor and if so, making property specific taxes is one such way to force the burden on to them.
...seriously? My point is that it's arbitrary and unfair, and you respond by saying, well, it might be that by chance some of these people escaped paying their fair share? How is that a response?
They do, in their own fields. Lawyers provide pro bono representation to the indigent, help charities and others who couldn't afford them, develop law to address problems, etc. Doctors do similar things, helping the ill regardless of their ability to pay. A-list actors use their status to draw attention to issues. Etc.
> A-list actors use their status to draw attention to issues
No way that compares...
Doctors treating patients is not voluntary; in many cases the doctor cannot turn away the patient. Lawyers' pro bono services aren't always voluntary AFAIK; sometimes the court appoints them. And it if it wasn't done sufficiently in a voluntary fashion, it would be required.
Clearly, that is not possible.
They then proceeded to harass their tenants, and to break the law, in an incredibly blatant and disproportionate manner.
If you don't want to follow tenancy laws, don't be a landlord. You have a choice in the matter, your tenants don't.
We need to make tenant abuse as ruinous to the landlord as it is to their tenants.
When we catch people selling drugs, we take their drugs, and their money, and throw them into prison. When we catch landlords doing this, we should take their properties. They aren't operating some secret underground criminal enterprise here - many of these abuses are well-documented.
I assure you, if you make an example out of a few landlords, the rest will stop with the frivolous evictions. The reason they are playing these games is that they have a lot less to lose then their tenants.
I suspect the landlords would up their aggressiveness to collect a higher risk premium on account of having a higher rate of getting busted. In expectation, it would likely be a wash.
Doing business (which renting out property is) is not a given right. The cost of doing business (taxes and regulations) is what makes possible the existence of the state at all - far from being a 'dysfunctional' concept.
narrow rent control law is a capricious policy in general, not just for property owners. a bunch of semi-corrupt political lotteries don't make a good government or just society.
The same goes for your own time and labor. You can't be a free person (as opposed to a slave) if you can't own your own time and labor -- if you can't sell your labor.
As with much else, the state gets to impose taxes and regulations. No argument there. But if those taxes or regulations prevent you from enjoying your ownership of property or self, then they are confiscatory and make you un-free. At the very least unreasonable tax/regulatory burdens make for a dysfunctional / distorted market, though as long as you can freely vote with your feet you're not so un-free as to be a slave. Still, just because you can move to some freer locality doesn't mean it's a good thing that the locality your leaving has high tax/regulatory burdens.
(If you're reading this and are hitting that downvote button, I hope you realize that nobody could seriously be advocating that this is the way things should be. But if this statement makes you that uncomfortable, I did my job.)
> somebody must be poor for society to function
I mean, if you can show me any significant society in human history without a servant/working/slave class though, I'll buy you a cookie. A really big cookie.
Right?
Any amount of compassion you have for the downtrodden is not enough (and has never been enough) to overcome this circumstance. Given that there has always been impoverished people, this likely holds true.
The best thing that you can do is to engineer systems that spread the misery around a bit and make it a little bit worse for you and a lot better for them.
Like, we could have plenty of affordable housing in urban centers for the poor, but we don’t, not because of the financial and political cost, but because we’re worried about those people then having too much time to think about escaping poverty, which we just can’t have. Ergo, to the exurbs with them!
Hard to imagine a dumber argument for why poverty exists.
You'll be first in line to see low-income housing built next to central park (below the 100s) though, right?
Your argument refutes what the parent post is saying, not me.
> And somebody must be poor for society to function.
You are making a claim that this is correct. You should have decorated it with "I believe". People then can show you how this is wrong.
A poor person adds to dysfunctionality in a society. These poor people cost more to society than they provide (subsided transport, social housing, social health care, subsided food stamps, etc...). The reason for that is that we allow big sprawling corps like McDonalds and such to pay low wages so they can profit on the top.
Mainly to point out my disgust towards attitudes like this:
> these poor people cost more to society than they provide
these are mostly the people that staff, clean and feed this city. Something that you will _never_ do.
I'm just saying that they are getting paid below what suffice to self-sustain a person. So their pay is being subsidized by the state for the benefit of the big corps.
> big corps cost more to society than they provide.
Fixed that for you.
Tell us how you really feel.
When you have a government where corruption and dysfunction is is tolerated or expected in some parts (police and MTA come to mind) that dysfunction inevitably seeps in everywhere else given the time.
As another commenter said the big real estate companies have the resources to work the system until they get what they want so as long as the system supports sloppy decision making and incompetence they can just work the system until they get the desired result.
Sure this is bad but it's not gonna change until the politicans apply pressure. They won't do that unless someone with connections gets screwed and makes it their mission to right the wrongs or something thrusts the issue into the public eye. It will probably take someone going postal for this to be thrust into the public eye because the people being screwed are mostly poor and nobody cares about what poor people do unless there's violence involved.
Without the politicians to applying pressure no change will happen and they won't apply pressure unless this affects people with connections or provokes outrage. Unfortunately that's just how these sorts of governments usually work.
Hopefully the NY Times names and shames these crimelords and their companies.
I've been wondering this for a while, but haven't come up with a satisfying answer: to what extent do people have the right to live in a given community? Does this depend on if people have lived in a community for some time? Does it only depend on whether they can afford to live there? I feel like these questions aren't black and white, but there's also no clear middle part I feel comfortable committing to.
We want housing to be more affordable in LA, [a different but still local] we also want Amazon to come to town and bring in a bunch of new workers from out of town. Those two goals seems hard to reconcile.
I remember driving through the Bronx with my dad in the 80s when he worked there. It looked like a war zone. Bubbles tend to pop, and bankrupt buildings get boarded up, not cheaper.
This discussion reminds me of people who dare not go to the gym because they're afraid of getting unsightly muscles. We're so very far from what you fear!
We want affordable housing = existing residents who want to rent their affordable apartments or continue to own their single family house without additional traffic/school overcrowding and their network of friends to have that opportunity too, politicians who want to represent these folks
We want tech jobs, more office space, more apartments = real estate developers, young tech professionals who want job options, incoming residents who aren't aware of how uncrowded these neighborhoods used to be, politicians who want to represent these folks
Cities that can grow outwards, like Houston or Dallas, can punt on this problem for a lot longer than LA or SF or NY can, but I'm very interested in seeing what that looks like long-term. Maybe Dallas hits a continuing density-vs-sprawl equilibrium that results in mostly-reasonable prices w/ mostly-reasonable commute lengths (people seem pretty tolerant up to 45-min one direction, IME) just over a wider and wider footprint without ever needing to densify - not many natural barriers for a while. But maybe it doesn't.
SF/SV -> Sacramento
NYC -> Newark
LA -> San Diego
High level management can day trip it via 1-2 hour train/car/shuttle ride to the secondary headquarters without the expense/complexity of plane rides and overbite hotels, or conversely the employees can day trip it to primary headquarters. Plus there is no timezone difference for conference calls. And most importantly the employees can still be within driving distance of their social network and have a very similar quality of life (climate, outdoor recreation, etc.) but not all of their paycheck is spent on housing.
We already tried that. Google, Apple, etc. located themselves in the small orchard towns of Mountain View and Cupertino instead of the big San Francisco. San Jose responded by building up its downtown, anchored by Adobe, and investing in light rail. A similar story played out in L.A., with media companies moving to Burbank.
This didn't solve the problem. There's really no way around building housing.
At least, this is my own particular experience. It took me years to learn how to ask good questions. Before, I would either:
1) When I ran into something that seemed frustrating or inefficient, I would assume that the task was just difficult and I needed to put my head down and slog through it.
2) Ask broad questions to try and build a mental model that would let me work more efficiently and know what to focus on, hear the feedback "you're trying to understand the universe", and think that meant I should stop asking questions and just keep punching. It was only at my current employer (where everyone is in the same office and my tech lead and I could have in-person 1-on-1s) that I got feedback on how to be more specific and contextual in my questions.
Do you think it matters that they were in-person? The fact that you called them 1-on-1s implies dedicated chunks of time for direct communication. Would they not have worked just as well over VoIP? Did you have to schedule time for 1-on-1s in the office, or was it more spontaneous?
FWIW, I'm visually impaired, and I spent most of my career so far on a distributed team where the same was true of my boss and most of my coworkers. So maybe there's some aspect of in-person communication that we're just used to doing without. Edit: Then again, remote work _is_ on the rise in the wider software industry.
yes.
I wish I had an explicit enough understanding that I could give you a solid explanation of why I believe this, but I don't.
San Diego is already a nightmare for commuters with the growth of tech in north county. I think major mass transit would have to go in first before additional growth would be feasible.
Its not on any of the main line's into London and not that well placed for anyone living in London let alone commuting in from more affordable places.
The difference between Texas and California is not geographical but political. Texas is pro housing. California is anti housing.
There are certainly hot spots in places like NY and SF, but it's not just one area. Lots of cities are growing. And it's not all due to evil corporations running amok, at a certain level it's just capitalism itself that requires growth - the GDP has to keep growing year over year, and the population probably has to grow slightly to provide for that growth. Immigrants move in, and children grow up and need somewhere to live. Add in the generational effect of baby boomers, i.e. that older people retiring and staying in their homes mean that we need more housing for the same number of jobs.
Specific booms like tech in SF may exacerbate the problem even more, but fundamentally our way of life just requires continual growth. This is at odds with the NIMBY attitude that I have a right for not just my home, but every building in my neighborhood, to stay exactly the same as the day I moved in. It's not at odds with affordable market rate housing, that just requires supply keeping up with demand.
So fighting residential development locally to try to push companies to other areas may be a rational strategy for some.
I'm not convinced that perpetual population growth will always be required for economic growth.
No there isn't. All the places with viable logistics and water supply are pretty much full up. Urban areas need barge transport, good rail grades, aqueducts, and rivers to carry away waste. You can't plop a city down in the middle of nowhere. The energy economics mean it will never work. All the sites worth building on have been built on. A lot of the places supplied mostly by truck are of questionable viability in coming years.
Probably the only area of the country that could long term sustain a much higher population density is the great lakes region.
If Oklahoma had the population density of the Netherlands it would have an additional 72 million people living in it...and oh by the way it’s got huge oil and gas reserves and some pretty enormous inland ports...
The Netherlands is, too, in the long run. But for now it's economically sustainable.
None of the other developed countries have vast interior deserts. The east and west coasts and some parts of the Mississippi and Great Lakes watersheds are plenty overpopulated.
I wouldn’t want to live there, but seems like a lot of bulk commodities, and products come in and out of Oklahoma and there is still plenty of room...
There are a few interesting studies in this area, California's agricultural section's tug-of-war with its residents for water is the biggest one that comes to mind, and the lesson you get is that industry uses up the lion's share of the water out of greed and sloth, but enough pressure will force them to curtail usage.
Have you looked at what it takes to make housing pencil out in the city? Developers are not "printing money". Construction costs are incredibly high, especially with inclusionary zoning.
I don’t live in SFO, but real estate and local politics are like white on rice. Developers are just one variant of real estate industry player. It’s often an old money game.
Historically, cities responded to this by building more housing, thus reducing the tension. In the 1970s, in certain locales like the West Coast, they stopped doing that. Forty to fifty years later, a massive housing crisis resulted.
We could start by acknowledging our mistakes and working to correct them.
Also, wouldn't you want your kids to be able to afford living in their hometown?
Many interests paint this as an all- or nothing- problem: "the developers just want to pave over Golden Gate Park!" "The NIMBYs just want their property values to increase!"
In reality, nobody credibly advocates this. Building high-density apartments in previously single-family home tracts is one solution. Paris is an excellent example of housing that is both beautiful and functional. Apartments are limited to six stories, and have good public transit available, so congestion isn't like Jakarta.
> At the meeting, one woman fretted that the tall building would violate the privacy of a nearby public school.
> When Tillman said he saw his project as necessary so people like his daughter could afford to come back and live in the city, one particularly motivated activist said she wished his daughter was killed in a terrorist attack.
> Parroting many of the Mission activists' concerns, Commissioner Rich Hillis complained that the design was "bulky, and a bit out of character" with the neighborhood, while Commissioner Kathrin Moore said that erecting an 84-foot tall building would be like "plopping a foreign object into this area and not thinking about the consequences." Commissioner Dennis Richards said, "I think a project absolutely belongs here. The question is what kind of project."
https://reason.com/blog/2018/02/21/san-francisco-man-has-spe...
So why people are not trying to buy land and build something on it instead? Buying a house will cost magnitude more than buying land and building your own house. Building will take time and resources, but... paying for a loan for 30 years? I think i can spend two years building my own home for the fraction of a cost of buying existing one.
Why no one is doing this?
Even in SF there are a lot of land for housing! For example, there are hundreds of body repair/tyre shops in SF. Why city ever need them in the city where Uber wins over owning your own car? But you can't just buy them and build more housing - in most cases you need to wait several years to "clean up" the soil.
Yeah, well...those places are already in use. And if you want to change that use, you first have to buy the land from the people who are already using it. And that's expensive, because people know what the land is worth. In other words: those auto repair shops are there for a reason. You can't just ignore the reason(s) and pretend that the land is vacant.
It's not as if every SF landowner is behaving in an economically suboptimal way because they're all stupid.
This is exactly what i am saying - it is economically suboptimal. They will be there until they are profitable.
But problem not in the land price itself, but also waiting for 3 years until you will be able to start new construction, this delay will increase actual price of this piece of land up to 30%.
There are many ways to reduce this delay.
No, you believe they're economically suboptimal, and you're making up excuses why reality disagrees with your theory.
"But problem not in the land price itself, but also waiting for 3 years until you will be able to start new construction, this delay will increase actual price of this piece of land up to 30%."
Proof of work required. You're going to have to prove that three years is a typical delay; that this results in the stated 30% price increases; and that this is the actual reason that your hypothetical auto-repair shops aren't all apartment complexes.
There's a simpler explanation: just as commercial rents are higher than residential rents, commercial uses of land are typically far more valuable than apartment buildings. If a redevelopment doesn't pay landowners a significant multiple of their current (commercial) revenue, they're not going to do it. Most apartment projects can't come close.
Sorry, i am not native speaker, but isn't it the same as "economically suboptional"?
> There's a simpler explanation
This neighbourhoods are mostly commercial districts that requires the first story to be commercial and other stories to be residential. Building up doesn't change commercial use of this buildings but just add more housing.
> No, you believe they're economically suboptimal, and you're making up excuses why reality disagrees with your theory.
I am not "believing", this is just a one hypothesis. I could be wrong, of course.
I'm saying that on average, whatever you observe in the world is already "economically optimal". You may believe that there's a better way to use land, but if reality doesn't agree with your beliefs, there's usually a good reason.
"This neighbourhoods are mostly commercial districts that requires the first story to be commercial and other stories to be residential. Building up doesn't change commercial use of this buildings but just add more housing."
It doesn't matter. If the trade doesn't benefit the current owner, it won't happen. Someone has to pay for the redevelopment, and I'd wager that in most cases, owners have to take on debt in order to finance redevelopment. So they go from having an annuity (fixed cash flow), to payments on debt, for a (possible) future gain. Maybe this is attractive for some owners. For many others, probably not.
So what about selling? Couldn't an enterprising developer buy the land and re-develop it for them?
Sure! Except: the current owner is making significant income from the business right now. That will go away, and they're going to want to be compensated for the loss. They're also not stupid, and know that the buyer is going to redevelop the land and charge more for it. Thus, they will (logically) ask for the buyer to pay them now for many years of future cashflow under the new use of the land.
In other words: owners know what the land is worth, and they're going to ask for it. The buyer is going to be paying not just for years of lost business income, but also, a significant percentage of her future revenue. And she's going to pay for redevelopment. And maybe that pays off, but it certainly doesn't pay off quickly -- and it isn't necessarily obvious that an apartment building is worth more than an auto repair shop. It depends on the health of the business!
This is why you can't just look at an auto-repair shop and say that it "should be" an apartment complex. It has nothing to do with regulation.
I got it, this is just misunderstanding. I meant that upbuilding is "econimically suboptimal", but current situation is optimal.
> In other words: owners know what the land is worth Actually, no. Some of developers told us that the problem with market is that most of the land is not for sale because owners just don't know that they can sell on a good price, they are not thinking about this at all. Developers are willing to buy land up to x10 more that they are currently buying.
> It has nothing to do with regulation.
In regions where there are a huge crisis in housing local government can introduce a new type of a Tax - Underdevelopment Tax. This will reduce margins of the owners that hold their land for "investing" opportunity and force them to sell their land to developers. Even if this tax will be low, they will start to think about selling their land right now and this help to the market a lot.
B. It can be much harder (higher down payment/harder to qualify) to get a land loan and a construction loan, Vs. a mortgage + more expensive as you need to pay for all of that for the time the house is being constructed and also pay for a place to live...
C. Often times lot values imply the highest density development e.g. in order for the purchase price of a lot to make sense you can’t just build a single family home but need to build 3 town homes for the economics to workout
The paperwork alone would be a nightmare!
Housing has come a long way since the days of the mail-order Sears & Roebuck assemble it yourself house.
Also frequently it’s property taxes that force people out of neighborhoods (eg their families own a place for years, and then the property values go up making it too expensive for them to live in). If property taxes were eliminated, this would displace fewer people. Naturally you don’t see any politicians talking about this since they don’t want to eliminate a source of revenue for the state — they’d rather blame Airbnb!
Prop 13 wouldn't be so damaging if it were easier to build. Unfortunately Prop 13 incentives and/or minimizes the consequences of communities restricting development, so it had this weird feedback effect. Regulations have unintended consequences and so we should be rightly wary of them. But that reality shouldn't be dispositive on whether we should attempt them.
Market dynamics are like gravity: you can't ignore gravity but gravity doesn't make human flight impossible, it just constrains the solution space. Arguing that we shouldn't attempt market interventions is like arguing that we shouldn't have attempted human flight because God didn't equip us with wings or that we should've waited around until we evolved wings.
If you eliminate property tax, or prevent it from rising, you make the absentee owner who only cares about a payoff 20 years from now leaving perfectly livable homes empty many magnitudes worse. (as evidenced by california)
eliminating property tax only incentives blocking all new development to drive up property values and encourage rent seeking
I'm quite interested to see your reasoning behind that statement. Don't people still want their property values to go up even with property taxes? Except in a no property tax scenario, people who own their homes outright would still be able to stay if they wanted to. Perhaps no property taxes would more highly encourage local owners to restrict newcomers. Isn't the government also interested in increasing property values so they can receive more revenue? In that case I suppose they would in a sense be "earning" the taxes they levy.
- Edited for clarity
Bingo. Rampant NIMBYism. Also growing the local economy should be the priority for local governments not creating a housing bubble
There is an argument that can be made that people who cannot afford to live in prime real estate in an economic powerhouse should sell their house and move somewhere else to enable growth or allow more housing to be built. But picking neither is not a productive outcome
I was just trying to point at that local governments are also encouraged to have high property values for tax revenue. They also tend to have a bit more power to be able to affect large areas property values by force. If people cannot/don't utilize the government to enact policies to force people out, it seems to me that it would be pretty difficult for people to enact those policies without governmental power.
What we see in places like San Francisco are property owners and governments teaming up to drive property values up in a mutually beneficial relationship.
Edit - It could be said that the government itself is rent-seeking in such an arrangement.
https://en.wikipedia.org/wiki/Land_value_tax
The problem is, many cities like NYC and San Francisco are trying to have their cake and eat it to. Liberal residents want to keep their suburban-style single family neighborhoods while simultaneously appearing to care about skyrocketing rents. You simply cannot have it both ways. The ONLY viable solution is to relax the rules blocking the construction of new housing. SB827 in California, which would have overridden local zoning to legalize the construction of higher density buildings within walking distance of transit stops, was a valiant effort to do the right thing, but it failed because of a strong anti-development sentiment from anti-capitalist tenants rights groups and pro-housing-appreciation single family home owners (in a particularly absurd moment, the mayor of ultra-tony Beverly Hills, which has built almost no new housing in the last few years, claimed to be against the bill because he was concerned about all of the "luxury housing" it would build in his town).
Those two cites are not the same at all. NYC has few suburban style neighborhoods and the ones we do have aren't that relevant to these discussions.
New York is at least somewhat functional as a large city, and can and does permit the building of massive amounts of high rise residential development. From where I stand in downtown Brooklyn, the skyline has become nearly unrecognizable in recent years. And predictably, rents are starting to fall noticeably.
San Francisco doesn't operate this way at all.
Yes, rent control exacerbates an already existing problem, but it doesn't create it. The same landlords who profit from the high prices of housing in our urban cores actively oppose new development because of that same reason.
We can't solve this problem by banning rent control. The only way to solve a capacity problem: adjust supply or demand. I don't see demand changing anytime soon.
In such a situation, there'd be no real real-estate speculation, and levels of rent-extraction above cost would be controlled by municipal bylaw (as they'd effectively be a tax.) Property development companies would all either be nationalized, or would be private government-exclusive subcontractors.
Basically: imagine China, but instead of privatizing every industry all at once, they had kept construction and property management state-run. How would that look?
https://www.forbes.com/sites/sarahsu/2017/03/21/good-news-fo...
"Last Wednesday, Premier Li Keqiang said a real estate protection provision that would ensure individual’s access to property under a 70-year lease would be renewed unconditionally is being drafted.
This will help to quell ongoing fears that wealth garnered from one generation will be removed after the 70-year lease ends by the government. And while this does not address the fate of 20-year leases, the precedent set in Wenzhou may be replicated in other areas."
I don't know how well this works (I only have a superficial knowledge of the property market from my travels and relations) but I imagine it becomes a problem when you have major improvements. For example, imagine a condominium. As a political matter the government isn't going to kick out 100 tenants just because the leasehold on the land terminated. So I suspect that in terms of revenue the governments are no better off than relying on property taxes. In the few cases I'm personally familiar with the typical scenario seems to be that the government offers renewal terms at a highly discounted rate a couple of decades before the lease expires. It seems like a pointless contrivance.
Certainly freeholds are nicer from the perspective of efficient markets because you don't have arbitrary dates to contend with. Imagine trying to sell land with only 10 years remaining on the leasehold. The seller can expect very little, which is to be expected and not per se problematic. But more importantly 10 years limits the types of things you can use the land for, especially if you're risk averse. In general buyers will find it difficult to find land with a remaining term long enough to recapture the value of improvements, so liquidity would suffer significantly. Seems to me property taxes are a much simpler, more consistent, and theoretically fairer way for governments to capture the value of land. And that's ignoring Henry George-style land-value taxes.
I suppose leaseholds may make it easier for governments to actually kick people off land if they're committed to doing so. The end of the lease is a nice, neutral date to implement some difficult policy objective.
Here's a short, interesting article a quick Google search found: https://www.straitstimes.com/singapore/housing/understanding...
What caught my eye was
CPF is the mandatory savings program, sort of like Social Security and Medicare, except you can borrow against it. So basically if there's only 30 years left on a leasehold you can't borrow against your CPF account. My guess is that as the leasehold nears expiry your ability to securitize simply goes down to nothing, probably long before termination. And even before then you probably start paying a premium because if you default the bank is stuck with a rapidly depreciating asset.From what little I've gleaned from my travels and from the academic literature, I think Americans enjoy an exceptionally liquid property market and efficient financing market, particularly for residential property.
Lots of important land uses like airports, factories, train stations require huge investment with returns spread over decades or centuries, it would be harder to get people to make these investments on leased land.
It seems you have no idea what unintended consequences you're preserving by staying beholden to an ancient status quo.
The law generally -- and correctly -- recognizes that making someone homeless is a very serious thing, and should not be done on a mere whim, no matter how much someone might want to argue that as a property owner their whims are sacred.
I think UBI would significantly help relieve housing pressure in large metro areas and perhaps help revitalize some currently-dying small towns and rural areas, which after all will need more services with increased population.
Even places that are economically barren see people just go onto Social Security disability (perhaps a form of UBI) instead of moving to regions with jobs.
There are also people who move when they retire, or when they have kids. This could facilitate that happening earlier which would also reduce the pressure on housing in cities.
It's because of zoning. Allow more high rise to be built and allow more expansion and demand can be met.
It's not some mystery. It's local laws that prevent people increasing height of buildings and prevent expanding the area.
It's a problem that can be seen around the world due to similar planning laws in many places. See the Demographia report below:
https://fcpp.org/wp-content/uploads/dhi2018-fcpp.pdf
http://www.harriscountytx.gov/CmpDocuments/74/Budget/FY18%20...
It's grown by 67% since 1990. Far greater than NYC or LA or SF in percentage terms.
The other thing that should be mentioned is that Texas has fairly high property taxes. They also help.
I suppose there are other problems like lengthy process of permitting (basically at least 1 year for issuing building permit) and entitlement (unpredictable). This huge delays reduces margins of a projects and in some cases they became unprofitable.
That is the entire problem. The entire problem of building more dense housing - even 3-4 stories in SF is negotiating every single thing besides the literal physical feasibility of construction.
If your startup doesn't think this is the key problem to solve, I'm not sure you have a complete grasp of what you're trying to do here.
1) There's a major time delay here. Most rent-controlled apartments have rent increases tied to inflation. Had zoning and land development policy over the last 50 years kept up, maybe in aggregate affordability within communities could have been preserved. As it stands, we are so far behind what would have been needed to keep things affordable that it's basically unworkable in the short to medium term (10-20 years) to expect changing zoning laws to solve our problems now. NYC would need an insane capital infusion, and any economic downturn would make the building market freeze up (as we saw in 2008).
2) New development in price-controlled neighborhoods doesn't solve the issue for people paying significantly under market. That's exactly what happens now, in fact: new development once a neighborhood is rezoned allows developers to buy up old properties and build luxury high rises. There is SO much demand for luxury (i.e. Manhattan yuppie) housing that, again, in the short-medium term, long-time residents are still necessarily displaced without protection.
3) To what degree should a community be able to resist change? Other than the fear of being displaced, renters also fear their communities being torn apart by gentrification, slowly dissolved by a changing demographic and rising prices. Now, I lean more on the side that communities don't necessarily have a right to exist (i.e. NIMBYism in CA), but there's definitely some leeway here, especially when those communities are classically disadvantaged (socioeconomically, racially, etc.). Rezoning a neighborhood that is fragile can have majorly negative impacts on the communities, and make things even more dire for the most vulnerable segments of the population.
4) It's unclear how much remaining demand is unsatisfied because of housing prices in NYC. Think of the surplus of people commuting in on major rail lines each day. Surely some fraction of them live in the suburbs for lifestyle reasons, but I'm sure a large fraction of them are simply priced out of the city. So demand for housing may increase if prices are lowered substantially. Depending on this unknown demand, rezoning could have little to no effect on the populations we're discussing here.
Rezoning is an extremely important part of the solution here, and the city should DEFINITELY be making aggressive moves to rezone in various places. But it's not a silver bullet, and in the short-medium term doesn't solve most of the problems that rent control have attempted to solve.
How much do tenants actually value a guaranteed right to live in a given community? When we look at anywhere in the U.S. that isn't rent controlled, we figure out, it's not much at all.
There is nothing illegal about signing a very long lease with a landlord. Commercial real estate contracts routinely include a a clause which allows tenants to extend a lease at a very similar price for many years in the future.
Landlord would absolutely love to do leases like this. But the reason this doesn't exist in the non-commercial settings is because no one cares enough about living in a place long enough to actually pay for that option.
Rent control only exists because its a a popular transfer of wealth, and is emotionally appealing, not because it actually makes people better off.
Tenants with kids value continuity of school districts. It’s a major reason why buying a house is so important. Tenants don’t seem to care because most tenants are high-income-no kids, old, or poor.
Usually bigger developments require no-negotiation, ironclad leases to make sales and financing easier. Smaller landlords and public housing are sometimes more flexible.
Philosophically, I don't like placing two sympathetic groups on opposite sides of a scale and weighing them, because that's usually a false choice and there is some external factors unaccounted for that make the choice less normative. In the case of rent control, this externality is clearly that it depresses new unit construction, exacerbating the problem. So I oppose rent control.
I find measures to limit the amount that property tax can increase on a property you own and occupy much easier to stomach than measures like rent control.
This city is full of landlords who got rich with the existing rent control system. It’s just preventing some of them from getting mega buck wild rich. So sad.
What? You thought that power was going to be used on behalf of the powerless? That may have been the stated intent. But the powerful tend to know how to use power better than the powerless do...
[0] http://www.igmchicago.org/surveys/rent-control
My landlord has hit between 4.8% and 6% every year without exception since 1991...for what? Besides the lobby I can't tell.
https://en.wikipedia.org/wiki/Land_value_tax
I'm very well aware of Georgism. In fact I agree that LVT is likely the least bad tax. However, there are challenges to implementation; mainly how to fairly assess the value of the land and what to do with capital improvements to it.
We can't just say no to everything that doesn't work perfectly if it adds a lot of value to society.
There is no magic wand to end discrimination entirely, but encouraging highly competitive markets is the best way to bridge the gap.
If you want more detailed information about market discrimination, I suggest you read "Product Market Structure And Labor Market Discrimination"[0] The same principles apply to the housing market.
[0]: https://www.amazon.com/Product-Market-Structure-Labor-Discri...
As long as the choice of tenant is a risk people will act as people and use superficial traits to infer suitability as a tenant. They will use past, unchallenged experiences which are more commonly called prejudices.
When it comes to soda however, a highly competitive market, things change completely. You can raise supply much quicker and you receive payment right away, and the customers ability to not honor the commitment is very limited since they consume the soda. Even if you believe all kinds of things about a black man's ability to keep a steady job, what types of people come over and visit him, his recreational activities and his family situation it doesn't matter, he's got the money for soda and you've got the soda, what happens after the transaction is of no concern to you. Even if you're a straight up racist it would be foolish not the take the black man's money and give him a soda. However, when the purchase is him signing the dotted line and you getting money every week or month you get more reserved about who you do business with.
capital improvements are not taxed in an LVT scheme. That's the L in LVT.
Japan fixed the problem with federal housing policy that doesn't allow local jurisdictions to create rent-seeking zoning density restrictions.
See Harvard Economist Edward Glaeser: Build Big, Bill http://www.nydailynews.com/opinion/build-big-bill-article-1....
>Punishable conduct is rarely punished.
As long as judges allow landlords to break the law without facing serious sanctions, they will continue to do so. Its the same behavior that encourages police officers to perjure themselves constantly on the stand and prosecutors to hide evidence and perform other misconduct in the pursuit of criminal convictions. In many cases throughout society, unfortunately, the law has become nothing more than a tool for the wealthy and powerful to punish and control the poor and powerless. Anyone interested in reading an excellent book on this subject should check out Glenn Greenwald's With Liberty and Justice for Some: How the Law Is Used to Destroy Equality and Protect the Powerful.
The Tenancy Tribunal exists to mediate disputes between the landlord and tenants, both the landlord and the tenant can bring cases. For example, landlords can use it to get tenants to pay for damage caused, and tenants can use it to get the landlord to fix something they are legally obliged to fix. The tribunal is non-biased, and the decisions they make tend to be fair.
The problem though is that all tenancy tribunal case are public. With the names of the tenants and landlords published, as well as the case and the outcome.
A lot of rental applications ask if you have ever been to the tenancy tribunal, and a lot of real estate agents will search the tribunal records (which go back 5 years) when you apply for a rental. It doesn't matter if you were in the right or wrong, or if you won or lost. Landlords are reluctant to rent to anybody that has been to the tribunal, as they are considered troublemakers.
Because of this, tenants are scared to go to the tribunal, even for justified cases, where they are in the right and would win. The opposite doesn't occur for landlords because there is more demand than supply for tenants, and also tenants often don't know that they can search the tribunal records.
These controls suffocate supply and now the owners of an artificially scarce basic resource have a lot of power. It's not exactly a surprise.