Now, I have not read the paper, but I would have thought the free market combined with sky-high wages and demand, combined with a lack of inventory, was the cause.
Rent Control surely just prevents local families from being muscled out by the tech employees?
> Rent Control surely just prevents local families from being muscled out by the tech employees?
Correct. And in the process of doing so, further contributes to the lack of inventory of market-rate rental units available to the influx of newcomers/tech employees.
As mentioned elsewhere in the comments here, this causes huge disparities for rents of similar units within a given building as landlords attempt to compensate for all the market-rate rent being missed from longtime tenants. E.g. I've known folks paying $4,000 while their neighbors pay $400. While I don't have numbers or a study to point to, my experience over the years with the SF housing market suggests the impact of this effect is nontrivial.
> Google or whatever doesn’t pay based on housing costs.
A number of companies have pay brackets that vary by location, to reflect cost-of-living differences in different locations. I can't tell you whether Google is one of those companies.
So what's the solution for addressing this problem, AND not having local families from being muscled out by tech employees? Because whatever is proposed, if it means that local families have to leave because the rent was increased astronomically underneath them, then it's a non-starter.
The solution is for local families to be muscled out.
Hi, let me introduce myself. I am SF's housing crisis. So are many of my friends. We're those "local families" who have been living in SF for 15+ years in rent-controlled apartments. We're still here because the rent is cheap. If our rent went up even moderately, we'd probably move to the suburbs; by the time you hit your 40s, you get tired of stepping over panhandlers and human feces.
If you really want to get angry, let me tell you about the multiple times I've moved away for extended periods and kept the apartment unoccupied as a pied-a-terre. Rent control makes it affordable!
There are a lot of us, enough to occupy a significant chunk of the housing stock. Because we've taken this stock off the market, the available float is smaller than it would otherwise be, so everyone's bidding up what's left.
Would average rents go up without rent control? Certainly. But it would force a lot of us "local families" to make long-overdue decisions, freeing up housing, and driving down the average "new rent".
What in particular about incumbent renters justifies making policies that benefit that group above all others? Is there something inherently less worthy about families seeking to return to a city after having left it? About a daughter seeking to move out of her parents house?
It's not about favoring one group over another, it's about (trying to) reduce volatility, favoring less change over more change when it comes to housing because forced relocation can be tough. Also things like reducing class segregation, etc. Not saying it works.
But rent control manipulates the free market. With rent control, people who might otherwise move, don't. Further, people who might rent a vacant apartment while they're overseas don't. Or people who start a family and move to the suburbs keep their city place as a pied a tier. So supply is suppressed, but demand is not.
"With rent control, people who might otherwise move, don't."
I'm failing to see the problem. Unless those people would have moved for reasons other than soaring rent, them getting to keep their homes is a GOOD THING.
There are plenty of bad outcomes: say they no longer need a 3 bed apartment. But with rent controls, they might actually pay more if they moved to a 1 bed. Or they get a job in San Jose and are forced to commute instead of just moving because they are getting such a deal.
But the bigger issue is that is artificially raises demand. That prices up for everyone else, which does more harm. It's a subsidy for older people paid for by younger people.
If they truly didn't want to move out because of soaring rent then they would lobby for building more housing. Rent control and prop 13 prevent this from happening. Older residents are now actively fighting to keep their protections and prevent the construction of new housing at the cost of newer residents.
Instead of letting the bubble pop when it's harmless it's growing more and more and when it does pop it is going to be extremely painful.
Rent control removes the incentive to build new apartments. There are second order effects that make it counterproductive. Even the socialist economists agree rent control is terrible.
So as to not remove the incentive to build new apartments, in San Francisco, rent control only applies to units built before 1978.
The SF rent control law (like the CA Prop 13) does allow rents to increase, but very slowly. It would be possible to have both without as strong of adverse consequences by changing the ceiling at which both are permitted to increase.
> So as to not remove the incentive to build new apartments, in San Francisco, rent control only applies to units built before 1978.
Indeed! It's also worth mentioning that this has had the perverse side-effect of encouraging people to find any and every way possible to block the removal of old buildings.
Which is to say that the incentive to build new apartments has been matches with tools designed to prevent exactly that.
Everyone who wasn’t gentrified out of their home agrees it’s great. An economist might foolishly brush off everyone being priced out of their neighborhoods as simply “externalities” but San Francisco’s politicians thankfully have a more nuanced view of the situation.
And, as ghouse indicates, new housing isn’t subject to rent control so developers make a killing if they get approval.
This addresses active developers who are looking to profit from renters. There are plenty of speculators in the Bay Area who purchase homes without renters or buy them out only to sit on the home and not rent it (since it decreases the value of the home). This isn't a rare thing, there many pre 1978 residences with nobody living in them owned by overseas investors.
This happens to a large degree even without rent control. Miami is full of properties owned by snowbirds who only visit for a few months in the winter or by rich investors who figure a penthouse on South Beach isn’t likely to lose value any time soon. This is especially true of investors from South America who are happy to own a stable investment in US dollars.
I’m not convinced it happens so much more in SF to cause the high rents. I think years of building almost nothing after the 208 crisis while jobs exploded is responsible.
Actually the opposite, by taxing land in high demand urban cores it would incentivize more efficient use of the land - i.e. building up to support more occupants or higher value economic activity. [1]
Deregulating the zoning restrictions would allow more buildings to be built. [2]
Here is a startling fact: in 2014 there were 142,417
housing starts in the city of Tokyo (population 13.3m, no
empty land), more than the 83,657 housing permits issued
in the state of California (population 38.7m), or the
137,010 houses started in the entire country of England
(population 54.3m).
Tokyo’s steady construction is linked to a still more
startling fact. In contrast to the enormous house price
booms that have distorted western cities — setting young
against old, redistributing wealth to the already wealthy,
and denying others the chance to move to where the good
jobs are — the cost of property in Japan’s capital has
hardly budged.
This is not the result of a falling population. Japan has
experienced the same “return to the city” wave as other
nations. In Minato ward — a desirable 20 sq km slice of
central Tokyo — the population is up 66 per cent over the
past 20 years, from 145,000 to 241,000, an increase of
about 100,000 residents.[3]
With artificially constrained supply from Prop 13, there's dozens of empty lots and empty units just doing nothing of value. It's surreal to hear about stories from baby boomers about moving across the country to NYC/SF/LA/etc and being able to easily find a job and affordable housing in a major city, often while attending school at the same time. The same generation has now pulled the ladder up behind them to spit down on future generations.
Not just Prop 13; I discussed with a contractor the possibility of building a new home here about a decade ago; estimate for cost of obtaining permits: $250k. The lot is still empty.
[edit]
Also due to house vs. lot-size restrictions the house would have been limited to just over 2000 square feet. This is regardless of the number of stories (i.e. a 2-storey house would need to have about a 1000 square foot footprint, but a ranch could have about 2000 square foot footprint).
>Actually the opposite, by taxing land in high demand urban cores it would incentivize more efficient use of the land
That's exactly what I was saying. The owners of inner city land pay very little cost for monopolizing land that could be put to better use. It's a store of value that is unlikely to go down in value. There is nothing to offset the instinct to hoard.
>The same generation has now pulled the ladder up behind them to spit down on future generations.
All of the "it was boomers what done it" is just the 1% playing identity politics as a means of scapegoating and divide and conquer.
At the end of the day, the 1% millenial children of 1% boomers are going to be the beneficiaries of this ladder pull-up.
Rent Control surely just prevents local families from being muscled out by the tech employees?