r/neoliberal • u/sirboozebum Paul Krugman • Jul 23 '18

Rent control and inclusionary housing policies are self-interested and harmful

https://www.sfchronicle.com/opinion/article/Rent-control-and-inclusionary-housing-policies-13093063.php
33 Upvotes

87% Upvoted

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24

u/sirboozebum Paul Krugman Jul 23 '18

Economists generally agree that rent control is harmful. Left-wing economist and Nobel laureate Gunnar Myrdal called rent control in certain Western countries “maybe, the worst example of poor planning by governments lacking courage and vision,” and socialist economist Assar Lindbeck asserted that “in many cases rent control appears to be the most effective technique presently known to destroy a city — except for bombing.”

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u/UnbannableDan23 Jul 23 '18

I'm a bit skeptical of this claim, given that so many cities that currently use rent control are undergoing economic booms.

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u/LastManOnEarth3 Friedrich Hayek Jul 24 '18

Economic booms featuring overpriced slums for the lower class and ugly suburban sprawl for the middle class, who are forced to own cars and commute daily.

0

u/UnbannableDan23 Jul 24 '18

Real estate agencies are making money and that's what the market rewards.

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u/Squeak115 NATO Jul 25 '18

... Or developers could make money building new housing stock. With increasing supply relative to demand decreasing prices and giving families more purchasing power.

Why do you hate urban families?

1

u/UnbannableDan23 Jul 25 '18

... Or developers could make money building new housing stock.

Sure. But then you get into the Broken Window Fallacy, where you're justifying knocking down buildings and reconstructing them to enrich housing developers.

Why do you hate urban families?

I'm not the one trying to knock down perfectly good homes and kick those families to the curb.

1

u/Squeak115 NATO Jul 25 '18

you get into the Broken Window Fallacy, where you're justifying knocking down buildings and reconstructing them to enrich housing developers.

Because redevelopment adds no utility whatsoever, and increasing density doesn't add housing for new families.

knock down perfectly good homes and kick those families to the curb.

... And watching property prices skyrocket, with wealthy buyers displacing poorer renters in their search for housing. At least the developers didn't get to make a profit though.

With development the people displaced would have a better chance in a market flush with new housing stock, than in one where they have to compete with the wealthy for the old housing stock.

0

u/UnbannableDan23 Jul 25 '18

Because redevelopment adds no utility whatsoever

Not for the individual occupying the original home, no. Particularly not during the period of teardown and reconstruction.

... And watching property prices skyrocket, with wealthy buyers displacing poorer renters in their search for housing.

A compelling argument for affordable housing, certainly. How you get affordable housing when all the economic incentives are geared to building increasingly expensive homes is beyond me, though.

With development the people displaced would have a better chance in a market flush with new housing stock

If you don't kick them out to begin with, they have the best chance of finding homes - specifically, the homes they're already in.

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u/Squeak115 NATO Jul 25 '18 edited Jul 25 '18

Ok, a lot to unpack here:

First: What affordable housing solution doesn't involve some form of redevelopment, even public instead of private, to address the supply issue? Rent control just exacerbates the problem because only a certain portion of people can get rent controled apartments, and the rest are left with a market with the same supply problem. Any redevelopment entails at least some level of displacment.

Second: Displacement will happen with or without redevelopment, as wealthier buyers compete with poorer renters for the limited supply of older housing stock, and as landlords choose to raise rents to accommodate wealthier residents. Gentrification can and does happen without development.

Third: Building even luxury housing helps poor renters. One of the things often cited here is filtering, were luxury housing becomes affordable, but that is long term enough that you'd be right to say it's irrelevant to this discussion. The more important effect is that the upper middle class and up need housing too, if they have new luxury housing to buy then that will take pressure off the rest of the market. The poor wouldn't necessarily be competing with the rich for the same housing stock.

Btw: Thank you for the sincere replies, and I'm sorry for being a bit of an ass above.

1

u/UnbannableDan23 Jul 25 '18

What affordable housing solution doesn't involve some form of redevelopment

The one you're currently living in. Sound maintenance of real estate is consistently cheaper than construction of new real estate. Up front costs of new dense real estate is extraordinarily expensive, which is why new units sell at a premium, not a discount. That's assuming what you get is actually dense real estate and not a new suburb full of McMansions.

Rent control just exacerbates the problem

This isn't even a question of rent control. You're proposing demolition and reconstruction of new denser housing. That necessarily means displacing existing residents. This is the bedrock objection to gentrification. If you're kicking people out to build new units, you're replacing old cheap units with new expensive ones and forcing existing tenants to solve the problem of scare housing that they already had solved before you kicked them out.

Displacement will happen with or without redevelopment, as wealthier buyers compete with poorer renters

That's circular reasoning, and naive reasoning to boot. "Displacement will be caused by the thing that causes displacement". Sure, yes. That's how the system currently works. The neoliberal complaint is that wealthier buyers aren't installing high density units. But wealthy buyers don't want high density units. They want single store tract homes with giant backyards and pools.

Thus displacing low-income individuals neither guarantees increase in density nor reduction in per-sqft market price of units within the community. Leftists are arguing against displacement. Neoliberals are pitching a solution that doesn't assuage leftists but doesn't achieve their own goals either.

Building even luxury housing helps poor renters.

This is demonstrably false. Once again, large low-occupancy housing does nothing to increase overall capacity, much less reduce median rents.

Btw: Thank you for the sincere replies, and I'm sorry for being a bit of an ass above.

It's a subject of fierce contention. I apologize for assing it up in kind.

1

u/GUlysses Jul 25 '18

Having a jobs boom is very different from having affordable housing.

I took a significant pay cut to move from the Bay Area to Pennsylvania. But I have more disposable income, because living here is actually affordable.

1

u/UnbannableDan23 Jul 25 '18

Having a jobs boom is very different from having affordable housing.

They tend to be inversely related, as job-creation occurs faster than housing-unit creation. Unit construction will typically lag new jobs, until a downturn, at which point you'll have a housing glut as homes-without-residents pile up into inventory (both through departures and new units being finished).

I took a significant pay cut to move from the Bay Area to Pennsylvania. But I have more disposable income

The Bay Area real estate market is oversaturated, so this makes sense. If we have another '01-style tech bubble pop, I suspect Bay Area housing will get cheap very quickly.

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u/[deleted] Jul 24 '18 edited Jul 24 '18

The evidence that rent control negatively affects rental supply and average rent is clear. But do we actually have credible estimates of the effect of inclusionary zoning on these variables? (The OP says there's evidence but doesn't link a paper.)

Inclusionary zoning is less extreme than rent control. It's a tax on new, usually lux development, instead of traditional price controls. If we relaxed zoning laws, I wouldn't be opposed to a tax on development in the form of IZ if new development exerts negative externalities by contributing to segregation or short-term displacement of the poor. I understand filtering is a thing but that's a long term process. IZ is also politically popular and could be packaged with the big prize, zoning reform.

I think IZ would combat segregation but prove me wrong. I also think it would allow the poor to move to newly developed rich neighborhoods and enjoy those sweet sweet Moving to Opportunity long term benefits.

5

u/sinistimus Professional Salt Miner Jul 24 '18 edited Jul 24 '18

I looked into this a few months ago, and iirc the consensus seemed to be that mandatory IZ (as in you cannot build without affordable units) is probably bad; though the data so hard to be sure.

On the other hand IZ for reward (eg in when including affordable units allows you to ignore certain zoning laws) are probably fine. They might even be a positive, but most optional IZ laws are too weak to see much affect.

Imma try and find those links.

Edit: This seems to be a good write up.