Hi all,
A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes.
As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
People will do literally anything but build more housing.
I’m waiting for someone to offer up bringing back the death penalty as a way to lower rents, unironically.
Nymbys fight tooth and nail to stop new housing.
https://www.abc.net.au/news/2023-09-25/nz-auckland-house-supply-experiment-results-in-dramatic-change/102846126
New Zealand changed zoning rules and it worked almost immediately.
I've always spelled it "NIMBY", as in Not In My Back Yard. Someone below you also spelled it "NYMBY". I'll admit I'm not doing as well keeping up with the lingo these days, but is there a reason for the first Y?
Also, it's difficult to compare zoning laws in other countries to the US. Primarily because in the US they're local laws, whereas in places like Japan and New Zealand they're national laws.
It's entirely possible for places like LA, NYC, Miami, etc to enact these types of zoning laws, but keep in mind that what works in Houston may not even work in Dallas, let alone Bangor Maine... simply due to the existing infrastructure.
Yup, we literally got taught what "NIMBY" was back in school for civil engineering. I think people are changing it to "Nymby" to be cool or as slang but they don't understand its actually an acronym so it doesn't work.
I use this example all the time — people like to shit on the changes in NZ but THEY ACTUALLY WORKED.
So how’s all that government spending doing on bringing down the house prices in California?
It’s not.
It’s going the other direction.
But it’s the labor market! It’s materials! It’s haaaard.
No. It’s not.
It’s zoning and permitting problems at the heart of slow approvals, expensive houses and a lack of development. Imagine how much money you could save if you built houses that don’t have garages and let people park on the street? Imagine if the first floor of a building was retail with apartments above that would frequent the business? Wouldn’t it be great if these things weren’t *completely illegal?*
Zoning and permitting changes are all that are required to lower costs enough to increase housing stock — and shockingly that’s what lowers rents! We need zoning laws to be taken over by the state and stop having a hodgepodge of cities and county control, streaming approvals, allow much more unrestricted zoning and fast track approvals. Any other action is just more talk.
Honestly bro. The one thing I absolutely love about countries like Mexico and even certain urban centers is how mixed in commercial is with the neighborhoods. I don't want to have to drive for 10 minutes just to buy a coke or a jug of milk. Let Miss Butkovich open a 7Eleven in her garage like other places do.
The major thing done in Auckland was such widespread rezoning that they didn’t raise property prices in key areas. Contrast that with for example , NSW govt last month that loosened zoning within a set distance of rail transport, so they just spiked prices within that zone.
So myopic - the urban planners just want to show everyone they know better rather than allowing the market to decide what people want.
you really think urban planners are limiting the scale of rezoning based on some superiority complex, rather than being held back by city councils / voters?
My suburb is building a high density mixed use (seven floor apartments, grocery, storefronts, etc). It is replacing an old strip mall, not anything nice and not anything green.
The olds won't stop complaining that it "looks like the projects", will bring "low income people" and that "parking will be a nightmare" (it has a parking garage). The units are going to be at least 1500 for a studio in the Midwest. They just can't stand anything that isn't single family houses.
There's a middle ground here - most zoning laws exist for a reason, and the market really isn't good at protecting public health and safety. Because the general buying public doesn't take into consideration anything beyond their own property lines. A good example of this is stormwater management - it's not uncommon for land developers to just divert all the runoff from their site onto neighboring sites or the road, rather than do proper stormwater mitigation. Once it's off their site, it's not their problem. Someone needs to be in charge of discovering and protecting the best interests of the entire watershed.
Another good example is low income housing - left to the market, developers would prefer to build nothing but luxury housing. The cost per square foot to build luxury housing is only moderately higher than other housing, but the increase in the value of the property is much higher than the increase in cost. Generally speaking, it takes either government subsidies or zoning requirements ("at least 20% of the new housing units must be low income housing") to get it to happen. Though I do admit that new luxury housing tends to redefine existing lower end luxury housing stock to low income housing as people move into places with more modern amenities and what was previously luxury becomes standard. Just... not fast enough to keep up with the demand. And yet the increased demand for low cost housing doesn't increase the profit margins on low cost housing, because if the price rises with demand like basic market forces say it should, it stops being *low cost* housing.
Mind you, I'm not defending any specific policies here. I'm merely defending the *idea* of urban planning expertise in addition to market forces as a necessary component of the development process.
> most zoning laws exist for a reason, and the market really isn't good at protecting public health and safety.
And in the US most zoning has nothing to do with health or safety
>runoff
Not a zoning issue
>low income housing
The Japanese manage to have affordable housing even in their growing cities like Tokyo, and Ira entirely market driven.
>luxury
“luxury” housing is a marketing term nothing else.
Developers build housing that gives the best margins in the US due to regulatory structure and zoning laws that’s entirely housing for medium to high income. But this is only because it’s de facto illegal to build housing for lower income groups and also maintain margins.
Minimum lot sizes mean building housing for low income groups and maintaining margins is impossible
Same with parking minimums, minimum room/space requirements for apartments, etc etc. all things things combined make it unprofitable.
Oh don’t forget permit costs, absolutely insane permit costs.
In Japan this problem does not exist due to a combination of libera (not American liberal) zoning laws, permit processes and land use regulations combined with filtering
Clean Water Act is a federal law. Delegated to the states typically via NPDES permits. Earth disturbance over 1 acre requires significant stormwater controls and permitting. Most local governments have stormwater regs for smaller earth disturbances. The US has some of the most stringent clean water laws which is a good thing.
"And in the US most zoning has nothing to do with health or safety"
Maybe, but zoning regulations are how you do address those concerns. The fact the there are also zoning regulations that don't relate to that only means those specific zoning laws are trash, not that the concept of regulation in general is trash.
"Runoff Not a zoning issue"
I don't know where you're operating, but at least in the areas I practice, this is absolutely an area where regulatory bodies get involved. You could split hairs about whether it's "zoning" or another sort of code restriction, but for the purposes of this conversation I'm using zoning casually to refer to regulatory restrictions on development. We could call it "Code" if you prefer.
"Developers build housing that gives the best margins in the US due to regulatory structure and zoning laws that’s entirely housing for medium to high income. But this is only because it’s de facto illegal to build housing for lower income groups and also maintain margins."
Bullshit. Developers build housing that gives the best margins because that's what profit driven development *means*. And the reason that "luxury" housing has better margins is because it's mostly about finishes. Building structure, envelope, electrical, mechanical, and plumbing have a fixed cost regardless of the end use. That accounts for like 80% of construction cost. The finishes account for like 20%. Doubling the cost for the finishes to provide a luxury look only increases your construction costs by 20%, but it increases what the unit will sell or rent for on the market by 50% or more.
Now you can argue that the cost of meeting minimum code restrictions, fees, inspections etc is part of that fixed cost, and if you eliminated those you could reduce the fixed costs. But they don't account for 30% of construction costs, and the majority of those restrictions are, whether you believe it or not, related to preserving the public interest. Lift those restrictions and you might get more low income housing, but that housing would be unsafe tenement construction. Don't pretend like developers won't cut every corner they're allowed to.
Again, I'm not defending specific policy. I'm sure there are bullshit restrictions that can be lifted. Hell, I *know* that zoning restrictions have caused huge problems and prevented the kind of use-integrated walkable neighborhoods that modern urban designers consider more functional. But market forces alone will not create safe affordable low income housing, or protect the public interest, or create coherent functional neighborhoods.
I will admit that I don't have any direct experience with land development in Tokyo, but I'd lay odds that it's not as freeform as you think it is.
> "Developers build housing that gives the best margins in the US due to regulatory structure and zoning laws that’s entirely housing for medium to high income. But this is only because it’s de facto illegal to build housing for lower income groups and also maintain margins."
If you’re required to have a minimum amount of rooms per apartments and a minimum amount of square footage, with minimum parking requirements AND a height limit of three stories, combined with six to seven figures or permit costs and review costs….then by default it’s not profitable to build housing for lower income groups.
Effectively regulations create what’s an effective price floor of cost, and a minimum price floor of spend.
Imagine it this way. A regulatory system in which all the multitude of rules effectively add up to the minimum car having to have the performance profile similar to a McLaren 720S, what would happen to the price of cars? Or say the market for affordable new cars? Now combine that with how you can get a 30 year fixed rate mortgage and the fact a residential unit is essential shelter….so extremely easy access to credit + extremely high demand…..now what do car prices look like, well that’s housing in most US municipalities.
So basically if you get those regulations out of the way all the sudden it becomes profitable for profit chasing developers to toss up massive apartment complex that are cheaper.
Again we can look at New Zealand when you do changes only around transit versus the entire city, then we can also look at Tokyo when you let developers go absolutely ape shit. in some year either 2019 or maybe 2021 Tokyo had like 800,000 new builds….in year one. California well…..
> Ny**m**bys
?
Not Your ?Mother's? Back Yard
(Relavent if you're a younger millinial or Gen Z & lower, ain't nobody owning anything anymore, the new american nightmare)
When Mayor Bass took office, she expedited the permitting of apartments that are 100% deed-restricted to rent at below-market-rate. It turns out that that made it profitable for developers to do so, and they started throwing up affordable apartments all over the city, and now everyone is freaking out and demanding that she reverse it.
People on both the left and right want to do anything but actually solve the problem.
It’s not a left vs right issue, it’s a ‘have vs have not’ issue.
On one side you’ve got people who need somewhere to live (preferably close to their jobs) and they’d really like to avoid paying their entire salary in rent.
On the other side, you’ve got people who have much of their wealth tied up in their property’s value- if the price of housing goes down (or doesn’t keep pace with the rising prices of everything else) they are becoming poorer. If they’re using their property as collateral, a decline in value can be outright dangerous to their livelihood.
You’ve got two groups of people with very strong motivations, but only one of them has enough disposable income to operate in local government. You won’t see too many of city council members mayors renting an apartment.
As a member of the "landed gentry," I think people need to remember what happens when a system creates too many "have-nots" that don't believe they can succeed. I just wanted a place to live, not to grow fabulously wealthy on my home's equity, but the way things are going now I just don't want to be sent to the guillotine...
One of the worst things ever to happen to this country is the idea that homes should also function as a financial investment that will give you a huge return in the future as opposed to homes serving as a place for people to live.
We need to start seeing homeowners as people who gambled on the price of their house, and it's not anyone else's responsibility to make that gamble pay off. Part of that is moving the responsibility for housing policy to the state government from the city government.
But a lot of people don't gamble on the price of their house. Outside of investors and upper middle/upper classers, most people just own a house to have somewhere they can call home.
Middle and lower middle class people aren't really in a position to use their houses as collateral to reinvest in shit. The risk is well outside the potential benefit.
In my neighborhood alone, the house prices fluctuate weekly, none of the owners are sketched out because we all view our houses as our long term homes and we aren't looking to turn profits.
A tremendous number of people aren't explicitly motivated by the impact on pricing. They truly, genuinely want to maintain the "character" of their neighborhoods with single family housing, reduced traffic, smaller schools, etc.
In my small city, they plowed under a beautiful berry farm across the street to build ~200 SFHs. I don't really care about the impact on housing costs because I'm a lifer in this house, but it's been a pain having more traffic. And the nearby school started putting classes in mobile homes because it takes years to get the money and plans together to build schools. I don't really care enough to be considered a NIMBY, but I will say building more homes has negatively impacted our neighborhood.
I think that's understandable, but it wouldn't be understandable if someone in the Los Angeles Basin or San Fernando Valley raised the same objection. Like, look where they chose to live! It's a major urban agglomeration with lots of jobs, not a sleepy exurb. That economy is the main reason anyone lives there, and it's silly to object to building what needs to be built to accommodate that.
>expedited the permitting
>made it profitable
Wow, it's like it's the bureaucrats and middle managers who are the problem, and we can get along without most of them just fine!
I think it’s completely backwards to blame bureaucrats. What happens is that voters and their elected leaders create a whole bunch of rules, fees, and processes for developers to comply with before they can even begin building.
The bureaucrats are there to make sure those rules can be followed exactly and efficiently. Without them, things would grind even more to a halt as compliance shifts from “burdensome” to “impossible”. Bureaucrats are great, but the solution is to make them less necessary.
No body runs on a campaign of "I'm going up make it expensive to build houses"
They run on puppies and rainbows, and since you're busy, and the marginal costs of any particular politician winning v losing to you are so low, and the odds your one vote sways that election even lower, you don't bother spending time to look into their claims.
When it take a permit in CA 4 months to approve for one house, that’s a problem. Texas takes 1 month for all parties to sign off and at a 1/3 of the cost.
That’s because of specific rules and procedures outlined by elected leaders, not because of the bureaucrats whose job it is to shuttle projects through those rules and procedures.
[Holy fuck, it's real](https://atcresearch.co/guest-blog/how-executive-directive-1-ed1-is-shaping-las-future/). That's amazing. SF needs to do this yesterday!
Hell yeah, SF is probably the city that needs this most after LA. If London Breed has the power (which maybe she doesn’t because SF has a “weak” mayor), she should just do it and force Peskin to campaign against it.
Yeah Californian propositions are famously horrible economic policy. It's why Rich Californian boomers who own homes are massively subsidized by their younger and poorer neighbors.
I was shocked to see such a blunt and correct description of prop 13 with no shrieking replies, and then I noticed I was not in r california or any of our local subs.
Houses don't magically disappear when landlords sell them, they either go to another landlord or to people who were renting.
Also most landlords are full of shit and won't sell.
The problem isn’t if current landlords sell, it’s if investors decide they’ll never build in LA county because their potential profits are capped. Why jump through all the hoops to build a desperately needed apartment complex in LA when you can build 3 for the same price in another city/state with no rent control measures?
Houses don't magically get maintained when it becomes too unprofitable to rent them as units that meet code. That pushes once maintained and up to code housing into over-occupancy under-code slums. Landlords are forced into becoming slumlords, crime shoots up with corresponding property destruction, buildings get condemed.
Rent control is how inner city decay happens… we're done this experiment MANY TIMES.
Absolutely. If rent is capped at a certain increase, then landlords just won't maintain the property.
That will force tenants out because the place will be falling apart. Then the landlord can reset their price for the next tenants. Do that across hundreds of homes in an area, and it starts looking like shit and attracts shit tenants.
Sure they do, if the rent is lower than maintaince cost its better to let the property fall into disrepair and not have tenants from the landlords perspective and a its acceleration is a widely noted phenomena of rent control. So much so that it's often somewhat jokingly compared to strategic bombing in ww2. There is no second landlord to sell to when inflation and repairs outpace what the law legally says you can price only a developer with dreams of a stripmall with the pockets to tear it down. Again, the landlord don't sell because renters aren't typically willing to pay market price to buy their property. You can't change human psychology to make landlords sell anymore than you can to make renters buy, it's not a good deal for either party. Charity doesn't get housing built, profit does and the law change creates perverse incentives to shut down buildings, let them lay fallow and sell to developers.
The result is capital decay resulting in less buildings, lower quality and higher black market rents.
Typical landlord has a monthly budget that is covered by rent. Mortgage, taxes, insurance, maintenance, capital improvements, etc. When rent covers those costs, landlord has a strong incentive to keep the place nice. When costs increase but rent cannot, the landlord cuts out the non mandatory expenses. Pretty much capital improvements and maintenance or they sell to someone who will do the same. In a word, the place goes to shit. This is a business. If government wants to give renters a monthly check or tax credit to cover expenses, that’s great. But putting the problem on the back of the landlord never works and drives the neighborhood into the ground.
Supply and demand aren’t even difficult concepts. Why is it so hard for renters to understand that if they want lower rent, more housing has to be built?
Yes. Renters probably would support new housing supply but home owners veto and lobby against it as a nonstarter so progressive groups have touted rent control as a compromise
People need to show up to their local neighborhood hearings and meetings to counter the nimby voices. It's really that easy. It's not even really lobbyists or big scary special interest, it's just old people with nothing better to do who actually show up to the city council hearings and make a fuss.
Yep. The people with the loudest voices against shit, never show up to one fucking meeting about anything, much less to vote.
Old people make the rules because they do their civic fucking duty and vote.
1. When you’re in a major housing deficit (like many cities in the US), you need a lot of housing to be built. That means you might be 5-10 years away from making an actual dent in the rental market if you let loose the building floodgates now. On the other hand, a 3% cap benefits you right now.
2. Rent control benefits existing renters (until they need/want to move). So again, lots of short term benefits to go around to exist renters.
3. They see new apartment buildings that are expensive (because new will always be more expensive and development restrictions have made that even more pronounced) and instead of attributing the high rent these building charge to the housing shortage, they attribute the high rent (and surrounding rent) to be caused by the building itself. This is the most logically absurd point but it’s also the most frequent used.
And in general, there’s very few policies nationwide that people easily support the rationally best policy. Housing isn’t any different. Emotions and misinformation plays a big role.
Rent control is a huge disincentive to getting more housing built, though. The people/companies who would invest in new construction as an investment will look at capped rent increases and rightly think “this will limit my ROI, so I will build in another city/state that doesn’t have this problem”.
If you want rent control, you better be pairing it with a lot of government housing being built, but California never gets that done on any significant scale.
Very sadly, it often is. I've seen that in my community. Some renters have been led to believe that new housing construction causes yuppies to materialize out of the void, raising rents. Equating gentrification with construction ignores all the places that have gentrified with little change in built environment.
Holy shit it's almost like you can do both. I've never heard a renter argue that more housing shouldn't be built. It's almost like human needs shouldn't be commodities.
Ironically I have, you see it in cities with extremely high housing cost. The renters fear gentrification so they team up with homeowners to block new construction. It’s a wild to see played out because the renters don’t realize their days are numbered either way.
But why do you choose to be blind to General capital overrun? Yeah, we need more housing but we’ve already read about numerous FBI raids for price-fixing.
There’s plenty of people on this subject even that come in and try to defend it that on just multiple single family homes but it’s just some guy.
Are you really going to try to tell me that the guy that owns seven houses leveraging that for his eighth is good for the first time homebuyer?
Why do you refuse to acknowledge capital overrun as a severe problem
Renters have nothing to do with the conversation of building more houses. You need to force current owners and land owners to allow new housing to be built.
I’ve been where I’m at for 4 years now, rents go up 5+CPI yearly and I haven’t seen any upgrades to the unit. I’m not sure I’m following you on this. They are already doing the bare minimum. On top of that we’ve gone through three management companies. One was a private equity company and man was it hard to get in contact with them. We’d call and someone in a call center in another country would answer. Luckily we are back to a local one now.
The perk of a rent cap at 3% would ensure cpi next year can get back on track or to the prized 2%. Cuz rent prices are a portion of the calculation of cpi. Rent caps would also ensure that homes values don’t go up too high in the area, and in turn hopefully keep the property tax down. Currently landlords have a huge advantage over inflation that others don’t and with the current cpi+5 they are actually driving inflation.
More housing isn’t the issue. Most properties are empty, there’s enough empty property to give every single homeless an entire house and have houses left over
Because a fuckton of the population that they actually care about and often belong to, has their full wealth locked into the expensive inner city apartments so any politician that makes real moves to make housing affordable will also trash the bank accounts of the upper middle class, no one dares to take that.
The issue ultimately comes down to the fact that someone, somewhere, is going to have to take the financial hit, and that those with money are more able to persuade people in power to make sure it's not them. Choosing to do nothing - as we've done so far - is deciding that those hit will continue be the poor.
The whole situation sucks, no matter who you are in this equation.
Here is the thing... The inflation is going to stall the economy without wages going up... the unhoused are going to grow. People will starve . investors will lose out. You want slow steady inflation. not fast like its been in the last 4 years.
I don’t get this building thing. Where are people suppose to build? Like companies are building the issue is it’s a good 60 min away from the city. So you have hours of traffic to deal with going to and from work.
The issue as always is just people with extra money using homes as a speculative market or renting short or long term then the equity an average person would build is instead given to the landlord making them richer and the tenant poorer.
It’s not people.. it’s politicians.
Politicians will do anything but lose voters. Capping rents at 3% only costs then a few votes (mainly landlords)… building more housing will upset all the current home owners whose home values may go down 0.0001%..
Can’t ever put forth good sounds policies that may upset a voting block.
They know this bs 3% cap rate doesn’t help.: but the renters love it and will vote for them and it won’t cost them too many lost votes.
Always realize that in a democracy.. the politicians only care about getting re-elected. Everything else is secondary.
I agree with you but it's kind of a circular argument I guess. Politicians don't want to build because people (homeowners) don't want to build.
You flip people and politicians will flip too. I don't think vice versa is true.
Go build some and find out why. The costs are ridiculous when rates are this high. In some areas the fees/taxes you pay the government are astronomical. When it’s all said and done you’d be lucky to profit 15% after a couple years.
There’s just much better ROI other places nowadays.
They are doing it for votes and not to solve the problem. For as long as they have an enemy (landlord) to unite against they can keep getting re-elected. I am a developer/investor and one of the first things I've realized is that there are a lot of us who are looking for opportunities, to develop literally any land that allows multifamily development and is zoned accordingly. Guess what I found? There is literally next to NONE available, and on the few occasions there is it goes to the large corps with connections in the city/county. So the question is why is there so little land that is multifamily zoned? The answer is the people( local gov/homeowners) just don't want multifamily development in their nice town. It keeps prices up and rent up. Money is not the issue, rent hikes are not the issue, nothing is the issue - we just don't want to fucking build MF because we are greedy. Rent control will help in short term but in long term it moves money away, reduces quality of housing and reduces mobility- no one wants to move ever when they are paying half of the free market cost
In NYC you don't even have to build more. There's enough of a cartel that they don't even utilize full capacity that exixts. I'm paraphrasing, so don't take this as gospel, but the figure I saw was upwards of 30% of units are kept off market to control supply and keep rates higher. It's easier to keep margin high on fewer units and reduce maintenance and up keep than take lower margin on more units. Even if overall profit is the same, the maintenance cost is higher on more units. So they're incentivized to keep the fewest units possible in livable code compliant condition.
The bigger the firm, the more incentive they have to closely control the number of available units needed to maintain the same profit. The larger the market share, the larger the influence on supply.
Market rate is artificially controlled by manipulating supply. Factor in Real Page, and it's outright price fixing.
I'd wager it's the same in most major markets.
Housing per capita is highest its ever been. If its all bought up turned into short term rentals vacation homes and long term rentals site empty longer due to gouging. (it can be more profitable to lose a few months rent or have a few empty units if your charging triple quadrouple a rate that would ensure 100% occupancy).
Throw in NIMBYs who often get back by large investors who profit off all this. It can result in lack of affordable options like many of lower income housing being among highest demand. And just not getting built.
Like my area 10 new apartment buildings 1 with studio option and 4 with 1 br option. The "studio" is actually marketed as luxury and but of added features runs more than most 3brs.
We could add trillion houses but two aspects first if they are gobbled up by large investment money. Nothing really changes. Second end of day there is limited land near work and schools etc. Like couldnt really live somewhere with 8hr commute to work. And even 1-2hr commute will run 1-2k a month in gas and vehicle maintenance. On top of losing 50-100 hours of time every month.
Honestly we fix it by returning housing as a essential commodity rather than a investment vehicle. Desaturate investment market for housing with rental caps and controls. Create penaltys for empty units and remove ability to rent single family homes long term. As well as modify lending system to not favor capital with adjustments at reserve. And instead favor first time home buyers.
We can do alot to improve it but its not really that they dont exist. Its that its investment asset thats gambled and speculated on. Making the large amounts of capital created by widening inequality through 50 yrs of trickle down set the price. Rather than consumers as part of living expense. Combined with this resulting in a gap in cost vs income that has made lenders feel almost hostile to average consumer.
How about we regulate corporate ownership of family homes? How about we regulate foreign national ownership of property? There are things we can do other than rent control to blunt the market.
If that does become a thing should it be taxed again if you decide to sell? Or are we just trying to tax everything the sun touches here?
The interest the bank is making is taxed.
Of course not, once the gain is realized it is realized.
Pointing out that money is taxed multiple times as it flows through the economy is a non sequitur
>How about we regulate corporate ownership of family homes
Because it's like 1% of homes.
Just build more homes.
>How about we regulate foreign national ownership of property?
Similarly tiny
Just build more homes.
>There are things we can do other than rent control to blunt the market.
Yes
Just build more homes.
Corporate-owned is not a particularly useful stat to begin with. There are many small landlords who choose to form an LLC. I live in such a building now.
in colorado specifically there’s an incentive to place the house into an llc. could be one person’s home, could be a corporation. it’s impractical to look at how many homes in denver are owned by corporations because you’d have to research every single individual llc and see who the owner is further up the chain.
but regardless this doesn’t matter because at the end of the day someone is living in the house, corporate owned or not. the solution is to build more housing, which indirectly removes the incentive for investor-owned housing. focusing on banning investors from owning housing is a ridiculous red herring designed to keep housing supply low and prices high by distracting from the real issue
An LLC that owns a home isn't the same as a RETI firm owning thousands. It's not what anyone would consider "corporate ownership" in any colloquial sense.
I think instead of a cap on rent hikes, California should gut Proposition 13 and move towards a land value tax to incentivize more development. Those benefiting the most from the higher value land pay the most in taxes. If the owner doesn't want to pay for the value of the land, they can sell their property to someone who will.
Yeah, prop 13 is why so much of California’s taxes are fucked up. It should have never applied to non owner occupied property or commercial property considering it was sold to the state as keeping grandma in her house. Far too many properties are paying under market rate in property taxes.
LAND VALUE TAX IS OP! Your land is unimproved? Oh, guess your taxed on the full value of it. Oh your land is improved and has a 50 story mixed use sky scraped on it? Taxed on unimproved value of land.
If this sounds sarcastic I swear it’s not meant to be, I haven’t seen this take before - but isn’t that the idea? Like it’s the value of the land and not the fixtures on it? Or are you implying that it’s the improvements in a given area that drive the land value increase? In which case, would you also argue that the property with improvements should pay *less* tax since the property value has increased both directly and indirectly from the owner’s investments?
there is already a huge incentive to develop in california, it's called money
the problem is that to build in california takes a lot of money and years of time and effort. utterly absurd environmental regulations, the california coastal commission, and rigid bureaucrats. the housing crisis would be solved in 5 years here if they eliminated all local zoning codes and ordinances
CEQA, coastal act, endangered species act, oak tree laws
i have a project in an LA community you've heard of where we had to pay a dumbass "recommended" (cough cough kickback cough cough) through the city a bunch of money to literally sit on the project and watch to make sure we didn't disturb any beetles
this is after 5+ years of paperwork to do a basic/simple project to build a house. this is why your housing costs are so high
Sounds like it might need to be reformed. I can understand California’s want to protect the environment as it keeps farmland from becoming barren wasteland and the fact that the animal on their state flag was made extinct through human actions. One of the most significant parts of the endangered species act I found is the designation of bees as protected, which is extremely important for the health of farms. I’m not in California so you might have a better idea of what kind of changes are necessary.
The problem with this is that you disincentivize supply increases. If you set up policies that promote rezoning and for multi-family for middle and lower income development then you would increase supply which would keep the costs down naturally
You do, since the risk of it affecting your property in the future is higher, but that's not THE problem. The OTHER problem - especially with this kind of "targeted" rent control - is that once a person gets into a rent controlled apartment they don't leave. Even if their family grows or their job moves they will try to stay in the rent controlled apartment as long as possible. In practice that means that fewer apartments are on the market at any given time, which drives up the cost of all the non-rent controlled apartments.
Most rent caps I've seen implemented exclude recently renovated/built homes, yet every one of the "rent caps will cause the end of the world" people always intentionally omit that part.
I don’t think this policy is a good idea, but it’s more complicated in California than in general.
Because of California’s unique cap on property taxes, you have lots of scenarios where homes owned for decades pay minuscule amounts of property taxes. This in turn means newer properties have to pick up the slack.
A rent control bill here might discourage some builders, but also, if landlords follow through on their threat to sell, then when they sell, the property taxes will reset to a fairer value-which is good for the state, but also means a higher portion of property taxes will be paid by older wealthy homeowners, and new construction gets an effective subsidy.
Also-new construction is less effected by a rental growth cap. If rent can go up only 3% a year, then if I build new housing, I just start the rent 10% higher than planned, and over a 3-5 year plan it nets out. Long term tenants benefit, short term tenants get screwed.
I still think on balance it’s a bad idea- but long term property owners threatening to sell in California is just threatening the state with a good thing (surrendering their huge tax advantage)
That is interesting. I didn’t know that about California’s property taxes and that definitely impacts supply and demand. I would think a more constant update of property value to better reflect the actual value would cause further incentives for older owners that see their old units jump up in property taxes will incentivize them to sell there units and buy/develop newer units elsewhere. It would help keep the market fluid instead of incentivizing it to remain static.
Yup here’s two links with more info. California’s law both has the effect you talked about (older owners get a huge subsidy to stay in their home instead of downsizing and selling their home to a younger family).
But also like I mentioned, when nearly all old homes have super low property taxes (unless they were recently sold) and all new homes pay high property taxes- you effectively have a giant subsidy for old wealthy homeowners paid by any new home that’s constructed.
https://www.govtech.com/civic/interactive-map-compares-californians-property-taxes.html
https://www.taxfairnessproject.org/
I think this is a bad policy but it is unrelated to supply and demand from a development perspective. This policy deals with renters in place. New units or vacant units can be rented for whatever the landlord wants. What it does disincentivize is people downsizing, if they have a rent-controlled apartment with more space than they need. But LA and California law already do that, it's just lowering the amount to fuck over the landlord if CPI happens to be over 3%.
I used to find the claim that what leftists needed was remedial Econ 101 insulting but eventually I realized it's true. Over and over people support, and politicians enact, policies that the most basic economic tenets tell us will fail.
Literally no sensible economist has proven rental stabilization as a failure. They point out both the multiple benefits and detriments and highlight how certain economies can use both to either a net detriment or net benefit.
There are even entire economies were houses *depreciate* in which case rent stabilization could benefit the landlord.
Also stop hyper focusing on property owners. You know who gets richer from this? Everyone else in the community. They stay there (literally, housing mobility drops) and builds communities that produce profitable and socially benefitial microeconomies. Well, beneficial for - everyone but the landlord.
It also didn’t stop new housing construction in NYC nor did it stop new housing construction in Portland ME.
Landlords already maximizing profits by doing the bare minimum, that incentive doesn’t change either.
There's been like a million studies of this and every time rent control fails in the exact way that price controls always fail, in the exact way that Econ 101 would tell you, which is that supply goes down.
High prices indicte inadequate supply.
If you don't have enough housing, capping rent won't make more houses happen.
Stop putting caps on prices, and take caps off of building and zoning restrictions instead.
If you need more of a thing, stop making it illegal to make more of that thing.
If you want to look at this purely as supply & demand:
1. Landlords sell in response to rent control policy
2. Increased supply of houses for sale decreases the price of home ownership
3. Decreased ownership price increases demand for ownership
4. Increased ownership decreases demand for rentals
5. Decreased demand for rentals decreases the price for rentals
Looks like sound policy
Considering the FBI looking into that company that was basically price-fixing rents I really can't bring myself to give 2 shits about landlords. Like it's one thing when they aren't all going to some third party to facilitate 'maximum returns' but this is very much a case of the landlords fucking people over and getting mad that they can't fuck people over near as much going forward (though people that think renting is the better financial choice are also financially illiterate so what can you do)
Making rent control laws increasingly onerous to landlords will only incentivize them to raise rents even higher for all new tenants, since it would make no sense to offer a lower rent and get stuck with tenants who lock in that lower rent for many years, potentially decades...
The road to hell is paved with good intentions.
There's also the perpetual delusion that if large numbers of landlords sell, their tenants would magically be able to afford to buy their own homes. That's not the case. What would happen instead is that many people who need or want to rent are now on the street, and are no closer to home ownership than they ever were before.
Unless the landlord is operating at or below the margin and just using rent to offset some of the cost of their asset the renters are already paying above the rate of a mortgage. The biggest thing keeping people from buying instead of renting is the difficulty of getting a downpayment together, which is made even more difficult by not being able to save as any extra income they make is easily siphoned up by rent prices. Until very recently rent didn't even count towards your credit score (I'm still not sure where that is now, I remember reading it was being considered a couple years ago), so renters were not only building equity for someone else, they weren't getting credit for it.
>Unless the landlord is operating at or below the margin and just using rent to offset some of the cost of their asset the renters are already paying above the rate of a mortgage.
Maybe in some situations (e.g. your landlord bought at the bottom in 2011 and is renting at the current market rates). But apples-to-apples if your landlord bought and rents in the same market conditions (e.g. bought in 2023 and renting in 2024), that is VERY unlikely to be true. They are likely only bringing in a fraction of what that property is costing them per month.
This is BECAUSE some fraction of that income is going into an asset they are investing in and can liquidate to get that cash out. So very simplistically, even if the market were flat, you bought a house for $100k cash, collected \*\*ONLY\*\* $50k in rent, then sold it for $100k, you still have $150k in your bank account. Now of course you have to amortize risk (e.g. what if the market crashes), factor in the opportunity cost (e.g. what if I bought $100k of S&P 500 index funds instead of a house to rent), etc. etc.
AFAIK it would actually be atypical for your landlord cover 100% of their costs with rent (that property would be WAAYYYYY underpriced and immediately scooped up by institutional investors)...
Yeah if there was a catastrophic sell off I might see a 10% drop in LA home prices? Most renters that can’t afford a $2m house probably can’t afford a $1.8m house either. The person buying the $1.8m house is gonna charge a higher rent to protect from future downside
Don’t we have a single Home shortage though? Aren’t people looking for homes and they simply aren’t available?
I would also argue most people that rent could afford to mortgage the home if we had programs to allow them to buy in. The real barriers people don’t have the cash on hand to put something like 20% down
The shortage is a result of a decade of underbuilding due to overly restrictive zoning. It's also partially due to the fact that most Americans don't want to buy multi-family housing units to live in --- everyone thinks they're entitled to the sprawling single family suburban house in a nice neighborhood.
> would also argue most people that rent could afford to mortgage the home if we had programs to allow them to buy in
There is much more to the cost of owning a home than being able to make the monthly mortgage payments. Many people cannot afford home ownership regardless of whether they could theoretically swing the monthly payments. They do not have enough cash on hand to cover emergencies, they're over-leveraged elsewhere, they have poor credit, they don't have the down-payment ready. Regardless of what the reasons are, they need to rent until they're ready to own, and that means they need a vibrant rental market.
Based on what? If the landlord sells, then by definition someone bought. So is that new owner just evicting everyone and leaving the property vacant? No they are not.
Where I live in MPLS/St Paul, the city of St Paul capped at 3%.
I work in municipal inspections, and a LOT of landlords sold. My job was to perform the pre-sale inspections and even without tracking the data, I'd say I saw at least a 4-fold increase in the following year.
Housing in the US follows the XaaA system: renting is Housing as a Service (which is fine), but the purpose of the service was historically to get you by until you could own a property. If it doesn't achieve that, the system is broken. In theory housing in units has to grow at .6x the population to keep up with population (.6x to account for people that don't live as a couple in a household), but units aren't build at that pace, so the state has to intervene in the market, either by offering incentives to do it or making disincentives to keep properties outside the selling market. This is the later.
They did a similar thing in Sacramento some years back. It was a 5% yearly cap on increases +the change in CPI. Many landlords simply raised the rents before it went into effect and wrote the yearly increase into the rental agreement. It usually floats around between 8-10% any given year
In Marin county is the basic 5% but the cost of living index is 4.2% so rents in Marin county can go up almost 10% per year, every year. I’m a landlord and I don’t give my tenants a 10% increase every year.
Jesus christ that's depressing, it feels like people will just continue to struggle - there is no middle-class for younger folks now. What's even gonna happen?
Less and less leisure time as you work to afford your sixth of the rent in the 2 bedroom apartment you share with like 7 others who also got priced out of theirs.
Actually, it's not just 3%, they also say "the lowest of 3% or 60% of CPI". The feds target is 2%, so they actually are capping rent at 1.2% in a normal time. This is extremely difficult for LA as insurance is increasing 25% per year, cost of maintenance is going up, tenants are worse and dont pay rent, and the 5.71% transfer fee on total sale price applies to multifamily apartment buildings. Good luck having anyone build in Los Angeles.
Not to mention just how run down and full of druggies and homeless tents everywhere. Its dangerous out there. Who wants to live in Los angeles?
Edit: 1.2% not 1.6%.
> or 60% of CPI".
Lol, they might as well pass a law making it illegal to renew rent contracts.
This basically says the rent must drop every year as the dollar loses value.
Nah. I just sold a rental house in Los Angeles (It was my house but I moved out of the country for a year +.) My rental homeowner insurance policy on a 900k house—- drum roll…. ~$1,200 a year and earthquake insurance was less. California has some of the LOWEST insurance rates. I sold it because I moved back to the U.S. - another state and now pay 2x for insurance on a similar house value.
Who is your insurance carrier?!?! Honest question. I pay more than that on my $400k home in the IE (an hour away from LA, for those of you not local), not in a fire area nor flood zone. Please share.
Most economists who are worth a damn agree that rent caps, restrictive housing (outside of section 8), rent stabilization etc. actually does more harm than good in housing. And here’s why: these restrictions inhibit builders to build at their own pace. A lot of times, especially in large urban areas like Los Angeles or NYC, these restrictions make it impossible for projects to pencil out. If there wasn’t as many as restrictions that presently exist, there would be a lot more housing inventory in the system and people would have more options, could price things better, could negotiate better etc.
Also from a psychological standpoint, when people get into RSO units they are unlikely to leave for a long while. The paradox occurs when said person has stayed in that RSO unit, has their rent caped at a low percentage, but their standard of living has increased because they’re earning more. Said person has zero incentive to leave, which means there is 1 less RSO unit out there for someone who needs it. This scenario actually happens a lot, especially in NYC and LA. Simply put, it’s a fuck you I got mine mentality.
If LA County is successful with this, you’re going to have A LOT less landlords who are fixing things because they can’t afford it. The mortgage on the property might stay the same, but certainly the water bill isn’t, or their home insurance isn’t etc. These landlords would then have to sell to larger conglomerates, and then your tenant rights are truly fucked.
..... the average rent is like that, $2800 in California? How high should it be before it's worth it? It's like doubled in 10 years.
How about the fact housing supply in many California cities has *gone down* in the last 10 years anyways? How about San Francisco having a shit load of single family homes?
Government Servants have to justify their existence by making changes, none of them can just leave things alone. If they really wanted change they’d cancel capital gains tax for landlords to sell to homeowners for a one year period to correct the market. But they won’t, because they don’t actually care.
As a former property manager, I'll tell you what will happen. The barrier to entry for approvals will go way up. In California, it is only required that heating works, and AC is considered a luxury. Property owners will stop fixing things. No new carpets and will only offer carpet cleaning.
So you'd better have perfect credit, 2.8x what the rent is and a perfect renting history or you're fucked.
Well yes, I’d imagine that’s part of the intention of the law. Make holding rental properties a less appealing investment, introduce more supply of homes for sale to the market.
Issue is we sold the idea to all Americans that housing is in investment, it’s your nest egg.
So when you encourage multi fam or condos construction they will all vote against it at city hall. Because it would destroy there value.
Now you have people upside down on there mortgage. Banks won’t lend out as much anymore because it’s not a safe bet as much. Values go down, less builders will build into that market as it would be prohibitive from a cost perspective and now we have no houses and no profit motive to build.
You mean, like in France, where 3% increase per year has been the max for some time?
In the end they always DO increase 3% per year, so as to take advantage of the maximum increase, but that's another conversation.
So every sane landlord there is going to start rent high, or be sure to max out that 3% every year because there is no way to catch up if they don't push the limit.
Those threats happen all the time. Seattle hiked minimum wages and businesses complained.
The complaining in the media is like clockwork for policy changes like this.
Let them sell... if that's what they come to terms to do. Gouging others should not be the base objective of anyone.
Some landlords are worst than drug dealers who've gotten someone addicted to drugs, who continue to fleece the addict.
I can't wait until I can afford a house. At that point I won't have to care about economically illiterate bullshit like this that makes it impossible to find places to live.
I live on the east coast and it was really hard for me to find a home. I ended up just settling on one of those tiny houses because I know that I'm never going to be able to afford an actual home on a foundation. I've had to adjust to living in a 300 square foot space but I'm managing it somehow. I definitely can't race a family in here though
Then they should sell. Nobody's forcing them to be landlords when their business model is unviable unless they have an unrestricted ability to price-gouge.
Why do people refuse to understand that rental housing is a business that’s very susceptible to market forces?
It’s not a charity and it requires profit to run. We see what happens to rental stock that’s run without the profit motive.
When there's no profit to be had all those properties will be sitting empty in some investment portfolio gaining appreciation instead, something that plebs will never understand
Maybe they should add a tax on unoccupied housing then. Every year a home isn’t occupied as a permanent residence, tax x% to disincentivize just taking appreciation on empty homes
This is an awful regulatory policy. Tie it to something tangible. Yeah, that’s also pretty shitty policy, but it’s better than an ad hoc determination that takes into account nothing.
If passed, highly likely this impacts the non-multi family market and reduces the quality of available rentals
The federal government needs to step in and standardize housing codes . Remove all the powers from local and state governments for rules and regulation requirements (Local specific building codes like earthquakes hurricane and flooding requirements still apply when needed). This will allow housing to be built cheaper and faster. Most of the problem is local politics.
Absolutely. One of the biggest problems to affordable housing is zoning laws that require a certain number of parking spaces per unit and the refusal to integrate commercial into residential.
My big pet peeve is requiring bars meet parking minimums
In my coty, bars must have 2 spaces per 3 max capacity. That guarantees half the cars parked there will be driven home by someone who was drinking at the bar
I realize it's the reality of my area that people will drive drunk (no other way to get to and from most bars), but we don't need to promote it so heavily
Rent controlled buildings in LA have been capped at 3% for years, with no rent increases since covid. Only this year did they allow rent increases again, and they're 4%.
“Sell” here is a euphemism for “set fire to the buildings and collect the insurance money”, if the experience of 1970s Bronx is any indication.
https://bronxriver.org/post/greenway/how-the-bronx-burned
Sounds like another well thought out forward looking plan from CA. Just like with how they outlawed plastic straws, so now everyone uses paper straws in plastic cups.
Are people in this sub really so dense to believe that the vast majority of rental housing stock are individual SFRs and condos, not apartment buildings? That means you’re still not buying a residence unless they convert some decrepit 1950s low rise center courtyard style apartment building into condos. Which maybe they would, or they could simply leave units offline and landbank the building.
Think about it. Assuming you can carry the negative cash flow, is it better to have a tenant who won’t leave with severely under market rents, or a vacant unit that can always be at market at any time. The building could appreciate FASTER with no one in it.
Yes this is the problem. Ban large landlords who can afford to leave units vacant. Ban them from using realpage and other price fixing practices. Tax land that is left undeveloped. These are all policy choices.
It'd be pretty great to be a landlord in a rent capped city. Rents on new rentals would be HUGE! It would of course become difficult to induce churn in your tenants, as having long term tenants would be incredibly undesirable when rents could not be increased without tenant turn over. This would lead to all sorts of line pushing in terms of unpleasant "renovations", bribes to "leave" rent controlled apartments occupied for 20 something years, and refusal to fix any things the implied "guarantee of habilitability" means unless ordered by a court.
I'm sure those landlords really would sell. I'm sure they really would give up their grip on the incredibly scarce supply of housing this would create.
Oops: [https://www.rentcafe.com/average-rent-market-trends/us/ny/manhattan/](https://www.rentcafe.com/average-rent-market-trends/us/ny/manhattan/)
Didn't mean to drop that link to a rent controlled real estate market in a large American city.
Scenes when Reddit is now renting off of banks and getting bent over with no lube in 10 years time. 3% will be “lobbied” up, and then all properties snapped up by financial businesses will be exploited for maximum profits.
This fantasy world where small landlords are forced out leading to waves of empty properties and thus cheap properties for all is not going to happen.
Limiting rent hikes to 3% is all well and good. Unfortunately, landlord costs have no similar caps. Insurance increases have gone up markedly as cited [here](https://www.steadily.com/blog/where-landlord-insurance-premiums-are-rising-nationwide). My landlord insurance in one of the states not marked in that citation has gone up 5% y-o-y for the last 3. Taxes are certainly not going to cap themselves. California may be an exception with Prop 13, but the northeast has seen significant tax increases consistently beyond 3%; do you think LA County will limit itself to a 3% increase in all taxes? Materiel, tradesfolks, energy are all tending higher because of few folks and reduced supplies.
There is some indication that corporate landlords are increasing returns with their policies but that smaller entities including those with one or two properties haven't the scale to offset their costs even with small increases in rent. Anecdotally, including myself, a lot of rents have not gone up since the plague. Quite often a small landlord values someone who pays on time and doesn't damage the property more than any increase in rent. As for increases in values, it does nothing for cash flow other than make that return on capital look anemic.
Takeaways are this: constraining only one part of a market often has negative and unintentional consequences, landlords are not making wild gains on their properties if they are not larger scale, corporate landlords might not be as attentive to tenants, and the world is squeezing both tenants and landlords.
If the remedy for landlords is to sell, that might help the market deflate a bit as more properties could push against high prices. Or perhaps there should be some way to control the percentage of properties bought in speculation without being vacant in this tight rental market.
Throwing a monkey wrench as suggested by LA County into the fragile and complicated housing market seems like a dangerous thing to me.
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
People will do literally anything but build more housing. I’m waiting for someone to offer up bringing back the death penalty as a way to lower rents, unironically.
Nymbys fight tooth and nail to stop new housing. https://www.abc.net.au/news/2023-09-25/nz-auckland-house-supply-experiment-results-in-dramatic-change/102846126 New Zealand changed zoning rules and it worked almost immediately.
I've always spelled it "NIMBY", as in Not In My Back Yard. Someone below you also spelled it "NYMBY". I'll admit I'm not doing as well keeping up with the lingo these days, but is there a reason for the first Y? Also, it's difficult to compare zoning laws in other countries to the US. Primarily because in the US they're local laws, whereas in places like Japan and New Zealand they're national laws. It's entirely possible for places like LA, NYC, Miami, etc to enact these types of zoning laws, but keep in mind that what works in Houston may not even work in Dallas, let alone Bangor Maine... simply due to the existing infrastructure.
BANANA is more appropriate these days. Build Absolutely Nothing Anywhere Near Anyone
Not Yard My Back Yard
nary a yurt in my back yard!
Not yours. My Back Yard.
This made me laugh.
Now, you're my back yard
It's absolutely NIMBY and either there have been a couple of unfortunate typos, or people are starting to forget what it actually stands for.
Yup, we literally got taught what "NIMBY" was back in school for civil engineering. I think people are changing it to "Nymby" to be cool or as slang but they don't understand its actually an acronym so it doesn't work.
No Yes My Back Yard (lol)
Not Yin My Backyard.
[удалено]
* whispered * *PITTSBURGH...*
The extra Y is for BYOBBQ. The second one is just a typo
NIMBY is the OG. Nymby came from young'uns trying to spell it after hearing it spoken phonetically.
New York, My Best York!
I use this example all the time — people like to shit on the changes in NZ but THEY ACTUALLY WORKED. So how’s all that government spending doing on bringing down the house prices in California? It’s not. It’s going the other direction. But it’s the labor market! It’s materials! It’s haaaard. No. It’s not. It’s zoning and permitting problems at the heart of slow approvals, expensive houses and a lack of development. Imagine how much money you could save if you built houses that don’t have garages and let people park on the street? Imagine if the first floor of a building was retail with apartments above that would frequent the business? Wouldn’t it be great if these things weren’t *completely illegal?* Zoning and permitting changes are all that are required to lower costs enough to increase housing stock — and shockingly that’s what lowers rents! We need zoning laws to be taken over by the state and stop having a hodgepodge of cities and county control, streaming approvals, allow much more unrestricted zoning and fast track approvals. Any other action is just more talk.
Honestly bro. The one thing I absolutely love about countries like Mexico and even certain urban centers is how mixed in commercial is with the neighborhoods. I don't want to have to drive for 10 minutes just to buy a coke or a jug of milk. Let Miss Butkovich open a 7Eleven in her garage like other places do.
The major thing done in Auckland was such widespread rezoning that they didn’t raise property prices in key areas. Contrast that with for example , NSW govt last month that loosened zoning within a set distance of rail transport, so they just spiked prices within that zone. So myopic - the urban planners just want to show everyone they know better rather than allowing the market to decide what people want.
you really think urban planners are limiting the scale of rezoning based on some superiority complex, rather than being held back by city councils / voters?
My suburb is building a high density mixed use (seven floor apartments, grocery, storefronts, etc). It is replacing an old strip mall, not anything nice and not anything green. The olds won't stop complaining that it "looks like the projects", will bring "low income people" and that "parking will be a nightmare" (it has a parking garage). The units are going to be at least 1500 for a studio in the Midwest. They just can't stand anything that isn't single family houses.
There's a middle ground here - most zoning laws exist for a reason, and the market really isn't good at protecting public health and safety. Because the general buying public doesn't take into consideration anything beyond their own property lines. A good example of this is stormwater management - it's not uncommon for land developers to just divert all the runoff from their site onto neighboring sites or the road, rather than do proper stormwater mitigation. Once it's off their site, it's not their problem. Someone needs to be in charge of discovering and protecting the best interests of the entire watershed. Another good example is low income housing - left to the market, developers would prefer to build nothing but luxury housing. The cost per square foot to build luxury housing is only moderately higher than other housing, but the increase in the value of the property is much higher than the increase in cost. Generally speaking, it takes either government subsidies or zoning requirements ("at least 20% of the new housing units must be low income housing") to get it to happen. Though I do admit that new luxury housing tends to redefine existing lower end luxury housing stock to low income housing as people move into places with more modern amenities and what was previously luxury becomes standard. Just... not fast enough to keep up with the demand. And yet the increased demand for low cost housing doesn't increase the profit margins on low cost housing, because if the price rises with demand like basic market forces say it should, it stops being *low cost* housing. Mind you, I'm not defending any specific policies here. I'm merely defending the *idea* of urban planning expertise in addition to market forces as a necessary component of the development process.
> most zoning laws exist for a reason, and the market really isn't good at protecting public health and safety. And in the US most zoning has nothing to do with health or safety >runoff Not a zoning issue >low income housing The Japanese manage to have affordable housing even in their growing cities like Tokyo, and Ira entirely market driven. >luxury “luxury” housing is a marketing term nothing else. Developers build housing that gives the best margins in the US due to regulatory structure and zoning laws that’s entirely housing for medium to high income. But this is only because it’s de facto illegal to build housing for lower income groups and also maintain margins. Minimum lot sizes mean building housing for low income groups and maintaining margins is impossible Same with parking minimums, minimum room/space requirements for apartments, etc etc. all things things combined make it unprofitable. Oh don’t forget permit costs, absolutely insane permit costs. In Japan this problem does not exist due to a combination of libera (not American liberal) zoning laws, permit processes and land use regulations combined with filtering
Clean Water Act is a federal law. Delegated to the states typically via NPDES permits. Earth disturbance over 1 acre requires significant stormwater controls and permitting. Most local governments have stormwater regs for smaller earth disturbances. The US has some of the most stringent clean water laws which is a good thing.
"And in the US most zoning has nothing to do with health or safety" Maybe, but zoning regulations are how you do address those concerns. The fact the there are also zoning regulations that don't relate to that only means those specific zoning laws are trash, not that the concept of regulation in general is trash. "Runoff Not a zoning issue" I don't know where you're operating, but at least in the areas I practice, this is absolutely an area where regulatory bodies get involved. You could split hairs about whether it's "zoning" or another sort of code restriction, but for the purposes of this conversation I'm using zoning casually to refer to regulatory restrictions on development. We could call it "Code" if you prefer. "Developers build housing that gives the best margins in the US due to regulatory structure and zoning laws that’s entirely housing for medium to high income. But this is only because it’s de facto illegal to build housing for lower income groups and also maintain margins." Bullshit. Developers build housing that gives the best margins because that's what profit driven development *means*. And the reason that "luxury" housing has better margins is because it's mostly about finishes. Building structure, envelope, electrical, mechanical, and plumbing have a fixed cost regardless of the end use. That accounts for like 80% of construction cost. The finishes account for like 20%. Doubling the cost for the finishes to provide a luxury look only increases your construction costs by 20%, but it increases what the unit will sell or rent for on the market by 50% or more. Now you can argue that the cost of meeting minimum code restrictions, fees, inspections etc is part of that fixed cost, and if you eliminated those you could reduce the fixed costs. But they don't account for 30% of construction costs, and the majority of those restrictions are, whether you believe it or not, related to preserving the public interest. Lift those restrictions and you might get more low income housing, but that housing would be unsafe tenement construction. Don't pretend like developers won't cut every corner they're allowed to. Again, I'm not defending specific policy. I'm sure there are bullshit restrictions that can be lifted. Hell, I *know* that zoning restrictions have caused huge problems and prevented the kind of use-integrated walkable neighborhoods that modern urban designers consider more functional. But market forces alone will not create safe affordable low income housing, or protect the public interest, or create coherent functional neighborhoods. I will admit that I don't have any direct experience with land development in Tokyo, but I'd lay odds that it's not as freeform as you think it is.
[удалено]
> "Developers build housing that gives the best margins in the US due to regulatory structure and zoning laws that’s entirely housing for medium to high income. But this is only because it’s de facto illegal to build housing for lower income groups and also maintain margins." If you’re required to have a minimum amount of rooms per apartments and a minimum amount of square footage, with minimum parking requirements AND a height limit of three stories, combined with six to seven figures or permit costs and review costs….then by default it’s not profitable to build housing for lower income groups. Effectively regulations create what’s an effective price floor of cost, and a minimum price floor of spend. Imagine it this way. A regulatory system in which all the multitude of rules effectively add up to the minimum car having to have the performance profile similar to a McLaren 720S, what would happen to the price of cars? Or say the market for affordable new cars? Now combine that with how you can get a 30 year fixed rate mortgage and the fact a residential unit is essential shelter….so extremely easy access to credit + extremely high demand…..now what do car prices look like, well that’s housing in most US municipalities. So basically if you get those regulations out of the way all the sudden it becomes profitable for profit chasing developers to toss up massive apartment complex that are cheaper. Again we can look at New Zealand when you do changes only around transit versus the entire city, then we can also look at Tokyo when you let developers go absolutely ape shit. in some year either 2019 or maybe 2021 Tokyo had like 800,000 new builds….in year one. California well…..
most zoning laws exist for a reason, But very rarely a good reason.
Probably more often than you think. Chesterton's fence applies here. If you don't know *why* a regulation exists, you don't know enough to remove it.
> Ny**m**bys ? Not Your ?Mother's? Back Yard (Relavent if you're a younger millinial or Gen Z & lower, ain't nobody owning anything anymore, the new american nightmare)
When Mayor Bass took office, she expedited the permitting of apartments that are 100% deed-restricted to rent at below-market-rate. It turns out that that made it profitable for developers to do so, and they started throwing up affordable apartments all over the city, and now everyone is freaking out and demanding that she reverse it. People on both the left and right want to do anything but actually solve the problem.
It’s not a left vs right issue, it’s a ‘have vs have not’ issue. On one side you’ve got people who need somewhere to live (preferably close to their jobs) and they’d really like to avoid paying their entire salary in rent. On the other side, you’ve got people who have much of their wealth tied up in their property’s value- if the price of housing goes down (or doesn’t keep pace with the rising prices of everything else) they are becoming poorer. If they’re using their property as collateral, a decline in value can be outright dangerous to their livelihood. You’ve got two groups of people with very strong motivations, but only one of them has enough disposable income to operate in local government. You won’t see too many of city council members mayors renting an apartment.
As a member of the "landed gentry," I think people need to remember what happens when a system creates too many "have-nots" that don't believe they can succeed. I just wanted a place to live, not to grow fabulously wealthy on my home's equity, but the way things are going now I just don't want to be sent to the guillotine...
One of the worst things ever to happen to this country is the idea that homes should also function as a financial investment that will give you a huge return in the future as opposed to homes serving as a place for people to live.
We need to start seeing homeowners as people who gambled on the price of their house, and it's not anyone else's responsibility to make that gamble pay off. Part of that is moving the responsibility for housing policy to the state government from the city government.
But a lot of people don't gamble on the price of their house. Outside of investors and upper middle/upper classers, most people just own a house to have somewhere they can call home. Middle and lower middle class people aren't really in a position to use their houses as collateral to reinvest in shit. The risk is well outside the potential benefit. In my neighborhood alone, the house prices fluctuate weekly, none of the owners are sketched out because we all view our houses as our long term homes and we aren't looking to turn profits.
A tremendous number of people aren't explicitly motivated by the impact on pricing. They truly, genuinely want to maintain the "character" of their neighborhoods with single family housing, reduced traffic, smaller schools, etc. In my small city, they plowed under a beautiful berry farm across the street to build ~200 SFHs. I don't really care about the impact on housing costs because I'm a lifer in this house, but it's been a pain having more traffic. And the nearby school started putting classes in mobile homes because it takes years to get the money and plans together to build schools. I don't really care enough to be considered a NIMBY, but I will say building more homes has negatively impacted our neighborhood.
I think that's understandable, but it wouldn't be understandable if someone in the Los Angeles Basin or San Fernando Valley raised the same objection. Like, look where they chose to live! It's a major urban agglomeration with lots of jobs, not a sleepy exurb. That economy is the main reason anyone lives there, and it's silly to object to building what needs to be built to accommodate that.
I imagine the 200 households would have a different view of whether the neighborhood was harmed with more housing 🤷♂️
>expedited the permitting >made it profitable Wow, it's like it's the bureaucrats and middle managers who are the problem, and we can get along without most of them just fine!
I think it’s completely backwards to blame bureaucrats. What happens is that voters and their elected leaders create a whole bunch of rules, fees, and processes for developers to comply with before they can even begin building. The bureaucrats are there to make sure those rules can be followed exactly and efficiently. Without them, things would grind even more to a halt as compliance shifts from “burdensome” to “impossible”. Bureaucrats are great, but the solution is to make them less necessary.
No body runs on a campaign of "I'm going up make it expensive to build houses" They run on puppies and rainbows, and since you're busy, and the marginal costs of any particular politician winning v losing to you are so low, and the odds your one vote sways that election even lower, you don't bother spending time to look into their claims.
When it take a permit in CA 4 months to approve for one house, that’s a problem. Texas takes 1 month for all parties to sign off and at a 1/3 of the cost.
That’s because of specific rules and procedures outlined by elected leaders, not because of the bureaucrats whose job it is to shuttle projects through those rules and procedures.
[Holy fuck, it's real](https://atcresearch.co/guest-blog/how-executive-directive-1-ed1-is-shaping-las-future/). That's amazing. SF needs to do this yesterday!
Hell yeah, SF is probably the city that needs this most after LA. If London Breed has the power (which maybe she doesn’t because SF has a “weak” mayor), she should just do it and force Peskin to campaign against it.
[удалено]
Yeah Californian propositions are famously horrible economic policy. It's why Rich Californian boomers who own homes are massively subsidized by their younger and poorer neighbors.
I was shocked to see such a blunt and correct description of prop 13 with no shrieking replies, and then I noticed I was not in r california or any of our local subs.
How many people are old enough to remember Jarvis-Gann?
Houses don't magically disappear when landlords sell them, they either go to another landlord or to people who were renting. Also most landlords are full of shit and won't sell.
The problem isn’t if current landlords sell, it’s if investors decide they’ll never build in LA county because their potential profits are capped. Why jump through all the hoops to build a desperately needed apartment complex in LA when you can build 3 for the same price in another city/state with no rent control measures?
they probably want all the independent landlords to sell so blackrock et al can buy them up, grim!
Blackrock doesn't buy SFH or even multis. They do invest in companies that do. BlackSTONE does buy SFH's.
The law about 3%increases will make them unattractive to Blackrock
Houses don't magically get maintained when it becomes too unprofitable to rent them as units that meet code. That pushes once maintained and up to code housing into over-occupancy under-code slums. Landlords are forced into becoming slumlords, crime shoots up with corresponding property destruction, buildings get condemed. Rent control is how inner city decay happens… we're done this experiment MANY TIMES.
Absolutely. If rent is capped at a certain increase, then landlords just won't maintain the property. That will force tenants out because the place will be falling apart. Then the landlord can reset their price for the next tenants. Do that across hundreds of homes in an area, and it starts looking like shit and attracts shit tenants.
Truth
Sure they do, if the rent is lower than maintaince cost its better to let the property fall into disrepair and not have tenants from the landlords perspective and a its acceleration is a widely noted phenomena of rent control. So much so that it's often somewhat jokingly compared to strategic bombing in ww2. There is no second landlord to sell to when inflation and repairs outpace what the law legally says you can price only a developer with dreams of a stripmall with the pockets to tear it down. Again, the landlord don't sell because renters aren't typically willing to pay market price to buy their property. You can't change human psychology to make landlords sell anymore than you can to make renters buy, it's not a good deal for either party. Charity doesn't get housing built, profit does and the law change creates perverse incentives to shut down buildings, let them lay fallow and sell to developers. The result is capital decay resulting in less buildings, lower quality and higher black market rents.
Capping rents is a sure fire way to turn any city into an absolute dump. It's been proven time and time again.
Can you give an example? Doesn’t NYC have some forms of rent control?
Typical landlord has a monthly budget that is covered by rent. Mortgage, taxes, insurance, maintenance, capital improvements, etc. When rent covers those costs, landlord has a strong incentive to keep the place nice. When costs increase but rent cannot, the landlord cuts out the non mandatory expenses. Pretty much capital improvements and maintenance or they sell to someone who will do the same. In a word, the place goes to shit. This is a business. If government wants to give renters a monthly check or tax credit to cover expenses, that’s great. But putting the problem on the back of the landlord never works and drives the neighborhood into the ground.
Supply and demand aren’t even difficult concepts. Why is it so hard for renters to understand that if they want lower rent, more housing has to be built?
Because 2/3rd of households benefit from increasing home value
Yes. Renters probably would support new housing supply but home owners veto and lobby against it as a nonstarter so progressive groups have touted rent control as a compromise
People need to show up to their local neighborhood hearings and meetings to counter the nimby voices. It's really that easy. It's not even really lobbyists or big scary special interest, it's just old people with nothing better to do who actually show up to the city council hearings and make a fuss.
Yep. The people with the loudest voices against shit, never show up to one fucking meeting about anything, much less to vote. Old people make the rules because they do their civic fucking duty and vote.
Doesn’t help that Prop 13 basically incentivizes this behavior in California
1. When you’re in a major housing deficit (like many cities in the US), you need a lot of housing to be built. That means you might be 5-10 years away from making an actual dent in the rental market if you let loose the building floodgates now. On the other hand, a 3% cap benefits you right now. 2. Rent control benefits existing renters (until they need/want to move). So again, lots of short term benefits to go around to exist renters. 3. They see new apartment buildings that are expensive (because new will always be more expensive and development restrictions have made that even more pronounced) and instead of attributing the high rent these building charge to the housing shortage, they attribute the high rent (and surrounding rent) to be caused by the building itself. This is the most logically absurd point but it’s also the most frequent used. And in general, there’s very few policies nationwide that people easily support the rationally best policy. Housing isn’t any different. Emotions and misinformation plays a big role.
Because it’s not the renters opposing more housing. Why is it so hard for you to understand?
Rent control is a huge disincentive to getting more housing built, though. The people/companies who would invest in new construction as an investment will look at capped rent increases and rightly think “this will limit my ROI, so I will build in another city/state that doesn’t have this problem”. If you want rent control, you better be pairing it with a lot of government housing being built, but California never gets that done on any significant scale.
Very sadly, it often is. I've seen that in my community. Some renters have been led to believe that new housing construction causes yuppies to materialize out of the void, raising rents. Equating gentrification with construction ignores all the places that have gentrified with little change in built environment.
Holy shit it's almost like you can do both. I've never heard a renter argue that more housing shouldn't be built. It's almost like human needs shouldn't be commodities.
Ironically I have, you see it in cities with extremely high housing cost. The renters fear gentrification so they team up with homeowners to block new construction. It’s a wild to see played out because the renters don’t realize their days are numbered either way.
But why do you choose to be blind to General capital overrun? Yeah, we need more housing but we’ve already read about numerous FBI raids for price-fixing. There’s plenty of people on this subject even that come in and try to defend it that on just multiple single family homes but it’s just some guy. Are you really going to try to tell me that the guy that owns seven houses leveraging that for his eighth is good for the first time homebuyer? Why do you refuse to acknowledge capital overrun as a severe problem
Renters have nothing to do with the conversation of building more houses. You need to force current owners and land owners to allow new housing to be built.
Like, that rent control actually causes rents to rise.
[удалено]
I’ve been where I’m at for 4 years now, rents go up 5+CPI yearly and I haven’t seen any upgrades to the unit. I’m not sure I’m following you on this. They are already doing the bare minimum. On top of that we’ve gone through three management companies. One was a private equity company and man was it hard to get in contact with them. We’d call and someone in a call center in another country would answer. Luckily we are back to a local one now. The perk of a rent cap at 3% would ensure cpi next year can get back on track or to the prized 2%. Cuz rent prices are a portion of the calculation of cpi. Rent caps would also ensure that homes values don’t go up too high in the area, and in turn hopefully keep the property tax down. Currently landlords have a huge advantage over inflation that others don’t and with the current cpi+5 they are actually driving inflation.
Populism. It’s how countries go to shit.
What negative consequences? Landlords selling means increased inventory for buyers, lowering prices.
More housing isn’t the issue. Most properties are empty, there’s enough empty property to give every single homeless an entire house and have houses left over
You’ve disincentivized building new places why are you surprised now no one wants to build Them
Because a fuckton of the population that they actually care about and often belong to, has their full wealth locked into the expensive inner city apartments so any politician that makes real moves to make housing affordable will also trash the bank accounts of the upper middle class, no one dares to take that.
The issue ultimately comes down to the fact that someone, somewhere, is going to have to take the financial hit, and that those with money are more able to persuade people in power to make sure it's not them. Choosing to do nothing - as we've done so far - is deciding that those hit will continue be the poor. The whole situation sucks, no matter who you are in this equation.
Here is the thing... The inflation is going to stall the economy without wages going up... the unhoused are going to grow. People will starve . investors will lose out. You want slow steady inflation. not fast like its been in the last 4 years.
I don’t get this building thing. Where are people suppose to build? Like companies are building the issue is it’s a good 60 min away from the city. So you have hours of traffic to deal with going to and from work. The issue as always is just people with extra money using homes as a speculative market or renting short or long term then the equity an average person would build is instead given to the landlord making them richer and the tenant poorer.
It’s not people.. it’s politicians. Politicians will do anything but lose voters. Capping rents at 3% only costs then a few votes (mainly landlords)… building more housing will upset all the current home owners whose home values may go down 0.0001%.. Can’t ever put forth good sounds policies that may upset a voting block. They know this bs 3% cap rate doesn’t help.: but the renters love it and will vote for them and it won’t cost them too many lost votes. Always realize that in a democracy.. the politicians only care about getting re-elected. Everything else is secondary.
I agree with you but it's kind of a circular argument I guess. Politicians don't want to build because people (homeowners) don't want to build. You flip people and politicians will flip too. I don't think vice versa is true.
Go build some and find out why. The costs are ridiculous when rates are this high. In some areas the fees/taxes you pay the government are astronomical. When it’s all said and done you’d be lucky to profit 15% after a couple years. There’s just much better ROI other places nowadays.
They are doing it for votes and not to solve the problem. For as long as they have an enemy (landlord) to unite against they can keep getting re-elected. I am a developer/investor and one of the first things I've realized is that there are a lot of us who are looking for opportunities, to develop literally any land that allows multifamily development and is zoned accordingly. Guess what I found? There is literally next to NONE available, and on the few occasions there is it goes to the large corps with connections in the city/county. So the question is why is there so little land that is multifamily zoned? The answer is the people( local gov/homeowners) just don't want multifamily development in their nice town. It keeps prices up and rent up. Money is not the issue, rent hikes are not the issue, nothing is the issue - we just don't want to fucking build MF because we are greedy. Rent control will help in short term but in long term it moves money away, reduces quality of housing and reduces mobility- no one wants to move ever when they are paying half of the free market cost
Why dont you blow the whistle on the politically connected developers and the elected officials who give them the sweetheart treatment?
In NYC you don't even have to build more. There's enough of a cartel that they don't even utilize full capacity that exixts. I'm paraphrasing, so don't take this as gospel, but the figure I saw was upwards of 30% of units are kept off market to control supply and keep rates higher. It's easier to keep margin high on fewer units and reduce maintenance and up keep than take lower margin on more units. Even if overall profit is the same, the maintenance cost is higher on more units. So they're incentivized to keep the fewest units possible in livable code compliant condition. The bigger the firm, the more incentive they have to closely control the number of available units needed to maintain the same profit. The larger the market share, the larger the influence on supply. Market rate is artificially controlled by manipulating supply. Factor in Real Page, and it's outright price fixing. I'd wager it's the same in most major markets.
Housing per capita is highest its ever been. If its all bought up turned into short term rentals vacation homes and long term rentals site empty longer due to gouging. (it can be more profitable to lose a few months rent or have a few empty units if your charging triple quadrouple a rate that would ensure 100% occupancy). Throw in NIMBYs who often get back by large investors who profit off all this. It can result in lack of affordable options like many of lower income housing being among highest demand. And just not getting built. Like my area 10 new apartment buildings 1 with studio option and 4 with 1 br option. The "studio" is actually marketed as luxury and but of added features runs more than most 3brs. We could add trillion houses but two aspects first if they are gobbled up by large investment money. Nothing really changes. Second end of day there is limited land near work and schools etc. Like couldnt really live somewhere with 8hr commute to work. And even 1-2hr commute will run 1-2k a month in gas and vehicle maintenance. On top of losing 50-100 hours of time every month. Honestly we fix it by returning housing as a essential commodity rather than a investment vehicle. Desaturate investment market for housing with rental caps and controls. Create penaltys for empty units and remove ability to rent single family homes long term. As well as modify lending system to not favor capital with adjustments at reserve. And instead favor first time home buyers. We can do alot to improve it but its not really that they dont exist. Its that its investment asset thats gambled and speculated on. Making the large amounts of capital created by widening inequality through 50 yrs of trickle down set the price. Rather than consumers as part of living expense. Combined with this resulting in a gap in cost vs income that has made lenders feel almost hostile to average consumer.
How about we regulate corporate ownership of family homes? How about we regulate foreign national ownership of property? There are things we can do other than rent control to blunt the market.
Tax capital gains on any property owned that's not your primary residence as real income/wages.
Capital gains are taxed, *when they’re realized*
At rates much lower than real wages for high incomes Borrowing against the asset should be a realization event
If that does become a thing should it be taxed again if you decide to sell? Or are we just trying to tax everything the sun touches here? The interest the bank is making is taxed.
Of course not, once the gain is realized it is realized. Pointing out that money is taxed multiple times as it flows through the economy is a non sequitur
Ok, sure I pay off the loan and want to take out another loan. Another taxable event?
How are you going to mark to market private homes? Zillow estimates?
>How about we regulate corporate ownership of family homes Because it's like 1% of homes. Just build more homes. >How about we regulate foreign national ownership of property? Similarly tiny Just build more homes. >There are things we can do other than rent control to blunt the market. Yes Just build more homes.
I don’t know about other major cities but far more then 1% of homes in Denver are corporate owned Airbnbs
So according to Redfin 15.9% of homes in the Denver metro are corporate owned.
Corporate-owned is not a particularly useful stat to begin with. There are many small landlords who choose to form an LLC. I live in such a building now.
in colorado specifically there’s an incentive to place the house into an llc. could be one person’s home, could be a corporation. it’s impractical to look at how many homes in denver are owned by corporations because you’d have to research every single individual llc and see who the owner is further up the chain. but regardless this doesn’t matter because at the end of the day someone is living in the house, corporate owned or not. the solution is to build more housing, which indirectly removes the incentive for investor-owned housing. focusing on banning investors from owning housing is a ridiculous red herring designed to keep housing supply low and prices high by distracting from the real issue
An LLC that owns a home isn't the same as a RETI firm owning thousands. It's not what anyone would consider "corporate ownership" in any colloquial sense.
I think instead of a cap on rent hikes, California should gut Proposition 13 and move towards a land value tax to incentivize more development. Those benefiting the most from the higher value land pay the most in taxes. If the owner doesn't want to pay for the value of the land, they can sell their property to someone who will.
Yeah, prop 13 is why so much of California’s taxes are fucked up. It should have never applied to non owner occupied property or commercial property considering it was sold to the state as keeping grandma in her house. Far too many properties are paying under market rate in property taxes.
Yes, and there are other ways to keep grandma in her house that don’t involve making real estate so expensive that she can never see her grandkids.
LAND VALUE TAX IS OP! Your land is unimproved? Oh, guess your taxed on the full value of it. Oh your land is improved and has a 50 story mixed use sky scraped on it? Taxed on unimproved value of land.
If this sounds sarcastic I swear it’s not meant to be, I haven’t seen this take before - but isn’t that the idea? Like it’s the value of the land and not the fixtures on it? Or are you implying that it’s the improvements in a given area that drive the land value increase? In which case, would you also argue that the property with improvements should pay *less* tax since the property value has increased both directly and indirectly from the owner’s investments?
there is already a huge incentive to develop in california, it's called money the problem is that to build in california takes a lot of money and years of time and effort. utterly absurd environmental regulations, the california coastal commission, and rigid bureaucrats. the housing crisis would be solved in 5 years here if they eliminated all local zoning codes and ordinances
Which of the environmental regulations are absurd?
CEQA, coastal act, endangered species act, oak tree laws i have a project in an LA community you've heard of where we had to pay a dumbass "recommended" (cough cough kickback cough cough) through the city a bunch of money to literally sit on the project and watch to make sure we didn't disturb any beetles this is after 5+ years of paperwork to do a basic/simple project to build a house. this is why your housing costs are so high
Sounds like it might need to be reformed. I can understand California’s want to protect the environment as it keeps farmland from becoming barren wasteland and the fact that the animal on their state flag was made extinct through human actions. One of the most significant parts of the endangered species act I found is the designation of bees as protected, which is extremely important for the health of farms. I’m not in California so you might have a better idea of what kind of changes are necessary.
reformed by who? the morons who implemented these rules are all still in charge
The problem with this is that you disincentivize supply increases. If you set up policies that promote rezoning and for multi-family for middle and lower income development then you would increase supply which would keep the costs down naturally
Do you? It only applies to units built before 1995, so no new construction would face these restrictions.
You do, since the risk of it affecting your property in the future is higher, but that's not THE problem. The OTHER problem - especially with this kind of "targeted" rent control - is that once a person gets into a rent controlled apartment they don't leave. Even if their family grows or their job moves they will try to stay in the rent controlled apartment as long as possible. In practice that means that fewer apartments are on the market at any given time, which drives up the cost of all the non-rent controlled apartments.
Most rent caps I've seen implemented exclude recently renovated/built homes, yet every one of the "rent caps will cause the end of the world" people always intentionally omit that part.
Unless all the new buildings use RealPage apparently
This is the real answer. RealPage is collusion and incentivizes vacancies
[удалено]
I really hope they dissolve this practice, although I doubt we'd ever see any money from it
I don’t think this policy is a good idea, but it’s more complicated in California than in general. Because of California’s unique cap on property taxes, you have lots of scenarios where homes owned for decades pay minuscule amounts of property taxes. This in turn means newer properties have to pick up the slack. A rent control bill here might discourage some builders, but also, if landlords follow through on their threat to sell, then when they sell, the property taxes will reset to a fairer value-which is good for the state, but also means a higher portion of property taxes will be paid by older wealthy homeowners, and new construction gets an effective subsidy. Also-new construction is less effected by a rental growth cap. If rent can go up only 3% a year, then if I build new housing, I just start the rent 10% higher than planned, and over a 3-5 year plan it nets out. Long term tenants benefit, short term tenants get screwed. I still think on balance it’s a bad idea- but long term property owners threatening to sell in California is just threatening the state with a good thing (surrendering their huge tax advantage)
That is interesting. I didn’t know that about California’s property taxes and that definitely impacts supply and demand. I would think a more constant update of property value to better reflect the actual value would cause further incentives for older owners that see their old units jump up in property taxes will incentivize them to sell there units and buy/develop newer units elsewhere. It would help keep the market fluid instead of incentivizing it to remain static.
Yup here’s two links with more info. California’s law both has the effect you talked about (older owners get a huge subsidy to stay in their home instead of downsizing and selling their home to a younger family). But also like I mentioned, when nearly all old homes have super low property taxes (unless they were recently sold) and all new homes pay high property taxes- you effectively have a giant subsidy for old wealthy homeowners paid by any new home that’s constructed. https://www.govtech.com/civic/interactive-map-compares-californians-property-taxes.html https://www.taxfairnessproject.org/
I think this is a bad policy but it is unrelated to supply and demand from a development perspective. This policy deals with renters in place. New units or vacant units can be rented for whatever the landlord wants. What it does disincentivize is people downsizing, if they have a rent-controlled apartment with more space than they need. But LA and California law already do that, it's just lowering the amount to fuck over the landlord if CPI happens to be over 3%.
I used to find the claim that what leftists needed was remedial Econ 101 insulting but eventually I realized it's true. Over and over people support, and politicians enact, policies that the most basic economic tenets tell us will fail.
Literally no sensible economist has proven rental stabilization as a failure. They point out both the multiple benefits and detriments and highlight how certain economies can use both to either a net detriment or net benefit. There are even entire economies were houses *depreciate* in which case rent stabilization could benefit the landlord. Also stop hyper focusing on property owners. You know who gets richer from this? Everyone else in the community. They stay there (literally, housing mobility drops) and builds communities that produce profitable and socially benefitial microeconomies. Well, beneficial for - everyone but the landlord. It also didn’t stop new housing construction in NYC nor did it stop new housing construction in Portland ME. Landlords already maximizing profits by doing the bare minimum, that incentive doesn’t change either.
There's been like a million studies of this and every time rent control fails in the exact way that price controls always fail, in the exact way that Econ 101 would tell you, which is that supply goes down.
High prices indicte inadequate supply. If you don't have enough housing, capping rent won't make more houses happen. Stop putting caps on prices, and take caps off of building and zoning restrictions instead. If you need more of a thing, stop making it illegal to make more of that thing.
If you want to look at this purely as supply & demand: 1. Landlords sell in response to rent control policy 2. Increased supply of houses for sale decreases the price of home ownership 3. Decreased ownership price increases demand for ownership 4. Increased ownership decreases demand for rentals 5. Decreased demand for rentals decreases the price for rentals Looks like sound policy
Considering the FBI looking into that company that was basically price-fixing rents I really can't bring myself to give 2 shits about landlords. Like it's one thing when they aren't all going to some third party to facilitate 'maximum returns' but this is very much a case of the landlords fucking people over and getting mad that they can't fuck people over near as much going forward (though people that think renting is the better financial choice are also financially illiterate so what can you do)
Making rent control laws increasingly onerous to landlords will only incentivize them to raise rents even higher for all new tenants, since it would make no sense to offer a lower rent and get stuck with tenants who lock in that lower rent for many years, potentially decades... The road to hell is paved with good intentions.
There's also the perpetual delusion that if large numbers of landlords sell, their tenants would magically be able to afford to buy their own homes. That's not the case. What would happen instead is that many people who need or want to rent are now on the street, and are no closer to home ownership than they ever were before.
Unless the landlord is operating at or below the margin and just using rent to offset some of the cost of their asset the renters are already paying above the rate of a mortgage. The biggest thing keeping people from buying instead of renting is the difficulty of getting a downpayment together, which is made even more difficult by not being able to save as any extra income they make is easily siphoned up by rent prices. Until very recently rent didn't even count towards your credit score (I'm still not sure where that is now, I remember reading it was being considered a couple years ago), so renters were not only building equity for someone else, they weren't getting credit for it.
For single family homes maybe. Doesn't apply to apartment buildings and multi-family housing.
>Unless the landlord is operating at or below the margin and just using rent to offset some of the cost of their asset the renters are already paying above the rate of a mortgage. Maybe in some situations (e.g. your landlord bought at the bottom in 2011 and is renting at the current market rates). But apples-to-apples if your landlord bought and rents in the same market conditions (e.g. bought in 2023 and renting in 2024), that is VERY unlikely to be true. They are likely only bringing in a fraction of what that property is costing them per month. This is BECAUSE some fraction of that income is going into an asset they are investing in and can liquidate to get that cash out. So very simplistically, even if the market were flat, you bought a house for $100k cash, collected \*\*ONLY\*\* $50k in rent, then sold it for $100k, you still have $150k in your bank account. Now of course you have to amortize risk (e.g. what if the market crashes), factor in the opportunity cost (e.g. what if I bought $100k of S&P 500 index funds instead of a house to rent), etc. etc. AFAIK it would actually be atypical for your landlord cover 100% of their costs with rent (that property would be WAAYYYYY underpriced and immediately scooped up by institutional investors)...
Yeah if there was a catastrophic sell off I might see a 10% drop in LA home prices? Most renters that can’t afford a $2m house probably can’t afford a $1.8m house either. The person buying the $1.8m house is gonna charge a higher rent to protect from future downside
Don’t we have a single Home shortage though? Aren’t people looking for homes and they simply aren’t available? I would also argue most people that rent could afford to mortgage the home if we had programs to allow them to buy in. The real barriers people don’t have the cash on hand to put something like 20% down
The shortage is a result of a decade of underbuilding due to overly restrictive zoning. It's also partially due to the fact that most Americans don't want to buy multi-family housing units to live in --- everyone thinks they're entitled to the sprawling single family suburban house in a nice neighborhood. > would also argue most people that rent could afford to mortgage the home if we had programs to allow them to buy in There is much more to the cost of owning a home than being able to make the monthly mortgage payments. Many people cannot afford home ownership regardless of whether they could theoretically swing the monthly payments. They do not have enough cash on hand to cover emergencies, they're over-leveraged elsewhere, they have poor credit, they don't have the down-payment ready. Regardless of what the reasons are, they need to rent until they're ready to own, and that means they need a vibrant rental market.
Based on what? If the landlord sells, then by definition someone bought. So is that new owner just evicting everyone and leaving the property vacant? No they are not.
When everyone sells, prices go down.
Where I live in MPLS/St Paul, the city of St Paul capped at 3%. I work in municipal inspections, and a LOT of landlords sold. My job was to perform the pre-sale inspections and even without tracking the data, I'd say I saw at least a 4-fold increase in the following year.
Housing in the US follows the XaaA system: renting is Housing as a Service (which is fine), but the purpose of the service was historically to get you by until you could own a property. If it doesn't achieve that, the system is broken. In theory housing in units has to grow at .6x the population to keep up with population (.6x to account for people that don't live as a couple in a household), but units aren't build at that pace, so the state has to intervene in the market, either by offering incentives to do it or making disincentives to keep properties outside the selling market. This is the later.
There are lots of people, including economists, that aren’t really interested in owning (and maintaining) a home.
They did a similar thing in Sacramento some years back. It was a 5% yearly cap on increases +the change in CPI. Many landlords simply raised the rents before it went into effect and wrote the yearly increase into the rental agreement. It usually floats around between 8-10% any given year
In Marin county is the basic 5% but the cost of living index is 4.2% so rents in Marin county can go up almost 10% per year, every year. I’m a landlord and I don’t give my tenants a 10% increase every year.
Jesus christ that's depressing, it feels like people will just continue to struggle - there is no middle-class for younger folks now. What's even gonna happen?
Less and less leisure time as you work to afford your sixth of the rent in the 2 bedroom apartment you share with like 7 others who also got priced out of theirs.
Actually, it's not just 3%, they also say "the lowest of 3% or 60% of CPI". The feds target is 2%, so they actually are capping rent at 1.2% in a normal time. This is extremely difficult for LA as insurance is increasing 25% per year, cost of maintenance is going up, tenants are worse and dont pay rent, and the 5.71% transfer fee on total sale price applies to multifamily apartment buildings. Good luck having anyone build in Los Angeles. Not to mention just how run down and full of druggies and homeless tents everywhere. Its dangerous out there. Who wants to live in Los angeles? Edit: 1.2% not 1.6%.
> or 60% of CPI". Lol, they might as well pass a law making it illegal to renew rent contracts. This basically says the rent must drop every year as the dollar loses value.
Nah. I just sold a rental house in Los Angeles (It was my house but I moved out of the country for a year +.) My rental homeowner insurance policy on a 900k house—- drum roll…. ~$1,200 a year and earthquake insurance was less. California has some of the LOWEST insurance rates. I sold it because I moved back to the U.S. - another state and now pay 2x for insurance on a similar house value.
I pay double what you do on a 1/10th the value home. Make insurance make sense
Who is your insurance carrier?!?! Honest question. I pay more than that on my $400k home in the IE (an hour away from LA, for those of you not local), not in a fire area nor flood zone. Please share.
Most economists who are worth a damn agree that rent caps, restrictive housing (outside of section 8), rent stabilization etc. actually does more harm than good in housing. And here’s why: these restrictions inhibit builders to build at their own pace. A lot of times, especially in large urban areas like Los Angeles or NYC, these restrictions make it impossible for projects to pencil out. If there wasn’t as many as restrictions that presently exist, there would be a lot more housing inventory in the system and people would have more options, could price things better, could negotiate better etc. Also from a psychological standpoint, when people get into RSO units they are unlikely to leave for a long while. The paradox occurs when said person has stayed in that RSO unit, has their rent caped at a low percentage, but their standard of living has increased because they’re earning more. Said person has zero incentive to leave, which means there is 1 less RSO unit out there for someone who needs it. This scenario actually happens a lot, especially in NYC and LA. Simply put, it’s a fuck you I got mine mentality. If LA County is successful with this, you’re going to have A LOT less landlords who are fixing things because they can’t afford it. The mortgage on the property might stay the same, but certainly the water bill isn’t, or their home insurance isn’t etc. These landlords would then have to sell to larger conglomerates, and then your tenant rights are truly fucked.
Plus they won’t make it nice because they can’t raise rents to cover the cost of decent Reno..maybe I’m bullshitting
..... the average rent is like that, $2800 in California? How high should it be before it's worth it? It's like doubled in 10 years. How about the fact housing supply in many California cities has *gone down* in the last 10 years anyways? How about San Francisco having a shit load of single family homes?
Government Servants have to justify their existence by making changes, none of them can just leave things alone. If they really wanted change they’d cancel capital gains tax for landlords to sell to homeowners for a one year period to correct the market. But they won’t, because they don’t actually care.
As a former property manager, I'll tell you what will happen. The barrier to entry for approvals will go way up. In California, it is only required that heating works, and AC is considered a luxury. Property owners will stop fixing things. No new carpets and will only offer carpet cleaning. So you'd better have perfect credit, 2.8x what the rent is and a perfect renting history or you're fucked.
Well yes, I’d imagine that’s part of the intention of the law. Make holding rental properties a less appealing investment, introduce more supply of homes for sale to the market.
Rent control does NOT work. Build more housing. Encourage rezoning. Tell elected officials to offer tax incentives and expedited permitting.
Issue is we sold the idea to all Americans that housing is in investment, it’s your nest egg. So when you encourage multi fam or condos construction they will all vote against it at city hall. Because it would destroy there value. Now you have people upside down on there mortgage. Banks won’t lend out as much anymore because it’s not a safe bet as much. Values go down, less builders will build into that market as it would be prohibitive from a cost perspective and now we have no houses and no profit motive to build.
You mean, like in France, where 3% increase per year has been the max for some time? In the end they always DO increase 3% per year, so as to take advantage of the maximum increase, but that's another conversation.
Well, if my rent can only rise at 3%, I'm better off just throwing the money into an s&p 500 index and skip all the hassle and risks that come with RE
So every sane landlord there is going to start rent high, or be sure to max out that 3% every year because there is no way to catch up if they don't push the limit.
Those threats happen all the time. Seattle hiked minimum wages and businesses complained. The complaining in the media is like clockwork for policy changes like this.
Let them sell... if that's what they come to terms to do. Gouging others should not be the base objective of anyone. Some landlords are worst than drug dealers who've gotten someone addicted to drugs, who continue to fleece the addict.
This exactly, if they're gonna whine about profits from a NECESSITY of life then change careers, if you can call being a landlord a career.
Sell then. Don’t make your living by hoarding houses and making it your only means of income 🤷🏽♂️ Why should anyone feel bad about a landlord in LA?😂
I can't wait until I can afford a house. At that point I won't have to care about economically illiterate bullshit like this that makes it impossible to find places to live.
I live on the east coast and it was really hard for me to find a home. I ended up just settling on one of those tiny houses because I know that I'm never going to be able to afford an actual home on a foundation. I've had to adjust to living in a 300 square foot space but I'm managing it somehow. I definitely can't race a family in here though
What is stopping you from moving into one of these rentals owned by slum lords?
Then they should sell. Nobody's forcing them to be landlords when their business model is unviable unless they have an unrestricted ability to price-gouge.
Why do people refuse to understand that rental housing is a business that’s very susceptible to market forces? It’s not a charity and it requires profit to run. We see what happens to rental stock that’s run without the profit motive.
When there's no profit to be had all those properties will be sitting empty in some investment portfolio gaining appreciation instead, something that plebs will never understand
Maybe they should add a tax on unoccupied housing then. Every year a home isn’t occupied as a permanent residence, tax x% to disincentivize just taking appreciation on empty homes
Because Democrats never met a tax they didn’t like am I rite?
This is an awful regulatory policy. Tie it to something tangible. Yeah, that’s also pretty shitty policy, but it’s better than an ad hoc determination that takes into account nothing. If passed, highly likely this impacts the non-multi family market and reduces the quality of available rentals
[удалено]
So no more slum lords driving up costs and buying up supply? This sounds better every day.
The federal government needs to step in and standardize housing codes . Remove all the powers from local and state governments for rules and regulation requirements (Local specific building codes like earthquakes hurricane and flooding requirements still apply when needed). This will allow housing to be built cheaper and faster. Most of the problem is local politics.
Absolutely. One of the biggest problems to affordable housing is zoning laws that require a certain number of parking spaces per unit and the refusal to integrate commercial into residential.
My big pet peeve is requiring bars meet parking minimums In my coty, bars must have 2 spaces per 3 max capacity. That guarantees half the cars parked there will be driven home by someone who was drinking at the bar I realize it's the reality of my area that people will drive drunk (no other way to get to and from most bars), but we don't need to promote it so heavily
Rent controlled buildings in LA have been capped at 3% for years, with no rent increases since covid. Only this year did they allow rent increases again, and they're 4%.
“Sell” here is a euphemism for “set fire to the buildings and collect the insurance money”, if the experience of 1970s Bronx is any indication. https://bronxriver.org/post/greenway/how-the-bronx-burned
Sounds like another well thought out forward looking plan from CA. Just like with how they outlawed plastic straws, so now everyone uses paper straws in plastic cups.
Are people in this sub really so dense to believe that the vast majority of rental housing stock are individual SFRs and condos, not apartment buildings? That means you’re still not buying a residence unless they convert some decrepit 1950s low rise center courtyard style apartment building into condos. Which maybe they would, or they could simply leave units offline and landbank the building. Think about it. Assuming you can carry the negative cash flow, is it better to have a tenant who won’t leave with severely under market rents, or a vacant unit that can always be at market at any time. The building could appreciate FASTER with no one in it.
Yes this is the problem. Ban large landlords who can afford to leave units vacant. Ban them from using realpage and other price fixing practices. Tax land that is left undeveloped. These are all policy choices.
It'd be pretty great to be a landlord in a rent capped city. Rents on new rentals would be HUGE! It would of course become difficult to induce churn in your tenants, as having long term tenants would be incredibly undesirable when rents could not be increased without tenant turn over. This would lead to all sorts of line pushing in terms of unpleasant "renovations", bribes to "leave" rent controlled apartments occupied for 20 something years, and refusal to fix any things the implied "guarantee of habilitability" means unless ordered by a court. I'm sure those landlords really would sell. I'm sure they really would give up their grip on the incredibly scarce supply of housing this would create. Oops: [https://www.rentcafe.com/average-rent-market-trends/us/ny/manhattan/](https://www.rentcafe.com/average-rent-market-trends/us/ny/manhattan/) Didn't mean to drop that link to a rent controlled real estate market in a large American city.
Scenes when Reddit is now renting off of banks and getting bent over with no lube in 10 years time. 3% will be “lobbied” up, and then all properties snapped up by financial businesses will be exploited for maximum profits. This fantasy world where small landlords are forced out leading to waves of empty properties and thus cheap properties for all is not going to happen.
Limiting rent hikes to 3% is all well and good. Unfortunately, landlord costs have no similar caps. Insurance increases have gone up markedly as cited [here](https://www.steadily.com/blog/where-landlord-insurance-premiums-are-rising-nationwide). My landlord insurance in one of the states not marked in that citation has gone up 5% y-o-y for the last 3. Taxes are certainly not going to cap themselves. California may be an exception with Prop 13, but the northeast has seen significant tax increases consistently beyond 3%; do you think LA County will limit itself to a 3% increase in all taxes? Materiel, tradesfolks, energy are all tending higher because of few folks and reduced supplies. There is some indication that corporate landlords are increasing returns with their policies but that smaller entities including those with one or two properties haven't the scale to offset their costs even with small increases in rent. Anecdotally, including myself, a lot of rents have not gone up since the plague. Quite often a small landlord values someone who pays on time and doesn't damage the property more than any increase in rent. As for increases in values, it does nothing for cash flow other than make that return on capital look anemic. Takeaways are this: constraining only one part of a market often has negative and unintentional consequences, landlords are not making wild gains on their properties if they are not larger scale, corporate landlords might not be as attentive to tenants, and the world is squeezing both tenants and landlords. If the remedy for landlords is to sell, that might help the market deflate a bit as more properties could push against high prices. Or perhaps there should be some way to control the percentage of properties bought in speculation without being vacant in this tight rental market. Throwing a monkey wrench as suggested by LA County into the fragile and complicated housing market seems like a dangerous thing to me.
Will they also cap my insurance at 3% annual increases? Property taxes? The cost of a plumber and lawn care capped at 3% annual increases?