I agree BMR is a scam, but not because of its effect on wages. It is too small of a factor, but because it is not market-based and leads to quotas, lotteries, middlemen, bribes- all bad.
To offset crazy high demand and prices, the only option is to increase supply (build taller, denser apartments/condos) or limit demand (disallow foreign buyers who speculate or invest, increase property taxes for owners that rent out their houses)
BMR is a scam in my opinion. It just prevents wages rising as they would naturally need to if housing became increasingly unaffordable to the point that workers can't even commute in. It recruits people into a program of lucky allocation rather than working for more. Busy or I'd write more.
Agreed. That is indeed what may happen. I'm definitely happy for the federal government to investigate the impact of these algorithms in cities with the fastest range of rent growth, however. It makes sense to ban it federally even if it's only really stopping price fixing in one or two cities.
To be clear, the million dollar scenario was intended as one in which the landlords collectively lost their minds and plunged themselves into long-term economic doom. In a more realistic pricing scenario, they'd collude to determine the absolute maximum price they could charge and still get tenants.
And when you think about it, that's how markets are supposed to work. Landlords want to charge as much as the market can bear, no more, no less. Renters want to pay as little as possible, and in a perfect market, it would reach price equilibrium.
But from the federal government's point of view, it's not as simple. Housing must be profitable in order to encourage new investment in housing. We're currently playing musical chairs with too few residential units for too many residents because there hasn't been enough housing investment since the 2008 crash. At the same time, they want to keep rents low, since money spent on rent isn't going into productive areas of the economy. They also want to keep rents variable, because strictly stratifying locations based in income has bad effects in society. (E.g. police officers not being able to afford to live in the large cities they work in.) Retaining the ability for lower-income renters to negotiate rent is helpful in that regard, but obviously not a silver bullet.
One thing I would be careful of though, is comparing rental prices to inflation. Housing costs are the single largest factor in the CPI-U, so it's almost a tautology that rents rise at the same rate of inflation, because inflation is largely measuring the rate at which rents rise.
Comparing to fed rates is more interesting. If you're getting less of a return on your investment than the current fed rate, you'll make more money by divesting yourself of your properties and putting the money into bonds. (And I believe this is the biggest driver of recent mass layoffs.)
This seems like it could be dangerous as it creates incentives for slumlords. If the landlords need to raise rent but they can't, then the only way for them to turn a profit is to cut their expenses.
When there is high demand for a product, including housing, the market has to respond. High prices attract investment in more housing, usually denser housing. Rent Control prevents the market signals from working. There is no incentive to construct more housing because its not worth it.
Additionally, if blue collar jobs can't be filled because its not worth the pay+commute, then either wages have to raise or these go undone.
If the market isn't allowed to operate, then you can't expect these systems to work.
Artificially lowered apartment rent seems obviously flawed but how about just not artificially lowering supply? Surely these high prices should have a lot of developers chomping at the bit to turn low density accommodation in to high density accommodation.
Artificially lowered apartment rent seems obviously flawed but how about just not artificially lowering supply? Surely these high prices should have a lot of developers chomping at the bit to turn low density accommodation in to high density accommodation.
Do you have a source for the claim that it was intentionally to keep rents high? That's contrary to the goals of most city planners, and would require corrupt influences.
While it's not impossible, it is a conspiracy theory, and requires evidence.
The way I see it, ridiculous rent is largely (but not solely) thanks to predatory real estate owners and bankers. Given that a place to live is a necessity and that people need to live reasonably close to their workplaces, I think it's worth considering some form of regulation. I don't know what that might be, but it's clear that the system we have doesn't work.
This viewpoint is 100% not supported with evidence from any jurisdiction on the planet. The only way to lower rents/costs for the poor without disastrous social consequences is to increase supply of market rate units. There is not other solution which works.
Seems like rent controls are the issues. Causing markets to be inefficient. No surprises there. Get rid of them and maybe supply increases as it can better match demand and capability of renters to pay.
Yet it isn't working in most european cities. Price increases and capital holders always build behind the offer/demand curve so they get a better yield from it. Also, rent is always high enough to milk as much as possible from modal income, as demand is pretty inelastic.
Also, read carefully, I don't want price control directly onto the private sector but the adminsitration controlling a big chunk of the offer.
There are some dynamic effects that might be dangerous to ignore. Like lobbying efforts for new construction might increase if there's money to made in construction of rental apartments, or more efficient use of square meters (smaller apartments/more used apartments).
But overall, yes, I totally agree. It's an allocation problem of a finite resource, with different tradeoffs.
My favourite idea, if we are going to keep the rent-controls, is to use a lottery.
I agree. Also how does this system change the cost of housing over all. I don't see how it changes anything. The simple reason rents are high in some areas is supply and demand. Will this increase supply? Or reduce demand in those areas. Doubt it.
To offset crazy high demand and prices, the only option is to increase supply (build taller, denser apartments/condos) or limit demand (disallow foreign buyers who speculate or invest, increase property taxes for owners that rent out their houses)
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