'Renters Are Struggling': Economists Back Tenant-Led Push for Federal Rent Control
nednobbins @ nednobbins @lemm.ee Posts 1Comments 364Joined 2 yr. ago
nednobbins @ nednobbins @lemm.ee
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tl;dr I was wrong.
I used to go to a restaurant that I was sure was a front.
Years ago I was walking home from the gym and I got peckish. I was in one of the less fancy areas of Manhattan so I didn't think twice about just walking into the first place I saw.
The second I walked in I decided it was a big mistake. This place looked fancy. Nice place settings, real wood furniture, etc. I was dressed like a bum and probably smelled bad.
But the head waiter came out and treated me like royalty. Fresh baked bread, a sauteed flounder that he filleted right at the table and all around baller service at a very reasonable price. I was the only person there but it was early so I didn't think much of it. I figured that if their food and service was this good when they thought I was a bum this is the place for me. I dropped a 100% tip and decided I'd go once a week and if I ever found a date I'd impress the hell out of her when we roll into a nice restaurant and the head waiter greets me by my first name and treats me like a big shot (aside: the first and only girl I brought there didn't like their vegetarian options but ended up marrying me anyway).
Ever time we went the place was practically empty. This was one of the less fancy areas of Manhattan but they were still paying Manhattan rent. The food was always top notch and did I mention how awesome the service was? Mooci, the waiter once came back from vacation and insisted that I try some of the moonshine from his Sicilian Mother. Constant freebies too.
We decided there's no way they could be turning a profit and assumed it was a mob front. Some older NYers may remember when the story broke that SPQR was a mob front, so it seemed pretty likely.
Well a few years ago we went back after moving out of state. The restaurant was under new management and everything sucked. Crappy place settings, shitty generic food and I didn't recognize anyone there. It turns out they weren't a mob front. They were just great cooks that sucked at running a business and ran out of money :(
The core problem, which causes that shortage, is that we have conflicting views on what housing is for.
On one hand, we want housing to be a right. On the other hand we want our houses to be good investments.
Those are conflicting goals. We need to pick one and be ready to sacrifice the other.
If you want your house to be a good investment, it needs to appreciate in value at a rate higher than inflation. The only way for that to happen is if housing keeps getting more expensive on a real money basis. That's a fancy way of saying that housing will be a bigger and bigger chunk of income.
Every single policy that reduces the cost of housing also degrades its effectiveness as an investment. If people can get housing any time they want, they have no incentive to pay somebody a bunch of money to someone hoping to fund their retirement by downsizing.
Your suggesting to legalize more housing will destroy the ability of homeowners to make a profit off their homes. Even though I stand to earn huge amounts of money from the appreciation of my own house I would support that, but I'm afraid I'm in the minority. The US has a 65.9% home ownership rate and for most people their home is their single biggest asset. If we address the housing shortage those people will all see their single biggest investment asset drop in value.
there is a record number of vacant homes at the moment.
We're currently close to the record for all time lowest vacancy rates. We're at 6.3%. The highest (over the past 70 years) was in 2009, at 11.1%. It got down as far as 5% a few times. I downloaded the raw data and it says the average is 7.28%
https://fred.stlouisfed.org/series/RRVRUSQ156N
There's a popular image of a bunch of Scrooge McDucks sitting on giant inventories of housing but the evidence doesn't support that. Someone saying, "I saw a bunch of empty houses." is exactly as logical an argument as a climate denier saying, "It's been cold all week." That's just an anecdote.
The data is very clear on the matter. We don't have enough housing.
That sounds nice in theory but what happens when you want to sell your house?
The only potential buyers would be people who either currently rent or are ready to sell their old house as soon as they buy yours.
What if someone wants to fix it up first? Nope, they can't do it. It will cut out the flippers but we've also just cut out all the renovators and restorers.
We could do something like this (and it may not be a terrible idea) but there will definitely be a cost. If we add that law, all the people who currently own homes (that includes both investors and owner occupiers) will see the value of their real estate holdings drop. In the US, over 65% of people own their homes and for most of them, their home is their single biggest asset. Richer people can diversify more so while this law wouldn't hurt the 35% who don't currently own homes, it will disproportionately affect the poorer end of the 65% homeowners (who have proportionately more of their savings tied up in their home).
If we don't also address that problem at the same time we'll create a cohort of people who can't afford to retire because we killed their plan of downsizing when their kids move out and living off the difference.