It’s an interesting idea to cap rents. One can expect that it might incentivize increased construction--but only if the entities constructing (developers) are the same as the investors, which is often not the case, which makes it harder to (in a lack-of-coordination scenario) cause developers to create more housing without strong price signals.
In rent controlled situations, sitting in some of those presentations by big investors, the big corporates are usually the ones who can best handle it. Mom and pop landlords can’t control or slash costs (precisely balancing rent/demand) to ensure yields. Goldman touts that they excel in rent controlled cities and it’s a net benefit to them, since they can pick up properties for cheap and “make them productive” by slashing the right costs that don’t damage demand (which is also easier in housing short rent controlled cities).
Anyway, it’s a specific point I’m picking at in an overall commentary/article I agree with here.
It’s a nuanced problem. Free-for-all ridiculous rent increases may drive construction but displace huge numbers of people and create massive social churn with the lag time in construction of new housing (which itself can damage desirability and rents, even if you were entirely heartless and just wanted maximum construction). At the same time, over controlled rents create shortages and benefit those who can dispassionately squeeze the last drops of juice out a property.
It’s an interesting idea to cap rents. One can expect that it might incentivize increased construction--but only if the entities constructing (developers) are the same as the investors, which is often not the case, which makes it harder to (in a lack-of-coordination scenario) cause developers to create more housing without strong price signals.
In rent controlled situations, sitting in some of those presentations by big investors, the big corporates are usually the ones who can best handle it. Mom and pop landlords can’t control or slash costs (precisely balancing rent/demand) to ensure yields. Goldman touts that they excel in rent controlled cities and it’s a net benefit to them, since they can pick up properties for cheap and “make them productive” by slashing the right costs that don’t damage demand (which is also easier in housing short rent controlled cities).
Anyway, it’s a specific point I’m picking at in an overall commentary/article I agree with here.
It’s a nuanced problem. Free-for-all ridiculous rent increases may drive construction but displace huge numbers of people and create massive social churn with the lag time in construction of new housing (which itself can damage desirability and rents, even if you were entirely heartless and just wanted maximum construction). At the same time, over controlled rents create shortages and benefit those who can dispassionately squeeze the last drops of juice out a property.