this post was submitted on 23 Aug 2024
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Housing Bubble 2: Return of the Ugly
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So, this ain't a HARD LINE finding, but it's a popular opinion in economist circles.
Here's a great video on the topic by unlearning economics:
https://www.youtube.com/watch?v=4epQSbu2gYQ&t=1259
Interesting. Yes, it's definitely not black and white. I didn't find the income inequality argument quite as confusing though. While it is good for existing tenants to be able to stay, I feel that increased inequality could lead to richer tenants putting pressure on poorer tenants, or their landlords, to leave, as they don't "fit" in the neighbourhood, which is a negative effect in my opinion.
Of course, that then brings in all the intricacies of how to properly manage gentrification...
"rent control" and "managed gentrification" are kind of two sides for same coin
The basic tenet is that downward pressure on any existing investment tends to put upward pressure on new investments from similar firms, sometimes pricing investors out.
In this case it's rent control putting caps on return outside market fluctuations. It causes builder firms to take on the financial burden of getting return on investment by pricing newer units higher. This prices out people and sometimes locks them into the rent control system as they can't afford the now higher priced newer housing.
This causes fewer units to be built as now you have to target a smaller but more financially viable market segment so "affordable housing" takes a slump.
The asterisk here is that people living in their current housing don't end up on the street, but it severely hampers city growth, as new tenents can't find affordable housing.
By Itself I don't think rent control is a net positive thing for a community, but rent control to keep tenents in their existing homes combined with heavy investment into real estate development from the government is a great one-two punch to eliminate homelessness.
Problem is #2 costs money while #1 doesn't so... Most of the time you only see politicians trying to focus down on the rent control.
Even problem #2 can have a net positive return when the societal costs of homelessness are factored in.