Rent Control is Bad, part 2
Debate Rounds (5)
This is a NO SCORING debate. You are more than welcome to comment on it, but please do not score it.
This debate is a continuation of this one:
1) The idea is that rent control is a price ceiling on rents. By not subjecting new housing to this price ceiling, you are not advocating rent control. From your source on San Francisco - "All new construction, since 1979, is exempt from rent control in San Francisco." This means that San Francisco effectively does not have rent control for large portions of the city.
a) As to "why...demand suddenly increase to two houses tomorrow," that could be for a myriad of reasons. Typically the reason is job opportunity. Silicon Valley is a prime example...without it, demand for housing in San Jose would be flat.
b) With the "no rent control to new buildings" amendment, is rising cost still a problem?
No, but this is no longer rent control. You are removing the price ceiling.
3) Was this agreeing that the constrained rent control wouldn't hurt incentives, even if it still causes the maintainance problem?
Yes, but you're acknowledging that removing the price ceiling, i.e. removing rent control, is the solution, not the problem.
4) The idea is that rent control prices rise a little bit each year (which is also what currently happens, but if it isn't, use this as an amendment), so it covers rising maintainance cost.
No, I believe that covers inflation.
If maintainance cost goes up, then his renting price will also go up so he still makes 100k.
Why does this require government intervention? Without rent control, if maintenance costs go up, so will rents to compensate.
The government regulation is there PRECISELY because the government does NOT want rents to go up, hence rent CONTROL. This is why landlords get screwed by legislation mandating a certain level of maintenance.
You're going to have to quote the relevant portions of your source.
It seems at this point, we are close to reaching a convergence. Now it may become an argument of definitions, in this case, "rent control." I accept I may be wrong in my definition, but I am drawing it from Wikipedia (http://en.wikipedia.org...):
"Although the political debate over rent control is far-reaching, as described below, the purposes and provisions of such laws are intended to be limited in scope. They define which rental units are affected, and may have only larger or older rental complexes covered by the law. The frequency and degree of rent increases are limited, usually to the rate of inflation defined by the Consumer Price Index or to a fraction thereof. San Francisco, for example, allows annual rent increases of 60% of the CPI, up to a maximum 7%.
Unregulated rent increases may be allowed when a tenant moves ("vacancy decontrol"). Rent-control laws that don't include vacancy decontrol are called strong rent-control laws. Such laws were in effect in five California cities (West Hollywood, Santa Monica, Berkeley, East Palo Alto and Cotati) in 1996, when AB 1164 (known as the Costa-Hawkins Rental Housing Act) made strong rent-control unenforceable in California (except in special cases like mobile home parks)."
Here, you notice it says rent control are "intended to be limited in scope." Perhaps it is a failure in deduction, but since this provision was in the "rent control" page, I assumed it was a form of rent control. Secondly, the passage refers to Strong rent-control laws, implying there is a differentiation between the forms of rent control e.g. full rent control is just a type of system under the broad category of "rent control." Lastly, the argument supporting rent control in this page argue for the sort of controlled rent control I have been arguing for, and though this may be wrong, I assumed the PRO where not creating straw mans.
Considering this, here are my questions to you:
1) Do you think "weak rent control," or if you prefer, "rent stabilization" is bad?
2) When mainstream economist argue against rent control, are they referring to full rent control, or the weak form I described as well?
3) If my argument is really a straw man, why are neoliberal economists recommending dismantling rent control rather than reforming it as I want?
lol, no need to apologize. I'm taking this in an extremely informal fashion, so no harm done if this moves forward or drops. I'm glad we are reaching a convergence, as that would mean we are making forward progress on the issue.
Regarding the definition of "rent control", in economic terms, the defining aspect of rent control is the price ceiling. It is through the price ceiling that rents are "controlled" by the government in such a manner that rents are invariably below market equilibrium price, leading to outsized demand and constrained supply. This price ceiling aspect leads to both affordability for the renter, as well as all of the negatives I discuss, namely lack of additional housing being built, and poor maintenance of existing housing.
Therefore, to say that rent control is "limited" is to say that either the ceiling is not very low (i.e. it's close to equilibrium price already), or that it is not widely applied, as in your San Francisco example. Especially in the latter, that would mean that rent control largely does not apply to San Francisco real estate, especially when it comes to new housing. It's a near-concession that rent control, i.e. the price ceiling, simply does not work, since a significant portion of the city does not have a price ceiling on rents.
What I see markets like San Francisco doing is establishing a "sliding price ceiling" that allows for slower adjustment to market rates. Since rents typically do not decline but only advance to accomodate for market movements, this is effectively a consumer protection advocacy stance.
Regardless, much of San Francisco real estate is not pretty and poorly kept with only blighted areas subject to renovation, and IMHO rent control is more than likely responsible for such a condition.
On your questions:
1) On preferences, I think the weaker the rent control the better. I acknowledge that there's always going to be some government regulation or intervention, and that such intervention is good in limited quantities. However, when it comes to price-setting, I'd much rather have the market determine this the vast majority of the time.
2) They are referring to the price ceiling specifically.
3) Your argument is not a strawman...rather it is akin to talking about generalizations instead of specifics, like playing pool without understanding the physics behind it. I mean, I understand your arguments and they make a lot of sense. However, technically speaking, there are very, very few times where it's appropriate to pick up the cue ball, i.e. apply outside intervention, although the few times it does apply is typically welcome for both players.
The main advantage to (especially limited) rent control for the landlord is that it leads to price stability, and thus a more predictable renter market. However, at a certain point, rent control makes a market "too predictable" and thereby "breaks" the game.
blueberry_crepe forfeited this round.
Pass, I guess. CON does have a round to post...so get to it! =)
Though it may waste a whole turn to do this, I need to ask this question before continuing. Do you think there exist a benign (no harmful economic effects) form of rent stabilization? I think there is, and if you disagree, I intend to argue that, while if you agree, then we are on the same page.
My form of benign rent stabilization is basically what I have been arguing:
1) Price control based on a year, under the assumption that a landlord will only make as much profit as he did at that year
2) New buildings are exempt from price control so there is incentive to build new buildings
3) the price control will adjust so that the landlord can meet costs and maintain his profit. However, he will have no (or few) opportunities to increase his profit based on demand. An additional board will be created to hear cases for exemptions.
4) Legal provisions for the landlord to maintain his buildings, so even if there is a disincentive to not maintain buildings, he will be forced to
5) The moral intention of the benign rent stabilization is to make sure as many people get housing, but letting traditional livelihood have a greater precedence in determining where you live over money. Money however, is more powerful for new buildings or between 2 bidders who have never lived in that place before (such as old tenant moves out, and 2 new bidders want the house, money will have a greater say than how close one of the bidders lives to that place).
So far I have heard 3 main arguments against rent control:
1) it disincentives new building constructions
2) it disincentivies landlords from maintaining their properties
3) it makes less people have housing
I believe my benign rent control solves these problems. problem 1 and 3 are solved by solution 2, while problem 2 is solved by solution 4.
The Resolution is Affirmed
CON: Alright, so now let's call "limited rent control" "rent stabalization." I concede that rent control is bad, but I am still convinced rent stabilization is good.
Both PRO/CON recognize that the debate over the resolution is over. Rent control is indeed bad, i.e. not preferable.
This is not a black and white assessment, rather that overall, the case against this particular price ceiling is stronger than the case for it.
CON asks: "Do you think there exist a benign (no harmful economic effects) form of rent stabilization?"
My stance on any government intervention is that it's a necessary evil, and should thus be of limited quantity. The idea is that the government generally has no business in setting prices wholesale for a slew of products, and that the private sector through "price discovery" is much more effective and efficient in allocating investment to appropriate sectors.
However, there are instances where the market will break down for a product even though the product is absolutely necessary for survival. An example of this would be if water traded on the marketplace, and how it would trade following a major disaster where the victims are cut off from a water supply. Supply and demand would dictate that the demand for water would be extraordinarily high due to extraordinary circumstances, but to deny water simply because people could not afford exhorbitant prices for such a basic good would be seen as price gouging and out-of-control greed by merchants. Thus, the government intervenes...this IMHO aptly explains why most utilities are quasi-government institutions even though they are ostensibly private corporations.
Similarly, housing is another basic good. It does no one any benefit to deny housing to individuals simply because rental rates are too high...it would exacerbate a situation of homelessness which is not only socially undesirable, but may even lower property prices for the very landlords demanding the high rents justified by the marketplace. This is another breakdown in price discovery, and in that sense, the government justifiably intervenes in a limited fashion to ensure that the market does not break down due to the normal mechanics of price discovery.
To apply this answer to CON's proposed rent stabilization proposal:
1) This will put a ceiling on profits, and landlords will sell their property in favor of less restrictive markets.
3) See #1.
4) See #1.
5) The problem with "traditional livelihood" is that many times, what is "traditional" is anachronisitic. Examples of this would be human sacrifice, which was practiced not only in "uncivilized" societies, but also in ancient Greco-Roman culture. Basically, "adapt or die".
I therefore conclude that CON's rent stabilization proposal is not benign, and has all of the elements that makes rent control bad.
blueberry_crepe forfeited this round.
blueberry_crepe forfeited this round.
1 votes has been placed for this debate.
Vote Placed by johnlubba 3 years ago
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