cross-posted from: https://lemmy.world/post/3560407

Considering how crazy expensive accommodations have become the last couple of years, concentrated in the hands of greedy corporations, landlords and how little politicians seem to care about this problem, do you think we will ever experience a real estate market crash that would bring those exorbitant prices back to Earth?

  • Valdair@kbin.social
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    1 year ago

    This is the only path I see - real estate needs to not be a guaranteed profit generator. It’s been viewed this way for decades. Rents are allowed to increase indefinitely, which inflates property values, which raises taxes, which raises mortgages, which raises rents, because real estate is said to be zero risk maximum reward investment. So it’s better to hold an empty unit until someone comes along willing to pay the price you’re asking than let it go for less.

    The only way I see around this is a really aggressive cap on rent. Like, once a rent is established, it can never be raised, for any reason, ever again (unless the property were radically transformed, like a large single family plot in to a townhouse development, condos, etc.). The home value can still do whatever, but it no longer has the catalyzing agent of perpetually exploding rents to drive it up.

    I spent a few weeks reading as much about rent control as I could, where it had been tried and analyzing how they failed. The legislation has never been remotely extensive enough - only touching a handful of (usually very old) structures in a single neighborhood, county, or city. Of course if there is a cluster of rent controlled units you will depress building where the properties might not generate as much profit vs. guaranteed to generate profit forever. But if it applies everywhere at once, you don’t have this problem. Landlords evicted tenants to get around the caps, because the only mechanism to increase rent beyond the cap was to cycle tenants out. So the real problem here is landlords taking it out on their tenants, rather than let the properties simply not be a guaranteed infinite profit generator. Finally people in rent controlled units tend to stay in rent controlled units, limiting mobility. This seems to be cited as a weakness but I never came across an adequate explanation as to why. You have to make landlording simply not worth it to bring the number of people who want to own homes in to balance.

    New developments would be able to charge whatever rent they wanted, if they wanted to rent them. So if you are absolutely determined to own and rent out properties, you have to keep building them if you want to keep setting new market rates.

    An interesting note though is once rents are largely stagnant (except for some special exceptions I would make where owning single units is unusual, like apartment complexes own by single property management firms who handle communal landscaping, clubhouse, etc.), those properties will actually remain competitive for longer… in an environment where average rents go up 10% a year, of course not increasing rent will make it unprofitable very quickly and you might as well sell… but when average rents go up 1% a year, it will actually stay profitable for a lot longer even if you can’t increase rent. So I don’t foresee an instant flood of the housing market.

    I also see benefit to pairing this kind of legislation with one that bars or otherwise limits corporations, especially foreign corporations, from owning and renting single family properties, but that’s a separate issue I haven’t studied as extensively.

    • severien@lemmy.world
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      1 year ago

      The only way I see around this is a really aggressive cap on rent. Like, once a rent is established, it can never be raised, for any reason, ever again

      We have something like that in my city. The rents grow, but are bound to the inflation. The dynamic is similar - the old contracts are vastly cheaper than the new contracts. That has several downsides:

      • young families can’t afford good apartments, since they will need to tap the new-contract market which is expensive
      • old people have nice large apartments for very little money. Sounds good at first, but then you often have situations where a single 80-year-old has a 100 m^2 apartment in the downtown, while a young 4 member family is in a 60 m^2 while paying more money. Even more perversely, the 80-year-old can’t move out, because they wouldn’t be able to afford a smaller sized apartment with a new contract.
      • old contracts become a form of property in itself and are sold on “black market”, inherited etc.
      • old contracts are not let go even if the apartment is not needed at the moment. So apartments are often empty, waiting for the kids to grow up, or used only occasionally (the family has a house outside the city and only occasionally spends time in the city).
      • you’re heavily disincentivized to move (to be closer to your work, family, get a bigger apartment for growing family etc.) because your old contract would get cancelled, and you will need to get a much more expensive new one
      • Valdair@kbin.social
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        1 year ago

        The problem is allowing there to be old vs. new contracts, not the control itself. There wouldn’t be a black market for contracts if the price of rent for a unit was permanent, public information, and tied to the property. Even if it’s sold, renovated, whatever - if the rent can literally never go up, sooner or later it’s going to make financial sense to sell it. It might not be today, it might not be next week, but someday, the goal is to force as much of the property ownership in to the hands of people who want to be property owners and live in the properties.

        It would have no effect on people who own and live in their home (except on the value of the property, if it causes a mass flood of properties on the market… which I doubt. The properties are still valuable just by virtue of being a place to live, they don’t need the rent generating component to be valuable).