Guardian article on Berlin rent control issue
"Berlin’s rent cap, though defeated in court, shows how to cool overheated markets," has lots of good links, including "Why Rent Control Works" from Jacobin Magazine.
For me, part of the reason I support the concept is it is a kind of "excess profits tax" since housing is expensive in part because of supply restrictions because of zoning and other rules. (Note I don't think government is heinous as restrictions usually come about because of nimbyism and a very facile understanding of how the housing market works.)
Why should commercial property owners be the sole beneficiaries of these capacity restrictions?
The trick is to balance rent control requirements in a manner that doesn't provide another reason to limit production of more housing.
Labels: housing market, real estate development, rent control, rental housing
posted by Richard Layman @ 1:46 PM&Permanent Link
5 Comments:
(Reposted to the right blog entry)
THIS IS BY charlie, NOT ME:
charlie said...
Meh. There isa supply side and a demand side, but the mistake is thinking equilibrium is a steady state. The point of equilibrium is to give a price to a hard to price good (housing).
Rent control benefits existing renters, penalizes new renters. Same as NIMBY. Both have a place.
Other views of the rent cap:
https://www.bloomberg.com/opinion/articles/2021-03-02/berlin-s-rent-controls-are-proving-to-be-the-disaster-we-feared?sref=4NgeXq8Q
Interesting view on urban AIRBNB:
https://www.ft.com/content/f78399ed-e9bb-4d54-8dbc-b5027ed09965
I doubt there is a single large American city that has the short term rental problem of european travel cities. Maybe SF.
But focusing on absolute numbers can miss that power of a small segment of renters/buyers driving the market. IT's the marginal buyer who sets the price.
One problem with housing markets is local knowledge; this stuff gets granular very quickly. Again look at the DC metro area market:
https://www.brookings.edu/research/state-of-the-capital-region-in-2019-housing-growth-and-affordability/
The NIMBY claims don't add up. DC itself is overbuilding, likewise with PG and Moco. The big laggard -- and the real NIMBY -- is Fairfax. And again that's more land ownership patters, although it would be easy to take something like route 50 and densify it -- easier to get commercial lots of the right size.
Re balancing current residents vs future residents, I've often asked "SmartGrowthers" on the benefits of density. As you were talking about supermarkets in SLC vs DC that is a good example -- you don't actually get the benefits promised.
What you do get is liquidity.
https://dc.urbanturf.com/articles/blog/the-future-of-friendship-heights/18174
(recognizing the age of current residents mean they aren't selling).
In markets you can talk about a liquidity premium which is partly what we see in real estate. "HOT" area doesn't mean its good, just means there is a lot of turnover.
Yes, so much to unpack. Not in order.
1. Yes, markets and submarkets are super micro.
2. Yes, because of the swift rise in prices, areas won't turnover until death (like Friendship Heights, but also my old neighborhood sees turnover mostly resulting from death, and decendents not wanting the house).
3. In strong (sub)markets, even marginal changes in demand or housing tenure type (e.g., shifting some units to airbnb) has an extranormal effect on the market.
You make an excellent point about how this drives pricing overall.
4. The Salt Lake vs. DC and density and retail thing is tricky. Part of the reason there is more variety in SLC is because for longer the market was weaker compared to DC. Plus DC's height restriction and other limitations on land use. Plus the city has more land compared to DC, especially as 1/3 of it isn't federal and pretty much inviolate to change, as it is in DC.
I also argue that the actual establishments but also the knowledge and capacity of independent retail in DC proper was wiped out by the 1968 riots and it took many decades for the sector to recover.
Of course, the rise of independents (mostly restaurants but some retail here and there) has been seriously damaged by the pandemic but plus the general problem of comparatively high rents even in "bad times."
e.g. https://www.washingtonian.com/2020/12/10/this-bar-star-felt-lost-when-her-restaurant-closed-until-she-got-her-hands-on-a-table-saw/
The thing in SLC is you have independent support groups for retailers. (But mostly it's a function of lower rents, and even in some cases, the fact that the market is small "forces" traditional property owners to rent to non-chains if they want to absorb the space.)
In grocery it's tricky. This area is close to the Albertsons hq in Idaho and Safeway in California, so both were big here (but got out of the market for various corporate reasons), and Smiths was developing multi state heft and expansionary visions on its own, then it merged with Fred Meyer and in turn FM was bought by Kroger.
But somehow independently, the Associated Food Stores retail grocery cooperative developed, providing support to independents. Two of the companies that are members, Harmons and Rancho, have more than 30 stores between them. Although AFS also owns some chains independent of companies it supplies, which also serve the Greater Salt Lake Market.
The cooperative in DC, District Grocery Stores, went out of business in the 1970s. It had supported mostly corner stores, not the bigger kinds of stores that AFS supplies. Probably the riots cost it too. But the fact that most of the stores were micro meant that as the organization of the grocery sector change, they weren't positioned to continue to participate.
The problem of current beneficiaries versus future beneficiaries is a conundrum.
There is no question that this is about "reproduction of space." You mentioned this issue before about London.
Because of the repricing upward of everything, legacy residents come out on the bad end of things.
The rise in pricing doesn't benefit legacy residents, unless they are owners, but not immediately.
But there is "the right to the city" issue in a way that people don't think about that much. Should the city belong only to the people who were already there? Don't other people have a right to the city? People like us, albeit two to three decades later?
WRT retail and other amenities (improved parks, libraries, schools, safer places, etc.) theoretically, you get more retail and other amenities, and in DC there is no question that's true. But the reality is that it's mostly been restaurants. Retail not so much. It needs different supports and DC Government just isn't mentally positioned to provide the right kind of support.
But you also have to develop space differently, and that isn't happening. Big developers provide big spaces.
And like I've written about many times, developers are mostly concerned about activating space, not whether or not the retailers can be viable.
Look at Wharf and Navy Yard. Retail per se, mostly sucks, isn't particularly successful. Restaurants and food consumption related businesses succeed, are the driver of the develops and the activation on the ground plane.
That retail isn't succeeding there ought to be a big issue, one that is studied and addressed, but I don't think planners have really noticed.
(From the beginning of the H Street planning process in 2002, I argued that DC's planners didn't have a very fine grained understanding of how things work at the store by store intra-block scale).
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Any thoughts on the Kennedy Street piece in the Post?
Last summer, I wrote a piece about Friendship Heights, because of a letter to the editor in the Post by a W3 Vision person, that the reason the retail there is failing is because of lack of density.
http://urbanplacesandspaces.blogspot.com/2020/09/friendship-heights-and-production-of.html
I said no, it's because there's too much retail and activity centers relative to demand.
For all that I wrote about SLC and the plethora of retail, it has the same issues in terms of facilitating "retail decay."
The Mormons pumped big money into the City Creek development, which replaced two Downtown malls, because they were afraid that the development of "The Gateway" would shift downtown and centrality away from the area by Temple Square, the mother church and the various headquarters facilities of the Church of the LDS.
City Creek is a fabulous somewhat open air center. It crushed Gateway, which as a retail destination is now totally and completely f*ed.
At the same time, Trolley Square hasn't been able to really develop strength either. (The only thing that has really revitalized it is the addition of a very nice Whole Foods store.)
I argue that it is because the area isn't big enough population wise to support all three, let alone the major developments in the suburbs.
That being said, Macy's is closing suburban stores, and other stores are closing, so there is some oversaturation. But then there is also the shift to e-commerce, over financialization, etc. that is affecting retail more generally.
OTOH, because there is so much growth in population, the region can handle what in a more built up area, would be too much retail, because people are buying a lot, because of their particular household stage.
(Back in the day when the Post published the Extra sections, which had local news too, the sections for places like Loudoun County were published at least two times/week, because of all the home sales ads, etc., while the inner core communities had only once/week sections. Plus when the Post killed the suburban Gazette papers, the Fairfax Times continued to publish.)
I guess too with "who benefits" (cui bono) from new density we have to look and consider separately the changes in the real estate market and the changes in the mix and provision of amenities.
And mix is an issue. Restaurants vs. retail, range of mix at different price points, etc.
I wrote about "price points planning" a couple years ago. It was in response to when Aldi first entered the market.
But I had been thinking about it since 2011:
http://urbanplacesandspaces.blogspot.com/2019/02/aldi-to-do-mixed-use-supermarket-in-dc.html
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