6 Responses to “Rent control … oh, how we miss those woe-be-gone days …” »»

1. john p
   Comment by john p | 11/15/07 at 10:56 am

   I’m not

   a big fan of socialized anyting, so I think I’m with you on the rent control thing.

   A

   couple of things to consider, however,

   first we hit a perfect storm of supply and demand

   which was thrown way off in the Boston/Cambridge area. Because it was an awful investment to build

   rentals, nobody did, so supply went down. Further, as Boston became College Town USA, there was a

   ton of pressure for rentals from the college students.

   second, the pendulum swung back too

   abruptly and at the worst time. We went from Peoples Republic to Capitalistic Robber Barron

   overnight. If you look at the economics during that period, it couldn’t have come at a worse

   time. Younger couples needed to be dual incomes to pay the rent or buy a starter home. Now that

   you had dual incomes competing for prices, even couples that didn’t want to be dual income had to

   become dual incomes. People were making less and had less buying power than before. Kids were

   graduating with steeper student loan bills to service, we had steep, steep increases in health

   care, transportation, gasoline, etc. When you add that stuff all up, prior to that people were

   paying about 25% or less of their income on rent. That gave them lots of cash to sock away for a

   down payment. This younger generation didn’t have that monthly savings and house prices

   skyrocketed.

   My point is that if you need to take the training wheels off, don’t wait until

   you’re going downhill on a bumpy road. If they dialed back more moderately on it or never had it

   to begin with it would have been better off. These abrupt changes are really bad and cause lots of

   turbulance. The reason why I agree with you is that if you don’t let market forces coexist

   naturally, you end up magnifying the problem (disparity) in the end and in this case the Generation

   X-ers ended up holding the bag. Nice work on the site by the way…

2. Observer
   Comment by Observer | 11/15/07 at 12:48 pm

   Rent control is an unmitigated

   failure, and has been proven so financially and economically in various academic papers over at MIT

   Center for Real Estate. The argument: it creates artificial frictions/drags on the process of

   housing development, so developers are less likely to create new housing, ceteris paribus to other

   markets. Perhaps more damning, it creates a “black” market – remember the Seinfeld where someone

   dies, and Elaine tries to get the rent-controled apt. as his “niece” for a huge fee? That is

   actually a good illustration of what happens. Once you have control of this rare commodity, you

   hang onto it and only release it for “fees” or to “family.” So the parties most in need of the

   housing rarely see it, and with housing starts becoming less frequent, the pool of rent-controlled

   product that is actually available actually gets smaller over time.
   As always, if you want to

   create housing, ease the frictions — restrictive zoning, restrictive building codes, an expensive

   and complicated entitlement process — and let the free-market proceed.

3. john p
   Comment by john p | 11/15/07 at 1:14 pm

   You had me completely until the last paragraph. We

   have strict zoning in the Boston area because of a lack of sensitivity toards neighborhoods i.e.

   the West End. The Combat Zone would have never had a Ritz Carlton had we not had some strong

   Government intervention and commitment to revitalize that area. That linkage to the Rose Kennedy

   Greenway to Boston Common/ Public Garden put us on a global level for beautiful cities.

   I

   think it is more of a balance that needs to be found. If we let developers have full reign you’d

   end up with walled off gated developments, over development, congested infrastructure etc. Poor

   planning creates hardships. For instance, if the 128 belt was traffic engineered for 1 car per

   household before “snob zoning” when the lots were much larger in the surrounding suburbs. When

   households went to two earners, you got double the cars, double the traffic. When they eased

   zoning on lot sizes they added more volume and created a hardship. Now that hardship gives more

   leverage for the commuter rail to raise prices. When poor planning creates more and more

   hardships, the hardships feed off eachother and future generations have to deal with a bigger mess.

   Look at New York and New Jersey, look at their taxes. The current generation inherited hardships

   and it costs a fortune to live there.

   Keep in mind that Boston had to transform itself from

   a pedestrian city to an automobile friendly city and somewhere in between they layered in the T and

   commuter rail. We’re struggling to make head way and for the most part, we’re succeeding little

   by little.

   It is annoying that because to get on the Orage Line in Malden you have to

   shove your way on and in the winter you can see the sweat condensating and hear people pleading to

   let them off at their stop. Because the experience is so unpleasant, many say to hell with it and

   pay the toll to drive over the bridge and pay to park in town.

   The people that are against

   zoning remind me of the Republicans in the 70’s. They made fun of the Democrats for wanting to

   have energy conservation and new technologies. If we weren’t so dependent on oil, the dollar

   wouldn’t be tanking and we would not have to be in Iraq. The end game without zoning and building

   codes would be far worse. My best argument to make my point is take a look around in Boston; even

   though the overall real estate market is tanking, Boston is staying afloat better because of the

   comprehensive planning strategy to link the best areas in a way that enhanced the city.

   I

   totally agree with changing the mindset of an “entitlement society”. The balance of government

   intervention and free market needs to adjust but doing these swings of one polar opposite to the

   other is very disruptive.

4. Matt
   Comment by Matt | 11/16/07 at 11:04 am

   I agree

   with you that rent control doesn’t work as a way of providing affordable housing. For developers,

   it’s a disincentive to invest, while for renters, it’s an incentive to live in that city. This

   manipulation of the market predictably leads to supply shortages.

   On the other hand, I think

   it’s hard to deny that poor people got screwed by ending rent control. The improvement of the

   quality of apartment stock and the increase in prices meant that the well-to-do (myself included)

   started living in the city, and poor people were forced to move further out – Revere, Quincy, etc.

   Now, the cost of commuting is put on those least able to afford it, and for whom public transit

   isn’t an option (the commuter rail does nothing for you if you work second shift).

   I’m not

   saying we should go back to rent control, but I do think we need to come up with better policies

   for increasing housing supply. Right now, almost all construction is aimed at the upper half of

   the market, and developers claim that this is the only way they can make a profit. Personally, I

   don’t believe it – if someone built smaller condos/apartments with less luxurious outfitting but

   sold/rented more of them, they’d still make money. Not as much as they would selling luxury

   units, but they’d still do fine.

5. HateAllston
   Comment by HateAllston | 11/16/07 at 12:52 pm

   And I’d like to take issue with

   people “renovating” apartments around the city. While this may be true for the South End/Back

   Bay/Kenmore area; many apartments in Brighton, Allston, Dorchester and Southie are still complete

   dumps. The only difference is that now they;re expensive dumps, as the nicer luxury condos and

   apartments around them, combined with the demand of mom and dads college dollars, drew their rents

   a lot higher.

   To add to it, many owners are making bigger bucks off converting individual

   three deckers into condos and selling them, rather then renovating only to rent.

6. Observer
   Comment by Observer | 11/16/07 at 5:42 pm

   Allow me to step back re: “restrictive zoning” – I believe that zoning is a necessary and useful

   tool for urban planning (after all, look how charming Houston is….not).
   The broader issue is

   that the zoning process in Boston is shockingly un-defined (Article 80 gives the City license to do

   pretty much whatever it wants even if the project is compliant with all zoning) and subject to the

   whims of our Mayor, the BRA and to some extent the n’hoods.
   For example, you option a piece of

   land to create housing. You know that the City is going to take a 15% bite out of the deal for AUs

   and that cost is factored into your acq. price. You meet w/ the City and they tell you to make your

   peace with the n’hoods. The n’hood tells you it wants more parking than required by zoning

   (happens frequently, even sites 1/4 mile from a T station!). What do you do? Your deal no longer

   pencils out. If you say no, the n’hood freaks out, doesn’t support you and whines to the City. If

   you say yes, you need to whittle down the AUs count until the project reaches the proper return. So

   the City tells you to add some density, so you have more sellable nsf to subsidize the original AU

   count, and the n’hood freaks out some more.
   Either way, you are screwed.
   Further, the

   entitlement process is a moving target that does not necessarily focus on the broader good for the

   City – it allows the very specific needs of immediate neighbors (I want parking so I can still park

   in front of my house!) to trump the needs to the City (we need more housing!). What ever happened

   to the “common”wealth? Andy why is there no political will to stand up as support the common,

   rather than micro, good?
   Needless to say, the stewardship of this process is sophomoric, and it

   leads to developers playing all sorts of games, as well as adding 1-2 years of pre-development with

   all the associated costs, to a pro forma.
   Sorry, wasn’t planning to indict the “system” but it

   is quite frankly largely responsible for some of the housing shortage issues the City

   experiences.

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