Rents in Capitol Hill are among the highest in the Seattle, and they don’t appear to be falling anytime soon. The average rent for a Capitol Hill/Eastlake apartment in September was $1,278, according to analysis from local real estate experts Dupre+Scott. Of course that number includes “efficiency” units and gets significantly higher as you add bedrooms and a private bathroom.
(Source: Dupre+Scott)
The trend has pushed affordability to the forefront in this year’s local election. City council candidate Kshama Sawant has made rent control one of the cornerstones of her campaign.
“Market rate housing is becoming increasingly expensive, in keeping with a minority of higher-salary people moving into the city,” she wrote in an email to CHS. “Low-income and middle-income people are being forced to move out into the farther reaches of the city or outside city limits, and have to commute long distances for their city jobs.”
But is rent control in Seattle possible? Sawant says a mass push at the city level could spark a debate in the state legislature to repeal the statewide ban. Others aren’t as sure.
Proponents of rent control argue it grants more stability for working-class individuals and families, allowing them to keep roots in a neighborhood without getting priced out. This in turn adds increasing value to the neighborhood as residents become more invested in their community.
Opponents of rent control, including these economists, argue that artificially depressing rents stymies new housing development, creates animosity between renters and landlords, and benefits a small number of renters lucky enough to land rent controlled apartments.
Tracing the history of rent control, both nationally and in Washington state is a strange saga. Back in 1930s New York there was a store clerk who was fined by the state for selling milk below the state-set minimum price. The case made it to the U.S. Supreme Court, where in 1933 the court found no reason to strike down the power of states to set reasonable retail price limits. That has since been interpreted to give states and cities the constitutional grounding to enact retail price controls, like those on rents.
In 1980, a Seattle group called Renters and Owners Organized for Fairness (ROOF) filed a rent control initiative with the city. It would have set up a rent control board and tied rent increases to the Consumer Price Index. The effort was ultimately unsuccessful. The following year, the Washington state legislature banned rent control, although much of the fight came over moorage fees for houseboats.
The statute prohibits and cities and counties from establishing any limits on rent hikes, moving the rent control fight to Olympia.
A 1980 Seattle Daily Times headline captures the uncertainty surrounding rent control, even during a time when it was up for serious consideration. (Image: Seattle Public Library Archives)
San Francisco’s rent control policy is among the most well known in the country. It sets limits on the maximum percentage a landlord can increase rent by tying increases to the CPI. A rent control board confirms the percentages and hears disputes between landlords and renters. The San Francisco model has allowed some longtime neighborhood dwellers to stay put. It’s also prevented others from moving into the most desirable, housing scarce neighborhoods and contributed to skyrocketing rents in apartments that are not controlled.
While Sawant has praised the San Francisco model, in an email to CHS she argued it didn’t go far enough because it only applies to certain buildings.
“Contrary to the popular myth, rent control in San Francisco is a veritable lifeline for tenants who would otherwise be completely priced out of the city. The problem is that it is not broadly applied, and therefore many tenants aren’t able to obtain rent controlled units. While the way rent control was implemented in San Francisco has not eliminated high rents there, it has still played a major role in keeping rents lower than they would otherwise be. The example of Boston illustrates this all too well. When its rent control laws were eliminated in 1997, apartment rates nearly doubled within the months that followed.”
It’s not very often that you look to Los Angeles for examples of urban planning but Sawant may want to look farther south than the Bay Area. LA has had rent control in place for decades — you can see a schedule of the annual allowable increases under the city’s Rent Stabilization Ordinance here:
03 – BULL Allowable Rent Increases 6-6-11 ca.pdf
The chances that the Washington state legislature warms to rent control is slim at best and mostly preempts any discussion about whether it could pass the council. It can be difficult to imagine many elected officials sticking their neck out on an issue when there’s no immediate possibility of having to make a decision on it.
Sawant is the only candidate in the election that strongly supports rent control and advocates for it. And, though she’s also an economics instructor, there doesn’t appear to be much if any support for rent control among the current class of elected officials around the city and state.
Council member Richard Conlin, Sawant’s opponent, is far more skeptical about the possibility and effectiveness of enacting rent control than his challenger. During last week’s debate at Seattle Central Community College, he called Sawant’s fight for rent control a “cruel illusion.” However, he didn’t dismiss it outright, opting to point out the procedural hurdles to enacting rent control.
“We don’t have the authority to do anything like that,” he said. “I’d like to see it happen, it can’t happen in the city.”
The mayoral candidates aren’t keen on the idea of rent control either. Incumbent mayor Mike McGinn and challenger Ed Murray have more or less brushed aside the idea of pushing for the issue. McGinn has touted his work to bring affordable housing projects online during his tenure, while Murray talks up increasing affordable housing incentives and has hinted at affordable housing “requirements” on developers.
On Monday McGinn took to Seattle’s sub-Reddit for an AMA session when he was asked about his views on rent control.
“I am skeptical of rent control because of the experience of other cities,” he wrote. “I am looking at what we can do to change our rules to require greater advance notice of rent increases, and increased relocation expenses.”
The city may not be able to keep your rent from rising even higher — but at least you’ll have fair warning.
Of course, we limit the number of houses that can be built; lets make sure we limit how people can charge for them.
Why not also force control on salaries? Or house prices? And quotas for the people that can move to our neighborhood.
> Why not also force control on salaries?
You mean like the minimum wage?
In Economics 101, everyone learns that price controls distort the market and create a deadweight loss. By this reasoning, the minimum wage decreases consumer welfare, since the total amount of labor income will be less with a minimum wage than without (fewer workers earning a higher wage).
Then, in Economics 102, everyone learns about elasticity and monopolies. It turns out that the demand for labor is not infinitely flexible. There’s a degree to which businesses need labor, and are willing to pay more than the price that they would pay in the absence of regulation.
In fact, most recent economic research has suggested that the minimum wage actually *increases* welfare. That is, the positive effect of the increased wage is larger than the negative effect of reduced employment.
I don’t think that SF-style rent control is a good idea. But I don’t think it’s a bad idea because all price controls are a bad idea. The research is clear on this point: price controls can improve outcomes.
If Seattle let building heights be taller this would help as more supply would flood the market.
Exactly.
Height is important, but it’s not the only thing. Boston is one of the densest cities in the US, despite being quite short.
In practice, my guess is that there are other regulations which matter more. For example, well over 50% of the city is zoned SF5000, SF7200, or SF9600. This means that each such parcel of land can only be used for one single-family house, and the minimum size of each lot must be 5000 square feet (or 7200, or 9600). The maximum height in such a zone is 30 feet. Even without changing the height limit, changing the zoning to allow attached housing (like townhouses or single-family rowhouses) in these zones would “open the floodgates”, as you say.
The reality in San Francisco (extremely high rents) seems to me the best evidence that rent control simply does not work for the vast majority of people, and in fact it raises rents for most.
San Francisco-style rent control is a terrible policy. But I don’t think San Francisco’s experience tells us much about how we can effectively lower rents. If we judge policies based on how they work across the country, then it’s clear that the only effective way to lower rents is to make your city an undesirable place to live (a la Detroit).
In reality, the more interesting question is not how to lower rents in an absolute sense, but how to slow down the rate of rent growth given that we live in a booming, vibrant, growing city.
It’s possible for some form of rent control to lower rents, for the same reason that it’s possible for some form of wage controls (like the minimum wage) to increase income. The “Econ 101” argument is that price controls always create a deadweight loss. But in practice, it turns out that some businesses need a certain amount of labor, and given the choice between paying higher salaries or going out of business, they’ll pick the former. It’s possible to imagine a minimum wage that was so high that going out of business would be a better option. But that level is much, much higher than where we currently are. In the same way, while there are clearly some rent control systems that will lead to slums and property abandonment, it’s possible to imagine a rent control system that will not have these problems.
I’m still very much of two minds about whether any form of rent control is a good idea. I think the “good” kind of rent control would be much less politically achievable than the “bad” kind, and the “bad” kind (like what SF and NYC do) is much more harmful than doing nothing at all. But the “good” kind could improve outcomes, if it’s done right.
Before someone else beats me to it, yes, I’m wrong about how rent control works in NYC. Posting a follow-up.
San Francisco had high rents before rent control. In fact, San Francisco has rent control because high rents weren’t just affecting poor people, but middle class tenants as well. I remember it. I was there.
The Los Angeles version is a model that both rental property owners and economists can live with. It has not negatively affected new construction there, and it has not resulted in the horror slumloard stories coming out of other cities, many of which are urban legends anyway. Most of the economists and others that are critical of rent control, are ignorant of the Los Angeles model. They are refering to NYC’s experience.
Just because it is an uphill battle because of state statutes (lobbied for by former mayor Charlie Royer), does not mean it’s not worth doing. Rents will not be any less if nothing is done. Developers are falling over themselves on this because Seattle is the Wild West for unregulated profits they cannot get elsewhere. That is a terrible basis to operate on, and it is not sustainable.
Can you explain the way in which Los Angeles’s rent control differs from the kind used in San Francisco, and the modern kind used in NYC?
At a glance, all three systems appear to be rent stabilization laws. The salient features include [a] no controls on the rent after a vacancy; [b] allowing rent to increase by a certain percentage, and no more, while the unit is occupied.
There has been extensive economic research on rent stabilization laws, and most of the research has found significant negative effects from these types of systems.
Make it easier and less expensive for new development in Seattle, ease restrictions for height/unit counts. Provide more compelling incentives for rents that are near median.
But going all-out on rent control will just end up raising rent for everyone else and stifling new development.
Let’s not forget property tax assessments. It seems ridiculous on the face of it to impose height restrictions that limit construction, then impose rent control on landlords, while having no limits on property tax increases. Renters love to pretend it should have no impact on rents and landlords should just absorb everything, but that’s a fantasy. The longer someone’s in a rent-controlled house or apt, the more incentive they have to not move. Eventually over the long run you could have a large % in one building of controlled rents. How can you constrain the rent increases while doing nothing to limit tax increases? Nice way to force a landlord into bankruptcy or having to sell out.
Well, first off, the Washington State constitution limits the increase in total assessed property taxes to 1% per year. Even the most stringent rent stabilization laws tend to allow a 2-3% yearly increase. It’s true that there are levies and assessment changes and other things which can lead to an individual property occasionally seeing its tax bill increase by more than 1%, but over a longer period of time, the 1% limit means that rents will still increase faster than taxes.
However, even aside from that, I think there’s a moral argument in favor of land taxes. There is only a limited amount of land in Seattle. None of us created it; there is no land that came into existence because of human effort. So why should any individual human get to enjoy the full benefits of owning that land (i.e. the rental income), to the exclusion of everyone else?
I very much doubt that property tax increases will force landlords into bankruptcy, given how ludicrously low property taxes are in Seattle. But even if they did, from a renter’s perspective, does that really matter? The building will get bought by a new landlord with more money; the new landlord will almost definitely do a better job at maintaining the property than the old one, given that we’ve already established that the old one was broke.
Aleks, I know the point you’re making, but “none of us created it” is definitely not true. Entire portions of Seattle exist on human-created landfill; the Lake Union shoreline, downtown waterfront, and even Lake Washington shoreline are all different than they were before white settlement.
You’re right, of course, but you have to admit that what you’re describing is kind of an edge case. :)
When economists say that taxes create deadweight losses, the idea is generally that some desirable economic activity doesn’t happen because of the tax. So I guess it’s technically true that a land tax will discourage people from creating more land in the manner that you’ve described. But that’s not exactly something that happens every day!
It is not necessarily the property tax rate that is driving the increases, it is the assessed value of the property that drives the property tax increases. For example, the property I purchased less than 2 years ago (at market rates) here on Capitol Hill is now being assessed for 2014 taxes at a price that is 40% higher than the purchase price, with no improvements made. So even with a stable property tax rate, the property taxes can increase dramatically for a property owner. If I were a landlord, and needing to cover the costs of ownership, then property tax would absolutely need to be considered when setting the rental price. I do think rent controls are a reasonable idea, but the costs of ownership also need to be considered as part of the equation.
I’m not convinced that property taxes here are “ludicrously low.” I pay over $5000 a year for a very modest, 700 sq ft home. Is this really low compared to other counties/states?
Yikes. Either you are over paying or there is something very special about that 700 sq ft.
The average house in Seattle is around 1500 sq ft and the average property tax is around $3500.
What’s your assessed value?
The assessed value, for property tax purposes, is a combination of “land value” and “buildings.” For some reason, my figures are $493,000 for the former and only $1000 for the latter (fortunately I bought my place in 1980, when prices were way lower than they are now). I have a nice little home, so it’s really odd that the assessed value is so low. I have always assumed that the land value predominates because, well, it’s Capitol Hill, but maybe I should put in a call to the assessor’s office.
How about we try to encourage developers to build more microhousing, since that is a market-proven way to provide an affordable housing option in our neighborhoods? Oh wait…we’re making it harder and more expensive to build those. Oops.
The problem with microhousing is that you’re lowering the floor. Look at the square foot price, often you see it north of $3 in Seattle for aPodments. Sure, you can get a 300 square foot apodment for $900-1000/mo. So what happens to the 700 square foot 1 bedroom apartment market?
Well, 1700 for 1 bedroom is very common in all the new bindings. I wouldn’t blame apodments, greedy landlords and NIMBYism making sure no more houses are built is what drives rent up.
I concede that microhousing/apodments are one way to provide more affordable rents (but not on a square foot basis!), but you seem to ignore all the downsides of these buildings…ugly/cheap design; wedged on to small lots; out-of-scale to surrounding buildings; no design or environmental review; no parking. There are already enough of these atrocities on Capitol Hill….I favor a complete ban on more of them, but that’s probably not going to happen.
However, the City and the DPD is now in the process of proposing much stricter regulations for microhousing ( see other thread on CHS). This will happen in the coming months, so to you and the developers: Give it up, you have lost that battle.
There are multiple different things that people mean when they say “rent control”. Two of the most common approaches are exceptionally bad, and have been roundly criticized by economists. The third approach has been moderately successful when used in Europe.
The first approach, or “hard rent control”, is a fixed limit on the rent that can be charged. You move in, and then your rent doesn’t change until you move out. This is how the original New York City rent control worked. No one thinks this is a good idea any more. Even New York has essentially abolished this system in favor of a newer one.
The second approach, or “rent stabilization”, is similar to the first, except that increases are allowed on a certain schedule. In particular, rent may be increased yearly by some percentage (possibly indexed to inflation), and certain cost increases (e.g. utilities) may be passed through.
Rent stabilization sounds like a good idea, but as usual, it gets bitten by the law of unintended consequences. For example:
– In general, once a unit becomes vacant, the price may be increased to any level. Therefore, landlords whose units have below-market rent have an incentive to let units become vacant, so that the price can be increased. They spend less effort on maintaining the property and assisting their tenants, so as to discourage them from wanting to stay.
– Because landlords know that the price increases are limited, they will set the initial price of the unit at a rate *above* the market. Tenants will willingly pay a higher price now for the guarantee of a rent-controlled apartment later. It’s similar to how fixed-rate mortgages have a higher interest rate than ARMs; you pay more for the stability. But that’s not a compelling result if your goal is to lower housing costs.
– If a tenant leaves a rent-controlled apartment, they face an almost certain spike in housing costs. Therefore, tenants have a strong incentive to stay put, even when leaving would make sense for them — e.g. they have a new job in a different neighborhood, or they have a baby, or their child goes to college, or the landlord is treating them badly.
Effectively, rent-controlled apartments combine the worst parts of renting (no equity; no ability to customize your home; payments increase every year) with the worst parts of owning (very hard to move; maintenance is largely your responsibility).
The third type of rent control, and the kind that I think we should be talking about, is controls on the *absolute* price level of rental homes. That is, each year, the government assesses the value of each property (as it already does), and based on that assessed value, determines what the maximum allowed rent will be for that property. The amount increases each year, based on inflation and/or reassessment.
Let’s compare this scheme to rent stabilization:
– Because the absolute price level is fixed, vacancy does not offer any advantages to landlords. Therefore, the incentive for landlords to kick out their tenants, or to poorly maintain their property, goes away completely. In fact, there is an incentive to upgrade and renovate properties, since doing so will increase the rent that you’re allowed to charge.
– The ability for landlords to “price in” the rent stability goes away. Rents are based on what the property is worth now, not what it will be worth after 5 years of minimal increases.
– Tenants are free to move, just as they are today. They do not have to worry about facing a huge rent increase if they move. This removes a lot of friction from the housing market.
There are still some downsides to this scheme. Because it lowers the amount of profit that landlords can make, it will reduce the supply of housing, compared to the alternate system where there are no price controls. However, just as the minimum wage increases total welfare, it’s possible that this scheme might do the same. To my knowledge, this system hasn’t been studied enough to give a definitive answer on the subject. (But that’s still a lot better than rent stabilization, which has been roundly rejected by mainstream economics.)
I’m still not sure whether I think rent control is a good idea at all. But if we do have it, then I hope that it uses the absolute price level model, rather than the failed rent stabilization approach.
Before someone else beats me to it, yes, I’m wrong about how rent control works in NYC. It’s true that NYC has rent stabilization, but it’s also true that NYC has a rent control system which works very similarly to the third type of system that I’ve described.
However, there is a key differences, which I believe is the program’s downfall. If a tenant leaves, then the unit switches from rent control to rent stabilization, or (for small buildings) to being completely uncontrolled. This means that the system has all the same problems with vacancies as rent stabilization.
I still think that a rent control system which did not allow price reset on vacancy would be a much better system than anything that currently exists in the US.
For a full explanantion, read the LA ordinance, and talk to people who have direct experience with it. LIMITING increases to inflation, for existing buildings and existing tenants. Reset to market rate when new tenants and new buildings occupy the same space, with those rent increases then limited to inflation, and so on.
I would like to see a cite to that research that states it had a negative effect in LA. Or that landlords were allowed to let their buildings deteriorate beyond code, as a direct reslult. That simply has not happened due to rent controls. I lived in LA for 10 years under it, and it worked quite well for renters, and did not keep new residential development down to any significant level. A lot of smoke was and is still be blown by some property owners and wannabes about it, but in LA, it did not wash, and they pretty much got to build whatever and wherever they wanted.
Last I checked, there were significant differences with NYC rent stabilization/control and how it was implemented and enforced. After renting in Seatlle for over twenty years now, I can tell you it is copying LA, but without rent controls, at a much faster pace and higher level.
Michael, I did read the LA ordinance, and it seems to describe a fairly typical rent stabilization scheme. The factors you note — limiting increases to inflation, reset to market rate with new tenants, etc. — are all fairly common for rent stabilization. This is how rent stabilization (but not rent control) works in NYC as well. It’s certainly how rent stabilization works in SF.
Here’s an article that studied rent stabilization in many American cities [1]. As you can see, while the results are mixed, they did find a measurable negative effect on mobility and maintenance and housing satisfaction, among other things. There was no negative effect on development, but that’s because new buildings are generally exempt from rent stabilization laws, and the market generally assumes that the risk of new buildings becoming subject to rent stabilization is fairly low.
So anyway, I’ve checked the rules in NYC and LA and SF, and as far as I can tell, they’re the same. If you think they’re different in a meaningful way, please provide a citation. Thanks.
[1] http://econjwatch.org/articles/rent-control-do-economists-agree
BTW, Keep in mind that the majority of housing stock, at any given point in time is not new construction. Therefore, it does not command the same market rents as new construction as a rule. And affordable housing stock is not generally new high-end construction, unless it is specifically desingnated to be. The number of the type will always be dwarfed by the number of existing non-new construction housing.
Unless you have a policy like Seattle, no rent control and no restriction of mass conversions of existing affordable housing to condos, and then when that reaches saturation, mass new, low-end construction that commands high-end rents, and gets favorable tax breaks without paying much if any in mitigation fees. So, Seatlle is not starting at the same point as LA, but it’s still not too late to benefit.
Very well written – Bravo!
Landlords don’t independantly decide what the market rate is, nor are they allowed to charge above that rate after a tenant moves out, no more than they determine what the local CPI is to determine how much they can raise the rent afterwards. At least in LA. I don’t know how that is administered in in SF or NYC. In LA, it is set by the rent stabilization board based upon independent data and surveys of the market.
I find it interesting how places that have both a reasonable cost of living, strong job growth and little regulation – like Texas – never enter the discussion. I’m not sure why folks out here fail to look at this model.
Because Seattle, Western Washington, and most of the West Coast large citys are progressive. Texas (with the exception of Austin) is not.
Cost of land in many cities in Texas is cheaper because they face fewer geographic constraints as many coastal cities. Yes Texas has had strong job growth but they are also bolstered by a major oil and gas sector which has been doing very well lately and that industry has a broad reach in terms of skills needed. It is also infamous for booms and busts, so if new production technology leads to a glut of oil / gas we’ll see how robust things are out there. Our technology sector has done great but it needs more specialized workers and probably is not as broad reaching. I’m not well versed on the differences in regulation between Texas and Washington, but having no state income tax is a pretty solid perk that both states share and is a big incentive for companies such as LLCs that have pass through income structures.
While it’s true that Washington doesn’t have a state income tax, that statement obscures the fact that we have a gross receipts tax (the B&O tax) for all business activity. For “services”, the B&O tax rate is 1.5%. But unlike with a traditional income tax, businesses are not allowed to deduct their expenses!
Let’s take the example of a nail salon. The salon takes in about $4 million a year, and has expenses of about $3.7 million; the remaining $300,000 is profit. The salon pays a tax rate of 1.5% of their $4 million in receipts, for a total of $60,000 in tax. That may not sound like a lot of money, but $60,000 is 20% of $300,000. So for this low-margin business, the measly 1.5% B&O tax rate is actually as bad as a 20% income tax!
As a contrast, in “business-unfriendly” Oregon, our nail salon would only pay a 6.6% tax rate on their income, for a total of $19,800.
In addition, there’s the overhead of actually filing taxes. In Oregon, it’s easy to fill out your state income tax return based on your federal return. In Washington, your B&O tax return must be filled out completely separately. If you’re a business, you’re probably paying an accountant to file your taxes, and so more complex tax returns mean lower profits.
The B&O tax is most favorable for companies that have relatively high profit margins. As such, it’s not too surprising that software and internet companies love Washington. But it would be a mistake to say that we have a business-friendly tax structure in general.
Good point Aleks. Time to do some research. I wonder how firms like Costco (2.94% operating margin in Q3 13) deal with this type of tax in their WA operations.
Let’s not forget a major source of the demand comes from companies like Amazon relocating its hundreds of imported h1b visas workers here. If these companies are saving so much money importing ‘foreign talent’ perhaps they should offset the cost of skyrocketing rents for locals they refuse to hire in the form of a steep tax. Seems like Seattle may have had the forsight to do this with Microsoft but these days not so much. It’s creating a huge imbalance if you haven’t noticed.
I found this to be a really insightful article on the NYC rent control system:
http://www.nytimes.com/2013/07/28/magazine/the-perverse-effects-of-rent-regulation.html?_r=0
That’s an interesting article. There also seem to be a lot of assumptions that may no longer apply in the post Great Recession world, espeically outside NYC. I also sense the veiled resentment against people who where there first being forced out merely to get the rents and/or market rate up. Like they don’t have a right to live there. Only the wealthy do. That’s very feualistic. Keep it in NYC, don’t use it as an example for Seattle.
For example, the increased numbers of apartments in Seattle has not brought the market rate down, and likewise, rent stabilization does not have the effect on market rates to the extent some economists theorize. When the rents do go down in an eventual cyclical (or maybe permanent this time) economic downturn, the pattern for over 20 years has been to plateau at a level that is still higher than before the spikes.
Just wanted to say excellent posts Aleks. It sure is nice to see rational economic thought, VERY refreshing change from the usual discussion which is neither rational or economically sensical. Just by chance, do you listen to Econtalk podcasts with Russ Roberts? You seem to have an Austrian esque view of things, something I can certainly appreciate.
Thanks for the kind words.
I wouldn’t really describe myself as an Austrian, nor as an adherent of any other “school” of economic thought. My understanding is that the various economic “schools” are much more prevalent in public policy debates among non-economists than they are among economists [1]. At this point, there is a lot of consensus among academic economists about most things. The main disagreements are about the inputs to the agreed-upon models. For example, if Alice and Bob disagree on the elasticity of labor demand, then they will also disagree on the extent to which the minimum wage will create unemployment. Or if they disagree on the extent to which redistribution should be favored over GDP growth, then they will also disagree on the optimal level of taxation. But those policy disagreements obscure the fact that they agree 100% on the economic laws that lead to each of the possible outcomes.
Anyway, I’m certainly no academic! But most of the stuff I’m talking about is fairly basic, and I have no doubt that someone with an economics PhD could point out dozens of ways in which I’m subtly (or not so subtly) wrong. :)
[1] http://www.reddit.com/r/AskSocialScience/comments/12p7x4/economics_why_are_there_so_many_divisions_in/
I would like to second the kudos to Aleks! She is obviously very well-informed on this issue, and I really appreciate her in-depth analysis.
Yikes… as a native son who has lived in SF for the last 6 years… please Seattle, don’t even consider rent control.
The housing stock in SF is insanely expensive, and it is also terrible! I am a white-collar worker and most of my friends and I live in run down victorians that we easily pay 2k per person per month for – note this is NOT for the entire apartment, it is simply the per-person rate. The average rent in SF for a one-bedroom is pushing $3k and in fact many of the local real estate blogs look at Seattle with an envious eye – your housing units have increased substantially more than ours over the last decade, even though we have 250k more people.
So, what do you get when you combine a lack of supply with a ton of demand? Bidding wars for crappy housing, which is surrounded by neighbors who are fossilized old coots who haven’t moved since the 70s and pay like $300 in rent. It is totally bizarro world.
And of course, there is virtually no disagreement amongst economists that rent control generally raises housing costs.
It’s just another flavor of NYMBYism. People don’t want their neighborhood to change, they put an effort in living here (renting or buying).
They fight new housing, they fight density. When the rent goes up, now they want to place rent control. In 10-15 years CH will be like San Francisco, some rents grandfathered at low price, other crazy expensive.
Perhaps if you moved into that place at the same time your elderly neighbor moved into his, and you stayed that long, you would have that level of rent too. Why should move out, simply because others want to move in who are not even buying the place? And your elderly neighbor likely is living on a fixed income too. SF pays a lot higher wages to white collar workers, and you chose to live there and those rents. You obviously can afford it, or you would be taking the BART in from Oakland or more likely now, from Pittsburg or Concord . So I don’t get anything but thinly veiled envy from you post.
Why should they get to live in a neighborhood they can’t afford? There is envy on both sides.
There are lots of neighborhoods to live in. I’m not sure why I should worry that not everyone can live on Capitol Hill.
Market rates mean those that can best afford the neighborhood live there. The renter that can pay wins, the landlord wins, the renter that can’t afford loses. Rent control means some lucky renters who can’t afford the neighborhood win, everyone else loses: those that can afford, the landlords, and the unlucky low income renters as the system deincentivizes building more housing.
I’m less worried about rent increases than I am about wage disparities. There are plenty of people who can afford the current rents. The cry for rent control comes from those being left behind by a widening income gap. A higher minimum wage and a state income tax could help narrow that gap. The extra tax revenue wouldn’t hurt either.
Given that there are still many other neighborhoods in the city that are affordable I don’t see that need to jump straight into rent control. Many neighborhoods south of downtown Seattle have much improved transportation with the new light rail and street car system and rents are nowhere near what they are on Capitol Hill. Sure they don’t have the sheer number of bars/restaurants/cafes that attract so many to the hill, but given time and demand from new residents they would develop.
To insulate oneself totally from the effects of rising rents there is always the option to purchase a home. There are several one bedroom condos and co-ops for sale under $200k, where monthly payments and HOA fees would be comparable to renting a one bedroom but you also get the home mortgage tax deduction. I certainly understand that there are people who would still struggle to save up the down payment and keep up with their mortgage at this level, but even with rent stabilization the payments are going to be roughly equal.
One of the major reasons rents keep going up is that there is a need to out do the previous building that just went up. They have stainless steel appliances, we will have gold plated appliances. All the apartments now require washer dryers, dishwashers, microwave, and higher end appliances that we didn’t need or care to have around in the 1970’s and prior. Also the apartment units were a lot smaller back in the 1900’s and so. Think tenement housing. We now require/demand a separate bedroom, closet space, storage area, colored concrete floors, etc. Many people who lived in tenement housing thrived and while we consider those conditions now poor, I don’t see where we can’t fix the apodment issue without the need to ban them. Sure they should require design review. Parking?? Really? I lived in Boston for 13 years and never needed a car. We need to constantly demand better transportation!
It is just naïve to think that apodment residents will all not have cars. In an ideal world, yes, but that’s unrealistic. Some parking is needed for ALL new buildings in a neighborhood as dense as Capitol Hill, with street parking as tight as it already is.
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