Rent control

He will be kicked out of the wet wing if he keeps this up

Bill English is getting praise from the Cato Institute:

Rising home prices and apartment rents have been in the news lately, but almost no one is looking at the real causes behind these problems. Instead, they are proposing band-aid solutions that will do little to help most people afford housing but will greatly benefit special interest groups.

According to the news, BostonLos AngelesMiamiNew YorkPortlandSan FranciscoOakland, San JoseSeattle, and Washington, DC, among other major urban areas, are all suffering from housing crises. Economists who have studied these regions know why their housing is becoming less affordable.

First, urban-growth boundaries and other land-use regulations in most of these regions have limited the amount of land available for new housing. Urban planners say these regulations are needed to control the externalities caused by urban sprawl. However, as New Zealand’s Deputy Prime Minister recently noted in a speech about a similar housing crisis in Auckland, urban planning itself “has become the externality” that is making housing the most expensive.  

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Herald editorial on state house changes

The Herald Editorial discusses the changes the government have made to state housing.

An era ended yesterday. The idea that a state house was awarded to tenants for life has been consigned to history. Legislation that put an end to this idea passed through Parliament late last year, remarkably with little comment. The law came into effect yesterday just as quietly. From now on, tenants will face a review every three years to see whether their income or circumstances have improved.

The absence of much protest suggests the public attitude changed long ago. Yet it shows some courage on the Government’s part. Sooner or later an elderly person is going to be evicted from a house she loves in a neighbourhood where she has lived most of her life, so that a family may be given the three-bedroom home she has occupied alone, and she will be on television.

Normally Housing New Zealand would be able to offer her a smaller but reasonably alternative home. But another historic change that took effect yesterday means the corporation no longer decides who gets a house.

The role has been passed to the Ministry of Social Development, which will assess applicants’ housing need as part of all forms of assistance they require. That makes sense and should make the system fairer.  Read more »

Useless subsidises bugger up housing market in Australia

Subsidies are evil, they suck cash and they almost never work as intended often distorting the market terribly.

Beware of any politician who thinks subsidies are a solution. Especially for affordable housing.

High-income earners are the overwhelming beneficiaries of government support for housing, a report has found, turning on its head the popular perception that low-income Australians get the greatest subsidies through rent assistance.

”Only 25 per cent of renters get any support from the government,” the cities program director at the Grattan Institute, Jane-Frances Kelly, said. ”They get none of the support that homeowners get. Even landlords get more.”

The report, Renovating Housing Policy, found homeowners received $36 billion a year in government subsidies, landlords about $7 billion and renters less than $3 billion.  Read more »

Green Taliban support selling of state houses…and rent control

The Green Taliban have come out with a housing policy that is surprisingly right wing in some areas. They support a rent to buy scam where tenants can buy their state house. In theory this is very right wing, but in practice almost always turns out to be a bum deal for the tenants.

In the second major part of their policy they revert to type revealing they are still statists intent on controlling every aspect of people’s life.

And like most Opposition policies, the Green Taliban’sloopy idea for rent control sounds good until you scratch the surface.

“This policy, meant to assist poorer residents, harms far more citizens than it helps”

They’ve ripped this policy off from the Green Taliban in the UK which announced it last year.

To be fair, rent control has had mixed results in Europe, and for places like Germany it has meant fewer Germans feel the need to buy their own home.

“Therefore, only 43% of German people own their house (the lowest in Europe)”

This paper (a bit dated now, but with luminary Milton Friedman as a contributor) makes some really interesting points both in terms of the housing crisis campaign, and the impacts of rent control:

From the point of view of the politically orientated policy maker, rent control has everything to offer. It silences (at least for a time) the noisy activists, it shows that the government is doing something about the housing crisis, and often as not it wins the political support of a large fraction of the voting public (over half of the households inmost urban areas are tenants). Moreover, rent control does not involve the use of government resources and hence doesn’t “cost” the government anything.

Tenant activists generally do not start out from the premise that “we must first ascertain the facts.” Quite the contrary. The objective of the tenant activist is to create a sense of crisis—to make policy makers and other tenants believe that the situation is truly desperate. A book entitled Less Rent More Control, which is “about rent control… and how tenants can organize to win and enforce it,” advises:

“Even if you can’t get good statistics, it’s often helpful to publicize specific cases of families paying a large portion of their incomes for rent.”  “Stories about specific families who are suffering from the housing crisis can be very useful in bringing statistics to life and in getting publicity for the rent control campaign.”

And we are seeing this for sure in the media here..with Campbell Live and the Herald campaigning for and on behalf of the Labour and Green parties.

The media for its part, always happy to advance the cause of the underdog—an admirable objective taken by itself—willingly cooperates in making notorious the plight of the underprivileged.

But does rent control help with a housing crisis…ermmmm…no it doesn’t:

Rent control worsens housing “shortage”.  Rent control makes rental housing relatively cheaper than it would otherwise have been. Accordingly, it increases the demand for housing. At the same time it reduces the profitability of investment in rental housing and hence reduces the supply.

With forcibly lower rents landlords have little interest in maintenance:

Rent control causes deterioration of the housing stock.  Faced with a rate of return on investment that is too small, many landlords recoup their losses on a current basis by allowing the physical stock of houses to depreciate at a faster rate. That is, regular maintenance and repair is neglected.

It’s just another tax:

Rent control redistributes income in haphazard fashion. Rent control is a form of tax that is levied on landlords, the proceeds of which are given to tenants. The amount of tax and subsidy varies according to the difference between the market rent and the controlled rent.

In large cities the effects of rent control could see large drops in the value of the rating system, as property values slump. Rates are aligned with values.

Rent control shifts the incidence of property taxation.  Rent control reduces the value of rental property.

Basically, in short simple words…Rent Control doesn’t work, ensures sums develop, and destroys value….yeah, no wonder the Green Taliban are keen on this.