> The market rent is exactly what other potential tenants are willing to pay.
You're not understanding the scam. Suppose you move in to a place and pay the then-market rent of $1000 a month. Let's further suppose that it cost you $2400 to move, plus a shitload of time and effort that you'd rather not repeat. If the next year the market price remains $1000/month, the landlord can still raise the rent on you because you'll be reluctant (and possibly unable) to pay moving costs again. The exact amount they can get away with depends on personal tolerance and your time value for money, but given how much moving sucks, in practice it's quite a bit.
> Or that the inability to charge market prices causes property owners to refuse to rent in the first place, thereby making housing problems even worse.
That is definitely a negative side effect, but not a huge one in practice. How many apartments can one person use? Who would really let an apartment building stand empty when you could be charging market rent? In San Francisco, pretty much nobody.
A bigger problem is that it might reduce the supply of new apartments. But that's also not a problem in SF because any building built after rent control was passed is not under rent control.
> Suppose you move in to a place and pay the then-market rent of $1000 a month. Let's further suppose that it cost you $2400 to move, plus a shitload of time and effort that you'd rather not repeat. If the next year the market price remains $1000/month, the landlord can still raise the rent on you because you'll be reluctant (and possibly unable) to pay moving costs again
many cities do not have rent control. the city i live in is one such city. the scenario you're describing does not happen here.
if an owner decides to raise rent above market, now that owner is faced with the possibility of not being able to rent out that space, because now they are renting above market price. even just 1 month of vacancy is already lost revenue that would often dwarf the potential gain of raising the rent.
owners also have costs too. when someone moves out, they have to pay to have the apartment repainted, listed, and brokered.
this is not the reason rent control exists. rent control exists because SF wants to keep prices low without building more housing, making life miserable for everyone.
> A bigger problem is that it might reduce the supply of new apartments. But that's also not a problem in SF
because the city continually refuses to allow new housing developments to be built.
> many cities do not have rent control. the city i live in is one such city. the scenario you're describing does not happen here.
Because -as you mention at the end of the comment- your city builds new housing to meet demand. Rent Control was enacted BECAUSE landlords were raising rents to absurd levels in cities that (for a variety of disgusting reasons) found themselves incapable of building new housing to meet demand. :)
> The exact amount they can get away with depends on personal tolerance and your time value for money, but given how much moving sucks, in practice it's quite a bit.
It is my experience, as you say, that rent tends to increase by a small amount each year, usually about 2%. Even people on fixed incomes tend to get cost of living adjustments, though, and the range is about the same as typical rent increases.
I do not see rents increasing by the amounts you suggest, which suggests that either all landlords since I started renting in 1991 have been leaving money on the table, or they can't actually do this reliably.
I think there are several reasons why they can't raise rents by 10% a year in order to keep people there, even though that extra money would be about what it costs to move:
Since the money it would cost to move grows only at inflation, by the second or third year it would suddenly be profitable to move, even for renters who really hated moving. In order to avoid this, landlords would have to apply the rise only once. But if they do this, then the market rate is just the higher one, and you could look at the initial lower rate as a promotion. In fact, this is quite common in rental advertising! Often it comes in the form of "first month free", which is about of the same scale.
More importantly, people who rent probably do not expect to stay in the same house or apartment for many years. In non-rent-controlled areas, rent is more expensive per month than buying the same sort of place, so if you intend to stay in the same location for more than a few years, there's no reason not to buy. As a renter, I've never lived in the same dwelling for more than three years, and when I move somewhere, I assume that I'll be moving again in a year or two, as conditions change (job, relationships, etc).
I just moved out of a non-rent-controlled 1 bedroom in NYC, where my landlord wanted to raise the rent from $2550 to $3100 per month. I've spoken with the new tenant, who moved in at a rate of $2400 per month. I turned in my keys on Friday, they painted the apartment on Saturday, and the new tenant moved in on Sunday. Despite this being February, they rented the place so fast that the second half of the month was paid for twice.
The dollar and timeline figures here tells me one of two things:
1) they wanted to get rid of me, particularly, or...
2) they took a calculated risk based on their experience managing a great number of units
I'd bet heavily on #2, since this is a pretty typical story in NYC.
They tried to raise the rent 22% to something 29% above market rate. They weren't able to get anything close to that rate for a new tenant. They will pull the same crap on this tenant next year too.
> More importantly, people who rent probably do not expect to stay in the same house or apartment for many years.
> In non-rent-controlled areas, rent is more expensive per month than buying the same sort of place...
Federal intervention has seriously distorted the home buying market with a variety of subsidies and tax writeoffs. Without this assistance, it would likely be substantially more expensive to buy than rent.
That scam isn't that common or the reasoning for these laws. Let's just assume that most renters and most landlords are fair actors. Sure they both want a better deal but most landlords don't try to factor moving costs in to the equation. Fact of the matter, and I own rental properties, you generally want to keep great renters, at least in our market, want to keep them almost to the point of not raising rent to risk losing them
That would be an insane decision on the part of the landlord though. An increase in price is either tolerable or intolerable. If the tenant is willing to pay an additional $1,000 a month, that's the new market price. If the tenant is willing to move, the landlord loses out on $500-2,000 as it takes time to bring in a new renter in even the hottest market.
The total loss of income is enough incentive for the landlord to keep rent increases reasonable. If your example held true, there would be violence in the streets across the globe but there aren't. The incentives keep increases in check in markets less insane than those in San Francisco and California at large. The policies of that city and state are the largest differentiator between them and areas with healthy markets/ Maybe we should be looking at policy beyond the veil of partisan rhetoric?
> If the tenant is willing to pay an additional $1,000 a month, that's the new market price.
That is incorrect. That is the new price of that unit for that tenant, as if it were a market of size 1. A similar unit on the market would rent for a different rate paid by similar tenants in the market.
You're not understanding the scam. Suppose you move in to a place and pay the then-market rent of $1000 a month. Let's further suppose that it cost you $2400 to move, plus a shitload of time and effort that you'd rather not repeat. If the next year the market price remains $1000/month, the landlord can still raise the rent on you because you'll be reluctant (and possibly unable) to pay moving costs again. The exact amount they can get away with depends on personal tolerance and your time value for money, but given how much moving sucks, in practice it's quite a bit.
> Or that the inability to charge market prices causes property owners to refuse to rent in the first place, thereby making housing problems even worse.
That is definitely a negative side effect, but not a huge one in practice. How many apartments can one person use? Who would really let an apartment building stand empty when you could be charging market rent? In San Francisco, pretty much nobody.
A bigger problem is that it might reduce the supply of new apartments. But that's also not a problem in SF because any building built after rent control was passed is not under rent control.