::  Posts  ::  RSS  ::  ◂◂RSS  ::  Contact

Decoupling property values and rents

July 26th, 2015
rent, housing, money  [html]

By and large people want higher property values and lower rents. If you're a homeowner you want your highly leveraged investment to appreciate and don't particularly care about other people being able to buy. If you're a renter you don't want your rent to go up, and ideally it would go down. Some renters are trying to buy [1] and they want property values to fall, but because most people spend much longer owning than trying to become owners this is a much smaller group.

Unfortunately, higher property values go with higher rents, and lower property values with lower rents, so people are in opposition. How can we decouple them?

Rent control is one way, but has downsides. If you push too hard people will just turn their properties from rentals into condos and owner-occupied houses. And if you want to have rent control be more than a temporary delay on rising rents then it can't reset to market when people move, which gives you several-year waits for apartments.

Means-tested housing subsidies are another option. You can require developers to set aside units for people making X% of the poverty line, or the government can give housing vouchers to people who couldn't otherwise afford apartments. These programs are very expensive, though, enough that they're perpetually underfunded. This means most of the people who need the help can't get it, and those that do have very long waits first. We could just pay the full cost and expand, but when you commit the government to paying the difference between 30% of your income and the cost of housing, housing is going to get even more expensive.

We do have another option here, though, one that can make property values go up while rents go down. We should make it easier for people to expand their houses. When people put in a dormer, finish a porch, or build an addition their property becomes more valuable, and having more available bedrooms reduces the upward pressure on rents. Homeowners win, landlords win, renters win, and our cities are healthier.


[1] Current homeowners trying to buy a different house also want lower property values, but not by nearly as much since generally you sell one house to buy a new one and so they're exposed in both directions.

Comment via: google plus, facebook

Recent posts on blogs I like:

High-Speed Rail in Small, Dense Countries

Four years ago I brought up the concept of the small, dense country to argue in favor of full electrification in Israel, Belgium, and the Netherlands. Right now I am going to dredge up this concept again, in the context of intercity trains. In a geographi…

via Pedestrian Observations October 12, 2019

What do executives do, anyway?

An executive with 8,000 indirect reports and 2000 hours of work in a year can afford to spend, at most, 15 minutes per year per person in their reporting hierarchy... even if they work on nothing else. That job seems impossible. How can anyone make any im…

via apenwarr September 29, 2019

Taxing investment income is complicated

How should a state tax investment income if it wants to maximize its citizens’ welfare? This sounds like a simple question but I find it surprisingly hard to think about. Here are some of the positions I’ve moved through over the last few years: Taxing in…

via The sideways view September 22, 2019

more     (via openring)

More Posts:


  ::  Posts  ::  RSS  ::  ◂◂RSS  ::  Contact