You probably won't see new commencement of building projects, but it probably doesn't mean ongoing projects would be scrapped...

And these things have a lead time of years

> Rational investors have no problem whatsoever projecting the impact to future cash flows and adjusting the amount they're willing to pay now.

That's not accounting for the time value of money.

Suppose you have a rental unit and before rent control you were planning to rent it out. That now has far less attractive returns and it suddenly makes more sense to sell it as a condo to an occupant rather than keeping it to rent it out. Likewise, other prospective landlords no longer want to buy it at the previous market price (returns went down and they can invest in stocks or housing in some other city instead), so the short-term effect is to increase the number of property sellers and decrease the number of buyers. Short-term, property values going down is the expected thing.

But construction going down is also the expected thing, for the same reason. If property values are lower then the number of viable construction projects is lower and less construction happens.

The lack of construction then continues until rents, even after rent control, are high enough to justify more construction, i.e. are even higher than they were originally, because now to justify the same investment as before you need the current rent to be high enough to account for the inability to increase it later. And with less construction happening, that's the natural result in a growing area. More people have to bid on the same number of units, rents go up. So the short-term effect is lower real estate prices, the long-term effect is higher.

Now you say, if we expect real estate costs to be higher later, why don't investors take advantage? Which is the "time value of money" issue. If you invest there now because the prices will be high later, what do you do with the property in the meantime? If you don't rent it out, paying $1 today to get $1 in ten or twenty years is dumb, so you only buy if the current price is at a discount. If you do rent it out, then you'd be stuck trying to sell a building with a rent-controlled tenant, which isn't worth as much as the same building as empty as you bought it which you could sell as condos or rent out at current rents instead of price controlled ones, and then you still need a discount. And so the current seller has to provide a discount even if the real estate costs will be higher in a few years.

The stock market has liquidity, fungibility, low transaction costs, etc etc. https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terri...

I think you're wildly overestimating the rationality of investors.

In a highly liquid commodity market full of professional traders, I'd agree. But the housing market isn't that liquid over 9 months and there are a lot of small timers. It seems more likely there'd be some sort of initial wobble as sophisticated participants reposition, then a period of calm, then the actual impacts set in over a few years.

It might not happen that way - someone does need to check - but at 9 months I wouldn't read much in to this study. The physical market would still be reorganising and it seems entirely possible that the eventual impacts are just different than what this study suggests. I'd want a period of more like 5 years to be confident that the data had given everyone in the market enough time to feel the impacts of artificially low rents and reposition appropriately.

Except the housing market, especially the rental market, is still significantly driven by small rental property owners and is a significant source of generational wealth transfer.

Starting with the assumption that all or even most investors / actors are rational is a continuing pox on both economic scholarship and societal thinking

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I lived there at the time. The George Floyd riots were in late May/early June 2020. I went to the protests by the police station in the Powderhorn neighborhood, that's the police station that got burned down. I got the hell out before that, though.

Most of the damage was concentrated in Minneapolis, a little south of the river. But what happens in Minneapolis affects St. Paul, and vice versa. St. Paul wasn't unscathed, either. Property values dipped as a result of the riots, and I'd go find more evidence of that if it wasn't just taken as a fact by the people who live there.

There was also an arson on a construction site in downtown St. Paul later that summer that spooked a lot of folks too.

There's also George Floyd Square, an ad-hoc memorial at the intersection where he was murdered. For reasons beyond me, this was a source of controversy for well over a year, and I know a lot of MN righties who took the city's willingness to leave the memorial there as "capitulating to crime" or something.

In short, don't use Twin Cities property values in the early 2020s to make generalizations about economics or policy. It took years for those scars to heal. Things didn't really go back to normal until 2023 at the absolute earliest, and some things haven't ever gone back to the way they were.

It's terribly hard to isolate rent because of the supply/demand shock (in geographically dependent directions) that COVID had on the market. It made people move, a lot of people got a lot of free money and were out of work, among many other changes.

There is a good paper about the effects:

https://www.sciencedirect.com/science/article/pii/S105113772...

Basically if you're in a "rent controlled" unit, you benefit, but live in a dumpster, because the owner don't have the reason to invest in the place.

But the supply of new units is down & all other renters are paying higher rates, because there is no incentive to build new units. NIMBY-ism has the same effect.

On the flip side section 8 acts as a price floor.

No easy solutions here. I do think if rent exceeds half your earnings as a minimum wage worker that’s a failure of the social contract.

Want people to have kids, make it possible to raise them on a working class wage.

Rationally , since it’s impossible to raise a family on what most people make , people aren’t making people anymore. Not at replacement rates anyway.

Yep. Rent control benefits the people who are already there, but punishes everyone else.

It will increase the price for new comers, lower the quality of buildings due lack of maintenance funding, and decrease new construction.

Rental control is NIMBY for renters who are already there.

Then again we have high rates of abandoned or unused housing as investment properties that sit idle even with uncapped markets… might as well cap the market if the effect is the same but people pay less rent

Laughable the one thing that all the English speaking capitalistic countries share today is that most of its citizens most of whom don’t have rent control by the way are headed for a lifetime of being a renter all their life.

They are also headed towards paying more than 50% of whatever income they make to rent that’s the United States, Canada, Great Britain, Australia, New Zealand, and Ireland.

I can’t speak for the other countries, but in United States, the so-called luxury apartment is in fashion, and there is nothing luxury about them, except for the amount of money you will be charged to live there.

The shortage of affordable housing has nothing to do with rent control because over most of the country there is no real rent control effective rent control.

America is the land of luxury apartments currently popping up everywhere. What is also ironic is the fact that there are very few states that have anything like Prop 13 in California, which took a ballot initiative passed by the electorate and was not passed by the legislator’s who supposedly represent the people in short, there will be nothing forthcoming for the majority of people across the country. It’s sink or swim for most you are on your own in poverty.

Supply and demand is and always has been a useful first-order approximation. Reality is a lot more complicated.

Dear reader, never believe anyone who says a serious societal problem is "just" anything. Especially on the internet when they use merely a pesudonym to assert their authority.

Especially when the person behind the pseudonym is a one-time washed-out author desperately clinging to their housing stock in Atherton.