4 thoughts on “#QTWTAIN: “But haven’t rent controls worked in Germany?””

  1. Posted 03/06/2016 at 11:26 | Permalink

    The Swedish Union of Tenants defends the Swedish rent control system as ‘not a rent control system at all, but a negotiated collective bargaining system that is half way between the free market and rent control’. Apparently, because the decision on what the rent increase should be isn’t made by government officials, it isn’t a control.

    You can see it here, the head of the Swedish Tenants Union declared on twitter:

    “We have no rent control in Sweden. Just as we have wage regulation. We are negotiating. Consumer Influence.” https://twitter.com/MarieLinder1/status/737005046899085312

    Or their diagram
    https://twitter.com/hyresgasterna/status/737571203053813762

    “Please feel free to read the article linked. PS. Market rents have been tested and failed.”

    It is truly incredible some of the things they write, but since most of it is in Swedish, much of it goes unnoticed by the rest of the world.

    Anyway, the queue in Stockholm is now 10 years for most places, and 20-30 years queue for inner-city Stockholm. Around 85% of Swedish local government, areas have declared a rental housing shortage, and this is even for regional and rural areas and small towns.

    It is worth reading up on the Swedish system. Their rent control system does not cap rents or freeze them but controls them by controlling the increases in rents through collective bargaining between landlords and tenants unions. Rises are almost always above CPI/Inflation. The resulting increase is then ‘distributed’ across the different properties according to the ‘use value’ system.

    Rent setting in Sweden http://www.sabo.se/om_sabo/english/Documents/Rent%20setting%20in%20Sweden.pdf

  2. Posted 06/06/2016 at 11:37 | Permalink

    A 100% Land Value Tax sorts all these housing problems out nicely, Take a typical London renter with a wage of £40K paying £16K pa in rent. Once we take taxes into account £16K pa, housing costs as as ratio of discretionary income is 2:1. If we shift taxes off wealth creation onto land rents, that typical Londoners tax bill, net of Citizens Income, becomes £5K pa (it becomes negative for renting couples with children). Housing costs now become 1:2. That’s a four fold improvement in housing costs as a ratio discretionary income. Furthermore, such a shift would level the playing field between landlords and owner occupiers (assuming a flattened, simplified tax regime as a result). The market can thus allocated resources at optimal efficiency (just as the private rental sector sans rent controls does), reducing vacancy, under occupation, land banking, urban sprawl, and regional inequality.

  3. Posted 06/06/2016 at 14:17 | Permalink

    In general, the German property market has seen falling values for decades – driven by demographic decline. This charts the history back to 1970:

    https://twitter.com/bondvigilantes/status/511494060855799808/photo/1

    and the population is discussed here:

    https://www.pop.org/content/germany-shrink-10-million-people-2050

    It remains to be seen whether the dash for immigration reverses the trend. However, with falling numbers of households it isn’t difficult to avoid the so-called hot spots if rents become too high: it becomes a direct arbitrage against transport cost and time. So rent controls have indeed been superfluous.

  4. Posted 06/06/2016 at 16:31 | Permalink

    Hardly a great surprise, but house prices and rents pretty much follow real wages over time in most of the Countries I’ve looked at. Germany seems no different in that regard. Things look to be picking up with rises in both HP and wages. Hopefully the Energiewende will grind to a halt before it does too much damage. If so, Germany could be a good place to “invest” in property:)

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