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Vaniver comments on Open Thread, May 25 - May 31, 2015 - Less Wrong Discussion
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You dramatically overestimate the economic efficiency of California's housing laws. San Francisco has rent control laws, and the rent increase allowed between 2015 and 2016 is 1.9%. Unless it's changed since the last time I looked, California in general will only reassess the value of a home for tax purposes when the home is sold (or, perhaps like with rent control, they allow adjustments only for inflation).
Obviously, moving is strongly discouraged by this policy, since any change allows the prices to readjust to reflect the market rate (on the limited available supply, not the total supply).
Not just down, but the same. If the little old lady who's lived on the same block since 1960 is forced out for some strangers, well, wouldn't that be a shame?
(Also note the politics: if you build new luxury flats, and a bunch of techies move in, and they vote to get rid of rent control or allow people to vote where they work, then even more change will happen. So better cut it off at the source, and not let them live where they'll be able to vote on those laws.)
It seems to me that someone with a rent controlled flat doesn't really have to worry whether low cost flats or high cost flats are build in his neighborhood. Why does a luxury flat produce a problem for someone with a rent controlled flat?
The neighbors are now different; this will change the character of the neighborhood, partially by changing what shops are profitable and partly just by changing who is around to interact with.
The new neighbors vote, and probably have different political preferences. Among other things, they are unlikely to be sympathetic to rent control.
If every apartment in a region is required to be cheap, then there is no value for the landlord in trying to be tricky. If some apartments are cheap and some and expensive, there is value for the landlord in trying to turn cheap apartments into expensive apartments, possibly by driving out the current tenants to get around the rent control laws.
I'm sure there are more that I've missed; I'm not even touching on the moral intuitions around high prices.
If there are few apartments on the market because some people do move and high demand those apartments will fetch high prices.