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Category rent control

Landlord Finally Free to Live in His Own Home

After battling in court since 2003, this family is finally able to turn their 60 room apartment building into one gigantic home for themselves. Of course, the beneficiaries of the rent-controlled apartments don’t believe the owner’s family should have the right to live in their own building. New York Post – VILLAGE TENANTS ‘HOUSE BROKEN’ The Court of Appeals found that Alistair and Catherine Economakis can go ahead with eviction proceedings against their low-income tenants at 47 E. 3rd St., as long as they plan to use their apartments for themselves. “We’re all working people, your typical, moderate-income working people. For them to want to kick us out so they can have a luxury mansion – it’s ethically and morally unconscionable. I don’t know what other word to use,” said David Pultz, 56, who’s lived in the building for the past 30 years. Pultz said he pays $625 a month for his one-bedroom apartment, and is concerned that if he gets booted, he’ll have to leave the city. (that’s about 1/4 -1/3 the market rate for that neighborhood) “At a time of a really grave housing shortage, it’s a matter of serious concern that an owner can be permitted to obtain 15 apartments for his own use,” he said, adding that in the rest of the state, owners can’t claim more than two apartments for themselves. As I described in Rent Control Part 3, rent control creates this type of class tensions between the property owners and the “entitled” class tenants. It seems completely silly that the landlord has to go to such extremes to get out of the burdens of rent control, but can you blame him? Compared to buying a new home, it probably cost him next to nothing in lost revenue to evict the tenants. Here is […]

Somin: Causes of the Defeat of Prop 98

Ilya Somin at Volokh – Causes of the Defeat of Proposition 98 There were two major causes of Prop 98’s defeat. One was the sponsors’ mistake in combining the popular cause of restricting eminent domain with a far less popular phaseout of rent control. The second and more unusual cause of 98’s defeat was the presence of Proposition 99 on the ballot. If you are interested in this, please check out Ilya Somin’s extensive writings on Proposition 98 and 99 at The Volokh Conspiracy.

Somin: Prop 99 Worse Than Nothing

Ilya Somin at Volokh: Why California’s Proposition 99 is a Lot Worse than Nothing Yesterday’s California returns show that Proposition 98 – the referendum initiative that would have imposed real restrictions on eminent domain and also phased out rent control – has been overwhelmingly defeated by a 61% to 39% margin. The rival Proposition 99 – an initiative sponsored by local governments and other pro-condemnation interests that only pretends to protect property rights – passed easily by 62 to 38.

Somin: Prop 98 Likely to Fail, 99 to Pass

Ilya Somin at Volokh: Polls on California Eminent Domain Ballot Initiatives Show Prop 98 Likely to Fail and Prop 99 Likely to Pass: In a recent Field Poll cited in the article, Proposition 98 was losing by 43 to 33 percent among “likely voters,” while Proposition 99 was ahead by 48 to 30 percent. A slightly earlier poll conducted by the Public Policy Institute of California has similar results. If, as is likely, Proposition 98 is defeated, it will probably be a result of the combination of the sponsors’ tactical error in combining the popular anti-eminent domain measure with a far less popular phaseout of rent control (a mistake I criticized in one of my earlier posts), combined with the presence of the deceptive Prop 99 on the ballot. The latter probably led voters to believe that they could protect property rights against takings without simultaneously attacking rent control. Keep your fingers crossed….

Rent Control Part 4: Conclusion and Solutions

Welcome to the final post in the series discussing the consequences of rent control. Thank you to the subscribers who have patiently awaited each new post. I hope everyone found it enlightening. If you haven’t read the entire series, you can catch up with these links: Rent Control Part One: Microeconomics Lesson and Hording Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Conclusion Rent control is not just a simple price control setting the price at which willing renters and landlords are permitted to do business, it is much worse.  It is a coercive act that gives landlords no legal option, but to rent to a tenant against his will, often at a financial loss.  Rent control adds a non-voluntary burden to landlords which deepens over time because landlords do not have the option to rent to a tenant at below market rates.  Not only does rent control cause huge distortions in the housing market, but the burdens fall disproportionately on the poor and underprivileged people it was intended to benefit. Although particular people are able to live with the comfort of low rent payments, even those renters will see their living conditions deteriorate as landlords neglect repairs and maintenance. As the situation gets worse, middle class residents are able to move away, leaving behind the poorest residents who have become reliant on the reduced rent. In effect, rent control grants property rights to renters, that originally belonged to the original property owners. Rent control becomes a redistribution of wealth to rent control tenants away from apartment owners, market apartment renters, and newcomers to the area. Nonetheless, over time the quality of life decreases for all residents of a city where rent control is imposed. Solutions So, it […]

Video: Both Sides of Proposition 98

With the referendum approaching, the debate over rent control is heating up in California. This video is pretty balanced in showing both sides. There are some memorable quotes, like “social security and pension plan would not pay the market rent, so I just wouldn’t eat.” I guess this guy values his $375/mo apartment over food. Or the pro-rent-control activist who says, “If you can’t find a place now, what will it be like if we lose rent control?” Another says, “Economically, this would be devastating.” I encourage them to take microeconomics, but I think economics was banned in San Francisco. Was that Proposition 76?

Rent Control Part 3: Mobility, Regional Growth, Development and Class Conflict

Part One of this series was a refresher on the Microeconomics of Rent Control and touched on how it encourages hoarding Part Two discussed rent controls influence on the black market for apartments, rental property deterioration and housing discrimination. Here in Part Three, we will discuss how rent control hampers mobility, regional growth, tax revenue, apartment development, and becomes a catalyst for class conflict. Mobility As mentioned in Rent Control Part One, duration of residence in a rent-controlled apartment has been observed to be three times as long as duration at market-rate apartments. One can see that the incentive to hoard rent-controlled apartments is also disincentive to relocate. The mobility of both the tenants and newcomers are drastically hampered by rent control. Unless the tenant has the money to rent a second apartment (or Governor’s mansion), it will be difficult for him to relocate closer to better employment. The tenant may rather endure a very long commute in order to maintain the rent-controlled apartment. As Walter Block put it, "They are, in a sense, trapped by the gentle and visible hand that keeps them where they are rather than where they might do better." Difficulties are multiplied if the local economy takes a turn for the worse. A downturn in local employment would not be relieved by people relocating for jobs, thus making the unemployment and poverty situation worse. Employees looking to relocate in the city with rent control are hurt the worst as they will have a difficult time finding available apartments. The drawbacks to the local economy are discussed in the section on regional growth and adaptation. The reduction in mobility is especially burdensome on families with children, since public schools tend to be local. If the local school is under performing, a family under rent-control will lose […]

Rent Control Part 2: Black Market, Deterioration and Discrimination

With New York’s new Governor’s rent subsidized by his landlord and California debating the best ways to end rent control through Proposition 98, I thought it was a good opportunity to discuss the negative aspects of rent control. This post is the second in a four part series on the rent control. Read all four posts: Rent Control Part One: Microeconomics Lesson and Hording Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Rent Control Part 4: Conclusion and Solutions Black Market and Deceptive Acts As current renters hoard their rent-controlled apartments, it is rare that new apartments become available. Sometimes, tenants would illegally sublet their units at higher rents. Landlords do under-the table deals or rent to friends and family. New York had to crack down on landlords charging “key fees” as high as several thousand dollars to new renters. Landlords will often find loopholes that will let them de-regulate a building, just to be released of the financial burdens. For example, in NY landlords will take their rent-controlled building and deregulate it by using the entire building as a residence for a certain number of years. This is space that could otherwise have been rented at a market rate. Deterioration of Existing Housing Stock Because of the disincentive to improve and maintain the property, landlords will often become slumlords and allow unhealthy conditions or activities to take place in the apartments. This lack of improvement not only is unpleasant to the current renter, but accelerates the end of the usable life of the aparment building. The Rand Corporation studied Los Angeles’ rent control law and found that 63 percent of the benefit of lowered rents was offset by a loss in available housing related to deterioration and […]

Rent Control Part 1: Microeconomics Lesson & Hoarding

This post has been released as the first in a four part series: Rent Control Part One: Microeconomics Lesson and Hoarding Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Rent Control Part Four: Conclusion and Solutions Opposition to rent control among economists spans the political spectrum, including over 90% of American and Canadian economists.  In fact, Swedish socialist Economist Assar Lindbeck famously said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing it.” (Assar Lindbeck, The Political Economy of the New Left, New York, Harper and Row, 1972, p. 39) Without getting into the morality of restrictions on property rights, I will discuss the more subtle consequences of rent control over a series of posts. Quick Microeconomics Lesson: As stated by the National Multi Housing Council: Rents serve two functions essential to the efficient operation of housing markets: they compensate providers of existing housing units and developers of new units for the cost of providing shelter to consumers; and they provide the economic incentives needed to attract new investment in rental housing, as well as to maintain existing housing stock. In this respect, housing is no different from other commodities, such as food and clothing — the amount producers supply is directly related to the prevailing market price. Those of us who have studied microeconomics understand the near-universally accepted supply/demand consequence of rent-control: a decrease in the quality and supply of rental housing over time. But, for those who need a refresher or quick intro lesson, Professor Alex Tabarrok of George Mason University and the popular Marginal Revolution blog explains the microeconomics of rent control in this video: When you have some spare time, watch this more […]

NY Gov. Patterson’s Rent-Stabilized Apartment in Harlem

NY Sun: Paterson Pays A Stabilized Rate of Rent The governor of New York pays about $1,250 a month for a two-bedroom, rent-stabilized apartment in central Harlem, even while owning a home upstate in Guilderland and having unfettered access to the 40-room Governor’s Mansion in Albany. Governor Paterson and his wife, Michelle, made about $270,000 last year, according to their tax returns. This is a classic example of hoarding. He should be ashamed of his Lenox Terrace apartment that someone would gladly pay market rate to rent, but seems to think it’s ok. Can’t we at least deregulate apartments when the inhabitant can afford to live in a market-rate apartment? I hope the media pays attention to this, and properly scrutinizes the dark-side of rent regulation.

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