
At first glance, this looks like a win for housing regulation in Santa Monica:
In March 2014, Wilshire Skyline settled a lawsuit with a group of tenants who had sued alleging harassment. The residents had claimed that the owners were trying to push them out to rent the units at higher rates. . . .
The owners and management company agreed to receive training in fair housing practices, adopt written policies for making repairs, and halt the practice of offering commissions to employees who persuaded tenants to move out.
So far so good. But then this happened:
Then, less than one year later, in February 2015, the owners invoked the Ellis Act, a state law that allows owners to boot tenants from a rent-controlled building in order to take the building off the rental market.
It will be converted into an office building:
As part of the renovation, the three-story building at 1305 Second Street will be retrofitted for earthquakes, its brick facade and decorative cornice and corbel details will be restored, and a deck area will be added on the roof. . . .
Formerly named Mar Vista Apartments, the building, until recently, held 49 rent-controlled apartments. Eight of those units were rented by Section 8 tenants.
A recent study looking at housing in San Francisco found that not only does rent control make a city as a whole worse off, it even makes the renters in a city worse off:
Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood.
PS. It’s sad to see a respectable publication like The New Republic carrying an article defending rent control. This is not like the widely debated minimum wage laws. As Paul Krugman pointed out, there really isn’t any respectable argument for rent controls:
[E]conomists, on both the left and the right, tend to disagree. As Paul Krugman wrote in the New York Times in 2000, rent control is “among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial”. Economists reckon a restrictive price ceiling reduces the supply of property to the market. When prices are capped, people have less incentive to fix up and rent out their basement flat, or to build rental property. Slower supply growth exacerbates the price crunch. And those landlords who do rent out their properties might not bother to maintain them, because when supply and turnover in the market are limited by rent caps, landlords have little incentive to compete to attract tenants. Rent controls also mean that landlords may also become choosier, and tenants may stay in properties longer than makes sense. And some evidence shows that those living in rent-controlled flats in New York tend to have higher median incomes than those who rent market-rate apartments. That may be because wealthier households may be in a better position to track down and secure rent-stabilised properties.
HT: Tyler Cowen
READER COMMENTS
RSF
Oct 23 2018 at 2:41pm
I think the only issue upnfor debate is happening w best to sunset rent control. I have some sympathy for the little old lady on the fixed income, but my general feeling is that most rent controlled tenants are living pretty large.
Ahmed Fares
Oct 23 2018 at 4:27pm
“Next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities.” —Assar Lindbeck
Given that there are always more renters than landlords, we’ll always have demagogic politicians who will support rent control to get elected.
Benjamin Cole
Oct 23 2018 at 8:38pm
Oh dear. Another op-ed criticizing rent control, without a single sentence referring to property zoning and artificial constraints on supply.
I propose a deal: property owners give up property zoning, and renters give up rent-control.
So who’s in?
Benjamin Cole
Oct 23 2018 at 10:38pm
Add on:
I accept that in a static state, the imposition of rent control (even with property zoning, or better termed, supply control) will only decrease the efficient allocation of resources.
Still, there is more to the story. Economics and politico-economics are close cousins, if not siblings.
If property zoning is not eliminated, or rent controls imposed, the propertied-financial class will only have incentives to preserve or expand the economic rent associated with property zoning. And indeed, that is what we see all along the West Coast, and in full flower in Hong Kong.
The results of property zoning in Hong Kong are remarkable, where “nano0flats” are a thing (200 square feet, and no, that is not a parking space. That is an apartment).
Kevin Erdmann has done insightful work on the connection between property zoning, and rising incomes and economic growth. More or less, regional economic gains are sucked into the pockets of the property-owning and lending class, through economic rents (throough property rents, and low-risk loans extended by property lenders).
Pardon me—did I say 200 square feet is a nano-flat in Hong Kong?
See this: “I come here every one or two weeks because I don’t have a washing machine at home,” says Luo, 33, who lives in a 110-sq-ft nano flat with his wife. “There’s simply not enough space for such a large appliance.”
https://www.scmp.com/news/hong-kong/community/article/2153143/nano-flats-boom-hong-kong-new-businesses-offer-big-ideas
A 110-foot nano-flat!
You too can live in the free-market citadel Hong Kong, and enjoy the high incomes that free enterprise brings! (Which will flow into the pockets of property owners, well, unless you have rent control).
Thaomas
Oct 24 2018 at 1:32pm
It is a happy ending. The higher value use will generate more tax revenue that the city can use to subsidize low income housing.
Comments are closed.