The high political price of correcting error
Not only is rent control policy poison, because it is hard to eradicate, clinging like ivy to the ground it covers, it often outlives whatever political utility that might have seduced well-meaning local officials into enacting it, punishing them or their successors.
Have another draught of that rent control elixir
Like the night of illicit pleasure that sows weeks of sorrow, those same elected officials are under constant siege should they consider rolling back — or, heaven forbid, repealing — any of rent control’s provisions.
Such detoxification now awaits the Washington DC city council. As reported in the Washington Post:
The District’s decades-old rent control system would be overhauled if legislation approved yesterday by a D.C. Council committee becomes law.
The Committee on Consumer and Regulatory Affairs voted 4 to 1 to do away with a system based on a rental unit’s “rent ceiling” and implement one calculated more in relation to comparable market values.
Ready to be happy, reader?
I’m just ziggy with delight.
Read on ….
Council members who voted for the change said the current system does little to protect renters from inflated prices based on the ceilings — the maximum amount a landlord can charge according to tabulations made by the city’s Rental Housing Commission.
Under the bill approved yesterday, rental increases for vacant units would be kept below market rate by a formula based on the highest comparable unit in the building.
(Just out of curiosity, once government states baldly that the ceiling is below market rent, isn’t it vulnerable to a takings claim?)
I never thought of it that way.
The DC councilors have decided that not only must they preserve an ongoing rent bargain element, they must also slowly phase in their changes:
The maximum increase [annually, until the new ceiling? — Ed.] that a landlord could charge an existing tenant would be 10%.
Transition rules are charitable and defensible, but they are also an asymmetry typical of rent control schemes: when rents are initially capped, owners almost never have transition relief — indeed, rents are sometimes reduced to some previous level — but when those same caps are lifted, residents gain relief.
The District’s rent control law, enacted in 1975 and later amended, covers about 100,000 of the city’s rental units.
Except for a brief fling right after World War II, mostly repealed (everywhere except New York City, 1947), rent control is almost exclusively a metropolitan fad of the unlamented Seventies, touching among others Cambridge (1971), New York City (1969 and 1974), Berkeley CA (1972 and 1976), Los Angeles (1979), and Santa Monica (1979).
“Hey man, rent control is funkadelic.’
Over the years, from the stifling broadcloth
Federally funded public housing, buildings constructed after 1975 and apartments owned by landlords who have fewer than five units are exempt.
Each of these is as revealing as a political scar:
1. Federally funded public housing
2. Buildings constructed after 1975
3. Apartments owned by landlords who have fewer than five units
The exemption of Federally funded assisted (not public) housing was established judicially, in a landmark
The ‘post-1975′ exemption uses the trust-me-just-this-once approach, in which government says to a shocked and outraged real estate industry, “Hey, we only took your predecessors’ property — we’d never think of taking yours.“
“I have no designs on property built after my last confiscation.”
Finally, the small owner exemption is, in my view, the moral smoking gun: the tacit admission that rent control is a pure wealth transfer. If rent control’s goal is affordability or even equity there is no logical reason to exempt small owners, but whereas large owners are easy to demonize,
“If only landlords would appear as we see them.”
small owners are politically visible, and often not that socio-economically different from their residents:
The problem is that rent control’s political benefits arrive immediately and its policy costs mature slowly, so that when, after a decade or more has passed, public officials realize the government factory has manufactured an expensive mistake, there is now an entrenched constituency fiercely resistant to any ‘retreat’:
The new bill was opposed by the committee’s chairman, Jim Graham (D-Ward 1). He could not persuade a majority of his colleagues on the panel to vote against the alternative bill abolishing the ceilings offered by Sharon Ambrose (D-Ward 6) that got support from fellow committee members David A. Catania (I-At-Large), Adrian M. Fenty (D-Ward 4) and Kwame Brown (D-At Large).
Like any other addiction, rent control is hard to kick cold turkey, making elected officials seeking to ‘reform’ it out of existence into gluttons for punishment:
We’re just trying to reform the system!
Graham said he was not sure how the city’s renters would be impacted if rent ceilings were abolished.
Councillor Graham confronts a political conundrum intrinsic to rent control: what principle should I use? Unlike affordable housing, which costs government money that is used to buy a target affordability, rent control is simply a clamp on rent increases, and thus a de facto wealth transfer from property owners to residents. Since it is economically nothing more than an extraction, it loses contact with both the market and any stipulated affordability. The effect is that a legislator is adrift, with neither a moral compass nor any policy lodestar by which to steer.
The legislator thus reverts to his basic political calculus: how to minimize aggregate pain? This leads to short-term thinking and irresolute compromises:
He wanted to postpone a vote on the legislation to get additional public comment, but he did not have enough votes to do that either. He said he still plans to hold a hearing on the matter March 31.
“The enthusiasm of landlords to abolish the rent ceilings makes me nervous,” Graham told a packed hearing room at the
Insert votes here.
Rent-control fosters this kind of zero-sum thinking: if rents are fixed and the pie is finite (because government refuses to pay), then the money for affordability comes solely from the owner. This leads to a political short-hand: good for owner must be bad for the resident.
Good for owner = bad for resident?
But W. Shaun Pharr of the Apartment and Office Building Association of Metropolitan Washington said he was pleased by the committee’s vote. “We are happy about that. Tenants should be happy as well.”
When the meeting ended, Fenty was surrounded by tenant activists who expressed displeasure with his vote.
“I was appalled and disappointed he voted yes,” said Foggy Bottom resident Sarah Shapiro.
Van Ness resident Eleanor Sreb, 84, cheered Graham to “Keep fighting!” Sreb said that when she moved into her one-bedroom apartment in the Van Ness South complex in 1979 [After rent control — Ed.], she paid $383 a month. Now her rent is $1,314.
Twenty-seven years’ of occupancy with average annual rent increases of 4.6%, compared with a corresponding annual CPI increase of 3.9%.
Is nothing sacred?
