Affordable Housing Institute : US

 [Continued from yesterday's Part 2 and the preceding Part 1.] 

 

By: David A. Smith 

 

Yesterday’s post, Part 2 of a series on Mumbai’s horrible rent control laws, cited Sulakshana Mahajan’s paper on the consequences of Mumbai rent control, which she calls, “The main culprit in slumming Mumbai.” 

 

Rent controlled apartments in Mumbai, October, 2007

 

That led us five years into the past to a Wall Street Journal article from June 5, 2006 (in red Calibri) about physically collapsing buildings and to a November, 2005 India Together article by Dilip D’Souza glumly explaining that rent control was a political sacred cow, even though everyone giving rise to its enactment is long dead:

 

Their children and grandchildren stay on in the same flats, paying the same rents. I know a couple who lived in a gorgeous flat in an old building near Churchgate. For years, they paid the rent for the flat that the man’s father had signed up for half a century earlier: twenty rupees a month. (Yes.)

 

Forty cents a month.

 

The amount they extracted from their landlord, just for giving him his flat back eventually, allowed them to buy themselves a home in a small town in another state.

 

Just as in New York City – exactly the same market dynamics.  Property rights have become squatters’ occupancy rights, traded in exactly the same way:

 

Mr. Sojatwala has lived in Building 333 for more than 20 years, since buying out his apartment’s previous occupant. The building, with an elegantly carved stone facade, was right in the middle of Mumbai’s textile district — an ideal location for his trading business.

 

Flats over shops are a hallmark of successful cities throughout history.

 

The Sojatwalas’ son, now 22 years old, grew up playing cricket in the hallway.

 

But while Mr. Sojatwala’s family and business have grown, the neighborhood has deteriorated. Garbage and raw sewage collect around his building, trees sprout from the roof and merchants have set up shops in the elevator shaft.

 

San Francisco, take note – Mumbai is coming to Pacific Heights?

 

A movie about the rent control tenant from hell

 

The strange thing about this state of affairs is not just that tenants pay absurdly low rents. They also want their landlords to carry out repairs and keep their buildings in shape. They also are unwilling to pay for the repairs themselves.

 

Earlier I speculated that rent control renters are subconsciously aware that they do not deserve their good fortune; now I’ll add that maybe it makes them unusually aggressive vis-a-vis government: I know I’m not worthy of this benefit, but as long as it’s here I have to act like I deserve it, lest I be found out.

 

I just found out how it ends

 

For example, one of the tenants of the Tavadia building told the press that she was paying a rent of Rs 100.  [Roughly $2. – Ed.]  But, as the Times of India reported, “she felt that the tragedy could have been averted had the landlord … not ignored their repeated pleas to repair the building.”

 

Extremely strange reasoning – where is it written that a private landlord has a duty to spend lakhs of rupees on you with no possibility or hope of return?

 

It was in such bad shape, she went on, that “anyone walking with heavy steps would set off a tremor.”

 

The lady lost her father in the collapse. I wish she and her fellow tenants had offered to pay to maintain the building. Her father might still be alive. I hope she understands that now.

 

If anyone is responsible for that man’s death, it is his daughter, who insisted on living in a structurally unsound building.

 

But there is a more sinister side to the Act too.

 

You think this is sinister?  I’ll show you sinister!

 

Actually, two sinister sides – no rental supply, and no labor mobility.

 

Real estate prices are so inflated in this city that many tenants can never hope to move from their rent-controlled flats. (Unless they move, like my Churchgate friends did, to a small town.) So they have no option but to stay.

 

They are house-locked – and that undermines labor mobility and economic competitiveness.  It also crowds out reuse of their large under-occupied flats by more people, exacerbating the housing shortage and increasing homelessness and pavement dwelling.

 

Rent control adds to their number

 

Landlords, meanwhile, know how lucrative it would be to sell their property, particularly to a builder. But what’s to be done with tenants who won’t leave?

 

Landlords try persuasion. They try pleading. They try the courts, but that takes years. Eventually, some landlords turn to threats and force.

 

Indeed, rent control and rental distortions lead to organized crime, most notably Japanese Yakuza. 

 

Proving tribal affiliation by permanent tattooing

 

Everyone knows the damage the Rent Control Act does. But why isn’t something done about it?

The simple answer: numbers. Tenants outnumber landlords. The low rent the Act has them paying outweighs all other considerations – they want to keep paying it.

 

We saw this with Mr. Sojatwala, who is thriving and economically rising, yet bound and determined to say in a physically collapsing structure:

 

Unlike China, where residents regularly make way for new skyscrapers, the beneficiaries of Mumbai’s rent controls flex political muscle to stay.

 

Some politicians admit being torn. “Rent control is increasingly being seen as an impediment for development and affordable housing,” says Milind Deora, a member of Parliament representing South Mumbai who wrote a letter to city officials asking them to help the tenants of condemned Building 333. “But politically how do you liberalize it? A lot of them are my constituents.”

 

Deora chooses what his constituents want over what’s right

 

For twenty years in Cambridge, I heard members of the Cambridge Civic Alliance (our local liberal party, so please recalibrate for your locality) say they need ‘to rethink’ rent control.  I always dismissed them, because ‘rethink’ was code for handwring over and do nothing about. 

 

Politicians know all about numbers.

 

They have to do the political calculus.

 

They are aware that the first of their breed who makes a move on the Rent Control Act will promptly lose the votes of millions of tenants. He will probably gain the votes of landlords, but that’s poor compensation.

 

Which means: nobody touches the Act.

 

Nobody touches the buildings.

 

At a meeting on May 20, in Mr. Sojatwala’s spacious apartment, signs of strain had begun to show. Tempers flared as the renters, most of them over the age of 60, sweated in the dark. They shouted that the landlord and the city were at fault because part of the building hadn’t been reinforced, and the goldsmiths weren’t kicked out.

 

Amazing how entitlement turns to grievance, isn’t it?

 

Where’s my picnic?

 

Earlier in the month, the renters decided to hire a contractor to prove that their part of the building was still sound. But a few days later, five truckloads of police showed up. Tenants were told to pack quickly. Then, under a government order, their apartments were padlocked.

 

Locked out, residents of Building 333 quickly regrouped. They turned the building’s veranda into a communal home, bathing with buckets of water and cooking with propane. Mrs. Sojatwala dragged out a phone line so she could make calls.

 

“The entire building is united,” she said, sitting amid her kitchen utensils and pails of rice. “This part of the building is still standing.”

 

For how long?

 

In his play and movie Betrayal, Harold Pinter offered the story of a long-running affair told in reverse chronological order, from the ultimate breakup back through time. 

 

 

Under the spreading chestnut tree

I sold you and you sold me

 

It was a brilliant conceit, for we could see each future-tense promise (“we must play squash together”) as the hollow pledge it was.  That’s how I felt researching and structuring this post, for having found those 2005 and 2006 six stories, I came upon this article from 1998 stating that:

 

The Supreme Court, while delivering its judgment on December 19, 1997 on appeals filed by several property owners in Mumbai, said that the existing provisions of the Act that related to the determining and fixing of the “standard rent” (the highest rent the Act permits a landlord to charge) was “no longer reasonable”. The court also said that the extension of these provisions beyond March 31, 1998 (the last day of the previous extension) would be “invalid” and “of no consequence”.

 

Yet somehow Mumbai’s confiscatory and evil rent control survives, further strangling the residential rental market and increasing slums, homelessness, and pavement dwelling.

 

One of many great Zimbio pictures of Dharavi