rent control

“Rent Is Too Damn High” Candidate’s Rent is Actually Quite Low

by Kathryn Ciano on October 20, 2010

in Property Rights, Regulation, Sanctimony, Zeitgeist

Oh look, a politician building a campaign on the premise that he understands his constituents’ plight is actually…very far removed from the issues that are important to his constituents.

There is nothing new under the sun.

Turns out that NY governor-hopeful Jimmy McMillan, famous for his viral “rent is TOO DAMN HIGH” YouTube clip, actually pays very little. Rent for McMillan’s Brooklyn one-bedroom is a mere $800/month, much lower than Northwest Washington, D.C.’s average of $1100/month.

In fact, for the last decade, McMillan has not paid his landlord any rent at all. The New York Times reports, “Mr. McMillan said in an interview on Tuesday that for at least the last decade, he had lived rent free. “We’re like family,” Mr. McMillan said of his landlords. “They don’t want me to pay any money at all. I am basically living there rent free.”

According to the Times:

Mr. McMillan said that he moved into his apartment, a one-bedroom on Nostrand Avenue in Flatbush, Brooklyn, in the early 1980s but soon fell behind on rent when he left his job in the Postal Service on disability. The landlady, Mr. McMillan said, admired his Vietnam War service and forgave the back rent and, eventually, the future rent, too. In exchange, he did maintenance work, and after she died in 2003, her heirs continued the tradition.

Building manager Viola Hampton told the New York Post, “The rents should go up but they haven’t. People don’t have that kind of money… Everybody here is like a family,” and said of her tenant’s platform, “He’s not necessarily talking about himself. He’s talking about the poor person.”

He’s not necessarily talking about himself, but McMillan rents a rent-stabilized apartment in the East Village for his son, for only $900/month, again predictably well below the area average.

This politician insists on occupying a rent-controlled apartment for his son, rather than let that space go to a person who truly needs it. Even sleazier is his refusal to contribute to the collective pot from which he believes “the poor” so richly deserve to take. Will he at least allow the public to see his apartment, or his son’s? Reports the Times:

“Mr. McMillan declined to show the apartment, saying he feared for his neighbors’ safety, and fielded questions from the driver’s seat of his parked graphite-colored Honda CR-V, which is also his mobile office. When he travels, he sleeps in it, too; in the back were a sleeping bag, a bottle of Scope Original Mint mouthwash and a pair of nunchucks he keeps in a seat-back pocket. That weapon happens to be banned by the state he wants to run. “My main object is to protect myself,” he said. “I will worry about the consequences later on.”

McMillan is riding high on this YouTube-fueled wave of popularity. Yet this is exactly the type of broad overpromising that corrupts politics and politicians alike. His words say “rent is too damn high.” But McMillan’s actions say: “I and my family will eat until we are full, but the rest of y’all should share the wealth.”

Do your little honestly, folks; it makes little sense to cheat the people who trust your word, all while promoting one of the worst economic policies of our time.

Rent Control: Why Is It So Bad?

by Kathryn Ciano on October 20, 2010

in Economy, Property Rights

When rent is “too damn high,” people move. Yet many cities still impose rotating rent controls, in a misguided attempt to make housing more affordable.

Governments can hardly be credited with behaving as rational actors. Still, for those of you with a lingering sense that maybe rent control-mongers might have a point, here’s a nonexhaustive list of why rent control is such bad policy:

  • Rent control reduces landlords’ incentives to rent out apartments. This means that rent control in a city keeps apartments available for rent scarce.
  • Demand skyrockets for the few available apartments. Unable to respond to rising demand in the logical way–raising price–landlords impose conditions on renters, or stop responding immediately to renters’ complaints because, after all, with such low vacancy levels renters have nowhere to go. This keeps relations between landlords and tenants tense and aggressive–hardly the friendly neighborhood model community-minded rent control-ers had in mind…!
  • Landlords paying more for apartments than they’re able to collect in rent cannot afford to maintain or repair units. Apartments stay in disrepair for the duration of rent-controlled tenancy, until landlords can collect market prices and therefore pay plumbers, caulkers, repairmen, etc.
  • Rent-controlled apartments cause stagnation. Tenants paying below-market prices for apartments are unlikely to move, even for higher wages or better jobs. This suppresses long-term economic growth, marginally disincentivizes the rent-controlled tenant’s instinct to find any work when unemployed, and depresses neighborhoods’ development overall.
  • Landlords afraid of statistically-inevitable squatters will rationally prefer shorter-term renters, inadvertently discriminating against just the people rent control is ostensibly designed to help, like retirees or families with young children.
  • Like any price control, restriction begets more restriction. If rent increases are only allowed between leases, rational landlords will not hesitate to evict bad tenants, even where under market price landlords would have more compassion for the same bad tenants. This translates to demand for further government interference on behalf of tenants, i.e., into deeper bureaucracy, more policing, and ever-more-developed landlords’ search for loopholes.

Rent Is Too Damn High

by Kathryn Ciano on October 20, 2010

in Property Rights, Regulation

Not much to add to this brilliant insight: The rent is too damn high!

Jimmy McMillan doesn’t get into details about what he intends to do about such high rent. The answer is clear: Let the markets go!

Sure it’s nice to live in a safe, high-rent neighborhood. Hopefully Jimmy McMillan understands that the problem with rental price caps (like rent control) and regulations (like banning food trucks) is that these policies create spikes and troughs across abutting rent districts. This artificially ghettoizes neighborhoods rather than permitting rents to rise and fall naturally to reflect the more nuanced actual rent prices people are willing to pay.

If he intends to fix the “too damn high” problem by mandating a maximum rental price, neighborhoods will suffer. From a 2004 CEI paper:

Price controls are, historically, a dismal failure; in the short-term they may produce a drop in prices, but they also destroy the incentives to produce more goods. Under rent control, housing stocks deteriorate[.] A survey of economists 20 years ago demonstrated that the destructive effect of price controls is more widely recognized by economists than is practically any other regulatory effect. As a Swedish(!) economist once noted, “rent control appears to be the most efficient technique presently known to destroy a city–except for bombing.”

Even that bastion of conservative thought the New York Times filled its latest article decrying the “disappearing rent-controlled treasures” with tale after tale of sad disrepair. The simple truth is that when housing boards prevent landlords from earning market price for the apartments they rent, landlords cannot afford to fix apartment problems as they arise.

After all, city-imposed rent control may keep the rent from getting too damn high, but the price of plumbing, masonry, flooring, repairing a leaky roof, bread for the landlord, plumber, et al–none of these fall under a price cap.

That’s how markets work, kids, in a nutshell. Prices aren’t pegged to anything; they simply reflect information.

Pegging one item’s price to an arbitrary number will either destroy the market for that item or it will require such extreme control over all related markets that even a Stalinesque dictatorship can’t keep it together. Only when the government lets go of price control entirely do prices correctly reflect what things are worth to the relevant market.

Rent is high. When rent is too damn high people move. Relate to your people all you want, Mr. Politician, but keep your hands off of price control!

Obama to Sign $6 Billion National Service Boondoggle; Mandatory Service Mulled

by Hans Bader on April 21, 2009 · 1 comment

in Bailout Watch, Economy, Nanny State, Politics as Usual, Stimulus to Nowhere

President Obama will sign into law a $6 billion “national service” boondoggle. In the March 31 Washington Examiner, I described how the “Americorps plan will waste money on ideological causes” like rent control and more lenient sentences for violent criminals:

“Despite exploding deficits, President Obama and congressional leaders are backing a $5.7 billion “national service” boondoggle. Obama’s proposed budgets, which break his campaign promise of ‘a net spending cut,’ will already increase the national debt by $9.3 trillion, according to the Congressional Budget Office (CBO), making even the Bush administration look thrifty by comparison. Where will the new money come from? The CBO says Obama’s $800 billion stimulus package will actually shrink the economy ‘in the long run.’ Much of the ‘national service’ funds will be wasted on ideological causes. In the past, they were used to pay young people to lobby for rent control and against anti-crime legislation, such as ‘three-strikes’ laws.”

This $6 billion may be just the beginning. In 2008, Obama promised “a civilian national security force that’s just as powerful, just as strong, just as well-funded” as our military.

Soon after the election, Obama’s web site announced plans to require students to perform unpaid community service every year. “Obama will call on citizens of all ages to serve America, by developing a plan to require 50 hours of community service in middle school and high school and 100 hours of community service in college every year,” announced Obama’s change.gov web page. Community organizers would no doubt welcome all the unpaid labor this makes available to them.

It is unclear if any federal power authorizes such a requirement: the Supreme Court’s decision in United States v. Lopez (1995), which struck down the Gun-Free School Zones Act as unconstitutional, made clear that private citizens and education are not inherently commercial enterprises subject to federal regulation under the Commerce Clause. (That decision was reaffirmed in United States v. Morrison (2000), which dismissed a federal lawsuit alleging violence between college students, as beyond federal jurisdiction).

My guess is that Obama will try to get around those decisions by conditioning federal grants to school districts on their mandating unpaid service by students. (The Supreme Court hasn’t struck down a spending-condition since United States v. Butler (1936)). Prior to the election, Obama supporters also spoke of sweetening the pot for college students (but not other students) by giving them a tax-credit in exchange for the community service.

The Obama Administration has temporarily put these plans for mandatory service on the back-burner.

Legal commentator Walter Olson of Overlawyered writes that after he publicized the Obama community-service requirement, and his post “began drawing thousands of visitors, the Obama website administrators at change.gov silently replaced the ‘require’ language with something new and different: ‘Obama will call on citizens of all ages to serve America, by setting a goal that all middle school and high school students do 50 hours of community service a year and by developing a plan so that all college students who conduct 100 hours of community service receive a universal and fully refundable tax credit ensuring that the first $4,000 of their college education is completely free.’”