A new paper estimates that Massachusetts voters’ decision to end rent control added $2 billion to the value of Cambridge, Mass. residential housing stock over 10 years. While some of this represents the improved worth of rental property whose value had been artificially suppressed by the previous law, much of it reflects improvements in the value of other, nearby property that had never been under rent control, as increased rates of renovation and improvement made whole neighborhoods more desirable. “In net, our estimates imply that more than half (55 percent) of the capitalized cost of rent control was borne by owners of never-controlled properties, illustrating both the importance of spillovers in housing markets and the potential unintended side effects of price ceilings.” [David H. Autor, Christopher J. Palmer and Parag A. Pathak, Cato Research Briefs in Economic Policy]
Some “affordable housing”/squatting enthusiasts in San Francisco are encouraging the stratagem of renting someone’s apartment for a night or two on AirBnB, declining to leave, and settling in for what might prove a prolonged process of eviction under the city’s highly pro-tenant landlord-tenant laws. [San Francisco Bay Guardian, with comments questioning whether even San Francisco's law would actually reward such a ploy, via @marketurbanism]
NYC’s rent control laws “disproportionately benefit the well-to-do, who are more likely than the poor to remain for decades in apartments that become increasingly underpriced as the years go by. … The 220 affordable apartments [in a new West Side development responsive to subsidy incentives] will be split up among households of four earning no less than $50,300 and no more than $193,000 per year —- or nearly four times New York City’s median household income.” [Jim Epstein, Reason]
Although we call it “rent control,” the key thing it controls is often not so much what you can charge for a lodging as whether you can ever reclaim it. This recluse successfully held out for $17 million to relinquish his moldy, squalid rented lodging at what is now 15 Central Park West. [New York Post]
P.S. But at least the U.N. likes the idea. While on the subject of legal insanity in NYC real estate: Andrew Rice, New York mag, “Why Run a Slum If You Can Make More Money Housing the Homeless?” I wrote about the epic New York City homeless-rights litigation in Schools for Misrule, and more links are here.
The Los Angeles Times profiles a lawyer who specializes in representing Los Angeles landlords:
In a DVD he gives to landlords, Block describes himself this way: “A man who has evicted more tenants than any other human being on the planet Earth.”
That’s where Block comes in. He has dedicated his considerable creativity and intelligence to helping landlords evict tenants from rent-stabilized buildings. He boasts that his firm has filed more than 130,000 cases since 1980, a year after rent stabilization went into effect. He helps landlords identify minor violations — a pet fish in an aquarium, a brightly painted bathroom, an extra occupant — to toss out long-term tenants who are paying below market for their homes.
Because L.A.’s rent stabilization laws prohibit landlords from raising rents anywhere near market value until a tenant vacates the apartment, and the only way to force a tenant to vacate is to evict them based on “good cause,” Dennis Block can make a living filing 5,000 eviction cases a year. Rent control as full employment for lawyers.
Is the 78-year-old George Pavia a bully resident-landlord who is trying to intimidate his tenants? Or is 67-year-old James Couri, convicted on federal fraud charges in the 1980s, a litigious pro se tenant whose addition of Pavia to his list of legal adversaries is a scheme to get out from paying rent? Six years of legal battles (helped by Couri’s ability to find Pavia’s technical violations of the regulatory morass facing NYC landlords) will culminate in a jury trial in 2007, though the personal enmities involved suggest that there will be years of appeals afterwards. Couri tried to enlist other tenants against Pavia in a suit claiming that Pavia overcharges tenants, but, inspirationally, the other tenants refused, feeling that their rents were reasonable regardless of what New York’s arcane rent control laws say. Pavia has not been able to evict Couri though the former feels harassed by his involuntary neighbor and the latter hounded a gay designer out of the building; one of Pavia’s lawyers explains, “Apparently, there are certain judges in New York who would rather take arsenic than evict a tenant.” For the Coasian effects of such judges, see POL Nov. 28; but see Giacalone for an opposing view that isn’t quite responsive. Moral: tenant background checks are your friend. (Ron Stodghill, “A House Divided: Uncivil War on E. 73rd”, New York Times, Dec. 10).
More petard-hoisting: “A champion of Berkeley rent control was ordered last week to pay his former tenants more than $100,000 in restitution by the very rent board he campaigned to create. By a unanimous vote, the Berkeley Rent Stabilization Board found that Michael Berkowitz, a paid aide to Councilmember Maudelle Shirek, had willfully misrepresented his residency status at his 2820 Derby St. property to skirt rent control. Berkowitz also works in a second position as chief of information services and neighborhood planning for the City of San Francisco.” (Matthew Artz, “Rent Board Orders Council Aide To Repay Overcharged Tenants”, Berkeley Daily Planet, Feb. 27)(via Myria who had it from Classical Values). And this just in: Republican Joe Thompson, the minority whip of the New Mexico House of Representatives, “was charged with drunken driving, hours after attending a bill-signing ceremony to highlight the state’s newest effort to crack down on DWI offenders.” (“Lawmaker arrested for drunken driving after attending anti-DWI ceremony”, AP/San Francisco Chronicle, Mar. 4)
One side effect of Manhattan rent control is that it creates a source of litigation that wouldn’t exist under a market-based system. When a tenant has a right to rent a 2800-sq. ft. SoHo loft for a few hundred dollars a month, it means that it’s worth holding a seventeen-day trial to determine whether the tenant is using the loft as her primary residence. If the tenant, who owns multiple pieces of real estate in New Hampshire, was paying market rents, then whether she was using the loft as a primary residence would be legally and economically irrelevant, and the trial would never have happened. Imagine how much is lost because New York City tenants and landlords litigate thousands of “holdover” cases every year. (Dennis Hevesi, “The Knottiest Cases of Landlord v. Tenant”, New York Times, Nov. 9; Henry Pollakowski, “Who Really Benefits from New York City?s Rent Regulation System?”, Manhattan Institute Civic Report, March 2003).