{"id":1132226,"date":"2019-08-05T11:00:45","date_gmt":"2019-08-05T16:00:45","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=107830"},"modified":"2019-08-05T11:00:45","modified_gmt":"2019-08-05T16:00:45","slug":"how-this-is-making-the-housing-crisis-worse","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1132226","title":{"rendered":"How THIS Is Making the Housing Crisis Worse"},"content":{"rendered":"

This post How THIS Is Making the Housing Crisis Worse<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

It\u2019s happened several times in the last couple of months \u2013 someone approaches me, clipboard in hand, and asks if I\u2019m a California voter. Then, barely waiting for my response, they start asking me to sign a petition related to rent control.<\/span><\/p>\n

The first time it happened, at my local organic market in Santa Barbara, I just politely said \u201cno thanks.\u201d<\/span><\/p>\n

The most recent time, at a professional women\u2019s surfing contest in San Diego last week, I couldn\u2019t hold back and ended up saying a bit more to the solicitor.<\/span><\/p>\n

And now, after hearing Bernie Sanders mention the idea during last Tuesday\u2019s primary debate, I want to tell you a more expanded version of where I stand on the topic (and why)\u2026<\/span><\/p>\n

My Grandparent\u2019s Experience<\/b><\/span><\/h2>\n

Let me first say that, like Bernie Sanders and other proponents of rent control, I\u2019m very familiar with the plight of poor families that rent all of their lives …<\/span><\/p>\n

My mom\u2019s parents rented the same apartment in downtown Wilkes-Barre, Pennsylvania for more than 50 years.<\/span><\/p>\n

Her father grew up in such poverty that he had to drop out of high school to go work in the coal mines.<\/span><\/p>\n

Her mother graduated from high school but stayed home to take care of the kids.<\/span><\/p>\n

They were Depression-era people, conservative with what little money they had, and they never made the leap to home ownership.<\/span><\/p>\n

After leaving the mines, my grandfather made his living doing all kinds of odd jobs \u2013 car mechanic, electrical work, etc. \u2013 including helping out his landlord whenever needed. His rent still went up on a regular basis. Even when my grandmother was living in the apartment alone in her early 90s, the landlord was talking about another increase.<\/span><\/p>\n

Would it have been nice if their rent, established in the 1950s, could have only gone up 3% or 4% a year so long as they stayed in that apartment? Absolutely.<\/span><\/p>\n

Still, they never complained. They knew prices for things went up over time. They cited a few times in the past when they might have been able to buy a house in the neighborhood but just couldn\u2019t mentally commit to the idea. Nor did they like borrowing large sums from banks.<\/span><\/p>\n

My grandmother died in that small apartment, with not very much to her name.<\/span><\/p>\n

Now, let me tell you another story\u2026<\/span><\/p>\n

Where Rent Control Goes Bad <\/b><\/span><\/h2>\n

As my grandmother was into her 80s, I was moving into New York City and looking for apartments.<\/span><\/p>\n

I was working for Standard & Poor\u2019s and making a good salary, but hardly anything exorbitant. My one-bedroom apartment just off Wall Street was $2,300 and was <\/i>subject to market rate increases going forward. <\/span><\/p>\n

My boss, perhaps 30 years older than me, lived a couple neighborhoods away. He obviously made more than me but he\u2019d been in New York for a long time and his apartment \u2013 twice the size of mine \u2013 was under rent control. I don\u2019t know exactly<\/i> how much he paid but I would guess a third of my rent for twice as many bedrooms. He also owned a vacation home outside the city.<\/span><\/p>\n

Meanwhile, there were plenty of rent-controlled people charging large amounts of money to let someone move into a vacant bedroom while their landlord received nothing.<\/span><\/p>\n

I also knew someone who lived in another state almost all of the year but maintained a rent-controlled NYC apartment as a little getaway (lying about residency in the process).<\/span><\/p>\n

This is just a little taste of what I saw, but the big-picture was pretty easy to see \u2013 rent control largely rewarded people who got there first, regardless of their financial status \u2026 it was easily abused \u2026 and it did very little to help newcomers or anyone looking to move from one place to another.<\/span><\/p>\n

There is also no doubt that many landlords do everything in their power to screw over tenants, especially in a place like New York City. And from what I saw, rent control didn\u2019t help that situation either \u2026 it merely discouraged building owners from improving their rent-controlled properties any more than was absolutely necessary.<\/span><\/p>\n

Indeed, New York City just changed a bunch of rules related to rent control and we\u2019re already hearing about landlords bailing on big capital investments.<\/span><\/p>\n

But you don\u2019t have to accept my personal experience or anecdotal evidence.<\/span><\/p>\n

The academic research is pretty decisive that rent control doesn\u2019t work, whether you\u2019re talking about New York or Paris.<\/span><\/p>\n

As Reason<\/i> noted in a recent article<\/strong><\/span><\/a>:<\/span><\/p>\n

\u201cBrookings Institute associate professor of economics Rebecca Diamond did a recent review of the literature on rent control, finding that \u2018Rent 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.\u2019 The reason is simple and boils down to the law of supply and demand. While some of the people renting may benefit from rent control by removing some of their risk, it also gives landlords an incentive to alter their supply of rental property.<\/span><\/p>\n

\u201cThey have several options based on the circumstances. First, they may withdraw their properties from the rental market to sell them as condos. Former George Mason University Chairman of the Department of Economics Donald Boudreaux summed it up nicely in a 2006 letter to the editor of The New York Times<\/i>: \u2018By decreasing the profitability of supplying units occupied by renters, these controls spawn condo conversions and prompt builders to construct fewer rental units and more units for sale to owner-occupiers. People who can’t afford to buy housing are unnecessarily disadvantaged.\u2019 Landlords may also stop investing in maintenance, which, over time, may lead to neighborhoods with many run-down properties. The bottom line is that rent control never increases the supply of affordable rented housing.\u201d<\/span><\/p>\n

What about this legislation they\u2019re trying to pass in California?<\/span><\/p>\n

Well, after I explained that I recently purchased a million-dollar home and would never want to cap my own future rental potential, the solicitor at the competition assured me that it would only apply to landlords who own three or more properties.<\/span><\/p>\n

At that point, I didn\u2019t bother to explain that I also recommend investing in companies like Real Estate Investment Trusts (REITS) that are essentially corporate landlords.<\/span><\/p>\n

It was clear we simply had different ideas about capitalism and free markets.<\/span><\/p>\n

If Rent Control Doesn\u2019t Work, What Will? <\/b><\/span><\/h2>\n

From my perspective, the person who took a chance on New York City back in the 1970s \u2013 when it was a far cry from its current look and feel \u2013 deserves<\/i> to get market rates for that money invested and risk undertaken.<\/span><\/p>\n

As did my grandparents\u2019 landlord\u2026<\/span><\/p>\n

As do I for working hard, and saving enough to buy a house in Santa Barbara.<\/span><\/p>\n

Can you imagine what it would be like if we suddenly capped the amount of dividends that stocks could pay to their investors?<\/span><\/p>\n

Well, that\u2019s exactly what rent control does with real estate.<\/span><\/p>\n

Perhaps the biggest irony is that some of the same people here in California who cry for more affordable housing are the very same people who don\u2019t<\/b> want garages converted into auxiliary dwelling units, Airbnb listings allowed in residential neighborhoods, or high-rise buildings in land-constrained areas.<\/span><\/p>\n

Look, housing affordability is a complicated issue. In highly desirable locations with little room for further development, it\u2019s doubly complicated.<\/span><\/p>\n

But I would much rather see solutions that start with increasing supply, even if it\u2019s something small like simply allowing existing homes to be partitioned into several micro houses. At least it\u2019s a start to fixing a long term problem and not a band-aid that will fester given enough time.<\/span><\/p>\n

Thinking we can wave a magic wand and keep prices in check through artificial rent controls isn\u2019t going to cut it.<\/span><\/p>\n

To a richer life,<\/p>\n

\"Nilus<\/p>\n

\u2014 Nilus Mattive
\nEditor, The Rich Life Roadmap<\/i><\/p>\n

The post How THIS Is Making the Housing Crisis Worse<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post How THIS Is Making the Housing Crisis Worse<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

There is a lot of talk in the political sphere about what to do about the housing crisis. I have people walking up to me in the supermarket trying to get me to sign one petition or another about what to do to solve it. Personally, I think the solution is a bit more complex than what Bernie and Co. are talking about doing, and the research is on my side.<\/p>\n

The post How THIS Is Making the Housing Crisis Worse<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[3122,3123,3124,3125,366,2679,741,3126,3127,835,3128,3129,3130,923],"tags":[24,241],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1132226"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1132226"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1132226\/revisions"}],"predecessor-version":[{"id":1132227,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1132226\/revisions\/1132227"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1132226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1132226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1132226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}