Saturday, May 10, 2008

Vote Yes on Prop 98

Two minutes spent reading the SF Chronicle's Friday point-counterpoint on Prop 98 should be enough to convince anyone that it's a good idea. Eliminating rent control is long overdue, and I'm hopeful that a statewide vote will do just that.Though we can expect strong support for the measure from the more conservative parts of the state, it probably won't pass without some assistance from those of us living under the specter of rent control. Oaklanders and San Franciscans need to see the fundamental error of rent control and help make a change.

Take a look at SFGate's article. What you have is a reasoned argument in favor of 98, which goes something like this: Rent control favors people who rent an apartment and never move at the cost of those who either need to move or who are new to the housing market.

The important point about this argument is that rent control is a zero-sum game. It does not benefit renters in any sort of absolute sense. Doing that would require an actual cap on rental rates. Instead, it creates a bifurcated marke, where landlords need to charge above-market rents to new tenants to make up for those who have lived in the building longer.

An egregious example of this kind of situation is an apartment building in New York which recently converted to a single-family house and was put on the market for many millions of dollars. In order to effect this conversion, the owners had to pay off tenants to the tune of millions of dollars to get them to leave. Rent control provided these tenants with an enormous asset, merely because they were willing to sit there and refuse to move.

I'm sure some of you are thinking such situations have some relationship to eminent domain actions, where the government or a developer must buy out owners to take over there land. But no such correlation exists. Renters have no ownership over the property they inhabit, and as such they should have no rights to that property's appreciation.

The counterpoint in the Chronicle's article is as predictible as it is terrible. The author is basically angry because his rent may go up under 98. Nevermind the economic damage being done to the rest of  the city. He wants what he wants, and that's all there is to it.

In fact, his argument is even worse than it appears at first blush. He complains that 98 might make him homeless. Well, did he ever consider that if he were evicted for non-payment in his current apartment -- say because he lost his job and had to find another -- that then he would be completely priced out of the market when he goes to find a new apartment? All because of his precious rent control.

Or consider another case. Let's say he wants to move to another rent-controlled city for a new job opportunity. Rent control ensures that he's unable to do that, as the starting rent in the new city will be far higher than that which he already pays.

Rent control is similar to Prop 13 in this regard. It decreases economic mobility by creating an enormous economic obstacle to moving. What this does is advantage those who are sedentary and less likely to jump at new work opportunities. The harm to the economy is obvious.

So, you might ask, shouldn't I support a direct repeal of 13 in addition to passage of 98? The answer is no, because I do not trust the government. 98 will simply change the contracting situation between landlords and tenants. Repealing 13 would provide the government with a vast new pot of money to steal. This I cannot support. I would, however, support a measure which repealed 13 while simultaneously capping property tax rates at some reasonable level.

Prop 98 is a step toward economic freedom in places like Oakland. We should support it. Its passage will produce better and cheaper housing, and it will encourage people to move to locations where work prospects are brighter.

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