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.

Housing Affordability Problem? Great!

America is beginning a remarkable transformation involving the re-urbanization of many upper-middle-class households. This trend is driven by a number of factors, including aging baby boomers, traffic jams and environmentalism.

Predictably, cities like Oakland will likely fail to take advantage of this trend because of their bizarre attachment to slums.
As far as I know, I'm the only East Bay blogger who actively opposes so-called "affordable housing" no matter how it's packaged. I categorically oppose it because it runs counter to any sort of optimistic vision of a growing, thriving city.

Affordable housing is designed to entrench those who are unable or unwilling to compete in the economy. It:

• Takes valuable land from those who would be willing to pay more for it and allocates it to others, disrupting the natural economic balance and distorting pricing signals in the marketplace.


• Creates "haves" and "have nots" among the poor by randomly selecting some of them to help. Economic reality makes it impossible to give every poor person a piece of coveted property without adopting full-on socialism. (Incidentally, labor unions do the same thing, but that's for another time.)


• Invites corruption by allowing government officials to distribute benefits to their cronies and their cronies' cronies.


• Discourages mobility. Much like rent control and prop 13, it makes the optimal strategy to never ever move apartments or houses, for fear that costs might rise. Thus, people turn down new job opportunities for fear of losing their government perquisites.


• Fosters mistrust among the potential higher-income residents by signaling that government is "out to get them." This is also the reason why no Oakland high school can attract the best students. Parents won't even give the schools a chance for fear that government officials will find yet another way to stick it to them.


• Carries with it the presumption that certain types of residents are more desirable than others.
  
  
  
  • If anyone's more desirable, wouldn't it usually be the wealthier resident?
  
  
  • Why not let the market decide who is more desirable?
  
  
  
  

V Smoothe writes, "Of course" there's an affordability "problem" in Oakland. What's that even mean? If people couldn't afford the prices charged for housing (whether to rent or to own), they would look elsewhere, and prices would decline. Obviously, outside of the housing bubble fallout, that's not happening. And that's great for Oakland! That means people want to live here. Why would we want to disrupt that?

The answer is simple: Petty selfishness. Governments enact policies like affordable housing because there are a set of people who want to get whatever they want, by whatever means necessary. In this case, they've failed to get what they want through the economy by competing, so now they want the government to change the rules of the game and just declare them the winners.

Now, I can hear people saying that I'm just piling on the "victims" in this situation. Such an argument is pure sophistry. No one is suggesting laws which tilt the scales of government against the poor. The scales should be flat for everyone, rich and poor, black and white. This is the proper function of government.

People like to argue that we need affordable housing so the people who work as low-wage service employees in a given city can also live in that city. The problem with this argument is that, in a supply-constrained environment, it's a zero-sum game. For each service employee who gets a spot, you have to kick out one lawyer, banker or engineer. Instead of the low-wage employee living in a suburb, the higher-income person moves there. So, the suburbs prosper while the cities suffer.

And, of course, the policies don't even have their intended effects. I know a couple who purchased a home using a special "affordable" mortgage by simply having the lower-earning spouse apply for the loan without the other. Everyone is familiar with the stories of well-off retirees living in absurdly cheap rent controlled apartments. The bottom line: Housing responds very well to economic signals, and by harnessing capitalism instead of railing against it, cities like Oakland can attract more affluent residents.

It's always so saddening to me to ride BART along the Highway 24 corridor. Cities like Orinda and Lafayette are the direct beneficiaries of the ridiculous policies on this side of the Caldecott Tunnel. In past generations, cities competed to attract the sorts of coveted residents and businesses which now flock to our eastern neighbors (and, humorously, Emeryville). These days, our cities compete to entrench ghettos and provide excellent housing for parolled felons.

To what end? To make our cities "funky?" I submit that we would do just as well on that score if we abandoned these policies. The Bay Area is full of interesting people with good jobs who would like to live in the sort of urban environment we can provide.

And besides, murder, rape, graffiti and wandering ne'er-do-wells are not "funky." They're symptoms of cultural suicide. We should be fighting against these forces, not inviting them in.

It's time to set aside these "affordable" housing policies, and pursue a rational, competitive drive to attract the best possible residents -- those who have competed in the economy and done well. In other words, we should let the market decide who lives here.