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Malibu |Props 98 or 99
Rent Control Ruse
M. Galles 6/2/08
The June ballot is bringing rent control back into the spotlight. Proposition 98 would protect all Californians from abuses of eminent domain and phase out rent control. Proposition 99 is a decoy measure which would override Proposition 98 if it attracted more votes, written by beneficiaries of eminent domain abuse, that the Legislative Analyst concluded involved so little reform that it “is not likely to significantly alter current land acquisition practices.”
Proposition 99 offers precious little protection. It wouldn’t protect farmland, churches, businesses or rental properties from eminent domain abuse. It wouldn’t restrict the almost unlimited purposes for which eminent domain is exercised. It leaves a gaping loophole for “blight,” which includes anything government decides not to like. It does not compensate owners for fighting abuses. So its backers are trying to re-frame the real reforms of Proposition 98 as an attack on renters.
Renters and renter advocates offer horror story scenarios if rent control ended. However, they omit the fact that Proposition 98 would only end rent control after current residents leave, revealing those scenarios as pure fiction. It also ignores the fact that rent control is simply a majority of voters in a jurisdiction (current renters) taking the property of a minority (landlords), which is why Proposition 98 includes it with other forms of government theft.
Gary M. Galles
Galles is a professor of economics at Pepperdine
University. [go to Galles index]
Rent control is theft because it removes landlords' rights to accept better rental offers, taking a large portion of their property values (shown in plummeting market values when it is enacted) and giving the “savings” to current tenants (why those tenants almost never leave). However, tenants voting themselves $500 monthly rent reductions is no different than each of them robbing their landlords of $500 a month. But while robbery is a felony, beneficiaries call rent control “democracy in action,” as though a majority vote legitimizes theft.
This can be seen by analogy to the labor market, where renters are sellers rather than buyers. Since a rent cap limits what landlords can earn as well as what tenants must pay, the labor market equivalent would be a law prohibiting employers from paying workers more than $10 an hour. Limiting what employers can pay, it limits workers’ incomes. Renters would recognize a maximum wage law as theft, even though it does the same thing rent control does to their landlords.
The arguments made against ending rent control also demonstrate that it is theft.
Worries that rents would rise sharply make sense only if rents are being held below what apartments are worth (what others would be willing to pay), stealing from landlords. And Proposition 98 does nothing to change rents as long as tenants remain, stopping only subsequent theft. Claims landlords would evict tenants to get higher rents or that rent control would reduce low-income housing reveal the same thing, because both require that rents are now forcibly under-priced (they also ignore the fact that any government assistance should be financed by Californians, not forced on landlords).
Mobile home owners complain ending rent control would lower their home values. But that is only because rent control has transferred much of the value of the park owners’ land to them (shown in reduced values of trailer parks and higher prices for sited trailers as a result). It would only undo that theft.
Rent control also causes reduced apartment construction, deteriorating housing, shortages, increased discrimination and landlord-tenant hostility. It is a policy-induced disaster that exists only because local renters vote to expropriate landlords' property.
Proposition 99’s backers must attack Proposition 98’s real eminent domain protections with rent control misrepresentations because their position is so weak. They gloss over that Proposition 99 does next-to-nothing to restrict eminent domain abuse, and rest their case on defending a form of theft (ironic, since eminent domain abuses are opposed as theft) whose consequences deserve to be a scandal, rather than something to perpetuate. Their anti-98 campaign is simply a testament to their faith in voter ignorance and gullibility. CRO
2008 Gary M. Galles