a conversation with vic(on rent control)

(Abandoned house in Detroit MI, Photo by Dylan Degraff)

I've been missing-in-action for over a month. Work tends to get in the way of blogging. I do owe Vic of NYC a long response - but it'll have to come in installments.

Anonymous said...
(Vic from NYC)

Hello Urbano, thank you for the response. I fully understand and appreciate your points but let me just make some clarfications of my own.

First let me just say that we both share in the belief that Manila needs to reform its low income housing policies. However, we may disagree in the particulars. I fully acknowledge that an overwhelming amount of economists share your views on rent control, but why are an overwhelming amount of tenant associations and renter organizations disagree with you and these economists. Is it a mere coincidence that landlords and giant real estate companies vehemently oppose rent control?Would National Low Income Coalition (NLIC), a group you worked with, agree on your stance to eradicate rent control? You mention the National Multi Housing Council's (NMHC) dissaproval of rent control, but are they a fair source for an opinion on the matter since they represent landlords?

on the National Low Income Housing Coalition - you're right. They do not have a stand on removing rent control. BUT they don't have a stand for spreading or maintaining it either. In fact, they are pretty much silent on the matter, which is probably the safe out between respecting some of the constituents, and respecting the research.

Between tenant associations -who have no small stake on the matter; landlords, who also have a stake in the matter; and disinterested economists (from academic research and governmental policy) -whom shall we believe? You could accuse the economists of having been bought by the landlords -if they were all from western economies. But when the chief economists of Finland and Vietnam tell you rent control is a problem, what can you conclude?

For every "study" that is anti-rent control, there is an equal and opposite version. But, what is unequivocal is who really benifits from eradicating rent control. Yes, there maybe iscolated cases such as Carly Simon. However, that is not an accurate picture to view the merits of rent control. The "Carly Simon" cases are propaganda tactics that landlords use to promote their cause. As a learned man as yourself, one must know there are always certain people that find loopholes for personal benifit. Much like Bush Sr. running Willie Horton ads to make voters believe Dukakis was soft on crime.

I'll have to disagree with you completely on that. You're using the "play the controversy" card that the anti-climate change and the anti-evolutionist love to use. The number of studies and the results simply do not correspond one to one "he said, she said" debate. The studies overwhelmingly point to negative effects of rent control (either as hard -price ceiling, or soft -tenancy protection models).

And yes, the studies ARE unequivocal on who benefits from removing rent control. It's the general population. The studies are too numerous to list (try researching with JSTOR or Lexis-Nexis, or even Google-Scholar), but here's a sample abstract from Basu and Emerson in The Economic Journal (October 2000):

"We consider a rent control regime where rent increases on, and eviction of, a sitting tenant are forbidden. When apartments become vacant landlords may negotiate new rents. If inflation exists, landlords prefer to rent to short-staying tenants. Since departure-date-contingent contracts are forbidden and landlords cannot tell whether tenants are short-stayers, an adverse selection problem arises, with a Pareto inefficient equilibrium. When tenant types are determined endogenously, multiple equilibria can arise where one equilibrium is Pareto dominated. Abolition of the rent control regime, cannot only shift the equilibrium out of this inferior outcome, but also result in across-the-board lowering of rents." (emphasis mine)

From Vic:

The true benificiaries of rent control is not the rich as you claim but the poor and NOT even the middle class. As a matter of fact according to the 1993 Federal Housing Survey, the median income of stabilized tenants in NYC was only $19,000. Of 200,000 tenants under rent control that pay below $400 rent, 80% make under $25,000. One third of these people (about 70,000 housholds) pay up to half their wages on rent. I bet all these people would disagree with your statement that "rent control benifits only a small number of existing tenants."

In 2000, 43.5% of the 2,216,749 renter occupied units in NYC metro area were renting for under $500. That's a little less that 964,300 households paying below $500. The 70K households you cited represent just over 7.26% of the total demand. Of the total number of renter households, 35.4% -or 784,726 households, were paying over 35% of their income to rent. Again, the 70K you quote represents little less than 9% of the total number of households paying more than 35% of their income on rent.

Again, in 2000, 14.6% of NY PMSA's households were earning below the poverty line. That's 308,190 families -or 4 times the number of households you quote. (All figures from 2004 American Community Survey - census.gov)

I was not comparing NYC's state of gentrification with that of Manila's real estate situation. I was merely pointing out how gentrification has relocated the poor in NYC as will eradicating rent control in Manila. The shanty towns and dillapidated buildings you speak of is a regulatory problem not the cause of rent control. As a matter of fact, In “Scapegoating Rent Control: Masking the Causes of Homelessness,” the authors point out that 3 out of the top 4 cities in the US with the most severe homeless problems do not even have rent control laws. Detroit and St. Louis, which never had rent controls, have suffered massive abandonment. But, in Santa Monica and Berkeley, where both have rent control policies, abandonment and homelessness is not a problem. You see we used the same example cities but used different studies to prove opposite points.

Again, you have to look at the urban land dynamics between the two cities - per sq. meter costs in NYC has more than tripled over the last decade, making redevelopment attractive to developers. No such pressures exist in Manila. Shanty towns are not a regulatory problem (otherwise we would have solved it by throwing inspectors at the problem) it is a demand and supply response.

As to the four cities you cite, the argument is non-sequitur. Detroit and St. Louis have severe homelessness problems because their economies are sliding into failure. Detroit, which built its economy on the US auto industry, lost over 76,000 people between the 1990 and 2000 census -and continues to lose people, and has fallen from the 5th most populated city in the US to the 10th in just 2 decades. The population in St. Louis, also a rust-belt city, shrank by 48,000 in the 90s. Clearly you can't compare them to Santa Monica and Berkeley where population is growing. Santa Monica is also part of the Los Angeles metropolitan area - and Berkeley, part of San Francisco-Oakland.

more, next time.