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Thursday, January 25, 2007

Case Study: Repealing Rent Control Can Reduce Gridlock

Read the story in today's L.A. Times about how the high price of gas has inspired people to move closer to their jobs, thereby reducing their commute (and the associated gridlock): click here.

Now just imagine how many people could live closer to work if all the rent-controlled apartments -- how many are there? 80,000? 800,000? -- were suddenly open to the highest bidder.

A single legislative act by the City Clowncil, namely, ending price controls on housing, could simultaneously reduce traffic, reduce pollution, reduce dependence on foreign oil, and reduce the average market price of rental housing in the City, and it wouldn't require City Hall to spend a dime.

Oh, I forgot: in the City Clowncil's manual, the ONLY way to solve a problem is to raise taxes and give more money to special interest constituencies. My bad.
************
UPDATE:
The number of units we could free up for commuters is on the order of 550,000.

I base this on a recent article in the L.A. Times, which stated: "Of the city's 780,000 rental units, Housing Department figures show, the 1979 Rent Stabilization Ordinance covers 550,000 that had a certificate of occupancy issued on or before Oct. 1, 1978."

Even assuming each unit housed only two commuters, that could be a million people walking to work instead of driving to work. Don't they consider a subway or bus a success if it gets 20,000 people out of their cars?

16 Comments:

Blogger Patrick Meighan said:

"Read the story in today's L.A. Times about how the high price of gas has inspired people to move closer to their jobs, thereby reducing their commute (and the associated gridlock)... Now just imagine how many people could live closer to work if all the rent-controlled apartments -- how many are there? 80,000? 800,000? -- were suddenly open to the highest bidder."

The logic doesn't necessarily follow, Walter. A sudden increase in the cost of rent could just as easily force people to move from their current affordable housing and into cheaper apartments FURTHER from their jobs... thus INCREASING gridlock.

Sorry, Walter.

Patrick Meighan

January 25, 2007 1:49 PM  

Blogger Walter Moore said:

Actually, it is not only logical, but is borne out by an empircal study conducted by economist Shirley Svorney, Ph.D, head of CSUN's Economics Department. Her study of data from New Jersey, if I recall correctly, indicates that rent control aggravates gridlock.

Nor is this surprising: rent control creates an artificial financial disincentive for people to move where they would otherwise move, i.e., close to work.

Other studies show, moreover, that rent control drives up the average cost of rental housing in a city, by artificially boosting the price of non-rent-controlled units.

Sorry, Patrick, but neither logic nor the data support you.

January 25, 2007 1:56 PM  

Anonymous Anonymous said:

This makes no sense at all. The reason gridlock has gotten so godawful on the Westside is that people can't afford to live where the jobs are. So they're commuting from more affordable parts of the city.

If you want another extreme example, look at Aspen, Colorado. Lot's of relatively good paying service industry jobs, but absolutely no place affordable to live. So workers double and triple-stack available housing or commute hours to and from down-mountain communities.

January 25, 2007 2:06 PM  

Blogger Patrick Meighan said:

"Actually, it is not only logical, but is borne out by an empircal study conducted by economist Shirley Svorney, Ph.D, head of CSUN's Economics Department. Her study of data from New Jersey, if I recall correctly, indicates that rent control aggravates gridlock."

Could you please post a link to that study so that I may verify?

Thanks,

Patrick Meighan

January 25, 2007 2:17 PM  

Anonymous Anonymous said:

I agree with Patrick.

January 25, 2007 3:49 PM  

Blogger Zuma Dogg said:

Walter,

You can relax on your wish for the end of rent control. It's coming to the November ballot.

That eminent domain protection ballot inititative with once sentence trojan-horsed in that calls rent control restriction "damage" and therefore illegal.

And everyone's gonna vote "yes" for the eminent domain part, and the end of rent control ride the coat tails. And luckily, you know the people backing the initiative will outspend the "rent control" advocates $1 billion to $1.

So I hope that open market rules of supply and demand shake out naturally, and the property owners don't take those units and raise the price so sky high, we will have the same problem we are having with the luxury condo widlfire sweeping the 15 districts.

January 25, 2007 3:54 PM  

Blogger Walter Moore said:

Yes, and I misspelled her name: it's "Svorny," no e.

Let's see if I get my HTML right:

http://ideas.repec.org/a/eee/juecon/v58y2005i3p421-436.html

January 25, 2007 4:05 PM  

Blogger Walter Moore said:

P.S. Here's an abstract from the Journal of Economics:

This paper adds to the empirical literature on rent control. We hypothesize that rent control affects commute times. New Jersey census tract data (from the Urban Institute/Geolytics Neighborhood Change Database) show a positive and statistically significant relationship between rent control and commute times for 1980, 1990 and 2000. For 1980 and 1990, we confirm that it is a lack of household mobility that is behind the longer commutes. For 2000, detailed rent control data allow an examination of the consequences of the specific type of vacancy decontrol legislation. The most restrictive ordinances have the strongest effect on commute times.

Download the article

January 25, 2007 4:09 PM  

Blogger Walter Moore said:

Zuma --

It's a shame that an effort to repeal rent control is hidden in some other ballot measure. Public policy debates should be honest and informed. I think the limits on eminent domain and rent control should be put to separate votes.

As for the effects of repealing rent control, it will essentially flood the market with "new" units; will reduce the price of non-rent-controlled units; and will eliminate the current financial incentive to convert to condos. It will also trigger massive property improvements to the existing housing stock, because landlords will finally be able to pass the price of same along to tenants -- who will be happy to pay it to live in nicer, cleaner, safer units.

The people who will lose are those who currently live in rent controlled units, obviously. What I would like to know is how many of them are elderly and poor or handicapped and poor. For them, we should publicize Section 8 housing subsidies; I suspect that our city could easily afford to make up the difference between what they pay now and what they would pay without rent control.

Another way to reduce rents in this city would be to reduce demand by deporting the hundreds of thousands -- millions? -- of illegal aliens.

January 25, 2007 4:16 PM  

Blogger Patrick Meighan said:

Walter,

Thanks for providing the link. Interesting stuff. It's a shame that just the abstract is available, as it means we gotta take the authors' word that their paper proves what they say it proves. But if we give 'em the benefit of the doubt, it seems that what they're demonstrating is that commute times are lengthened by household permanence, and that household permanence is aided by rent control. So what really shortens commutes is when everyone gets kicked out of their homes and has to find a different place to live.

Again, what you're calling for, Walter, is for Angelenos who rent to be forced from their homes (aka, "household mobility"). Remember that 60% of this city's residents are renters, making your proposal for gridlock-abatement a tough political sell. 'Cause, speaking as a renter, the only thing I'd like less than dealing with LA gridlock is to beat LA gridlock and be rewarded with an eviction notice.

I think I'd rather just ride a bike, or have rapid transit like every other civilized city in the world.

Patrick Meighan
Los Angeles Greens

January 25, 2007 4:48 PM  

Anonymous Matt Dowd said:

gridlock is bad cause theres millions more people here, and the streets aint gettin any wider.
as long as people from all over the US and mexico etc etc still come here, then nothin's gonna change.
maybe we should let market decide who stays in town and who leaves.
problem is, rent goes up, more families share houses, the children become aggravated with tight living conditions, and find 'family' amongst the gang culture, outside of that stressed house.
so....
the bottom line rests with the employers, taking on undocumented workers for cheap, and sustaining the incentive for them to stay here. and the illegals are their own worst enemy: too many of them competing for available work, driving down their own price.

at least the passport regulation came in already. that ought to plug up a few holes. restricting the excess labor force influx here should open up some opportunity for legal residents, but employers need to raise their pay rates for legals. right now everyone's making capital improvements with cheap labor, but how long will the real estate market continue to support current prices.
property speculators will always count on tenants arriving from somewhere but unless employers pay citizens real wages, well, just look out the window. welcome to los angeles. 2007.
click here to see latest weapon developed by US govt. to control border, and crowds

January 25, 2007 4:53 PM  

Blogger Walter Moore said:

Patrick, you actually CAN get the article as a reprint, but, alas, it costs $30.

And don't fear a world without rent control. On the contrary, you would have far MORE options than you do now. Right now, around 550,000 units are totally off limits to you, because the tenants in those rent-controlled units will never leave.

If we repeal rent control, those people no longer have any particular incentive to stay or go. Rather, everyone -- all renters -- will base their decisions on things like how far away their jobs are, how many bedrooms they need or want, and, of course, their budget.

Owners of the giant new units, moreover, will have to lower their rents, because some of the people living there will re-locate to previously rent-controlled units.

As for "forcing" renters from "their homes," let me remind you: renting is not the same as owning. If you rent a place, you do not own it. It is not "yours." Nor are the many headaches that come with ownership.

Price controls distort the allocation of resources. We should eliminate price controls on rental housing if we want to fight gridlock, fight pollution, reduce dependence on foreign oil, and reduce the average apartment rent in our city.

January 25, 2007 5:09 PM  

Blogger Patrick Meighan said:

"As for "forcing" renters from "their homes," let me remind you: renting is not the same as owning. If you rent a place, you do not own it. It is not "yours." Nor are the many headaches that come with ownership."

I may not own it, but I did enter a contract with the person who did. When that contract was signed, we were each fully aware of the responsibilities and protections that came with the arrangement... and one of those protections was the law that prevents the owner from jacking up my rent at the owner's sole whim. The owner knew that the law was as such before renting to me, and he voluntarily entered into the contract regardless. That being the case, I'm not super jazzed about your attempt to change the rules of our contract retroactively... a rule change that'd force me, my wife and my infant daughter out of our home (yes, Walter, we may not own the house, but it is *our home*... unless you're somehow declaring that the several million renters in the City of Los Angeles are all, in fact, homeless).

Sure gridlock sucks, but mass evictions suck worse. So yeah, go ahead and put your rent control revocation on the ballot, Walter. See how many votes it loses by.

Patrick Meighan
Los Angeles Greens

January 25, 2007 8:42 PM  

Blogger Walter Moore said:

Oh, I'm sure it would not pass. It's called "tyranny of the majority." It's why this town will continue to disintegrate into Tiajuana, and why the Soviet Union's housing got worse and worse. Congratulations on using law to take someone else's property. Enjoy it until "your home" crumbles around you.

January 25, 2007 9:37 PM  

Anonymous Anonymous said:

^
good debate

January 26, 2007 1:20 PM  

Blogger Givemeabreak said:

I am renting for the first time in 15 years. Without realizing it I rented a unit that was way over-priced for the neighborhood, (I sold a house and was living in a hotel and needed to find a place fast). I didn't even know the property was under rent control. I found that out later when there was a mice infestation, and the landlord told me she didn't have to give me any screens for my windows.

Well, after some research, I found out that the landlord works for the city, in the department of real-estate development, yes, where the city buys up land in "poor" areas and "turns it around" except, "Whoops" the poor don't really get to see it because after they "turn it around" they realized "Whoops, we spent too much money making this nice, now we have to pay the loan back and the only way to do that.... oh, I'm sorry, is to rent it out at a high price, our bad. Next".

This landlord harges me $1850 for a very small, 2 bedroom unit in an area that they call, "hip and trendy" but realistically, they just call it that, unless graffiti, garbage and abandoned shopping carts on the street are considered hip and trendy...

Let me say, getting any decent repair from them is like pulling teeth. In fact, the only reason I got screens is because I called the city. I'm sorry, was I living in this place for eons and not paying market share rent? No, I was living here not even a year paying ABOVE market share rent for this area based on comparables that I found out about later.

Upon looking for other places to live, I have found that landlords in Glendale, where there is no rent control, will charge the highest they can get, but LIMIT what you get--I don't see much "healthy competition" going on. It's either $1,400 for a super-dump, $1,800 for a decent unit with some problems (no parking, no storage, bad location), or $2,600+++ for a small unit with amenities...

I do not believe lifting the rent control will stop gridlock. In fact, these new buildings are being made for roommates. Go to NoHo, go to any of these new "Luxury" apartment buildings with the pools and the gyms, and you will see that they are specifically made for roommate situations. Which means... MORE PEOPLE, not less.

Los Angeles screwed up with the transportation system a long-long time ago, to build more buildings and inviting more people in without addressing that adequatly was a big mistake.

But hey, Isn't Los Angeles the next New York?

Looks like it to me.

Bye-Bye-the Los Angeles of my youth, hello commercialized, industrialized, greed-

One day, only the Rich will be able to live in Los Angeles...

and when the earthquake comes... I hope they look good in their Gucci while it's happening!

I'm outta here!

May 20, 2008 8:03 PM  

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