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Jewish World Review July 12, 1999 /28 Tamuz, 5759

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Econophone

Cutting edge California retreats to old, failed ideas

http://www.jewishworldreview.com --
IT WAS SHOCKING FRONT-PAGE NEWS in San Francisco when the courts ruled recently that landlords had a right to stop renting property they owned, despite local rent-control laws to the contrary. Needless to say, there are rumblings of an appeal.

One San Francisco supervisor lamented a "shortage of even semi- affordable housing" in the city, which is "a real crisis." There was no indication of any awareness that rent-control laws have caused housing shortages wherever they have been imposed, whether in Hong Kong or Paris, New York or Melbourne. Sometimes, rent-control advocates claim that there was already a housing shortage and that rent-control laws were enacted to keep landlords from taking advantage of the situation by "gouging" tenants. But history says otherwise.

New York City had a high vacancy rate when rent-control laws were first passed, early in World War II. A housing shortage then developed and became a lasting part of the New York way of life.

Housing shortages, like other shortages, are too often thought of as a physically inadequate amount, either absolutely or relative to the population. It is neither. It is an inability to obtain the desired amount at the current price.

Ordinarily, in a free market, such a situation leads to a rise in price, which simultaenously reduces the amount demanded and encourages an increase in the amount supplied, until the two come into balance. Price controls prevent that rise in price from changing the behavior of suppliers and demanders, so the shortage persists.

Rent control in Sweden was a classic example of a price-induced shortage without any greater physical scarcity. After rent-control laws were enacted during World War II, Sweden began having housing shortages -- and began a massive program of government-sponsored building of housing. At one time, Sweden had the most rapidly growing housing stock in the world -- and yet the waiting lists for applicants for housing grew longer.

There was more housing per person but, at the artificially low price of housing, rising incomes allowed increasing numbers of people to afford ever- increasing amounts of housing space. For example, many young adults who would normally be living with their parents rented their own rent-controlled apartments instead.

In short, the amount of housing space demanded at artificially low prices vastly exceeded even the rapidly increasing housing supply. The fact that there was plenty of housing in Sweden was dramatically revealed when the rent- control laws were repealed. Immediately there was a housing surplus.

As rents rose to levels determined by supply and demand, private builders found it profitable to start constructing housing. Since privately constructed housing was built to suit the tastes of tenants and homeowners, rather than government planners, many people moved out of the government- built housing, leaving vast numbers of vacancies.

Like other laws keeping prices below the level produced by supply and demand, rent control leads not only to a shortage of the product but also to a deterioration in its quality. This has happened not only with housing but also with cable television service, medical care and other goods and services.

Yet it always seems to come as a big surprise to politicians, journalists and others for whom indignation is a way of life.

Across the Bay from San Francisco, Oakland officials are waxing indignant at landlords for neglecting maintenance on rent-controlled apartments. Inadequate maintenance of course speeds the deterioration of the existing housing stock, while rent control discourages building replacements. The net result can be a declining housing stock and higher rents in the long run. But who in politics worries about the long run?

California prides itself on being on the cutting edge of new advances. Unfortunately, many of these new advances are in fact retreats to old ideas that have failed repeatedly -- but whose failures are unknown to those who are so modern that they disdain to study history. Two thousand years ago, when Roman emperor Diocletian issued a sweeping edict controlling the prices of innumerable goods, "people brought provisions no more to markets," as a contemporary put it.

What is happening in California's rent-controlled housing is as predictable as the swallows returning to Capistrano -- but not nearly as attractive.


Up

07/07/99: A quagmire and a vision
07/02/99: The Fourth of July
06/29/99: "Urban sprawl" and liberal gall
06/18/99: A famous victory
06/14/99: A victory in Chicago
06/10/99: Mass shootings and mass hysteria
06/08/99: The other side of affirmative action
06/03/99: Childish labor laws
06/01/99: Demonizing for dollars
05/27/99: The real public service
05/24/99: Income, taxes and demagoguery
05/18/99: Random thoughts
05/14/99: Aborted knowledge
05/10/99: The new "fairness"
05/04/99: Holding parents responsible
05/03/99: Exit strategies
04/28/99: Tragedy and farce
04/26/99: Guilt and cop-outs
04/21/99: Choosing a college
04/16/99: When success fails
04/13/99: A photo-op foreign policy
04/09/99: Russia and the Serbs
04/06/99: Random thoughts
03/31/99: Irresponsible "experts"
03/29/99: Another Doleful prospect?
03/23/99: Random thoughts
03/22/99: Loving enemies
03/19/99: Naming names
03/15/99: Undermining the military
03/10/99: Joe DiMaggio -- icon of an era
03/02/99: Facts versus dogma on guns
03/01/99: Losing the cultural wars
02/22/99: "Saving" social security
02/18/99: Too many Ph.Ds?
02/8/99: A national disaster
02/8/99: Economic fallacies in the media: Part II
02/5/99: Why economists visit dentists so often
02/2/99: Warning: Good news
01/29/99: What is at stake?
01/26/99:Moral bankruptcy in the schools
01/22/99: Who is going to convict Santa Claus?
01/19/99: Seeing through the spin
01/13/99: A trial is a trial is a trial
01/11/99:Trials and tribulations
01/08/99: Rays of hope
01/04/99: Random thoughts
12/31/98: The President versus the presidency
12/29/98: The time is now!
12/23/98: World-class hypocrisy
12/21/98: The spreading corruption
12/17/98: Politically "contrite"
12/16/98: Polls and partisanship
12/14/98: The "non-profit" halo
12/11/98: Corruption and confusion
12/03/98: The health care "crisis"
11/30/98: Knowing what you are talking about
11/23/98: The impeachment legacy
11/23/98: Random thoughts
11/19/98: Tales out of bureaucracies
11/16/98: Scholarships based on scholarship
11/12/98: Forward march
11/09/98: Moral outrage
11/05/98: Will the Republicans ever learn?
11/02/98: A voter's duty
10/30/98: The poverty pimp's poem
10/29/98: Random thoughts on the election
10/27/98: "Partisan" and "unfair"
10/23/98: Ed-u-kai-tchun
10/21/98: McGwire, Maris and the Babe
10/20/98: MURDER IS MURDER!
10/16/98: Lightweight Boxer
10/14/98: A strange word
10/09/98: Impeachment standards
10/08/98: Alternatives to seriousness
10/07/98: Heredity, environment and talk
10/02/98: A much-needed guide
10/01/98: Starr's real crime
9/24/98: Costs and power
9/18/98: Are we sheep?
9/16/98: Judicial review
9/15/98: Hillary Rodham Crook?
9/14/98: Taking stock
9/11/98: Moment of truth
9/04/98: Random thoughts
8/31/98: The twilight of special prosecutors?
8/26/98: "Doing a good job"
8/24/98: America on trial?
8/19/98: Played for fools
8/17/98: A childish letter
8/11/98: Hiding behind a woman
8/07/98: A flying walrus in Washington?
8/03/98: "Affordability" strikes again
7/31/98: Random thoughts
7/27/98: Faith and mountains
7/24/98: Clinton in Wonderland
7/20/98: Where is black 'leadership' leading?
7/16/98: Do 'minorities' really have it that bad?
7/14/98: Race dialogue: same old stuff
7/10/98: Honest history
7/09/98: Dumb is dangerous
7/02/98: Gun-safety starts with
parental responsibility
6/30/98: When more is less
6/29/98: Are educators above the law?
6/26/98: Random Thoughts
6/24/98: An angry letter
6/22/98: Sixties sentimentalism
6/19/98:Dumbing down anti-trust
6/15/98: A changing of the guard?
6/11/98: Presidential privileges
6/8/98: Fast computers and slow antitrust
6/3/98: Can stalling backfire?
5/29/98: The insulation of the Left
5/25/98: Missing the point in the media
5/22/98: The lessons of Indonesia
5/20/98: Smart but silent
5/18/98: Israel, Clinton and character
5/14/98: Monica Lewinsky's choices
5/11/98: Random thoughts
5/7/98: Media obstruction of justice
5/4/98: Dangerous "safety"
5/1/98: Abolish Adolescence!
4/30/98: The naked truth
4/22/98: Playing fair and square
4/19/98: Bad teachers"
4/15/98: "Clinton in Africa "
4/13/98: "Bundling and unbundling "
4/9/98: "Rising or falling Starr "
4/6/98: "Was Clinton ‘vindicated'? "
3/26/98: "Diasters -- natural and political"
3/24/98: "A pattern of behavior"
3/22/98: Innocent explanations
3/19/98: Kathleen Willey and Anita Hill
3/17/98: Search and destroy
3/12/98: Media Circus versus Justice
3/6/98: Vindication
3/3/98: Cheap Shot Time
2/26/98: The Wrong Filter
2/24/98: Trial by Media
2/20/98: Dancing Around the Realities
2/19/98: A "Do Something" War?
2/12/98: Julian Simon, combatant in a 200-year war
2/6/98: A rush to rhetoric


©1999, Creators Syndicate