At the grocery store the other day I saw a poster informing the public about a meeting taking place this coming Saturday. It is a meeting designed to organize a committee to get rent control laws passed in Southern Oregon. I plan on going and hopefully informing people about the effects of rent control on a community. I don't know what arguments I will go up against, but here are some of the ones I could come up with. I want to be as prepared as possible to combat this thing from every angle so please post your best arguments for rent control and a reasonable refutation.
P = Proponent
M = Me
P: Aren't you tired of paying higher and higher rent every year? (actually on the poster) Wouldn't it be great to keep rental rates affordable? We just need to pass a local law restricting the amount rents can be raised every year.
M: If rents are forced down, won't there be less incentive for new affordable housing to be built? This plan seems like it would reward current renters at the expense of future ones. There would be less options for someone if they want to move from one side of town to the other. Do we really want to prevent our kids from being able to find an available home when it's time for them to move out of the house? Or do we force them to move to another town to find rental space?
P: Currently landlords are getting rich off our hard work. We have to live somewhere and the landlords use this fact to force us to pay whatever they demand. If we don't pay it then we become homeless! This new bill will just level the playing field so that they don't extort us with unreasonably high rental rates. Landlords will still be able to make profits, just not unreasonable profits.
M: Landlords are not currently making a killing on real estate. Most of the investors who have purchased homes in our valley over the past decade have overpaid for their property. This means that they can barely afford mortgage payments as it is. A mortgage amount of $50,000 at 7% with a 30 year amortization comes to a monthly payment of about $350. The average rental rate of a 3 bed/2 bath apartment or home is about $750 to $1,200 depending on the part of town. With per unit costs for apartments at about $80 thousand or single family homes at about $150 to $200 thousand, this means the mortgage payment in many cases is larger than the rent being collected. On top of a mortgage payment, the property owner is responsible for taxes and insurance. On top of those costs, the property owner is responsible for necessary repairs. Rent control will mean homes aren't getting repaired as often as they should.
I am not sure how coherent this is or effective it might be. I look forward to seeing your posts. Please help me fight for what's right! Private property rights.
http://www.youtube.com/watch?v=x9PUJZYzw3k
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Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Show them basic economics. If a price ceiling occurs, it will lead to a situation where some people cannot get the good in question.
Carter:P: Aren't you tired of paying higher and higher rent every year? (actually on the poster) Wouldn't it be great to keep rental rates affordable? We just need to pass a local law restricting the amount rents can be raised every year.
While paying less rent may be a sweet deal, using price controls to reduce the price will cause landlords to stop selling their renting services. This means that some people cannot rent, even if they want to for this high price.
Carter:P: Currently landlords are getting rich off our hard work. We have to live somewhere and the landlords use this fact to force us to pay whatever they demand. If we don't pay it then we become homeless! This new bill will just level the playing field so that they don't extort us with unreasonably high rental rates. Landlords will still be able to make profits, just not unreasonable profits.
If landlords collectively forced the price of renting up in the town, then this would create a business opportunity. Landlords would enter the market and lower their prices to compete. The original landlords would have to lower their prices or go out of business because they can't compete.
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NirgrahamUK, thanks for the link to the video. I have heard that lecture quite a while ago. I don't need to be convinced that rent control is bad. However, I don't think I will be allowed to log everyone in the meeting onto the internet to show them a Youtube video.
Thanks Eliotn, I like the logic. Here are the arguments I imagine coming from opponents:
What are landlords going to do with their property if not rent it? The logic is that owners of rental units would rather receive no payment rather than a lower payment than they want? i.e. The landlord wants $800/month but can only get $700/month with the new law. And this landlord chooses $0/month rather than the $700/month? I don't think so.
What if the new landlords that move into town want to charge the going rental rate which is too high for us renters to pay?
Please send more pro and con arguments. I need to load my arsenal. I only have a week to prepare. Thanks folks, much appreciated.
Carter:What are landlords going to do with their property if not rent it?
sell it, or run businesses out of it.
Carter:Aren't you tired of paying higher and higher rent every year? (actually on the poster) Wouldn't it be great to keep rental rates affordable? We just need to pass a local law restricting the amount rents can be raised every year.
My dad rents industrial bays and indexes his prices to inflation (IIRC, some variant of the PPI). But since you're probably talking in terms of consumer housing, I'd look up the CPI data for rent costs (http://www.bls.gov/cpi/) and then the rise in cost of rental prices in your area and index those to the CPI. I'd imagine prices will remain fairly steady. Then argue that a price cieling will yield landlords a net loss in purchasing power, and that such a ceiling will most likely force them to sell off their properties at a reduced value (since they can no longer be used for renting) not to mention reduce all property values in the area.
Landlords wouldn't conciously set their prices at something unaffordable because they need tenants to make a living.
Walter Block, in "Defending the Undefendable" has a chapter on slum lords.
Robert Murphy, in "The Politically Incorrect Guide to Capitalism" has a chapter on rent control.
I think both would serve you well.
Price controls, generally meant to provide increased access to a good, serve to put marginal producers out of business. This actually lowers the availability of the good and defeats the (generally) stated purpose of the price control. Price caps on rent will have several effects.
Rental property owners are businessmen seeking profit. If they are not allowed to be sufficiently profitable (as they would determine on the free market) due to the cap on rental rates, they will reduce their expenditures on other items related to the rental property, such as maintenance. Ultimately, they may be forced to liquidate the property if they can not generate enough revenue to justify keeping it. The control of rent will also inhibit interest in the entry of new rental property into the market, as the profitablity of the venture will be reduced. This both limits the availability of rental properties (at any price) and inhibits the natural market mechanism that would seek to drive rents down (competition).
Having a tenant also means increased expenses. If my tenants are causing a capital loss due to damage, payment in arrears, etc., I would certainly desire to remove them rather than to continue to have them in my property. I had this exact situation in my house when I sought to rent it out - if I couldn't get a market based rate is wasn't worth the risk of damage to me. I would rather idle it or have a trusted friend live there than accept a mediocre rent payment.
If the community is serious about reducing the price of rental properties, they should consider reducing property taxes, reducing zoning restrictions, and otherwise seeking the enhancement of the profitability of the rental industry. Then selfish self interest of the market participants will get them exactly what they want - which is more housing. There would most likely also be a range of available prices, from a cheap shanty to a deluxe condo. But the simple truth is that forcing someone to provide the deluxe condo at the shanty price will cripple and eventually destroy the industry.
One hundred trillion Zimbabwe dollar note
Thanks Jason,
I was hoping to hear more arguments in favor of rent control so I can play out how to argue back. This will most likely be a debate style format since it is not entirely formal. However, I do appreciate the info. The last paragraph in particular is very helpful as it gives a way to present a plan for encouraging housing growth properly.
Banned,
I don't plan on receiving a platform to pull out charts and teach people what those indexes are, what they mean, and how they're relevant. I am trying to focus on very simple logical arguments. Again, the toughest thing for me is knowing what kind of arguments proponents will come up with. I am pretty versed in Austrian Economics, Positivism, Monetarism, etc. However, I don't plan to debate economists. I will be talking with average people who have no knowledge of economics besides their obvious knowledge about their personal interests in low rent. Again thanks for the additional cons.
You could always try going for the jugular, and attacking their authority. Ask them what they think is the purpose of law. Ask them why winning a popularity contest gives them any right in determining how businesses should run their businesses. Do they have zoning laws? If so, why not ask them to get rid of the zoning laws, allowing more renters to pop up and lower prices?
At most, 5% of the population would need to stop complying to bring down the government.
Private Property rights is a good point to use. Remember this may get political. Be prepared to alter your tone and speech used. Keep it simple and easily understanding. Then if a if smart guy throws his vocab. around, use real economic facts. Property rights usually makes the opposition feel uneasy and recognizing their authoritarian demands. Or at least leaves them in that light, and unfavorable to others. Making you look like a saint compared to that scheming demon. (those who have been in a debate class or public speaking know what I mean)
Carter:I don't plan on receiving a platform to pull out charts and teach people what those indexes are, what they mean, and how they're relevant. I am trying to focus on very simple logical arguments. Again, the toughest thing for me is knowing what kind of arguments proponents will come up with. I am pretty versed in Austrian Economics, Positivism, Monetarism, etc. However, I don't plan to debate economists. I will be talking with average people who have no knowledge of economics besides their obvious knowledge about their personal interests in low rent. Again thanks for the additional cons.
Give them a thought exercise in price controls, from the entreprenuer's point of view. Suppose there was a price ceiling on laptops, for example, and it costs me about $400 dollars to produce one, and I sell it for $450. Lets say that a price ceiling was imposed by government, that would imprison me if I did not sell my laptops for $300 or less.
Why would I produce laptops and sell them to other people? My time would be better spent doing other things, rather than produce laptops, unless I want my money to be eaten.
Then show how this analogy is valid for rent control, landowners will end up refusing to sell it.
Beware of the critic who says, "Well, we can fix that with more government policy." Look at his/her proposed solution, another law, and show how that will cause more harm. I find that using an analogy, instead of economic theory, is the way to show people.
Justin D: Private Property rights is a good point to use. Remember this may get political. Be prepared to alter your tone and speech used. Keep it simple and easily understanding. Then if a if smart guy throws his vocab. around, use real economic facts. Property rights usually makes the opposition feel uneasy and recognizing their authoritarian demands. Or at least leaves them in that light, and unfavorable to others. Making you look like a saint compared to that scheming demon. (those who have been in a debate class or public speaking know what I mean)
I really like this.
when you use laws to set a price lower than the market price you introduce corruption. artificially surpressed prices creates artificially high demand. In the case of products, people will want to go resell those products elsewhere (see CFL lightbulbs being subsidized in California, people were selling them on ebay because the prices elsewhere were 4 times as much).
In the case of a rental property you're giving more power to the landlords. Since it is illegal for them to charge the market price one of several things will occur.
1. The landlord will get someone who is willing to pay the market price illegally under the table. such under the table payments circumvent taxes and are thus undesireable from the perspective of the town.
2. The landlord will make non-monetary demands on the tenants. "you're getting this place so cheap, I could replace you in an instant. strip." This actually happened in san francisco where it came to light that people were performing sexual favors for access to rent controlled units.
I can't think of anything else off the top of my head. But you're giving the landlord additional leverage over the tenant besides simple money.
You're giving the landlords extra-legal power.
Peoples eyes glaze over when you start using words like supply and demand and price. Those who argue for rent control are ends justify the means types. They don't believe in property rights for rich people. They believe that money is the root of all evil. What, in my opinion, you must do is threaten them.
"If people can't afford their rent now, it means there aren't enough apartments to go around - if there were vacancies, or people were living together, a landlord would make it cheaper until he fills the vacancy. But if people can't afford their rent now, and you introduce rent control, then only one type of landlord will come into the market: Slum lords. Whether you like it or not, housing is a business. The landlord will not work for free, so he'll either stop maintaining the place, or sell the place - to a slum lord. When you arrest the absentee slumlord, the property is likely auctioned off. Perhaps the government will run the place, but it will do so at a deficit. Finally, you will need higher taxes to support your mandated price housing, but as you know, the wealthy can afford to move. You'll have less tax paying citizens in the long run."
Through rent control, you determine by force the hourly wage of the landlord. Just like you want time and a half for overtime because otherwise you'd rather watch the game, they'll withold overtime, they'll work for you and do maintenance at rock bottom standards - barely legal. So by what right do we introduce rent control, and where? Are we saying each person has the right to housing alone and in the neighborhood of his or her choice? And this right supercedes the right of the owner to set his own price?
Something like that.. use Joe Regular words.. not fancy economical sounding stuff.
Might be interesting to search for some kind of true confessions of a landlord or slumlord.. The techniques they use brought to light may be convincing.
Good luck.
Carter:I don't plan on receiving a platform to pull out charts and teach people what those indexes are, what they mean, and how they're relevant.
They're relevent insofar as it is common for property owners to index their rent prices to them. I suspect many members in the group will think that their rent is being raised arbitrarily because their landloards are greedy, but I would have a hard time believing that they've never heard of a price index.
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