Nothing but Palaces 9

Why build rental housing when you can't truly own it?

A defining historical characteristic of Americanism has always been great respect for private property.  From our earliest days, property rights were thought to be as important as life and liberty.  Indeed, James Madison, the Father of the Constitution, flatly said so:

It is sufficiently obvious, that persons and property are the two great subjects on which Governments are to act; and that the rights of persons, and the rights of property, are the objects, for the protection of which Government was instituted. These rights cannot well be separated. The personal right to acquire property, which is a natural right, gives to property, when acquired, a right to protection, as a social right.

- James Madison, Address at the Virginia Convention

It should come as no surprise, therefore, that protecting property from unlawful seizure is mentioned in the Bill of Rights.

The Due Process clause in the Founder's original Fifth Amendment reads:

No person shall ... be deprived of life, liberty, or property, without due process of law.

While nearly the same clause in the Fourteenth Amendment, added a century later, says:

...nor shall any State deprive any person of life, liberty, or property, without due process of law.

Over the years, activist judges and politicians have caused an owner's rights to use their own property to decline, but even today it survives in some places. In Texas, for example, you have every right to defend your own property with deadly force, and people do.  You can even so defend your neighbor's private property, if he's asked you to keep an eye on it.

Alas, not every state feels nearly so strongly about the sanctity of private property.  We've seen in this series that in most of our Democrat-abused major cities, the government uses its power to steal from private property owners with the temerity to want to rent dwelling space to others.  Rent control laws regularly prevent landlords from deciding on the appropriate value of their property for themselves, and give tenants government-enforced "rights" over property that is not theirs.

In a way, the logical consequences of rent control provide an illustration of what's happened to so many of our laws and freedoms all across the fruited plan: a vote-attracting bad idea brings about knock-on results, step by step, that make a mockery of fairness, common sense, justice, and right.

What's worse, the ill effects brought on by the initial misguided government action are used as a reason for yet more government action. This generally makes matters worse instead of undoing the harm, continuing the vicious cycle of reduced freedom while giving us yet another illustration of the folly of straying too far from our Founders' original intent.

Among the many deep and profound legal issues we don't comprehend in our present political scene is why rent control isn't a "taking" of the landlord's property. A taking would be forbidden by the Constitution, and rent control surely would have been seen as such by the Founders - which no doubt is why liberal judges have decided that rent control is nothing of the sort!

In addition to the due process clause, the Fifth Amendment also includes the Takings Clause, which states that "private property [shall not] be taken for public use, without just compensation."  While the Fifth Amendment as written only applied to actions by the federal government, the Fourteenth Amendment extends the Takings Clause to forbid actions by state and local governments as well - not that it seems to make much difference anymore.

We aren't the only ones who wonder.  The Wall Street Journal reports that a group of New York landlords have gone to court to assert that recent changes in the New York rent control laws have gone too far:

The complaint seeks to demonstrate that the rent laws are "arbitrary and irrational" and violate constitutional protections against government actions without due process of law. It argues, for example, that the law doesn't promote more housing, and provides strong protections to affluent renters.

It also argues that through rent regulation, the state and city government are violating constitutional protections against the taking of private property without just compensation.

Landlords draw comfort from a Federal appeals court ruling in 2015 that found that rent regulation was a “public assistance benefit” for tenants.  Taking from landlords to benefit tenants would appear to be a taking.  Landlords are spending money on a lawsuit to find out, and tenant advocacy groups are raising money to hire lawyers to argue that it isn't.  We shall see how it shakes out, but given that it's New York, we don't hold out much hope for Constitutional rights that have long been forgotten there.

The Road to... well, you know

And it did take a while to get where we are today, which just underscores how long the road back would be.  Consider what's necessary to make rent-control laws work.  It seems easy to pass a two-liner law saying, "Thou shalt not raise the rent by more than 3% per year."

Experience shows that rent control is not nearly that simple.  Over the years, New York law has had to cover many tendentious issues.  What if one tenant leaves and the landlord does a major overhaul to upgrade the property for the next tenant?  If you can't raise the rent after upgrading, nobody will ever do upgrades, or even basic maintenance.  Yes, the government can attempt to enforce minimum standards of habitability and fine landlords who don't comply, but if tenants are allowed to pay rents that don't cover the costs of maintenance, buildings fall apart sooner or later no matter what the rules say.

Then you have all manner of technicalities.  What if the tenant leaves and the dwelling sits empty for awhile?  Do you have to go back and look at whatever the last rent was, and do the math as if it had been occupied?  How far back do you have to go?

Should the type of tenancy make a difference?  If utilities are included, as they are in many city apartments, it makes sense to charge more for a family than for a single person.  What about pets?

The first round of rent control avoided many of these problems by stating simply the max you could raise the rate on an existing tenant.  Once someone moved in, they were protected from rent increases; but if they moved out, you could reset the rent to whatever you pleased for the next guy.

It shouldn't take a Harvard degree to figure out what happened next: landlords who wanted to raise the rent simply refused to renew the lease.  They forced the old tenant out, let the apartment sit empty for a while, raised the rent, and started over.

Tenants thus evicted screamed to their elected representatives for help, and the politicians obliged: Most rent-controlled jurisdictions quickly developed rules requiring an automatic right to renew the lease indefinitely as long as the legally-allowed rent increases are paid.

What happened after that?  We now see situations where the landlord's best interest is not to have a tenant because the tenant enjoys a "right" to an unrealistically low rent which doesn't cover the apartment's share of utilities.  In effect, we have tenants who have the "right" to sit tight in property that rightfully belongs to someone else for as long as they jolly well please - in some cases, even after death do them part.

We at Scragged do not defend violence or thuggery.  However, it should come as no surprise that exasperated landlords have been known to hire bully-boys to get rid of "tenants" who are, in reality, government-backed thieves and freeloaders.  Being government-backed, of course, the tenants tend to eventually win in these sorts of situations, and the landlords go to jail.

Which is all very well for tenants, but if a landlord is expected to invest millions of dollars into property that he doesn't really own or control in any real sense, why would he bother?  As we've seen throughout this series, this government malfeasance and legalized theft are a strong deterrent to anyone who might otherwise feel inclined to provide housing for his fellowman.

Even after a century of experience, neither our politicians nor our voters at large ever learn.  New York just passed a law that, in effect, allows people to stay rent-free in apartments for a year:

They’re expanding the housing court’s authority to postpone an eviction for a year — usually because the tenant isn’t paying rent — “if the tenant cannot find a similar suitable dwelling in the same neighborhood.”

When do people usually stop paying the rent?  When they have lost their job and have no money.  What are the odds that an unemployed person who is already behind on rent is going to be able to "find a similar suitable dwelling in the same neighborhood"?  Zilch.

When a landlord challenged the New York rent law in 2010, a federal appeals court found that landlords retained some rights over the apartment which was why rent control wasn't a "complete taking."  In the case of the government forcing a landlord to retain a non-paying tenant, we'd argue that the landlord has no remaining rights at all, but then again, we aren't legal scholars.

So, once again, the Powers That Be, in their infinite cupidity, have added yet another incentive to potential landlords to only build or rent to plutocrats who'll never be short of cash.  That's important not just for paying the rent, but for paying the shrink - it's illegal to refuse a tenant who is mentally ill, even if he's been hospitalized for lunacy.  Even being an arsonist is not necessarily legal grounds for eviction!  When it is, actually reaching the point of legal eviction by the sheriff can take months.

Of course, getting the bad tenant evicted is no protection against their coming back with a match for revenge.  Yes, once the fire is set, the authorities will probably intervene and may even arrest the firebug, but in the meantime, your investment is reduced to ashes.  Again, such behavior is relatively rare among the well-heeled, and where it does occur, at least there's some point in suing.

The only ways confiscatory laws like these can continue to exist indefinitely, is if the landlord is someone who doesn't care about the money.  Fortunately for poor criminals, there is such a landlord: the government, armed with unlimited quantities of forcibly-extracted Your Tax Dollars.  The New York City Housing Authority is famous for swallowing billions of dollars of tax money while falling billions of dollars behind in essential maintenance - but there's never any risk either of the Authority going bankrupt, any of its minions being fired, or any tenants being evicted regardless of how much money they earn.

Poverty Has Reasons

In the years leading up to the Great Depression, most Americans understood property rentals to be mostly a matter of the right to freedom of contract.  Landlords could offer a lease on whatever terms they preferred, and potential renters could choose to accept it or not.  Once signed, the renter had whatever rights the lease gave him, no more and no less.  If the landlord failed to provide something specified in the lease, like heat or water, he could be sued for breach of contract.  Similarly, if the renter failed to pay on time, the lease provided for cancellation and eviction.

New York City in particular had a large accumulation of 19th-century housing stock built before zoning or safety standards.  Many of these old tenements were firetraps, and people died trapped in fires every week.  These residences were, however, cheap, and they were both safer and more comfortable than the mean streets.

With the coming of the Depression, many of the previously poor became ever more so and could no longer afford even those low rents.  They were evicted, but nobody took their place. The value of these ancient, rotting properties plummeted.

Enter reformist mayor Fiorello LaGuardia, armed with hundreds of millions of Federal recovery dollars.  He worked mightily to purchase and bulldoze the wrecks, replacing them with safe, modern, clean, well-designed, even beautiful high-rise residences.

Today, we look at the results of slum clearances in cities nationwide and see instead the vertical slums that started being demolished in the 1970s in a process that continues today.  At the time, though, LaGuardia's efforts were viewed as the wave of the future.  They were even successful: visitors in the late 1930s and early 1940s saw decent, clean, responsible working-class residents, worthily occupying their taxpayer-funded domiciles.

The reason was that LaGuardia's housing agency exercised common sense unheard-of (if not illegal) today: They demanded that would-be renters have savings in a bank account, a steady job, be loyally married, and be members of various stability-inducing civic organizations.  These markers have long been hallmarks of generally responsible people who will behave well if given the opportunity to do so.

However, these sorts of tenants, being responsible, continued to move up in the world: after the war, they relocated to the new Levittown suburbs where they could actually own their own home instead of renting.  In their place came the next tier down of people slightly less responsible and disciplined.  Then, in due time, those which could moved up and out, to be replaced by lower classes, and so on down the line until the slums were back - this time subsidized indefinitely, that's right, by Your Tax Dollars.

Or so it seemed: In the mid-70s, President Ford refused to bail out a bankrupt New York City.  It took nearly three decades of hard work by Republican mayors for the City to be able to afford another socialist Democrat in City Hall, who's working overtime to put the place right back where it was.

Nothing Motivates Like Hunger

The premise which drives most modern housing regulation is the idea that everyone deserves a safe, comfortable place to live.  Nobody much questions this, because it seems so self-evidently humane and reasonable.

But is it?  Do crack fiends and pyromaniacs deserve a place to live while they endanger the lives of everyone else there?  Do thieves and rapists have a right to be accepted into an apartment building where other people with belongings and children live?  How about mentally ill people who randomly defecate and urinate - do they have a right to be housed with normal people who've done nothing to deserve cholera or hepatitis?

When LaGuardia built his affordable housing, he didn't need to worry about the insane or drug addicts demanding admission.  They already had a place provided for them: the state mental hospital and penitentiary, respectively.

But today, we've got rid of most of our insane asylums and made it almost impossible to commit people to them.  In most deep-blue cities, drug abuse is all but legalized no matter how crazed the addicts become.  Meanwhile, our betters move heaven and earth to import as many more people that can't provide for themselves as they possibly can.

Yes, many of these people need help, but for many of them, a home is not the help they need, or at least, a home is not sufficient.  What they need is medical help - and for some, it's a prison cell.  For some, it's a seat on a deportation flight to wherever they properly belong.  And unfortunately, in this imperfect world, there are some people that, no matter what we do, we just aren't going to be able to help in any meaningful way, so our primary concern ought to be helping everyone else by simply removing the dangerous from the public street and placing them where they cannot harm others - even, in some cases, six feet under.

Therefore - why does our government attempt to do the impossible, at our expense, by championing the "freedom" of the insane to befoul once-pleasant public places and destroy once-profitable real estate?  Why must we tolerate these futile, dishonest, pointless, and wasteful interference in a nation and economy that once epitomized freedom and liberty?

And why do we continue to do so, with only the occasional whimper of protest?

Obviously things are not yet bad enough for change to be demanded with force by an infuriated electorate.  Our Founders would be disgusted and ashamed with what their descendants tolerate and would contemptuously sputter that, in a republican democracy, we're only getting nothing less than we deserve, because we put up with it.

The people of California would rather step around piles of feces, dodge rats, and evade violent homeless psychopaths every day than support Donald Trump.  They even rail at him for urging the EPA to investigate the feces and needles flowing from their streets into the Pacific Ocean - presumably they'd prefer to just keep the filth on the streets so Flipper can swim freely.

The people of New York City are willing to pay outlandish rents that are, all agree, Too Damn High, in exchange for the privilege of living in the supposed world's greatest city.

Anyone who doesn't like it just moves to Texas, where things work rather differently - outside of the equally-blue cities, of course.

And only when one of those factors changes, and the situation becomes intolerably worse for most people, will there be any possibility of change.  Unfortunately, when that moment comes, there will be a Democrat holding out government provision of all our needs as the solution, at the expense of Those Evil Rich.  That choice will be offered in 2020, in 2024, and most likely, in every presidential election thereafter, until it's accepted.

After that, there won't be a choice anymore.  Choose your home carefully, while you still can!

Petrarch is a contributing editor for Scragged.  Read other articles by Petrarch or other articles on Law.
Reader Comments

Texas may be better, but not a good solution by a long shot. Real estate prices are out the roof and the government has it's nose stuck into EVERYTHING to do with home ownership. As an example of the ridiculous: A home recently listed in a small town not too far outside the Dallas-Fort Worth metroplex- 750 square feet, wood frame, peeling siding, sagging composition roof, unknown built date, small city lot, glaring neglect and listed for $75,000.00. May not seem high to someone used to flying in the rarefied atmosphere of a New York, or California city, but common people are being priced out of the market for owning a home or renting even an apartment. Families will increasingly be joining the drug addicts and mentally ill in the streets if something doesn't give way soon.

October 17, 2019 1:02 PM

You're right about building high price housing, but there are risks in that marke too.

reports that lots of high-price condos were built in Manhattan in the hope the foreign wealthy woudl snap them up. Lots of them are unsold, however.

The Atlantic is wroth with developers wanting to build for the wealthy, but as you say, city regs make it nearly impossible to build for the middle class.

They said:

In Manhattan, the homeless shelters are full, and the luxury skyscrapers are vacant.

Such is the tale of two cities within America’s largest metro. Even as 80,000 people sleep in New York City’s shelters or on its streets, Manhattan residents have watched skinny condominium skyscrapers rise across the island. These colossal stalagmites initially transformed not only the city’s skyline but also the real-estate market for new homes. From 2011 to 2019, the average price of a newly listed condo in New York soared from $1.15 million to $3.77 million.

But the bust is upon us. Today, nearly half of the Manhattan luxury-condo units that have come onto the market in the past five years are still unsold, according to The New York Times.

What happened? While real estate might seem like the world’s most local industry, these luxury condos weren’t exclusively built for locals. They were also made for foreigners with tens of millions of dollars to spare. Developers bet huge on foreign plutocrats—Russian oligarchs, Chinese moguls, Saudi royalty—looking to buy second (or seventh) homes.

But the Chinese economy slowed, while declining oil prices dampened the demand for pieds-à-terre among Russian and Middle Eastern zillionaires. It didn’t help that the Treasury Department cracked down on attempts to launder money through fancy real estate. Despite pressure from nervous lenders, developers have been reluctant to slash prices too suddenly or dramatically, lest the market suddenly clear and they leave millions on the table.

The confluence of cosmopolitan capital and terrible timing has done the impossible: It’s created a vacancy problem in a city where thousands of people are desperate to find places to live.

From any rational perspective, what New York needs isn’t glistening three-bedroom units, but more simple one- and two-bedroom apartments for New York’s many singles, roommates, and small families. Mayor Bill De Blasio made affordable housing a centerpiece of his administration. But progress here has been stalled by onerous zoning regulations, limited federal subsidies, construction delays, and blocked pro-tenant bills.

In the past decade, New York City real-estate prices have gone from merely obscene to downright macabre. From 2010 to 2019, the average sale price of homes doubled in many Brooklyn neighborhoods, including Prospect Heights and Williamsburg, according to the Times. Buyers there could consider themselves lucky: In Cobble Hill, the typical sales price tripled to $2.5 million in nine years.

This is not normal. And for middle-class families, particularly for the immigrants who give New York City so much of its dynamism, it has made living in Manhattan or gentrified Brooklyn practically impossible. No wonder, then, that the New York City area is losing about 300 residents every day.

January 17, 2020 11:42 AM
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