Here’s a column by George Will that tackles New York’s very odd rent control/stabilitzation laws—which have been in effect in one form or other for far longer than my lifetime, and which are being challenged in court:
The tenants in the Harmons’ three rent-controlled units [in their owner-occupied building] are paying an average 59 percent below market rates. The Harmons would like to reclaim one apartment for a grandchild, but because occupants of two of the units are over 62, the Harmons would have to find the displaced tenant a comparable apartment, at the same or lower rent, in the same neighborhood.
In addition to rent control’s random dispersal of benefits ”” remember, half of the Harmons’ apartments are uncontrolled ”” rent control is destructive because it discourages construction of new apartments and maintenance of existing ones.
Here are more details about the Harmon case.
I must confess that, even were I the beneficiary of these laws, I would have to (reluctantly) acknowledge their basic unfairness. Of course, life is unfair, but the law should strive to be as fair as possible, and rent control seems extraordinarily arbitrary, a sort of squatter’s rights to rental real estate at greatly reduced prices, and the subsidy of some renters at the expense of the others who happen to have come later.
The question is: what’s the remedy? Is the law really unconstitutional? Remember, it’s a state law at this point (see the details and the history here).
Will’s argument for its unconstitutionality is the Fifth Amendment:
Rent control is unconstitutional because it is an egregious and uncompensated physical occupation of property. The Constitution says that private property shall not “be taken for public use, without just compensation.”
A property right in a physical thing is a right to possess, use and dispose of this thing. Because government-compelled possession of property by a third party is an unambiguous taking, the Harmons’ property right has been nullified.
Of course, these apartments were not “taken.” If the government had commandeered the Harmons’ brownstone and forced them to convert it to apartments and take in tenants, that would be the case, but the Harmons (or their parents and/or grandparents) seem to have freely decided to take on these tenants (or their parents; rent-controlled apartments in NY can be inherited) before the current stabilization law went into effect. So it’s hard to see this as a government taking exactly, since the government did not take over the units entirely, and the Harmons still own the building and can sell it if they want.
The “public use” part of the law, though, would probably apply, because it has been liberally interpreted to mean practically anything that’s arguably in the public interest or to promote the public good, and rent control laws were originally intended to do that.
The best remedy would probably be repeal of the law by the NY state legislature, or for New York to opt out at the city level. Neither of those things is likely to happen, although legislators in the state have been slowly watering the rent control and rent stabilization laws down over the years. Repeal would have the virtue of being clear, but it wouldn’t answer the question of the constitutionality of such laws.
Why am I writing about all of this? Well, as an ex-New Yorker, I’ve long known about the city’s strange rental situation. But it’s part of a larger issue which has reared its ugly head lately: class warfare. The city’s rent-control laws were originally intended to protect the poor from the allegedly rapacious rich, and although they’ve long ceased to have any real relationship to that, if you read the comments on message boards about rent control issues, you’ll see that that’s what’s driving the discussion.
It’s a lot like the sort of thing we’ve become familiar with during the Obama administration, and in the Republican primary as well. At stake is the direction the country will take vis a vis capitalism and free markets. How unfettered should they be? Do people need protection from exploitation, and if so who, and from whom, and how can it best be accomplished without gumming up the whole works? Even those who advocate and support rent control laws must recognize the unintended consequences for the entire housing market, if they’re being honest.
Funny thing—I set about to write this post because I’m so tired of the primaries, and I wanted to tackle something completely different. But in the end it’s not so different after all, is it? It all comes down to how much the government should intervene to control our financial lives—and even our lives in general.