A lot of people think I hate rent control. Not true. My feelings are conflicted:
1. I think society ought to do something to help the poorest among us afford decent housing;
2. The way LA does rent control is suboptimal, because: (1) it’s not means tested, so many beneficiaries are not particularly poor and many poor people are not beneficiaries; and (2) the cost falls on property owners, rather than on society as a whole.
3. But, I am happy to operate in a rent control environment, because it creates arbitrage opportunities (assets which are low-priced because of the low rents), which are opportunities to make money.
That said, I have recently started to think more about rent control from the perspective of the tenants who benefit from it. And I’m not so sure it’s great for them, either.
Consider this: We very often come across small apartments which are jammed with people, typically an entire family including adult children. By any standard, the living conditions are not great for the occupants – people are sleeping in closets, five or more people are sharing one bathroom, belongings crammed everywhere, etc.
Why do the occupants choose to live like this? Obviously, it’s because they have a cheap apartment which they are unwilling/unable to give up. I understand and empathize… it’s incredibly expensive to live in LA and jobs are scarce / underpaid and cheap housing is basically a life-line keeping the family afloat.
But I think there is something else going on, too. Under rent control, you have something of value (the right to live in this particular space at some below market rent), but you can’t sell it (unless someone like me happens to come along) or borrow against it. In fact, the only way to keep this valuable thing is to stay in it. That means no moving to chase a better job, or to start a business, or to get more room for a family. It’s actually like owning a single-family home, with none of the compensating benefits of tax write-offs or appreciation.
Everyone’s life-path is shaped by the opportunities around them. You go through one door, new doors open and others shut. If you’re stuck in this one, increasingly unsuitable, apartment, you’re basically signing up for a life where you can’t/won’t go through the new doors that open. And I think that makes for a life with diminished possibility, which seems like a recipe for a life wasted.