Yet another bad regulatory innovation

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There’s a proposal up for discussion this week at the city council’s Housing Committee that warrants some discussion.

In a nutshell, the city is considering requiring every landlord of a rent stabilized unit to report the rent she is charging to the city every year.

Why? Because apparently there are hundreds of people being overcharged.

This is a really dumb idea, and one typical of government, because it fails to accurately weigh the harm the regulation seeks to prevent with the unintended consequences of the intervention.

To whit: If you are being over-charged for rent, you have remedies. You can go to the housing department and get your money back plus have your landlord fined. If he tries to evict you for non-payment, you can raise your rent history as a defense against the eviction and you will succeed 100% of the time.

Surely, there are people every year who, through lack of information or initiative, fail to resist illegal increases. But, my guess is that the number is actually quite small. And we can probably get a pretty good sense by just looking at how many complaints there are each year re illegal increases… even if you think the problem is under-reported, surely it’s not by an order of magnitude.

Now consider the downside of the proposal: We deal with the housing department every day and I can tell you that it is not, shall we say, running at peak efficiency. For example, every time we take over management of a building, we file paperwork with LAHD letting it know where to send paperwork. ~50% of the time, the paperwork is sent elsewhere.

Another example: If you have a notice to comply (even an illegitimate one), and you don’t comply, it takes the city 8-10 weeks to get you in front of a hearing officer… who will likely then take another 2-3 weeks pondering the case before responding (never mind that the statute says 10 days).

Now, this overburdened department is going to be responsible for querying every landlord in the city every year to get rents for every unit, then determining if a rent increase was legal (by comparing the names on the leases, checking whether gas is included in the rent because that allows an extra 1%  increase, etc.)? And, then, when the department thinks it has found an over-charge, it’s going to review the lease, issue a fair determination, and then enforce it?

What could possibly go wrong?

If you want to reduce over-charging, just reduce the expected value associated with flouting the law. For example:

  1. Annually mail tenants in rent stabilized units a letter explaining the 3% limit and inviting them to complain if they think they’re being over-charged;
  2. Dramatically increase the fines for over-charging

Boom. Much better enforcement at a MUCH lower cost than a rent registry.

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