Drawing the Crisis: Eddie Chak and Neena Holzman on the eviction epidemic

Price controls may have been put into effect due to undersupply, but they definitely contribute to undersupply as well. Any economics text book will describe the theory of why this happens. In SF, we can look at practical examples. In my hood, I know of:
1. An in-law unit kept vacant rather than deal with a lifetime tenant.
2. A unit converted into an Airbnb rather than deal with a lifetime tenant.
3. Two units in a 3 unit building being kept vacant for years until the last tenant moves out so the owner can eventually sell the building vacant. Due to rent control, a vacant building sells for much more than a building with tenants — the opposite of what happens elsewhere.
4. A tenant who paid the rent on a unit for a year and kept it vacant while he traveled around the world. It made sense for him to hold on to the unit since he pays about 30% of the market rent.
5. Many buildings that were converted from rentals to TIC’s to avoid dealing with rent control.

These are all actual ways rent control contributes to undersupply. I’m sure there are many more.

Some good points are made here. We need more cartoonists to get these hard points across. Thanks for sharing.

You’re mixing cause and effect. Rent control doesn’t “lead to” an undersupply of housing.

We have an undersupply of housing because a crap-ton of people want to live here, and we only have so much space. We can’t build our way out of the housing shortage any more than we can drill our way out of the finite supply of fossil fuels. But… just like with drilling for fossil fuels, building till there’s no tomorrow WILL ruin the quality of life.

Rent control is just one of several *responses* to the shortage. When you have a shortage of anything, you can respond in one of 4 different ways (all responses to all shortages fall into one of these categories):
1. Create more of the commodity, but with some commodities this is not a viable option without other awful consequences.
2. Do nothing. Let the price float. You still have a shortage. You just ration the commodity by wealth, instead of need, persistence or chance.
3. Ration by luck, or by need. This may be the most efficient and fair system, but it takes tremendous political will in a political climate like the US.
4. Price control, which is what we do to a limited extent in San Francisco. Not perfect, but it at least limits some of the abuse.

Rent control leads to chronic under supply of rental housing — aka exactly what is happening in SF. Rent control dooms us to a never ending housing shortage. It’s nice that it makes you feel good that it curbs greed. That doesn’t build any housing unfortunately.

Uh, you left out the AirBnB gravy train.

“don’t buy a property if it doesn’t pencil out when you buy it. ”

and that pencil includes the continuation of rules in place at the time of purchase?

See, your side likes to keep changing the rules and then yelling “greedy” & “foul”.

If you want to keep the prices ‘as they were’, at least keep the rules as well.

Evictions generally occur when a) A homeowner is moving into his home,
b) a renter is damaging the landlord’s home or otherwise violating the
terms of the lease, c) a renter is paying an unfairly low rent that
endangers the homeowner’s ability to maintain his home, or d) a
homeowner is improving a home (and hence the neighborhood and City). In
all of these cases, the eviction is an unquestionably positive
development. So, we really should be encouraging more evictions to
improve our City as they inevitably lead to better homes, residents, and
neighborhoods.

Letting landlords charge what they want and then giving subsidies is far inferior than rent control. It takes away some of the more compelling aspects of rent control.

One benefit of rent control to the public is that landlord greed is limited. Just because someone can afford it, doesn’t mean they should be gouged. Also, subsidies never enjoy the kind of support that something like rent control does, because they’re not available to everyone. That invites envy from those who don’t get it, and pits people against each other.

Every tenant considers the possibility that they’ll be evicted. When the time comes, you have to fight. It’s a different situation than the landlord is in. Every tenant needs a home. No landlord needs to be in the landlord business -they can work for a living like normal people. But if they want to make investments, we shouldn’t be forced to subsidize if they fail. Bottom line: don’t buy a property if it doesn’t pencil out when you buy it. If, OTOH, it does, then you have nothing to worry about. A good tenant that pays their rent on time month after month in perpetuity, is something every honest landlord should want.

The point with opportunity cost is more subtle. Assume for a moment that my mortgage rate is 5% and the ROI on an alternative investment with a similar risk profile is also 5%. Then, taxes aside, it really doesn’t matter if the landlord has a 100% LTV, a 50% LTV or owns outright.

It is absolutely legitimate to factor into my costs the returns I am foregoing elsewhere.

People buying properties take into lots of different scenarios. It is reasonable to project a certain level of turnover. Many times you will get more turnover than that and the property will remain viable. But a certain minority of owners will get stuck with lifers and their actual returns will drop below their target ROI.

And that is where they need the provisions to evict for Ellis, OMI, Condo, remodel, demo and so on.

Finally, if landlords should consider factors like zero turnover, then why shouldn’t tenants consider factors like the probability of Ellis? If you are a tenant in a building where everyone pays a low rent and is determined to squat there forever, then you should prudently expect that your building may be re-purposed at some point, and especially if ownership changes hands and so the enterprise is no longer viable.

If it’s a public good, then the public should pay for it. Period. I honestly believe if we all had to kick in to subsidize rents for certain people rather than just putting that expense on a minority group (the majority of this city is renters) we’d come up with a better system than the current one. We could have a reasonable discussion on who should get subsides and why and how much rather than just giving a massive subsidy to folks who happen to never move which is what we currently have.

Opportunity cost is moot. Opportunity cost is just on paper, and exists with every investment. If you think you can hypothetically make more money in some other hypothetical investment, then please, do sell and reinvest. Otherwise quit whining.

And if the landlord bought more recently, they should have run the numbers. If the numbers work out with the current rent, great. If they don’t, they shouldn’t buy. But if you buy a property that doesn’t pencil out with current rent, and expect it to pencil out based on some hypothetical opportunity to increase the rent, which may or may not come, then you’re a fool. It’s not the job of the tenants to subsidize a landlord’s poor decision.

When tenants turn over, the mods say they have “no skin in the game,” that is they supposedly don’t have the same attachment to the community as homeowners. When tenants stay in the community, the mods want to kick them out. Tenants can’t win, I guess.

And please, there is no short straw for landlords. If landlords can’t pay the bills on the *initial* rent, then they should set the rent to something they can pay the bills on. After that, it only gets better with time. The problem is that landlords are used to the gravy train of continuous exorbitant increases in their rental income, at the expense of other residents.

Correct. There are a lot of provisions in the rent ordinance that the tenant lobby do not like. Most of the 15 just cause evictions for a start. And the various pass-through provisions for another. But they are in there for a reason – to prevent the entire ordinance being thrown out as unconstitutional.

Moreover the State has passed laws, like Ellis and Costa-Hawkins which, even though the tenant mob hate them, actually help rent control pass constitutional muster.

And of course it is not unusual for the courts to throw out local changes to the law that are deemed to be excessive.

Several courts have held rent control by itself is not a taking; but if there is absolutely no mechanism to allow landlords to terminate a tenancy, effectively creating lifetime guaranteed leases, some elements of rent/eviction control likely would be considered a taking.

I support rent control and strong tenant protections. I’m just frustrated with many in the progressive camp who seem to think there is a legal way to prevent all no-fault evictions, prevent techies from moving here, or that rent control doesn’t encourage scarcity that has to be countered with increased building.

If you think I’m right wing, you haven’t traveled much.

If it’s a public good, then let the public pay for it. Not a random selection of property owners who draw the short straw with tenants that stay for decades.

The fact that you think that a landlord just sits back and collects the checks shows the true extent of your ignorance.

Being a landlord requires risk, capital, effort, hassle, interpersonal skills and, at least in this town, becoming an expert in the law unless you want to be fleeced.

Whether the mortgage is paid off is moot. If you own the building outright you still have the opportunity cost, i.e. the return you could get on that 1.5 million if you sold and reinvested.

And what if the landlord bought much more recently?

Landlords can refinance anytime they want. I was being generous. If the landlord owned it for 30 years instead of ten, then it would be paid off already. Any rent at all is just gravy now, on top of the massive increase in the value of the property that has turned the landlord into a millionaire just for sitting back and collecting the checks.

Your obsession with the toilet is something I can’t understand. The real issue is what I just outlined.

Yeah, I thought about this. Its probable that the 100 yo toilet uses 7g per flush, rather than a more modest 5g from the 70s. At 10 flushes per day per person, that about 6U for the toilet ALONE. @$15/U, I suspect the “bank” being “made” is by our fearless extorters.

In no way would I agree that paying less, due to less-than cost-of-living inceases, could result in a fair outcome. You might say the same about Min Wage or compensation generally hats been held back.

Don’t forget that 30 yrs ago, interest rates were around 12%, Seems like any talk about a fair ROI would need to take that into account – if we’re gonna hold things static.

You know a policy really works when the right calls it a “taking.”

$1200 for a 2br is probably a fair price. If the landlord owned the place as long as she’s been renting, they’re making bank.

So? That kind of math can be applied to many things, from tax cuts to parking tickets to mortgage interest deductions to you name it. Rent control serves many purposes, of which helping the poor is only one. It prevents landlords from taking advantage of tenants (both poor and not so poor), stabilizes communities, prevents people from having to leave the city, etc. I could care less if rich people benefit from it too. In fact I want rich people to benefit, because the more people who benefit, the more people who are invested in continuing the public good for everyone.

Those drawings suck.

By definition, rent control helps the rich more than the poor. Take someone who has $1,000 rent versus $5,000 rent. Fast forward 20 years and assume the rent control average increase of 1.7% versus a market rate increase of 6%. The $1000 rent goes to $1401 rather than $3207 for a savings of $1806 per month. The $5000 rent goes to $7005 rather than $16036 for a savings of $9031 per month. So the rich person saves about 5x as much on their rent 20 years down the road than the poor person. Rent control is a failed policy.

It is more complex than that, wcw. The rent ordinance does contain language that is specifically designed to get ahead of any “takings” objections.

For instance, buried in the language of the ordinance is some wording that says that landlords are entitled to a reasonable rate of return. That begs the question of what is reasonable, of course. But there is a little-used petition that landlords can make to the Rent Board that allows for a rent increase simply because the landlord isn’t making a reasonable return.

Likewise, the ability for an owner to evict to move in is predicated on the important notion that if you own a property, it can be your home.

And of course Ellis, which came out of a court case, and is predicated on the idea that a municipality cannot enforce someone to be in a business if they no longer wish to be.

As for price controls, they can work but only in the short-term, typically in response to war, emergency, natural disaster etc. In the long-term they suppress supply and inflate demand. Either is a problem. Both together are a disaster

in Cwynar v City & County of San Francisco (2001) 90 CA4th 637, the case that struck down prop G (1998) which restricted OMI evictions, the court held that the aggressive regulation constituted a “pre se taking,” in that “Proposition G effectuates coerced life-time tenancies which effectively extinguish plaintiffs’ right to occupy substantial portions of their property.”

Additionally if a law “compel[s] a landowner over objection to rent his property or to refrain in perpetuity from terminating a tenancy.”  (Yee, supra, 503 U.S. at p. 528, 112 S.Ct. 1522.), it may be considred a per se taking.

Point is, rent and eviction control laws walk a fine line against private property rights, and without mechanisms like OMIs and the Ellis act, they likely run afoul of the takings clause.

IANAL, but that doesn’t seem right. If rent control were a taking, the courts would have thrown it out. Instead, the state legislature passed Ellis.

Price controls work: they control prices. It is because they work that demand increases. Problems start when there is no supply increase to match. Cash subsidies do not increase supply, they just shift costs to the public sector.

A reasonable housing policy almost has to start with supply. One clever suggestion would be for the city to hire some good architects and to preapprove infill development for all underutilized lots. Sadly, that will never happen; the only thing many seem to want is to impede development any way they can.

Yes, I have noticed over the years that the most meddlesome and precious tenants are educated, under-achieving whites. They are the ones who complain a lot, bleat about their rights and try and hoard their units.

I’ve had poor and non-white tenants as well, and they had none of that attitude. They had ambition beyond a lifetime squat, and they didn’t see a tenancy as a lifetime estate and entitlement to be ceaselessly fought over.

This story also indicates who the real beneficiaries of rent control are – it’s not poor, impoverished people, it’s sophisticated, educated people familiar with bureaucracy who know how to game the system.

Get used to it. Its the nu normal. even SPUR and PBA approve.

The way to do it is to lease your prop to a ‘non-profit’ like THC, which will then petition govmint for subsidies to rent out to mod/lo-income renters, who will then have no ‘rights’ (though they can retain their cheap rent as long as they don’t complain or cause trouble); and almost everyone wins.

What I’m waiting for is a large corp to sue, under TPP or another pact,, saying that RC infringes on their right to make a profit. After beau-coup lawyers fees, govmint will settle with them for a sizable sum and probably retain non-disclosure to stanch the drain. Otherwise, kiss your Property-luvin’ Rights Siyonara.

Google it. IIRC, something like $1200 for a 2br. But of course, that doesn’t play well with the narrative (I hate docu-dramas).

Naylor is just an extortionist. She was offered a buyout but balked for 2x the amt.

BTW, having an antique toilet is quaint. But in a drought, its a social liability – 5 gal of fresh to flush a cup of pee?!

When Feinstein introduced rent control I suspect that she never envisaged a situation where there would be a vast underclass of rental serfs obsessively engaged in a war of attrition to permanently annexe housing for themselves for no reason other than that they feel a bloated sense of entitlement to live in a place they know they cannot afford.

It will take another generation to flush out these self-absorbed boomer parasites.

“there is no rent control as long as the Ellis Act stands”

Sentiments like this betray a fundamental lack of understanding of property rights and constitutional law. Without OMIs and the Ellis Act, rent control is essentially a regulatory taking.

If it is in the public interest to keep Naylor in the city, the public should subsidize her. Price controls are an inefficient way to counter market volatility; they merely encourage scarcity. Subsidies are cheaper, in terms of net social cost.

Funny how these sorts of sob stories never mention how much rent the tenant is paying.

Any bets on what Naylor and her husband are paying in rent?