Rent Control Makes For Good Politics And Bad Economics

Authored by Gary Galles via The Mises Institute,

One needn’t read very much about public policy before coming across some statement to the effect that “bad economics makes good politics.” This statement is clearly untrue when good politics is defined as furthering mutually beneficial arrangements, as good economics is central to that task. But the statement is often true when good politics is defined as attracting 50%-plus-one votes on some issue or candidate, which is a much different standard, leaving plenty of room for government-imposed harms to be imposed on citizens.

Few issues reflect this divergence between “good” politics and bad economics more clearly than rent control. One of the most universally accepted propositions among economists is that rent control produces a host of adverse social consequences with its large involuntary redistribution of wealth and suppression of market prices as communicators of information and incentives. Despite that, it has been adopted as policy in many places and times — and now is a good time to revisit these issues, as efforts are currently underway in several states (including California, Oregon, Washington, and Illinois) to repeal existing statewide restrictions on rent control.

How Rent Control Destroys Value 

Rent control takes a large portion of the value of residential properties from landlords. It does so by removing owners’ rights to accept offers willingly made by potential renters. And the value of the rights involved are large. For example, after Toronto imposed rent control in 1975, affected building values fell by 40% over five years, and a decade ago, such losses were estimated at $120 million annually in Santa Monica. A law like rent control, which can take half or more of each apartment’s value from the landlord, harms them just as much taking away half of their apart­ments, even though the latter is recognized as theft. Those stripped property values are given to current tenants, whose resulting bonanzas are shown by the fact that those under strict rent control almost never leave.

Rent-Controlled United Decline in Quality and Quantity

By taking away so much of the effective ownership of rental housing from owners, rent control creates several other additional adverse effects. Without owners’ ability to capture the value of their buildings, the rental housing stock deteriorates in both quantity and quality. Reduced incentives for maintenance and repair erodes existing rental housing. Further, owners retain little incentive to construct new rental units, bringing new apartment construction to a virtual halt, taking with it local construction jobs and tax revenues. Rental units are also converted to condos and non-housing uses to escape the burdens rent control imposes. All of this reduces rental housing availability, which worsens the problem of inadequate housing rather than alleviating it.

Rent control also increases discrimination and landlord-tenant hostility. Owners who can no longer be compen­sated for increased costs created through crowding, water usage, potential damage, or reduced probabili­ty of actually paying the rent — or any other unattractive tenant charac­teristic — have sharply reduced incentives to accommodate those who might impose them. This is why rent controlled areas, rather than helping those of low and moderate means, become increas­ingly popu­lated by higher income tenants with few children. Further, tenants bla­me “greedy” land­lords for not providing the services they desire, and landlords view tenants as the enemy engaged in an ongoing rip-off, even though rent control is the real culprit.

Rent Control Creates Black and Gray Markets 

Rent control’s artificial restrictions on mutually agreed upon exchanges also lead to evasion attempts, such as under-the-table payments, agreements to renovate apartments or upgrade appliances at private expen­se, personal connections, etc. Not only do these alterna­tive forms of competition favor higher income renters, rather than “the poor” (who populate rent control rhetoric but far less of the housing available under it), they lead to rent control boards to stymie such at­tempts. That enforcement, as well as the costs land­lords must bear both to defend them­selves and comply with its edicts, consumes a great deal of resour­ces that could have been put to productive uses. 

Despite such an overwhelming case for rent control being bad economics, why has it not been equally politically unattractive? The essential reason is that in cities where rent control is imposed, existing local renters, who are the recipients of the value taken from landlords, form a political majority who approve of that theft, vote for it, and go to great lengths to rationalize and defend it as part of “the wonders of democracy.”

Rent control offers current tenants perhaps the greatest economic returns of any policy they could use their majority power to enact. Not only do they save what can far exceed $1,000 a month compared to what market prices would be, they are also awarded what amounts to life tenure. If you saved $1,000 a month and stayed 10 years, that would be $120,000, while staying 21 years would generate over a quarter million dollars in benefits. And many long-term tenants have saved themselves far more. What other political act offers local renters so great an economic benefit in exchange for their votes?

Rent control’s “pro renter” rhetoric also allows a powerful form of misrepresentation. Rent control benefits current renters, but it does not benefit renters overall. It harms all renters and potential renters who aren’t already in rent-controlled units. It harms all those who seek to rent apartments after rent control is imposed, mainly finding “no vacancy” signs instead. But they don’t get a vote in the communities to which they’d like to move. Even though those who are eventually successful in finding a controlled unit have been harmed, once there, they don’t want their finally-achieved good deal halted. Rent control also harms renters in surrounding communities, as the restricted supply of available units raises rents there, as well. But they don’t get a vote, either. Rent controls also harm those who rent houses, which are usually exempt, because rent control’s reduction in housing availability leads those rents to be bid up as well.

Rent control also involves unusual characteristics that weakens and divides opposition.

The Long-term Effects of Rent Control 

Because housing is durable, there is an unusually sharp dichotomy between short-run and long-run effects. The short-term effect of imposing rent controls on the available supply of rental units is quite small. Proponents can focus only on the immediate effects to argue that objections are unsubstantiated. However, the cumulative effect of ongoing rent control is very large, leading many economists over the years to recognize its ability to decimate the supply of urban housing.

Property owners, who might be expected to be unified in opposition to the threat to property rights rent control poses, are also subject to divide and conquer techniques.

Not only are rental housing owners far outnumbered by current tenants, many of them live outside the jurisdiction considering rent control, undermining their voice. And if they raise money for an opposition campaign, their efforts against the harm that would be imposed on them can be easily demonized as proof of how much they rip off tenants whenever they are given a chance.

Some Property Owners Benefit 

Property owners are also split in other ways. Owners in neighboring areas, who would otherwise tend to side with those in the jurisdiction considering rent control, due to the similar threat posed against them, can be bribed away because the reduction of housing supply “next door” increases their demand and raises their rents. Owners of commercial property, who are usually exempt from rent control, can benefit from higher rents for their properties due to the influx of higher income residents rent control brings. The restriction in supply of rental units in an area also raises the price of owner-occupied homes, undermining their support against rent control.

Rent control can give current tenants massive windfalls taken from owners by their dominant majority vote. That also means politicians who cater to that politically dominant majority can more easily acquire and maintain power. The fact that current tenants benefit at the expense of those in nearby areas and all other future prospective tenants can be masked by pretending current tenants interests are the same as all actual and prospective tenants. Rent control also splits owner opposition to the threat of expropriation by exempting commercial uses and houses in the jurisdiction by increasing the value of their properties, as does the spillover gains they capture from the reduced supply of rental housing nearby. That combination goes a long way to explain why, in majority renter areas, the truly bad economics of rent control frequently translates into “good” 50%-plus-one piracy politics.

 

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US lawmakers raise doubts on sale of smart bombs to Saudi Arabia

A group of US lawmakers said on Monday they had requested more information from President Donald Trump’s administration about the potential sale of precision-guided munitions to Saudi Arabia, expressing concern about civilian casualties in Riyadh’s campaign in Yemen that delayed the deal last year. Thirty mostly Democratic lawmakers signed the letter to US Secretary of State, Rex Tillerson, and Secretary of Defense, James Mattis, citing expectations that the administration plans to go ahead with the sale. “As you know, the previous administration made the decision in December 2016 to halt a planned sale of precision-guided munitions (PGM) to Saudi Arabia due to concerns over widespread civilian casualties and significant deficiencies in RSAF’s (the Saudi Air Force’s) targeting capabilities,” the letter, […]

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Trump’s Bombing of Syria: Continuation of a Policy Which Started Only 3 Years After Syria Became an Independent Nation

The CIA backed a right-wing coup in Syria in 1949, a mere 3 years after Syria became an independent country.

Clark University History professor Douglas Little notes:

Recently declassified records… confirm that beginning on November 30, 1948, [CIA operative Stephen] Meade met secretly with Colonel Zaim at least six times to discuss the “possibility [of an] army supported dictatorship.” [“Cold War and Covert Action: The United States and Syria, 1945-1958,” Middle East Journal, Winter 1990, p. 55]

 

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As early as 1949, this newly independent Arab republic was an important staging ground for the CIA’s earliest experiments in covert action.

 

The CIA secretly encouraged a right-wing military coup in 1949.

The reason the U.S. initiated the coup? Little explains:

In late 1945, the Arabian American Oil Company (ARAMCO) announced plans to construct the Trans-Arabian Pipe Line (TAPLINE) from Saudi Arabia to the Mediterra- nean. With U.S. help, ARAMCO secured rights-of-way from Lebanon, Jordan and Saudi Arabia. The Syrian right-of-way was stalled in parliament.

In other words, Syria was the sole holdout for the lucrative oil pipeline.

(Indeed, the CIA has carried out this type of covert action right from the start.)

In 1957, the American president and British prime minister agreed to launch regime change again in Syria. Historian Little notes that the coup plot was discovered and stopped:

On August 12, 1957, the Syrian army surrounded the U.S. embassy in Damascus. Claiming to have aborted a CIA plot to overthrow neutralist President Shukri Quwatly and install a pro-Western regime, Syrian chief of counterintelligence Abdul Hamid Sarraj expelled three U.S. diplomats ….

 

Syrian counterintelligence chief Sarraj reacted swiftly on August 12, expelling Stone and other CIA agents, arresting their accomplices and placing the U.S. embassy under surveillance.

 

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More importantly, Syria also had control of one of the main oil arteries of the Middle East, the pipeline which connected pro-western Iraq’s oilfields to Turkey.

 

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The report said that once the necessary degree of fear had been created, frontier incidents and border clashes would be staged to provide a pretext for Iraqi and Jordanian military intervention. Syria had to be “made to appear as the sponsor of plots, sabotage and violence directed against neighbouring governments,” the report says. “CIA and SIS should use their capabilities in both the psychological and action fields to augment tension.”

 

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The plan called for funding of a “Free Syria Committee” [hmmm … sounds vaguely familiar], and the arming of “political factions with paramilitary or other actionist capabilities” within Syria. The CIA and MI6 would instigate internal uprisings, for instance by the Druze [a Shia Muslim sect] in the south, help to free political prisoners held in the Mezze prison, and stir up the Muslim Brotherhood in Damascus.

Newly-declassified CIA documents show that in 1983, the CIA drew up plans to pressure the Syrian government by using Iraq, Israel and Turkey as proxies:

Syria at present has a hammerlock on US interests both in Lebanon and in the Gulf — through closure of Iraq’s pipeline thereby threatening Iraqi internationalization of the [Iran-Iraq] war. The US should consider sharply escalating the pressures against Assad [Sr.] through covertly orchestrating simultaneous military threats against Syria from three border states hostile to Syria: Iraq, Israel and Turkey. Iraq, perceived to be increasingly desperate in the Gulf War, would undertake limited military (air) operations against Syria with the sole goal of opening the pipeline. Although opening war on a second front against Syria poses considerable risk to Iraq, Syria would also face a two-front war since it is already heavily engaged in the Bekaa, on the Golan and in maintaining control over a hostile and restive population inside Syria.

 

Israel would simultaneously raise tensions along Syria’s Lebanon front without actually going to war. Turkey, angered by Syrian support to Armenian terrorism, to Iraqi Kurds on Turkey’s Kurdish border areas and to Turkish terrorists operating out of northern Syria, has often considered launching  unilateral military operations against terrorist camps in northern Syria. Virtually all Arab states would have sympathy for Iraq.

 

Faced with three belligerent fronts, Assad would probably be forced to abandon his policy of closure of the pipeline. Such a concession would relieve the economic pressure on Iraq, and perhaps force Iran to reconsider  bringing the war to an end. It would be a sharp blow to Syria’s prestige and  could effect the equation of forces in Lebanon.

 

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If Israel were to increase tensions against Syria simultaneously with an Iraqi initiative, the pressures on Assad would escalate rapidly. A Turkish move would psychologically press him further.

Recently-declassified CIA documents show that in 1986, the CIA drew up plans to overthrow Syria by provoking sectarian tensions.

Neoconservatives planned regime change in Syria once again in 1991 and again in 2001.

And as Nafeez Ahmed notes:

According to former French foreign minister Roland Dumas, Britain had planned covert action in Syria as early as 2009: “I was in England two years before the violence in Syria on other business,” he told French television: “I met with top British officials, who confessed to me that they were preparing something in Syria. This was in Britain not in America. Britain was preparing gunmen to invade Syria.”

 

Leaked emails from the private intelligence firm Stratfor, including notes from a meeting with Pentagon officials, confirmed that as of 2011, US and UK special forces training of Syrian opposition forces was well underway. The goal was to elicit the “collapse” of Assad’s regime “from within.”

Indeed.

A leaked communication shows that Secretary of State Hillary Clinton said in 2012:

The best way to help Israel deal with Iran’s growing nuclear capability is to help the people of Syria overthrow the regime of Bashar Assad.

 

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What Israeli military leaders really worry about — but cannot talk about — is losing their nuclear monopoly.

And high-level American and Turkish officials say that Turkey supplied Sarin gas to Syrian rebels in 2013 in order to frame the Syrian government … to provide an excuse for regime change.

Indeed, the U.S. has carried out regime change in the Middle East and North Africa for six decades.

The post Trump’s Bombing of Syria: Continuation of a Policy Which Started Only 3 Years After Syria Became an Independent Nation appeared first on crude-oil.news.

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Egyptian billionaire launches new bank in Europe

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