When I moved to the Los Angeles area of California in 1978, there was a lot of debate regarding current laws enacted in the Los Angeles area regarding rent control. The stated problem was that the rising rents in areas such as Santa Monica was forcing out the elderly, who were on a fixed incomes, from their apartments where they had been long-time tenets. The Government solution was to impose restrictions on how much landlords could raise the rent on apartments in these areas.
My thoughts were:
1. The law was not fair. The politicians, on behalf of the citizens of Los Angeles, decided that the elderly should not be pushed out of their apartments; however, the landlords were going to bear the cost (i.e., lost rents they could have received without the restrictions).
2. The law was overly broad. As stated, the law was intended to assist the elderly on fixed-income that could not afford the rising rental rates and had been renters for a long-time. However, the law applied to ALL renters whether elderly or not; whether they could afford the rents or not; and whether or not they had been long-time tenets.
3. Other solutions would achieve the objectives of the law without the problems stated above. For example, the city could have subsidized the qualified elderly or the city could have provided a tax break to landlords that froze the rents for the qualified elderly.
The law had many unintended consequences. For example,
· A landlord that just bought the building could reset the rental rates. Landlords sold their properties. The law was changed to plug this loophole.
· Landlords converted their properties to condominiums. The law was changed so that a majority of the renters had to vote in favor of the conversion.
· Landlords cut back on maintenance to save costs. The law was modified to force the landlord to keep up the maintenance. Later the law was modified so that this cost could be passed on to the renter in the form of higher rents.
· Current renters sublet to other renters off the books for the current market value of the rents. The landlord did not receive any of this additional rent. The law did not address this situation.
In all the above, the city had essentially appropriated part of the landlords property without compensation for the lost revenue or value. What is most disturbing is that rent control had been tried before in other areas (e.g., New York City) with disastrous results (e.g., landlords abandoned the properties or went into bankruptcy).
For many years, I thought that the politicians were just ignorant fools. With other better solutions available and with a history of failure, why would they implement such a law? After many years, I concluded that they politicians were not ignorant. They had implemented a law that achieved exactly what they wanted. Because of this law, renters would vote for them. The politicians had bought the vote of the renters using the law.