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SCOTUS: Rent Control Is Forever
Normally denials of petitions for certiorari pass by in relative silence. The general expectation is that the Supreme Court takes very few cases each year, and most of those that it takes involve matters of administrative and public law that are of concern to federal government and its many distinct agencies.
Many people, myself included, hoped that this inexorable trend would change with the petition for certiorari that James and Jeanne Harmon filed challenging the constitutionality of New York City’s rent stabilization laws. Harmon had tirelessly promoted his cause to everyone who would listen, and when New York City was requested to answer the petition for certiorari hopes rose. When the case was held for further reflection, they rose yet again. But in the end the unexplained denial of certiorari, without a visible dissent, indicated that it was business as usual in the Supreme Court.
It is important to understand what this tells us about the current attitudes of the Supreme Court. All too often, we discuss–as in connection with the Affordable Care Act–the deep divisions between the conservative and liberal justices. But we do not often talk about the strong agreement across that political divide on questions pertaining to property rights.
The nub of the difficulty is this. Every member of the Supreme Court comfortably works within the dominant administrative law paradigm. Their major task is to make sure that the system does not spin out of control on a variety of procedural issues. But none of them will ask on principled grounds why there is any form of administrative regulation in this area in the first place. That is especially painful in dealing with questions of pricing, where the regulatory solutions come out in a distant second place.
The key government officials have thrived in this environment. Exhibit A is this reaction to the decision:
“The court’s decision is consistent with longstanding precedent that affirms the city and state’s authority to enact these laws, which are an integral part of the city’s effort to provide affordable housing to New Yorkers,” said City Council Speaker Christine Quinn, in a statement. “Now, the city’s rent regulation system can proceed unfettered, as we continue to ensure affordable housing is available to New Yorkers.”
The dubious premise behind this quotation is that the system has worked to ensure the supply of affordable housing. The huge administrative cost of running the apparatus, the massive disparities in treatment, the painful point that the low rents called for under the ordinance help create the very shortage that the regulations are said to relieve are just not in the mental frame of Ms. Quinn or any other rent control supporter. The system will never be dislodged from within the City’s political process. Now that the flank attack has been rebuffed, it won’t be undone any other way. An open wound in New York City’s body politic has received the implicit imprimatur from a Supreme Court that does not think that property rights belong on its intellectual and judicial agenda.
Published in General
Rent control always seemed weird to me. Rather than let the market push prices down via supply & demand, local governments work to curtail home construction through regulation & enforcement.
Christine Quinn is running for mayor–one of my office colleagues sent sent me a $500 per plate Quinn fundraiser invitation today–and now she can say, “See, I made sure you continued to get free stuff.”
Proponents of rent control often argue that without price ceiling ordinances, no one but the very wealthy would be able to afford housing in the city and we’d see a rapid process of gentrification.
How would demographics of the city change if NYC had no rent control and instead allowed available housing stock to clear at market price? Would goods and services be in turn more expensive since labor would presumably be more expensive?
Rent control has been in place in locations like NYC & San Francisco that it’s hard to picture what the situation would look like if these cities eased off the strict pricing regulations.
It would be in better repair..
Rent control has been in place in locations like NYC & San Francisco that it’s hard to picture what the situation would look like if these cities eased off the strict pricing regulations.
The liberal cities that impose rent control also usually have zero-growth policies, zoning laws, and other regulations that make it very difficult to expand the supply of housing.
If you truly had a free market in NYC or SF I’d suspect you’d get a whole lot of new high-rise condo and apartment buildings that would greatly increase the supply of housing and keep prices in check.
But, if you kept all the zero-growth policies in place and just eliminated rent control, the prices would indeed skyrocket and price out all but the wealthy.
How would demographics of the city change if NYC had no rent control and instead allowed available housing stock to clear at market price? Would goods and services be in turn more expensive since labor would presumably be more expensive?
Rent control has been in place in locations like NYC & San Francisco that it’s hard to picture what the situation would look like if these cities eased off the strict pricing regulations. ·50 minutes ago
This is going to sound snide, but it’s not: you could always look at how the housing markets are working in every other city in the U.S.
As a previous resident of New York, I was held hostage to the housing shortages created by rent control and forced to pay astronomical prices for apartments that absorbed nearly 40% of my take home salary. If rent-controlled apartments were released to the free market, it would increase supply and bring down average prices for the entire city.
Thomas Sowell has written extensively on a similar concept (earmarking land for environmental protection) and the effect this has had upon the escalation of real estate prices in the state of California.
The other unmentioned consequence of rent control is that landlords have neither the incentive or wherewithal to maintain their property. A family member lives in a 2,000 sq ft rent-controlled apartment on Riverside Drive in Manhattan and the building looks as if it should be condemned.
This is going to sound snide, but it’s not: you could always look at how the housing markets are working in every other city in the U.S. ·21 minutes ago
A fair point. Though since Manhattan is an island, and SF is on a peninsula, the available land to build new housing is more constrained than in most other cities.
Without the right of private property there is no liberty. In its basic unit, private property is the labor of every single citizen. What good is the 14th amendment if we all become mere slaves to an ever expanding and controlling government? Without rent control it is possible that housing costs would skyrocket. But without consumers who could afford that housing, wouldn’t the prices have to become competitive? People who own property should be able to rent it at market prices just as people who work for others should be able to charge market prices for their labor.
Whatever the costs or dubious benefits of local rent control laws, I just don’t see how the US Supreme Court is going to strike them down as unconstitutional without returning to the “substantive due process” doctrine that it turned away from in 1936-37. (Look up “Switch in Time that Saved Nine” on Wikipedia, which may also serve as a lesson in what Obama is really up to with his recent rhetoric against the US Supreme Court; too many have forgotten that FDR’s court-packing threat did accomplish his goal.) NYC has had rent control since WWII; any landlord/developer who has purchased or built rental property there the last 70 years has done so with notice that rent control in some form does or will apply (the disincentive which is the practical argument that such laws are harmful). But constitutionally that fact weakens any procedural due process or contract clause claim fatally. Let’s not mirror the error so many on the Left make in arguing for Obamacare (that its desirability as policy somehow compels the conclusion that it is Constitutional); the idiocy of rent control as policy tells us nothing as to its (un)Constitutionality.
Why is rent a controlled price but other things are not – like food, what I get paid by my employer, health care (not yet, so much, anyway), airline tickets? I need at least some of these things to live, and food prices are so expensive, without price controls, I might not be able to afford to eat.
Rent control is vote-buying, plain and simple. One might assume that if you live in Manhattan, you work there – and you can commute. There’s no rule that says if you work on the island you have to live there. Advocating for rent control ensures large constituencies will continue to vote in what they think is their own self-interests, when it’s not much different than propped-up housing prices buoyed by the expectation that the federal gov’t will bail out mortgages – and so the price inflates. By creating controls on rent, incentive to build, repair, improve property diminish, because increased investment on the asset won’t yield any return. It’s a great way to throw market dynamics, keyed by price, right out the window – hiding behind the fig leaf of caring for the little guy.
Why would the Court get involved in this one, now? The issue needs more publicity before we convince the Court that it’s worth taking on.
P.S. I disagree with Robert Mitchell’s comment that: “the idiocy of rent control as policy tells us nothing as to its (un)Constitutionality.”
It is true that the Constitution is not a policy paper. But the protection of property rights was/ is no mere abstract principle. The men who wrote and ratified the U.S. Constitution understood that it was/ is a good. There were policy preferences embedded in the constitution’s structure and in its principles. The refusal to recognize them is part of what created the constitutional mess we are currently in.
Even with a fixed supply, I think rent control will make the price higher than the free market equilibrium price for a significant segment of new tenants, i.e., those who can only find a place if they (illegally) sublet from current tenants who move out but don’t relinquish the apartment. This practice, which only exists because of rent control, further restricts the stock of housing available at any given time. The new tenant is screwed, the landlord is screwed, and the old tenant makes an undeserved profit. I wonder how many people in NY or SF have such an arrangement? I remember reading about it in “Bonfire of the Vanities.”
The constant erosion of property rights is at the very core of the erosion of all individual rights. When those rights are being taken we are being taken…it is the essense, the center.
P.S. I disagree with Robert Mitchell’s comment that: “the idiocy of rent control as policy tells us nothing as to its (un)Constitutionality.”
My point is you need to make a legal argument based on the text of the Constitution. What specific provision of the US Constitution prohibits New York’s Rent Control law? Remember, the Constitution contemplates a federal system, in which States are assumed to have general powers; those granted to the Congress and the President are limited to enumerated powers. The only provisions that limit state power that come to mind are the Contract Clause and the Due Process clause; US Supreme Court precedents in either area since 1936 (or earlier in the contract Clause) suggest it would be a much greater leap for the Court than, say, ruling Obamacare unconstitutional under the Commerce Clause.
In a recent Wall Street Journal piece, Professor Epstein argued it is a taking:http://online.wsj.com/article/SB10001424052970204464404577118912082926658.html
This is going to sound snide, but it’s not: you could always look at how the housing markets are working in every other city in the U.S. ·21 minutes ago
A fair point. Though since Manhattan is an island, and SF is on a peninsula, the available land to build new housing is more constrained than in most other cities. ·19 hours ago
True, however new housing can always be built up instead of out.
P.S. I disagree with Robert Mitchell’s comment that: “the idiocy of rent control as policy tells us nothing as to its (un)Constitutionality.”
My point is you need to make a legal argument based on the text of the Constitution. What specific provision of the US Constitution prohibits New York’s Rent Control law? Remember, the Constitution contemplates a federal system, in which States are assumed to have general powers; those granted to the Congress and the President are limited to enumerated powers. The only provisions that limit state power that come to mind are the Contract Clause and the Due Process clause; US Supreme Court precedents in either area since 1936 (or earlier in the contract Clause) suggest it would be a much greater leap for the Court than, say, ruling Obamacare unconstitutional under the Commerce Clause. ·21 hours ago
I’ll bite: Commerce clause!
Sincerely,
Ubermensch Pelosi