Tuesday, May 27, 2008

Emminent Domain/Rent Control

I recently visited with friends who live in a city where rent control has been in force for several years. They expressed concern about California's upcoming election where Propositions 98 and 99 are on the ballot. Both are advertised to restrict local governments from exercising emminent domain. However, Prop. 98 has a provision for removing rent control. So the choice on 98 either restricts emminent domain and remove rent control or allow local governments to exercise emminent domain.

Gee, what a choice, huh? If you are a renter, you can vote away your landlord's right to raise your rent, but in doing so, you hand over the privilege of moving you out of your home to the local government.

As a renter, myself, I cannot blame my friends for wanting to keep their rents from going up. However, I abhor government interference in the market. That means rent control and emminent domain. Both actions aggressively coerce property owners to give up their right to do as they wish with their property. The principle of property ownership is a foundation for all human rights. If a property belongs to you, you have the right to do as you wish with it. Taking away that right by force, whether for benevolent or altruistic reasons, such as restricting the rent or forcibly removing the owner from one's property is still a violation of his rights.

To look at the problem from a broader perspective, we have to examine why landlords would want to raise the rents in the first place. If it is to antagonize or inconvenience their tenants, the landlord runs the risk of blowback from them. There are many reasons why an individual landlord would raise rents, but regardless of the reason, voluntarily changing the rental rate subjects that landlord to the exigencies of supply and demand.

I believe the problem goes deeper than the immediate context of renter-landlord relationships. I start with monetary policy and the inherently, inflationary nature of central banking vis-a-vis the Federal Reserve. As new money, created by new debt begins to circulate in the general economy, businesses and individuals find themselves with increasing financial obligations. In addition, the infusion of new money is felt in the marketplace, thus causing a devaluation of the currency. Every dollar becomes worth less than it was before and therefore businesses and people need more dollars to pay for the goods and services they acquire for surviving and hopefully prospering. It becomes a vicious cycle and those lowest on the monetary food chain - in this case, the renters, find themselves having to struggle more to keep up their standard of living.

In an economy based on sound money, prices tend to remain stable and the relative value of the currency holds, allowing people and businesses to plan ahead. There is little need for actions like rent control to protect renters from their landlords. Landlords would have little need to raise rents and if they did, the market would present more viable options for the tenants.

Emminent domain is just plain wrong. It is government theft of private property and no one should tolerate it. If a property is attractive enough for a city to acquire it for any purpose, it should give the owners of that property the choice to either sell or not sell and if the owners decide to sell, the city should pay the full market price for it. The key words here are force and voluntary. No one should be forced out of their property, but encouraged to enter into a market transaction voluntarily. The only time anyone would be forced out of their property is when something in or from that property presents a clear danger to the neighboring properties and the owner in question refuses to respect the rights of the other owners. In this case the local government acts in a defensive manner to protect the rights of those who haven't offended anyone.

In short, I understand why my friends desire maintaining rent control, but as time goes on and inflation puts pressure on the market, it becomes increasingly more difficult for landlords to stay in the business of renting out domiciles. It also hurts the renters who have to pay more for food and energy, so the lifting of controls presents a more onerous problem. Imposing more controls on specific areas of the marketplace superficially fails to address the real problem of inflation, yet provides some relief for a short while. However, if we want to address the real problem, we have to look at monetary policy and start there.

the tenants are free to move out and find a place that's more to their liking or they can organize and collectively bargain with their landlords to keep the rents steady.

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Blogger Elliot said...

Good post. I voted Prop 98, but unfortunately it didn't pass. Next time, I hope people will wake up and realize the importance of property rights.

2:43 AM  

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