Rent Control Critics Side Step Housing Reality

James Magid is a senior majoring in political economy of industrialized societies. Respond to him at [email protected]





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I have been following the rent control debate with much interest. First, I would like to say that I am not necessarily a proponent of rent control per se. The truth is, however, that opponents of rent control (who say that proponents of rent control are side stepping economics) are side stepping reality.

Opponents of rent control use simplistic economic models of supply and demand to justify a positions that lets the market decide the price of rent. The problem is that the housing situation in Berkeley is a little more complicated. In the area around campus demand outstrips supply (fixed at any given moment) and is relatively inelastic.

In addition, although the student population has remained relatively stable as Robert Cabrera mentioned ("City Politics Do Not Bode Well For Builders," March 21), UC Berkeley's reputation has grown. More students are coming from out of state and from abroad; they do not have access to cars and they do not have family nearby. This increases the inelasticity of demand and students have fewer choices. (I hope the new bus passes will help alleviate these problems.) This means that in Berkeley, given an "unregulated" market, landlords can charge whatever they want and students are still going to pay because they do not have a choice (other than going to another university).

Opponents also say that since they are able to charge the market price, there is now more incentive to build new rental units. True, but there are a couple problems with this assumption. First, now that landlords have more income, why should they bother with building any more units? As the Reddy case shows, a few landlords control a huge amount of property around campus. This can lead to a non-competitive market, potentially elevating prices even higher. And supposing that out-of-area builders would be interested in taking advantage of the astronomically high market price of rent, where on earth would they build new units? Other than the lot on the corner of Channing Way and Telegraph Avenue, I cannot think of any large tracts of vacant land lying in wait.

Cabrera also claims that "students are transient, and everyone knows that with higher turnover there is higher maintenance" ("Rent Control: Affordable Housing Program or Political Tool?" March 2). This again is a true statement. But the fact that students are transient also makes them vulnerable. Because students are only staying for a short while, they will be more likely to accept a sub-par rental unit. Long-term tenants would probably do some more research before moving into some of the abominable housing around Berkeley.

In addition, the short-term residency of students presents legal problems. I know that my landlord (who shall remain nameless) has 53 open cases against him, filed by tenants. But since it takes so long to get a court date, students often graduate or move before they have a chance to pursue the case to its end. The invisible hand of the market does not have a chance to weed out the crappy landlords.

Finally, as a casual observer, in the last year I have seen neither the building of new rental units, nor improved maintenance. I recently had a hole in my wall caused by a rolling vehicle and it was not until I called the housing inspector to come and issue a citation that anything was done about it. I am not talking about a leaky faucet here ... I could see the parking lot through my wall.

Another economic condition we could analyze is externality. So what if landlords leach off students and their parents, that is the market, right? True, but UC Berkeley is one of the best public schools in the world. By charging such high rent, we are raising the cost of living in the nearby area, and thereby potentially excluding students who otherwise might have gone to school here and contributed to the academic environment. Sure, students can commute or ride the bus now from neighboring cities, but this takes away from their study time. Students should not have to deal with this kind of housing market ... it is not fair.

Leaving the realm of the undergraduates, graduate students and professors might also be discouraged from choosing UC Berkeley as their institution of learning or teaching because of high rent. The university does not benefit from the housing situation and the loss of rent control. In fact, it is directly harmed by it. The future and reputation of this university is something that effects all of us. The market price needs to be adjusted because of this negative social externality.

A friend of mine made an interesting observation the other day. There was a vacant apartment in her building for three months. She said she had never seen that before. I found out later the landlord wanted almost $2,000 per month for a two bedroom about five blocks from campus. Now it makes sense. Now that rent control is gone, landlords are charging such high rents that they are hitting the ceiling of the price range people are willing to pay.

As I said in the beginning, I am not pro-rent control. I am however an opponent of a total laissez-faire housing market for Berkeley. There is just too much at stake. Adam Smith himself declared that government intervention is necessary, especially for public education. My only purpose in writing this opinion piece is to show that the housing issue is not as simple as either proponents or opponents of rent control present the issue. Just because one supports rent control or opposes a totally unregulated Berkeley housing market, does not mean one is a leftist, weirdo, pinky communist as Cabrera would have readers believe. Using neo-classical economics, that darling of property owners, one can still see significant problems. Perhaps there is a better, more just way to regulate this strangely constructed market.

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