Coastline Home - cccd.edu x - Writing Assignment 6: Rent Cont *Cult_Assignment_4.docx X C A coastdistrict.instructure.com/courses/88724/assignments/1587775 DEN WEST CORI GWC = ECON110-23092 (ONL) > Assignments > Writing Assignment 6: Rent Controls and Housing Subsidies Fall21 Golden West Writing Assignment 6: Rent Controls and Housing Subsidies Account Home Due Sunday by 11:59pm Points 20 Submitting an external tool Available Oct 4 at 12am - Oct 10 at 11:59pm 7 days Syllabus Dashboard Announcements Answer the following questions based on the Reading: Bankrupt Landlords, from Sea to Shining Sea and the housing subsidies podcasts in Module 6: Modules Courses 1. Consider an apartment would rent for $2000 but the government restricts the rent to $700. What are the three adverse effects of implementing rent controls? Use a supply and demand framework to explain these Assignments impacts in the market. Calendar Discussions 2. Using the numerical example in question 1, explain where the size of the monetary payments from subsidies or "key-money payments" made to landlords come from. Eh Grades Inbox 3. If the government uses a subsidy to pay the difference between the lower rent price and the equilibrium price, such as with section 8 housing, what problem of rent control is avoided? Which problem still persists and BigBlueButton (Conferences) why? History 4. Consider using tax breaks as a subsidy to build new public housing units. What impact should this have in the market? Explain using a supply and demand framework. Student This tool needs to be loaded in a new browser window Services Load Writing Assignment 6: Rent Controls and Housing Subsidies in a new window ? Canvas Help K 68 F Mostly clear ~ 9 3 7() 8:54 PM Type here to search O 10/5/2021 18X Coastline Home - cccd.edu Module 6: Rent Controls and Hot X *Cult_Assignment_4.docx C A coastdistrict.instructure.com/courses/88724/pages/module-6-rent-controls-and-housing-subsidies?module_item_id=5241292 DEN WEST CORI GWC = ECON110-23092 (ONL) > Pages > Module 6: Rent Controls and Housing Subsidies Fall21 Golden West Account Home Module 6: Rent Controls and Housing Subsidies Syllabus Dashboard Announcements This week's lessons: Modules Courses Read and Listen: Assignments Chapter 11: Bankrupt Landlords, from Sea to Shining Sea (19th edition: Chapter 11, 20th edition: Chapter 10) Calendar Discussions Podcast: Eh Grades Inbox npr share BigBlueButton (Conferences) the housing fix Section 8 Vouchers Help History The Poor - But Only If Housing Is Available Student Services Section 8 Vouchers Help the Poor - But Only if Housing is Available: Link and Transcript ? Canvas Help Podcast Episode #259 Real Estate Investing News: Rent Control Wars in California Assignments: Writing Assignment 6: Rent Controls and Housing Subsidies Discussions: Discussion Forum 6: Rent Controls and Housing Subsidies Previous Next K 8:55 PM Type here to search O 68F Mostly clear ~ 9 () 10/5/2021 18Coastline Home - cccd.edu x - Module 6: Rent Controls ar X = Ch. 1 Introduction - Princip X * Course Hero My files - OneDrive X w essay 2 .docx P Miller, Benjamin & North, E X P Efforts to Evade Controls X C plus.pearson.com/products/97706734-94bf-416d-80ed-9f421f025feb/pages/a5f21f431032e4e32df8a9246d297952f5e875654-P70010143030000000000000000004A4?&userPreferredType=read Chapter 10 Bankrupt Landlords, from Sea to Shining Sea QT n Table Of Contents X Contents Bookmarks Recent Efforts to Evade Controls (o > Chapter 6 Sex, Booze, and Drugs The distortions produced by rent control lead to efforts by both landlords and tenants to evade the rules. This in turn leads to the growth of cumbersome Q > Chapter 7 The Economics of Obesity government bureaucracies whose job is to enforce the controls. In New York City, where rents can be raised when tenancy changes hands, landlords have an incentive to make life unpleasant for tenants or to evict them on the slightest pretense. The city has responded by making evictions extremely difficult and Chapter 8 Kidneys for Sale costly for landlords. Even if a tenant blatantly and repeatedly violates the terms of a lease, the tenant cannot be evicted if the violations are corrected within a "reasonable" time period. If the violations are not corrected eviction requires a tedious and expensive judicial proceeding. For their part, tenants routinely try Chapter 9 Are We Running Out of Water? to sublet all or part of their rent-controlled apartments at prices substantially above the rent they pay the owner. Because both the city and the landlords try to prohibit subletting, the parties often end up in the city's housing courts, an entire judicial system developed chiefly to deal with disputes over rent-controlled Chapter 10 Bankrupt Landlords, from Sea to Shining Sea apartments. A Brief History of Rent Controls Strict controls on monthly rents force landlords to use other means to discriminate among prospective tenants. Simply to ensure that the rent check comes every month, many landlords rent only to well-heeled professionals. As one commentator put it, "There is no disputing that Santa Monica became younger AA The Adverse Effects of Rent Controls and richer under rent control." The same pattern occurred under the rent-control laws of Berkeley, California, and Cambridge, Massachusetts. Efforts to Evade Controls Bureaucracies Flourish The Losers from Rent Controls Damage Around the World Discussion Questions Part Three Labor Markets > Chapter 11 Das Kapital in the Twenty-First Century Chapter 12 (Why) Are Women Paid Less? Hide Chapter 13 The Effects of the Minimum Wage Type here to search O 65 F Mostly cloudy ~ 9 - = (() 7:55 PM 10/6/2021 12Coastline Home - cccd.edu x - Module 6: Rent Controls ar X = Ch. 1 Introduction - Princip X *Course Hero My files - OneDrive X w essay 2 .docx P Miller, Benjamin & North, E X P Bureaucracies Flourish X C plus.pearson.com/products/97706734-94bf-416d-80ed-9f421f025feb/pages/ae952506074f6f8dae99f69f7940be449239d6329-P70010143030000000000000000004A8?&userPreferredType=read Chapter 10 Bankrupt Landlords, from Sea to Shining Sea QT n Table Of Contents X Contents Bookmarks Recent Bureaucracies Flourish (o > Chapter 6 Sex, Booze, and Drugs There is little doubt the bureaucracies that evolve to administer rent-control laws are cumbersome and expensive. Between 1988 and 1993, New York City Q > Chapter 7 The Economics of Obesity spent $5.1 billion rehabilitating housing confiscated from private landlords. Even today, the overflow and appeals from the city's housing courts clog the rest of 72 New York's judicial system, impeding the prosecution of violent criminals and drug dealers. In Santa Monica, the Rent Control Board began with an annual Chapter 8 Kidneys for Sale budget of $745,000. Today a staff of 20 reports to the five-member Rent Control Board, whose $5 million budget is about the same as that of the City's Fire Department. Funding for the Board comes from landlords, who are required to pay an annual assessment of $175 per unit. Also, even though state law now Chapter 9 Are We Running Out of Water? mandates that apartment rents in Santa Monica can be increased when a new tenant moves in, the new rent is then controlled by the city for the duration of the tenancy. The Rent Control Board conveniently maintains a Web site (http://www.smgov.net/rentcontrol/) where one can go to learn the maximum Chapter 10 Bankrupt Landlords, from Sea to Shining Sea allowable rent on any of the 28,000 rent-controlled residences (about 70 percent of the total supply) in Santa Monica. A Brief History of Rent Controls AA The Adverse Effects of Rent Controls Efforts to Evade Controls Bureaucracies Flourish The Losers from Rent Controls Damage Around the World Discussion Questions Part Three Labor Markets > Chapter 11 Das Kapital in the Twenty-First Century Chapter 12 (Why) Are Women Paid Less? Hide Chapter 13 The Effects of the Minimum Wage Type here to search O 65 F Mostly cloudy ~ 9 - = (() 7:55 PM 10/6/2021 12Coastline Home - cccd.edu x - Module 6: Rent Controls ar X = Ch. 1 Introduction - Princip X *Course Hero My files - OneDrive w essay 2 .docx P Miller, Benjamin & North, E X P The Losers from Rent Cont X X C plus.pearson.com/products/97706734-94bf-416d-80ed-9f421f025feb/pages/a089fc70611b92e7c199750e11f3f4146af3de673-P70010143030000000000000000004AC?&userPreferredType=read Chapter 10 Bankrupt Landlords, from Sea to Shining Sea W QT n Table Of Contents X Contents Bookmarks Recent The Losers from Rent Controls (o > Chapter 6 Sex, Booze, and Drugs Ironically, the big losers from rent control-in addition to landlords-are often low-income individuals, especially single mothers. Indeed, many observers Q > Chapter 7 The Economics of Obesity believe that one significant cause of homelessness in cities such as New York and Los Angeles is rent control. Poor individuals often cannot assure the discriminating landlord that their rent will be paid on time-or paid at all-each month. Because controlled rents are generally well below free market levels, Chapter 8 Kidneys for Sale there is little incentive for apartment owners to take a chance on low-income individuals as tenants. This is especially true if the prospective tenant's chief source of income is a welfare check. Indeed, a significant number of tenants appearing in New York's housing courts are low-income mothers who, due to Chapter 9 Are We Running Out of Water? emergency expenses or delayed welfare checks, have missed rent payments. Chapter 10 Bankrupt Landlords, from Sea to Shining Sea Often their appeals end in evictions and residence in temporary public shelters or on the streets. Before the state-mandated easing of controls, some apartment owners in Santa Monica, who used to rent one- and two-room units to welfare recipients and other low-income individuals, simply abandoned their A Brief History of Rent Controls buildings, leaving them vacant rather than trying to collect artificially depressed rents that failed to cover operating costs. The disgusted owner of one empty and decaying eighteen-unit building had a friend spray-paint his feelings on the wall: "I want to tear this mess down, but Big Brother won't let me." Perhaps AA The Adverse Effects of Rent Controls because the owner had escaped from a concentration camp in search of freedom in the United States, the friend added a personalized touch: a drawing of a large hammer and sickle, symbol of the former Soviet Union. Efforts to Evade Controls Bureaucracies Flourish The Losers from Rent Controls Damage Around the World Discussion Questions Part Three Labor Markets > Chapter 11 Das Kapital in the Twenty-First Century Chapter 12 (Why) Are Women Paid Less? Hide Chapter 13 The Effects of the Minimum Wage Type here to search O 65 F Mostly cloudy ~ 9 - = (() 7:55 PM 10/6/2021Coastline Home - cccd.edu x - Module 6: Rent Controls ar X = Ch. 1 Introduction - Princip X *Course Hero My files - OneDrive w essay 2 .docx X P Miller, Benjamin & North, E X P Damage Around the World X X C plus.pearson.com/products/97706734-94bf-416d-80ed-9f421f025feb/pages/a79fdb43660159429ecb7209e5437a05603a4a5e4-P70010143030000000000000000004BO?&userPreferredType=read Chapter 10 Bankrupt Landlords, from Sea to Shining Sea W QT n Table Of Contents X Contents Bookmarks Recent 73 Damage Around the World (o > Chapter 6 Sex, Booze, and Drugs The ravages of rent controls are not confined to the United States. In Mumbai, India, rents are still set at the levels that prevailed back in 1940. A two- Q > Chapter 7 The Economics of Obesity bedroom apartment near the center of the city may have a controlled rent of as little as $8.50 per month. (Nearby, free market rents for an apartment of the same size can be as much as $3,000 per month.) Not surprisingly, landlords have let their rent-controlled buildings decay, and collapsing apartments have Chapter 8 Kidneys for Sale become a regular feature of life in this city of twenty-two million people. Over the past decade, almost one hundred people have been killed in the collapse of rent-controlled buildings. The city government estimates that a hundred or more apartment buildings are currently on the verge of collapse. Chapter 9 Are We Running Out of Water? Even communist nations are not exempt from rent controls. Long after the last American troops left Vietnam, that nation's foreign minister, Nguyen Co Thach, Chapter 10 Bankrupt Landlords, from Sea to Shining Sea declared that a "romantic conception of socialism" had destroyed his country's economy after the Vietnam War. Thach stated that rent control had artificially encouraged demand and discouraged supply and that all of the housing in Hanoi had fallen into disrepair as a result. Thach concluded by noting, "The A Brief History of Rent Controls Americans couldn't destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and that we must change policy." AA The Adverse Effects of Rent Controls Apparently, this same thinking was what induced the state of California to compel changes in Santa Monica's rent-control ordinance. The result was an almost immediate jump in rents on newly vacant apartments, as well as a noticeable rise in the vacancy rate-exactly the results we would expect. Interestingly enough, however, prospective new tenants were less enthusiastic about the newly available apartments than many landlords had expected. The reason? Efforts to Evade Controls Twenty years of rent controls had produced many years of reduced upkeep and hence apartments that were less than pristine. As one renter noted, "The trouble is, most of this area ... [is] basically falling apart." Another complained, "I don't want to move into a place that's depressing, with old brown carpet that Bureaucracies Flourish smells like chicken soup." The easing of rent controls has changed both the ambience and the aroma of Santa Monica apartments-but only because the market is better able to perform its functions. The Losers from Rent Controls Damage Around the World Discussion Questions Part Three Labor Markets > Chapter 11 Das Kapital in the Twenty-First Century Chapter 12 (Why) Are Women Paid Less? Hide Chapter 13 The Effects of the Minimum Wage Type here to search O 65 F Mostly cloudy ~ 9 - = (() 7:55 PM 10/6/2021 12Coastline Home - cccd.edu x - Module 6: Rent Controls ar X = Ch. 1 Introduction - Princip X *Course Hero My files - OneDrive w essay 2 .docx P Miller, Benjamin & North, E X P The Adverse Effects of Rent > X C plus.pearson.com/products/97706734-94bf-416d-80ed-9f421f025feb/pages/a2ba4838899777f2a6684851fd7a750774921df2a-P7001014303000000000000000000498?&userPreferredType=read Chapter 10 Bankrupt Landlords, from Sea to Shining Sea W QT n Table Of Contents X Contents Bookmarks Recent The Adverse Effects of Rent Controls > Chapter 8 Kidneys for Sale 70 In general, the unfettered movement of rental prices in a freely competitive housing market performs three vital functions: (i) it allocates existing scarce Q > Chapter 9 Are We Running Out of Water? housing among competing claimants; (ii) it promotes the efficient maintenance of existing housing and stimulates the production of new housing, where appropriate; and (iii) it rations usage of housing by demanders, thereby preventing waste of scarce housing. Rent control prevents rental prices from Chapter 10 Bankrupt Landlords, from Sea to Shining Sea effectively performing these functions. Let's see how. A Brief History of Rent Controls Rent control discourages the construction of new rental units. Developers and mortgage lenders are reluctant to get involved in building new rental properties because controls artificially depress the most important long-run determinant of profitability-rents. Thus, in one recent year, 14,000 new housing The Adverse Effects of Rent Controls units were built in Dallas, a city with a 7 percent rental vacancy rate but no rent-control statute. In that same year, only 4,000 units were built in San Francisco, a city with a 2 percent vacancy rate but stringent rent-control laws. In New York City, the only rental units being built are either exempt from controls or heavily subsidized by the government. Private construction of new apartments in Santa Monica also dried up under controls, even though new Efforts to Evade Controls office space and commercial developments-both exempt from rent control-were built at a record pace AA 71 Bureaucracies Flourish Rent control leads to the deterioration of the existing supply of rental housing. When rental prices are held below free market levels, property owners cannot recover the costs of maintenance, repairs, and capital improvements. Thus, such activities are sharply curtailed. Eventually, taxes, utilities, and the expenses of the most rudimentary repairs-such as replacing broken windows-can exceed the depressed rental receipts. Under rent controls in Santa The Losers from Rent Controls Monica, the city insisted that owners wishing to convert empty apartment buildings to other uses had to build new rental units to replace the units they no longer rented. At a cost of up to $300,000 per apartment, it is little wonder that few owners were willing to bear the burden, choosing instead to leave the Damage Around the World buildings empty and graffiti-scarred. Rent control impedes the process of rationing scarce housing. Tenants are understandably reluctant to give up controlled apartments, so one Discussion Questions consequence of rent controls is that tenant mobility is sharply reduced. Even when a family's demand for living space changes-due, for example, to a new baby or a teenager's departure for college-there can be substantial costs in giving up a rent-controlled unit. In New York City, some landlords charge "key Part Three Labor Markets money" (a large up-front cash payment) before a new tenant is allowed to move in. The high cost of moving means that large families often stay in cramped quarters while small families or even single persons reside in large apartments. In New York, this phenomenon of nonmobility came to be known as housing Chapter 11 Das Kapital in the Twenty-First Century gridlock. It is estimated that more than 20 percent of renters in New York City live in apartments that are bigger or smaller than they would otherwise occupy. In Santa Monica, some homeowners rented out portions of their houses found themselves trapped by their tenants, whom they could not evict even if they Chapter 12 (Why) Are Women Paid Less? wanted to sell their homes and move to a retirement community. > Chapter 13 The Effects of the Minimum Wage Chapter 14 The (Dis)incentives of Higher Taxes Hide Chapter 6 Sex, Booze, and Drugs Our story begins in 1943, when the federal government imposed rent control as a temporary wartime measure. Although the federal program ended a few Q > Chapter 7 The Economics of Obesity years after the war, New York City continued the controls on its own. Under New York's controls, a landlord generally could not raise rents on apartments as long as the tenants continued to renew their leases. Rent controls in Santa Monica are more recent. They were spurred by the inflation of the 1970s, which, Chapter 8 Kidneys for Sale combined with California's rapid population growth, pushed housing prices and rents to record levels. In 1979, the city of Santa Monica (where 80 percent of the residents were renters) ordered that rents be rolled back to the levels of the year before and stipulated that future rents could go up by only two-thirds as Chapter 9 Are We Running Out of Water? much as any increase in the overall price level. In both New York and Santa Monica, the objective of rent controls has been to keep rents below the levels that would be observed in freely competitive markets. Achieving this goal required that these cities impose extensive regulations to prevent both landlord and Chapter 10 Bankrupt Landlords, from Sea to Shining Sea tenant from evading the controls-regulations that are costly to enforce and that distort the normal operation of the market. A Brief History of Rent Controls It is worth noting that the rent-control systems in New York and Santa Monica are slowly yielding to decontrol. For a number of years, many apartments in New York have been subject to only "rent stabilization" regulations, which are somewhat less stringent than absolute rent controls. In addition, New York AA The Adverse Effects of Rent Controls apartments renting for over $2,700 per month are deregulated when a lease ends. In Santa Monica, the state of California eventually mandated that rent for newly vacant apartments could increase. Even so, in both cities, much of the rental market is dominated by some form of rent controls. Accordingly, in this chapter we focus on the consequences of those controls. Efforts to Evade Controls Bureaucracies Flourish The Losers from Rent Controls Damage Around the World Discussion Questions Part Three Labor Markets > Chapter 11 Das Kapital in the Twenty-First Century Chapter 12 (Why) Are Women Paid Less? Hide Chapter 13 The Effects of the Minimum Wage Type here to search O 65 F Mostly cloudy ~ 9 - = (() 7:55 PM 10/6/2021