Rent control and time

Welp, bring on the supply-splaining:


Because I am talking demand-side today and if there is one policy that supply-siders love to lecture me on other than ‘splaining the micro I teach in the first 3 weeks of my freshman class, it is rent control.

Rent control strikes me as one of those policies that could be enormously helpful or harmful, depending on its design. Most rent control policies are well-intended but badly designed; they get passed in perpetuity, and I think most public sector economists agree that price controls are useful at times in specific instances, but permanent price controls just aren’t a sustainable idea–people find ways around them, there’s underhanded behavior instead of just market behavior, etc.

But temporary price controls can be very useful, indeed. I have long believed UC Davis’ Dan Sperling right in advocating for a price floor for gasoline. That one can be permanent as far as I am concerned; it is a technology-forcing measure that tries to move people off a polluting power source to others.

Rent control, by contrast, should not be permanent. That doesn’t mean it should never happen. Now, maybe the politics are such that if you give people rent control for a bit, it becomes permanent. I don’t buy that, but it’s worth mentioning, though.

Here are the general, valid complaints about rent control:

1. It’s inflexible, and thus it keeps renters stuck in units when they might be better off moving to locations that would be more welfare-enhancing;

2. Ditto, and thus it keeps landlords from making improvements that are location-efficient;

3. Given time, renters age and often become affluent enough that they no longer need rental protection, which they still take anyway because they like the place and why not?

4. Ditto, inflexible, so that it sticks it to newcomers who would find the location welfare-enhancing, but they can’t live there because the units aren’t moving because of rent control.

I’m not going to get into the normative objectives from market ideologists; they will usually explain their position to anybody who doesn’t run away quickly enough, so they hardly need me to do that work.

What I wish people understood about the concerns renters have: most of those fears are short-term because people who have low-incomes often do not have the resources to invest long-term, nor do they have a lot of cushion to withstand short-term price shocks.

Buying them time and easing their transition would be a helpful thing.

1. Supply is medium- to long-term strategy for affordability*.

If one quarters’ building is enough to make rents drop, then the shortage in construction has been vastly over-estimated, and I don’t think it is. It takes time to finance, approve, and build new units, and even if filtering theories are right (not the asterisk), low-income renters are the last people served with filtering.

Now, with more market-rate units, etc, in theory the short-term price benefits should accrue to those down the market segments and reduce downward raiding.

2. Existing landlords can move quicker than most renters and most new suppliers.

In practice, though, any number of things may happen. Existing landlords, eyeing the rents being charged in the new units, jack up their rents believing that they are going to catch the gentrification wave as it comes it. And they may be right.

Now in theory, so many new units should come that landlords can’t do that–they will face too much competition from new units. But those units coming online happens, at the soonest, in 2+ years. Landlords have a lot of renters on month-to-month leases. Time advantage: landlord.

3. With urban population growth, filtering can take a long time, indeed, if it happens ever.

If we are adding new residents, many mays start at the bottom of the filtering process, but that may not be the case for many newcomers. More affluent newcomers can consume new units and slow the process for stabilizing rents on the supply side.

4. We need time to plan for those that the market never seems to get around to serving. We have people who are homeless because of shortage problems, undoubtedly, and short-term price shocks could make that problem worse. We don’t want that.

We want to be able to keep housing vulnerable people in housing in the short term to avoid worsening that problem. But we also have those who need permanent, supportive housing. The market doesn’t build for this group; it never has unless the public sector contracts for it. These are folks who were struggling long before the rapid urbanization and zoning combo left our cities undersupplied.

Getting a smart public housing plan off the ground will take a little.

With temporary rent control that allows for escalation to a yearly ceiling, I don’t see a ton of downside. If, as supply siders think, housing prices immediately react to new supply and competition forces landlords to keep their prices reasonable, then nobody need hit the ceiling or prompt the escalator. And the escalator can be designed to hold harmless long enough to allow renters to make moving arrangements even if local supply doesn’t ante up.

*I’m not convinced in global capital era that filtering theories are right. But I can pretend they are for the sake of argument.

No, I did not cancel my NYT subscription because “I can’t stand views different from mine”

Ever since the New York Times did laughably dumb thing that we “edumacated people are supposed to pay to consume because….It’s New York! It’s the Times!” #15,021,818 of running various “Nazis aren’t so bad” articles (yeah, this one is the most explicit, but virtually all the let’s understaaaaaand Trumpsters boil down to the same damn thing), a number of people I follow took social media to say they were cancelling their subscription only to get lectured on how the NYT isn’t their “safe space” and “learn to deal with civil society and disagreement”, etc.

Bitch, please.

I cancelled my subscription to the NYT before it got to “let’s normalize the Nazi” which the NYT defend with “it’s reporting on reality” like somehow, all of us are so damn stupid we thought, prior to the New York Times soppy reporting about Nazi Tony and his girlfriend, that Nazis had horns and tails and only lived in caves in Arkansas.

Why did I cancel? Because here is what I got with the Op-Ed page from the Financial Times over the past few days:

–a piece on the importance and difficulties of the South African presidential election (not great, but still more informative than David Brooks inanities about ham)

–a piece about the ideological wedges appearing even among hard Brexiters, nicely done, by a writer I almost never agree with but at least I don’t feel like just made myself stupider having spent the time to read him (Gideon Rachman)

–Martin Wolf on the stock market correction

–a long piece about how high tech firms are helping fossil fuel companies remain competitive with renewables.

From Le Monde:

#MosqueMeToo : des musulmanes dénoncent des agressions sexuelles subies à La Mecque

(A piece about women coming forward about sexual abuse in their religious communities and the response from leaders)

Afrique du Sud : le centenaire de Mandela, terni par la crise politique
More on the South African presidential election.

I could go on with what I from get from German and Israeli papers, but I think the point is made. Did y’all know Merkel finally pulled together a coalition? I did!

In the run-up to the 2016 election, the dudes at the NYT seemed pretty obsessed with Hillary’s emails, long after I had read my fill of the story for the months of prior coverage.

Then I had to sit through well-intended but often silly commentary from Frank Bruni as he went across the country trying to sell us “Trump voters are complicated, complex human beings with nuanced views on the world” stories that always read like this:

Bruni: It’s important to BJ Cockle that people understand she’s not a racist.

BJ Cockle: I just don’t think it’s right for that Mooslem president to give out free phones to the blacks. And I just don’t think a woman president is a good idea. What about her children?

I just don’t need to pay for that. My forehead and keyboard and can’t withstand any more of that.

To be sure, there are some excellent reporters at the New York Times, reporters at the very, very top of their games doing the best reporting found anywhere.

But those stories get picked up by the AP and I can read them in the LA Times without paying for columnists to write some version this about my beloved home after they spend 30 minutes in a layover at LAX:

Los Angeles, a tiny inconsequential cesspool of traffic and d-list actors, exists in a hopeless cultural vacuum of its own making because it’s not New York, is where people live lives of utter desperation, unlike the love and conviviality experienced on a NY subway, so that Angelenos resemble not so much Americans but the eloi and morlocks of Wells’ dystopian future living today among us. (insert all us’s being impressed by that obscure lit-rary reference!). Do these people even read, yo?

So yeah: I don’t need to pay for this garbage just to find the bits of excellent reporting that remain. I didn’t cancel to protect my delicate widdle political feelers: I canceled because there are better newspapers that help me understand the whole world, treat other countries like their politics and struggles and matter more than David Brooks’ feelings about lunch meat, and where cities other than New York get discussed in terms other than hackneyed navel-gazing.

Where, in other words, I get more for my dollars. Sorry, not sorry. Maybe the Times will come back from the editorial morass it’s gotten itself in, and if so, I’ll be happy to think about putting it back into my media routine. Until then, no.

If the NYT remains worth it to you, good on ya. Read on and subscribe on with my well wishes.

“Now is not the time…” to be conservative…more thoughts on SB827 and Prop 13

So predictably, the entire BoyInternet thinks I’m sooooooooo stupid for thinking that value capture could everrrrrrrr happen in California because Prop 13 and doesn’t this stupid woman realize her proposal modifies Prop 13 and JEEEZ WOMAN YOU CAN’T USE SB827 TO CREATE A COMMUNIST STATE YA KNOW. (Because that’s totally an accurate account of what I suggested.)

The only reason y’all got your unders in a bunch is that I’m a woman who has the nerve to suggest that she might have policy ideas that might work better than what THE MENZ have derived. I said over and over again that I support 827, it’s better than nothing, etc. I didn’t go into Prop 13 problems because my value capture post was already long, and it was “wish list” post anyway.

OHHHHHH and then one of my very, very junior co-authors, a dude, tried to lecture me about my “tone.” You are lucky, friend, that I am a nice lady.


Screenshot 2018 02 11 21 05 55

Perhaps the most interesting, but frustrating, comments came from the bros who lectured me that “Now is NOT the time to pursue Prop 13 reform…”

Um…..why exactly NOT? And if not now, when, exactly? Who died and left you arbiter of what now is the time for?

I get why Senator Weiner is going for what he thinks is a possible legislative win. I’ve been told he “supports Prop 13 reform.” But apparently not enough to stick his neck out. I get his approach here; he’s a junior legislator who is discovering the lay of the land in Sacramento, and he doesn’t want to overreach.

But I don’t understand why the rest of us are being such conservative little ninnies about it. The Democrats have the assembly, the California Republicans still seem to be in disarray, and THIS HERE GUY IS a “GIVES ZERO FIGS ABOUT RE-ELECTION” GOVERNOR:


When exactly will political conditions be “right” if not right about now? Californians elect themselves a Republican governor with unfortunate regularity, and we could have one quite soon. At some point, California Republicans are going to get themselves organized again. At least two of our likeliest D candidates for guv’nor are going to be running for President from the California governor’s mansion (do we have one? I’ve never checked) if elected, and the last thing they want to be associated with is a tax change.

Proposition 13 is a policy that undermines every single gain we make in environmental policy and land use reform, and this includes SB827.

Imagine you have a bucket of good policy results…and as you pass more good policies…that bucket starts to fill up. But alas, there’s a pretty big hole in that bucket that diminishes the ability of each and every good policy change, like SB827, to deliver what we need it to.

That big hole is Prop 13. We’d be better off phasing it out even if we chose a really long timeline, like 30 years, to soften the blow to individual homeowners.

As long as Californians expect to get rich from their housing, our infill strategies are going to be both a) a struggle and b) less impactful than they could be.

And perhaps most of all in transit value capture: y’all infill advocates TAKE TRANSIT FOR GRANTED IN WAYS YOU SHOULD NOT. Transit agencies across the United States are in, for all practical purposes, worse financial shape then they have been in for quite some time. For all our Measures M and R, all we do when we expand these systems is put Metro on the hook for operating service that loses money with every vehicle they put on the road.

And yes, while our new investments are supposed to yield us new patrons, even New York does not have enough passengers to clear their costs. If they can’t with their passenger loads, it’s good evidence that the rest of us US systems aren’t going to, either.

Y’all just assume that T in your TOD is going to be there, operating, for when all the new families come to move into your infill. Well, ok, but the T in the TOD right now is not providing service that is good enough to really change the game, and it won’t get there if we can’t increase frequencies across the board. That takes money, and we don’t have it. And we don’t have a lot of choices for getting it.

All of the major metros where we want TOD already have relatively high sale tax burdens, so that way may be closed off to us. We can’t keep pouring money into capital improvements and getting tiny margins back unless something changes about how we fund transit.

So yeah, part of my rationale behind a land value tax reform via value capture is that it’s way more just, and it gets rid of a dumb policy that hamstrings everything in California from our schools to our climate policies.

But the other reason for value capture is that as a transit policy person, I WANT THE MONEEEEEEEEEEEEEEEEEY FOR TRANSIT. The rest of y’all should, too.

We’ve kicked the can down the road far too long on both transit finance and reforming Prop 13. We should do as much as we can to dismantle the latter whenever we have political opportunities to try it. IF IT’S JUST IMPOSSIBLE to recoup value from land around stations, then help me figure something else out that isn’t a sales tax.

Should Weiner be the one taking the political risk? That’s his lookout; he seems to know the score.

But SOMEBODY has to, and we should be thinking about exactly when Prop 13 reform happens, and that has to be a better answer than “after the apocalypse when we’ve devolved to cannibalistic tribes grilling our peers over bonfires on the centerline of the 405”–also known as “not now” and “later.”

What I’d fix about SB827, aka that white paper has sooooooo been written already

The “takes the cake” response to yesterday’s post is this one:

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This is “Shut up, bitch” politics 101. Lisa, you are speaking about the wrong things in the wrong way. Lemme splain how you best participate in policy, lil lady.

Holy crap, what’s it like to get up in the morning assuming you are entitled to tell a woman as accomplished and as intelligent as I am what I may say and how to say it?

Look, nobody is out to ruin SB827. I’m glad you think I’m that important, but um, no.

I had what I consider to be an important point to make about how difficult policy design is when it comes to really getting money and benefits to flow into the hands of impoverished renters. And how, if policymakers are not really, really careful, the policy process works to screw over poor people even that’s the last thing people crafting and advocating for a policy intend. These problems apply to SB827.

So let’s get this through some heads: I have more than earned the right to write about urban policy even if my every blog post isn’t a perfect roadmap that spoonfeeds people policy solutions. I’m not a free consultant.The material on this blog is offered without charge and without advertising; the public does not pay my salary even since I work at private university.

Here’s how you respond if you don’t agree with my point. “Hey, I don’t think you’re right on this one. I think Weiner & Co really has a handle on it.”

Ta-da! Disagreement that treats me like an equal instead of misguided girl speaking when she should be spoken to.

So I could write a white paper, but it would be a little redundant because Henry George already wrote the book in 1879: Progress and Poverty. You can read it all here.

If 18th century prose is not to your taste (understandably), some super-smart UCLA professors spelled it out in the LA Times Op-Ed page not that long ago (July 2017, actually). It was circulated widely and is generally approved of by all the very smart people who splain things to me. What to do is *right there* spelled out in 750 words.

We have been talking about value capture strategies around train stations in California since Christ was a carpenter. At least since I was in grad school, which was right after the Lincoln assassination.

You want loose supply? We can give you looser supply! It would just be nice if the regulatory change and transit investment combo weren’t just windfalls to landowners here, and we could split the nice land value bumps that SB827 will bring between developers and governments so that government could use its damn power to boost the purchasing power of poor people for housing instead of just lobbing softball economic gains to landowners who already have lots.

I have no heartburn when developers develop developments and make money. That’s their job!

But pointing out when public policy is doing dumb, unfair things is, in fact, my job.

Thus I do have heartburn when in Los Angeles alone we are spending billions and billions of dollars to make places extra-nice and extra-profitable to develop with public investments in transit (let alone HSR) with taxpayers recouping fractions of what we put in because of the way we deal with property taxation in this state.

Value capture as a strategy goes like this:

1. Governments build wonderful amenities like train stations that add value, often gobs, to land–value that landowners get even though they themselves have not done really anything to earn it, such as by actually improving the property themselves. We spent $900 mill on the Expo Line alone. It’s a lovely train! It has made land more valuable along Expo. Let’s get part of that $900 million back! When we upzone in high land value areas like Santa Monica, we can recoup some of our investment. Whee!

2. Value capture is just what it sounds like: governments capture either all or part of the value of the publicimprovement in the land value (but the not the property value) so that developers can still improve the property (and still gain on their investments), but the government recoups some revenue from the investment it has made that got capitalized in the value of the land.

When we do not do that, our public investments in things like transit—especially when combined with nice plans for allowing more intensive land development, like SB827, near transit—become nice, multi-billon dollar windfalls for landowners.

A great, big, fat hand-out of unearned land value windfall.

But, where, o where, could we ever find revenues to expand renter support programs, like vouchers, for California renters? There’s just no money anywhere!e

Yeah, there’s money there, it’s just going to private landowners. Again and again and again and again. We’ve done it with all our metro rail systems, and we will race to do another nice land value giveaway with high speed rail, too.

So the cycle goes something like this: California public policy makes owning land a cash machine for owners, and then we get mad at people for having entrenched interests in their property values, since our policies do not distinguish between land value and building value.

SOOOOOOoo is there any info on the value capture strategy of which you speak?

Yes! Yes there is! It has been bigily studied and described! It’s been implemented I places. It’s been evaluated.

There’s this big huge lineup of reports from researchers at the University of Minnesota.

There’s this discussion The Man Himself David Levinson writing for CityLab.

This friendly brief from APTA!

This friendly informer from the High Speed Rail Advocacy folks.

This nice summary paper from an open access journal.

This nifty book from the Transportation Research Board (a secret Illuminati organization if there ever was one)

This awesome report from Brookings.

This cool study on TOD Value Capture in Massachusetts.

This little blurb from Smart Growth California folks at SCAG who have a really helpful discussion of tools that may be used in California!

This fantastic report from the Lincoln Land Institute. That has a GREAT submission from Mr. Windfalls for Wipeouts Himself, Dean J. Misczynski, who fist published (brilliantly) about this particular topic in 1978.

From FHWA here.

We might, for example, just tweak this approach a bit.

Some private consultants have been working on this VERY IDEA in affordable housing!

OH BOY OH BOY IT’S GOT ITS OWN WIKIPEDIA PAGE!! (A little light; David L, go fix it. )

New York City is eyeballing it.

And of course, the very nice VTPI Report from Jeffery J. Smith and Thomas A. Gihring, which is a GIGANTICALLY LARGE annotated bibliography.

So may I skip the white paper, boss?

Here’s the specific fix, spelled out:

Since we are with BS827 setting up special districts around transit stations anyway, we should set up them up special assessment districts, use the transit-value and up-zone value in land appreciation to derive revenues to put into a fund for: a) rental vouchers; b) school districts with new student need from the new developments and c) transit operations and support. Stations are expensive. They should be far more self-financing than they are. This is one way to do it.

I assume that Senator Weiner has smart legislative staffers who know what value capture is. That it’s not in this legislation, explicitly right now instead of TBD, says something to me, and I don’t like what it says. It says to me our legislature is going to let the value capture ship sail away on us–again–and with it revenues the state or localities could have had to do nice things.

If you don’t like that I don’t like SB827 with these provisions, in the words of Steve Martin: Welll exchuuuuuuuuuuuse me.

Now THAT cat is out of the bag, let me repeat my point from yesterday, which is about the policy process, and NOT about Weiner, YIMBYs, or any specific policy, which I am going to repeat because if the value capture part of this wasn’t obvious to you before I spelled it out, then you are NOT enough of an expert on the policy process and injustice to tell me what I may and may not post in the name of appropriateness.

When you treat the concerns of impoverished people in the “TBD” category of legislation, like so:

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It is very likely that the sausage factory will leave their concerns on the curb, even if your nice, well-intended, progressive bill writer says that won’t happen. Individuals don’t control politics enough for their “I’ve got this” to be a bankable claim.

If you pass the supply components of this rule without value capture (to happen “later”) and without a commitment of those funds for specific people (not general funds), you lose leverage over development (that’s the point, fine, but don’t give away the store), and you set the stage for fighting over affordable units project by project (again, with less leverage, so it’s a both headache for citied and developers AND less effective), instead of a) capturing the value we are due and b) just letting market rates fall where they fall andthen c) using captured revenues to provide income support directly for renters who can’t pay market rates without subsidy. Yes, landlords are likely to capture that increment in rent, but the renter gets to be housed in the process, which I thought was the point here, so I’m in.

And you don’t have to futz with rent control.

And, btw, landowners near stations will have much less incentive to convert their properties if we don’t do value capture on land appreciation, so the policy also has a strong efficiency argument.

Nope, it’s not an easy fix. Landowners love the sugar they get. But they shouldn’t get as much as they do, and they shouldn’t get it at the expense of their neighbors who have contributed to the sale taxes and gas taxes that went into building the transit in the first place if those same neighbors are not making enough $$$$ to be able to stay near transit without income support.

And it would help if Americans didn’t purposefully suck at public housing.

That’s what I’d fix.