Friday, December 6, 2013

The rent is too damn high!

One of the growing pains associated with getting wealthier is that things change in value and thereby the dynamics of tradeoffs change in turn. Here is a great example of this phenomenon. As I heard this story driving into work the other morning, I was struck by how poor the reasoning was for those who are "fighting back".

The essentials in this story are indicative of something happening in many places. San Francisco is a very desirable place to be. It is not just my opinion that it is awesome. As evidenced by the story, it is many people’s opinion and those opinions are strong (as measured by the willingness to put lots of their money behind that opinion). As the San Francisco desirability has grown, the value of real estate there has grown too. Ah, but there is the rub. Not everyone benefits from that increase in value. Now that new additional people and their wallets have arrived, the current residents who were enjoying it for less cost than what it is worth today are screaming, "There goes the neighborhood!"

It has always been the case that a rising value of real estate meant that the use of that real estate would change over time, but for some reason it has become a popular media topic. There are a few of ironies in these stories that don't get adequately reported if they are mentioned at all:

  1. A large part of why the cost of living rises quite rapidly as popularity rises in many highly desirable places like San Francisco is because of legal impediments to growth and development. The same government that creates the zoning laws et al. that limit development is the government those "fighting back" would like to see prevent the cost from rising.
  2. Dovetailing with that is the irony that rent-controlled living, artificially shielding renters from the full cost of living, discourages real estate development that would then be subject to rent control. A viscous cycle emerges of artificial scarcity begetting higher costs and hence higher value for the cost shielded (rent-controlled) space.
  3. As evidenced by some of the comments in the written piece, there seems to be a huge intolerance for change (and those bringing the change) by those who espouse tolerance as a virtue of the current neighborhood.

But here is what really struck me—the poor reasoning of those "fighting back". I put fighting back into quotes because the use of it in the reporting is pejorative towards those being fought against. Those "fighting back" (the renters) actually are attacking those who were already being disadvantaged through rent control. My points are the following:

  1. It sucks to see things around you change in ways that you don't desire. Part of that in this story is the composition of the neighborhood. But I think that is a sideline issue and a distraction. The renters would not be bringing it up if it did not put a more high-brow spin on the real fight—namely, the desire to continue to get something for less than the full cost at someone else’s expense. Nevertheless, let’s take seriously the consideration that change isn't always beneficial to all involved. But that is a fact of life. Don't be mad at those changing the neighborhood. Be glad to live in a place that largely allows change.
  2. No one said you deserve to live in the same place for the same cost for as long as you like. That is a promise no one can reasonably keep. Don't be mad that the real estate owners have found a "loophole" to evict the rent-controlled tenants. Be glad to have benefitted at the owner’s expense up until now.
  3. You are the RENTER. You chose to RENT the place you lived in, which meant you weren't responsible for all the risks and expense associated with being an OWNER. Now that the OWNER, the one who is entitled to the property, has seen a return potential for the risk he bore, he has the natural right to realize that return. Don't be mad that the OWNER has new options. Be glad you didn't have to bear costs and risks you chose to avoid.

Yes, this change isn't working out very well for those who were benefiting from rent control. And I do indeed sympathize with the difficulties and emotional stress and loss that all come from having to move. But think about it this way. Suppose San Francisco had instead grown to be very undesirable. Suppose rental rates had plummeted. Suppose that come renewal time those in rent-controlled apartments either had cheaper rent options in different apartments or simply wanted to leave San Francisco altogether. Would it be in any way right to force the renters to renew the now more expensive rent-controlled lease and to force those who wanted to leave to stay in San Francisco?

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