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June 2, 2008

LAist at the Polls: Vote NO on Proposition 98

Vote No on Prop 98Though it’s not as high profile as the magical adventures we had on Super Tuesday, there’s an election tomorrow and it’s of critical importance for everyone in the State who isn’t a landlord or a massive corporate entity. In addition to various local elections, there are two propositions on the ballot tomorrow competing for your vote on seemingly the same issue - Prop 98 and Prop 99.

Both propositions aim to amend Eminent Domain law in the state of California, ostensibly to prevent abuses of ED such as those highlighted in the 2005 US Supreme Court Case Kelo Vs. The City of New London. Such reforms are arguably long overdue. However, the similarity of the propositions and brazen mendacity on the part of certain interests make tomorrow's vote critical. Neither proposition adequately addresses the concerns of ED, a problem for those of us serious about preventing Kelo style overreach, but while one of them doesn't go quite far enough, the other is nothing more than a malicious scheme to destroy renter's rights and hasten California's transition to a third world style economy. It's a brazen attack on the middle and working class of California's cities shamefully disguised as an attempt to strengthen their rights.

To put it bluntly, the specific intent of Proposition 98 is to abolish Rent Control in the state of California.

Vote no.

A more detailed (and pedantic) discussion after the jump.

Some of you may not be convinced that rent control is worth preserving. You're wrong, but that doesn't mean you're stupid. So consider that it isn't just rent control at stake - a victory for prop 98 will also place numerous other renter’s protections in serious, possibly terminal jeopardy.

Here, in full, are the provisions of Proposition 98:

1) Bars state and local governments from taking or damaging private property for private uses.

2) Prohibits rent control and similar measures. (Emphasis mine.)

3) Prohibits deference to government in takings cases.

4) Defines “just compensation.”

5) Requires an award of attorneys fees and costs if a property owner obtains a judgment for more than the amount offered by the government.

6) Requires government to offer to original owner of condemned property the right to repurchase property at condemned price when property is put to substantially different use than was publicly stated.[4]

It all seems fairly innocuous, but it’s the second clause of provision 2 that ought to have you breaking out in cold sweats. Note that it bans not only Rent Control, but also “similar” laws. Naturally, the concept of “similar” is left cleverly undefined and it will almost certainly require multiple lawsuits to fully clarify what this means. Proponents, if they're smart, are probably betting that the courts will make as broad an interpretation as possible. We at LAist cannot pretend to accurately predict what that clarification will entail but thanks to the internet, we can make some an educated guesses – It doesn't take a lawyer to deduce that arguably “similar” measures might include:

A) The rules that govern the eviction process (including the requirement of advance notification when the owner wishes to move into a residence.)

B) The requirement that a tenant cannot be evicted from a rent controlled property unless the owner intended to occupy the residence – in other words, they can’t kick you out just because they could make more money with someone else.

C) The requirement that landlords must notify you of changes they intend to make to your dwelling, especially if such changes (like foundation repair) will cause hardship or severe inconvenience to the tenant.

D) The requirement that evicted tenants be provided with a relocation fee.

Of course, bear in mind that with rent control gone, your landlord can raise your rent to whatever the going market rate happens to be, which of course is determined by forces over which tenants have absolutely no control. Even after the Real Estate bubble imploded exactly as every single critic of flipping and related practices predicted, the housing market remains largely unregulated. Look forward to future bubbles that will probably end just as well as this one did.

Neat trick huh?

Opponents of Prop 98 are recommending that you vote Prop 99 instead. While it's arguable that prop 99 doesn't go far enough in reigning in potential ED abuse, it does pretty well, but it also has the added effect of rendering prop 98 moot:

Proposition 98 includes a provision that would nullify any other attempts to amend Article I, Section 19 of the California Constitution that appear on the same ballot. Such a provision is common when multiple ballot items on the same subject are on the same ballot. The so-called "poison pill provision" blocks conflicting pieces of law when one measure has more votes than the other. Only Proposition 98 is affected by this provision: if Proposition 99 wins more affirmative votes than Proposition 98, then only Proposition 99 will go into effect, not Proposition 98.

Finally, for those of you who aren't fully convinced, The Western Center on Law and Poverty has issued the following statement via e-mail:

[We] seldom take a position on ballot propositions. However, Proposition 98 contains dangerous amendments to the state constitution that require us to oppose it. Proposition 98 is billed as eminent domain reform. In reality, Proposition 98 would go far beyond eminent domain by eliminating local residential and mobilehome rent-stabilization laws (once the existing tenants move). Broadly and vaguely drafted, Proposition 98 would likely also invalidate other land use regulations, tenant protections, and affordable housing requirements. We see Proposition 98 as a very serious threat, jeopardizing all of our affordable housing work. Proposition 99, also on the June ballot, would prevent government from taking a home to transfer to a private developer. This was the situation in the Kelo case in 2005 that sparked eminent domain reform measures throughout the country. Western Center supports this modest constitutional change. Our housing team continues our work in the legislative and legal arenas to ensure that redevelopment activities do not unfairly take the property of our clients, both homeowners and renters, without adequate purpose or compensation. We advocate a No vote on Prop. 98, and a Yes vote on Prop. 99.

Ordinarily, there's a tendency to want to state that each side has merit, but this is the rare instance when there is clearly a worst case scenario. Whether you're a home owner or a renter, the clear choice is the one that defends all of us, not just landlords and speculators. Vote no on 98, and preserve your right to live in city limits.

Photo: P1010019.JPG by clubjuggler via Flikr.

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Comments (13) [rss]

Well written. Thanks.

 

Hey, I appreciate you guys doing this piece. So far, one of the best that I have seen yet summing the various bits of this silly little piece of legislation.

Another thing about 98 is that it is so poorly written that one could argue that it invalidates itself. I wrote a piece on my site showing how:

http://tinyurl.com/3jfofo

Anyways, thanks again and all of y'all get out there and vote.

 

For the Los Angeles County Bar Assoc's judicial recommendations...

http://www.lacba.org/showpage.cfm?pageid=9390

 

Great job, Lincoln. There's no hanging proposition you're not afraid of. NO!

 

From the LA Times:
http://opinion.latimes.com/opinionla/2008/05/rent-control-ma.html

Pepperdine economics professor Gary M. Galles fired the first shot, writing in a letter published May 14 that there were "serious problems" with the Times' arguments for rent control:

The "serious debate" about rent control...is long since over. The adverse social consequences it produces -- including reduced apartment construction, deteriorating housing, shortages, increased discrimination and landlord-tenant hostility -- are among the most universally accepted propositions among economists. And they exist because rent control is theft.

Rent control is theft because it removes landlords' rights to accept better rental offers, taking a large portion of their property values (shown in plummeting market values when it is enacted) and giving it to current tenants (which is why those tenants almost never leave).

That is also why rent control issues are not best decided by voters. When a majority of voters in a jurisdiction (current renters) take the property of a minority (landlords), it is no different than if they held up those landlords at gunpoint each month -- except that would land them in jail.

The next week The Times received and published this pointed (and brave) response from Larry Nathenson, one of Galles' students.

Rent control is theft? Like holding up landlords at gunpoint? Is professor Gary M. Galles serious?

Rent control would be theft only if landlords had a right to a specific amount of rental income. But in the course I am currently taking with Galles at UCLA Extension, he has taught me that there is no fixed fair price for anything.

Suppose a developer builds a large apartment complex in anticipation of population growth that doesn't occur. Or suppose a factory closes and some of the workers move out of town. Either scenario would lead to an oversupply of rental housing and lower rents. Have the developer and factory owner stolen from local landlords? Of course not. But the effect of such market fluctuations on landlords' income is the same as rent control, more so than a holdup at gunpoint.

Rent control may or may not be bad policy, but it is not theft. Economics is a science whose findings may help us decide political issues, but this sort of hyperbole is not helpful.

We received an immediate retort from Galles:

Larry Nathenson claims rent control isn’t theft because landlords don’t have a right to specific amount of rent and because unexpected market conditions that lower rent al offers is not theft. While true, those facts do nothing to refute that rent control is theft.

While landlords do not have a right to a specific amount of rent, they do have a right to accept what tenants would willingly offer for their units. Market conditions that lower rents are not theft, because landlords’ property rights are not violated. But rent control, which forcibly lowers rents below what willing tenants would offer, takes away that right and much of the value of landlords’ properties in the process. That is theft, enforced by government guns rather than robbers’ guns. Worse, it directly violates the central role of government—the protection of citizens’ existing property rights—as Locke explained long ago, echoed by America’s founders.

There is no difference in results between tenants robbing their landlords of $500 they already have each month and tenants voting themselves $500 monthly rent reductions, except rent control takes the money before landlords get it. But taking the value of someone’s property before they receive it rather than after does not transform what we would all recognize as theft into something legitimate, unless someone is determined not to recognize their equivalence.


 

Just because the rent is held down doesn't mean the housing problem is fixed. The market is still valuing the properties for their actual value. If rent doesn't keep up, it just means that someone can *never* leave their apartment for another apartment at the market rate because they can't afford it. So it reduces everyone's social mobility.

I think it'd be best to get rid of rent control, thus causing wages to go up appropriately - employers need employees, and they'll have no choice but to pay those employees enough to live close enough to work. And if wages go up, and rent tracks realistically with the property values, some of these renters (ahem, me) can eventually achieve the dream of buying their own place. All rent control assures is that people will be stuck where they are.

 

Amcallis, what you say makes no sense. I'm not trying to be mean, but please understand, respectfully, that what you're saying is just nonsense. Like claiming that getting rid of the minimum wage will actually increase overall wages, or that cutting taxes on the rich actually increases government revenues. or that a flat tax would affect all income groups equally.

Not trying to insult you, I promise. Just, what you say is the literal definition of "non sequitor."

But to address one point, the market is most definitely goddmaned not valuing the properties for their actual value. Unless somehow you can explain why 1 and 2 bedroom houses in a neighborhood suffering from a dangerous gang war are "worth" 500 to 800 thousand apiece. No, the market is selling things at "whatever people who want to turn a fast buck are willing to pay." Which isn't sane or reasonable or safe.

The fact is, the market is an unregulated corrupt cesspool and most people shouldn't have to suffer because artifically created demand is pushing prices up beyond what anyone but the rich or foolish are willing to pay.

 

am; "I think it'd be best to get rid of rent control, thus causing wages to go up appropriately -"

And everything else wiith it. Hope you don't mind paying $30 for your next latte at Starfucked.

 

Not only that JRB, but bear in mind that the price of everything else won't go up - mysteriously, rich people don't like paying 30 bucks for coffee any more than the rest of us. They want cheap coffee and they want cheap employees.

What is more likely is what's happened to SF - everyone who Rich or willing to live in a closet with 3 other people have been pushed increasingly out of the city. Even police officers and other essential workers can no longer afford to live in the city they serve.

 

Rent control simply creates two social castes. One casts dependent on the rent control who lags behind the economy, and home owners who advance with the economy. I don't want my fellow citizens to languish under rent control.

My previous post stands: this isn't a socialist country. I don't want handouts, but as soon as you start giving handouts, everyone wants them, and both the job market and the housing market is destroyed.

JRB: what's the problem with $30 coffee? We had $0.05 coffee back in the 50's. That's how economies work. Controlled inflation is healthy.

Ross: When employers can't find people to work for them, compensation goes up. Proof positive in Tokyo - people can't afford to live where the jobs are, so many employers provide their employees with nearby housing assistance as part of their benefits package. Don't like that situation? Work in a smaller city or where land isn't so scarce.

 

amcallis, i have to go with ross and the others on this one. i don't really see evidence supporting what you are saying.

 

"JRB: what's the problem with $30 coffee?"

Nothing if you can afford it I suppose.

What if you work in a price competitive business with big box stores taking away your customers? What if your boss has to keep costs down in order to compete with that kind of competition?

Then your pay can't go up because what he charges for his products can't go up.

So what's the solution Ami? Just let the big fish eat the little fish until there are no little fish? What happens to the Mom and Pop business that has been there to serve the community for 50 years? What happens to the loyal employees who have worked there for 25-30 years?

You must be a prof of economics like this Gary M. Galles mentioned above, because you know nothing about real economics.

 
The adverse social consequences it produces -- including reduced apartment construction, deteriorating housing, shortages, increased discrimination and landlord-tenant hostility

These are a few criticisms of rent control not addressed in any of the responses.

As someone who lives in a rent controlled home, I would prefer rent control abolished. It took way too long and too many hoops to get a place to live. I'd rather pay market rate and not be discriminated against for reasons beyond my control.

 
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