Column by Paul Bonneau.
Exclusive to STR
Every now and then my wife and I get the itch to go into property rental. For example, we look at real estate listings on the Oregon Coast. A duplex would be nice, because we could take one unit for ourselves, and rent the other out. The renter could help watch our place while we were not around, and we might even work out a deal for him to do lawn mowing and other maintenance. A nice, voluntary, mutual-benefit kind of situation.
But then I come to my senses, because I look at a website describing Oregon rental protection laws [4] (keep in mind this site is a distillation of the law, simplified as much as possible (!) so non-lawyers can understand it).
My favorite (as in, “most absurd”) mandate on that site, is a prohibition on discriminating against a prospective renter if “you have won an eviction case brought by a former landlord.” Heaven forbid that one should use past behavior in an individual as a predictor of future behavior!
It is interesting to speculate who makes out in such a regime.
The first and most obvious group is the legal profession. Lawyers, judges and legal bureaucrats clearly make out like bandits, with money flowing from the pockets of renters and landlords alike, to handle the disputes. And just look at all the juicy disputes created by this law. A landlord can be dragged into court for almost nothing. You’d better hire a lawyer to interface with your renters!
The next group that benefits are rental service companies. Some people do decide to rent out homes but simply give up trying to negotiate the legal minefields, and dump the whole mess on these companies. That is money out of these landlords’ pockets, and because that money comes from renters, it is money out of renters’ pockets too.
The next group that benefits are the “corporate landlords,” the big outfits with many units that have full-time legal and service departments. As usual, government regulations, far from being an impediment to such outfits, instead benefit them by driving their smaller competitors out of the market. This in turn restricts housing supply, which drives up rents and improves their bottom line. That extra rent money comes right out of renters’ pockets. No doubt these renters are pleased to be supporting these big corporations. It’s also usually the case that big corporations have sweetheart deals going with the regulators, who might look the other way when a renter complains about her unit. Corruption is really fun!
The next group that benefits are the irresponsible renters, the ones that cause all the problems, destroy rental units, and the like. They often go from one unit to the next, almost constantly under eviction orders (that take time to complete due to the legal intricacies). True, their costs still go up, for the previously-mentioned reasons, but they still find units to rent because landlords are not able to easily keep them out of their properties, due to the anti-discrimination laws. In a lot of cases these renters are on the dole anyway, and thus do not see the increased cost.
Just as there are beneficiaries and “rent-seekers,” there are also losers in this regime.
The most obvious ones are the decent, responsible renters. All the above factors drive up their costs of renting, substantially. The fact that small-time landlords are driven out of the market also drives up costs of units due to shrinking supply. Fixing units trashed by irresponsible renters drives up cost. All these costs eventually come out of the responsible renters’ pockets since the landlords who stay in the market simply pass them on to their renters. They certainly don’t eat the costs themselves; if they can’t make a profit, they are not going to stay in the business.
The next group that is screwed are the small-time landlords. These people are looking for a little extra money from a “granny flat” or extra bedroom, but it’s not going to happen if they have to negotiate the legal minefield. If they try to operate in the grey market and just ignore the law, it might work - depending on who they get for a renter. But even the process of finding a decent renter (e.g. a renter not “protected” by government) is fraught with risk because you might ask the wrong question or “discriminate” somehow. You don’t know until you start asking, a Catch 22. You might avoid this by renting to obvious illegal aliens, who are not quite as “protected”; but it’s probably a lot easier to stay out of the market and leave that granny flat empty. Who needs the headaches?
Finally, the overall business climate sees increased cost. Businesses need employees, many of whom will be renters. If rental costs go up due to the rental “protection” racket, then their cost of employment must go up as well. Their employees are not going to sleep in their cars, after all (although even that too is now happening in places like California). What a deal!
I am at a loss to understand why rental “protection” laws are popular. The rent-seeking groups are not a very large percentage of the population (although lawyers are vastly overrepresented in legislatures, which should give a clue). If there is anyone who should be able to understand the economics of renting, it should be the renters, who are a large group. Are they simply stupid, unable to understand the effects of these policies?
Perhaps so. “There is a reason they are renters.” Or maybe they just believe in the government religion, like almost everybody else. Call it “protection” and they are happy, even if it is the fox protecting the chicken coop. I suppose it simply does not occur to them, to put themselves in the landlord’s shoes for once - and indeed, the law actually prevents any honest interactions between renters and landlords.
Let’s say I build a duplex, moved into one side as a vacation home, and put the following ad in the paper for the other side:
For Rent: One half a duplex, price XXX on a monthly basis. No government employees or former government employees or anybody on the government dole need apply.
Let’s just imagine there is a government employee out there looking for a place to rent, and he sees my ad. Have I harmed him?
No. I have helped him. Why? When I do rent that unit out, another person (not a government employee) has been taken off the market. Thus the competition for the remaining units is reduced, and the government employee is put in a better position to get one, and to pay less for it when he does. Not only that, but he does not have to associate with someone (like myself) who looks down on his choice of employment. Even though I have “discriminated” against him (merely a euphemism for choosing someone else), I have benefited him.
Now, I understand there is a certain psychic benefit to sending the government attack dogs around to beat me up or threaten me, to make me remove my preferences from my ad. There might even be a fiscal incentive, perhaps a fine I must pay that ends up in his pocket.
But that is not going to happen. Why not? Because we are well-off enough to have choices. That’s why I was able to afford building the duplex in the first place. I am going to look at the law and say, “Fuck that!” I will just build a vacation home for myself, or buy an RV, and the renters can go rot in Hell as far as I’m concerned.
I understand a lot of renters probably do understand this situation; but I am sorry. I cannot help them. They, like the rest of us, will just have to wait for the coming Revolution to dump this renter-hating regime of parasites and scum into the dustbin of history.
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