Freeman

ARTICLE

Rent Control and the Penultimate Solution

Rent control is not so benign as its proponents would like us to believe it is.

JUNE 01, 1993 by SCOTT GARDNER

Mr. Gardner, a former landlord and proponent of free-market housing, is a newspaper columnist and author of Live Rent-Free for Life, a satirical exposé of the New York City rent-control system.

In January 1988 President Reagan indicated that he would ask Congress to end federal aid to cities that had enacted rent control laws. This request was motivated by newly completed studies showing that the destructiveness of rent regulation effectively nullified any benefits that might be bestowed on municipal economies by federal funds. Predictably, his proposal aroused such a storm of protest and recrimination that the President backed down, and since then no national politician has dared to challenge rent controls in any public forum.

I can readily understand why. For the past fifty years, rent control has been a sacred cow of statism. In fact, this law is considered by many to be among the crowning achievements of enlightened social legislation.

As a former owner of a small Manhattan townhouse with just six residential tenants, I had occasion to experience this “crowning achievement” first hand. During the ten years I owned this property, I was involved in thirty or forty administrative actions, which included assorted rent rollback hearings, illegal occupancy determinations, nonpayment proceedings, violation summonses, unauthorized subleases, and rent overcharge rulings, all precipitated by my tenants’ unlawful conduct.

In every case I found myself at the “enlightened” mercy of a group of judges, politicians, and bureaucrats who exhibited such biased and vindictive attitudes toward landlords that I began to feel as though I were a Jew in Nazi Germany.

At first I dismissed this feeling as an outrageous overreaction to the difficulties I was going through. Having had relatives who perished in the Holocaust, I tried to convince myself that this inappropriate comparison was the product of my own imagination. After doing some additional research, I came to the conclusion that this apparently innocuous law called rent control is not so benign as its proponents would like us to believe it is.

While there are obviously many differences between rent control and Naziism, both systems display similarities too numerous to ignore. The sad truth is that when rent control’s rhetoric of humanitarianism is peeled away, underneath is a political philosophy ominously similar to fascism.

I am aware that in today’s entitlement-oriented society, there is a great resistance on the part of the social liberal community to see rent control in any but the most humanitarian light, claiming it provides a measure of protection for the poor and the downtrodden. Naziism initially was also seen as a great benefactor of the poor by many observers both inside and outside Germany.

Long before Hitler embarked on his program of mass extermination, Nazi discrimination and restrictions against the Jews were primarily economic in nature: expulsion from the professions, confiscation and destruction of commercial property, extortion of money for ransom and exit permits. To avoid trivializing the Holocaust and invoking visions of Auschwitz, I therefore limit my comparison of rent control with the early treatment of the Jews at the very beginning of the Nazi regime.

The analogy between rent control and Naziism starts with the disturbing fact that while it is unfortunate for people to be antagonistic toward landlords (or Jews as the case may be), it is extremely dangerous to have these prejudices mandated by government, codified by law, and politically enforced.

Rent control laws that have been entrenched in communities like New York City, Berkeley, and Cambridge implicitly assume all landlords are greedy scoundrels and need to be disciplined and punished for exploitation of their tenants (who are all paragons of virtue in desperate need of protection against such monsters). By singling out landlords for such “special” treatment—and making it the law—rent control’s similarity to the Nazi policy of discrimination against Jews becomes readily apparent.

Rent control is based on a denial of the notion of equality before the law. For example, in New York City, any and all statements by tenants are automatically accepted at face value as true, while every allegation by a landlord must be accompanied by documented proof. While there are dozens of official complaint forms, telephone hotlines, and agencies dedicated to protecting tenants against their landlords, nothing similar is available for landlords’ protection against their tenants. While tenants are given free legal counsel by the city, landlords must assume these costs privately. And finally, the law specifically forbids tenants from entering into separate rental agreements with their landlords, thus abrogating property owners’ rights of voluntary contract. But this double standard before the law is just the tip of the iceberg.

While rent control stops short of confiscating a landlord’s property outright like the Nazis did to the Jews, this law does force landlords to subsidize their tenants regardless of whether the tenants need such support or whether the landlords can afford to give it.

The large numbers of wealthy tenants enjoying the benefits of rent control—including such luminaries as a former mayor of New York City, a city housing judge, a state assemblyman, the U.S. Ambassador to the United Nations, and an heiress to the MCA fortune—have been well documented in the press.

This irrational system lacks even the appearance of logic, which underlies welfare-state redistributionism that requires the rich to subsidize the poor. Yet despite its irrationality, rent control has remained in force so many years for three primary reasons:

• Landlords are a small minority of the voting population.

• Landlords cannot pick up their properties and move them across state lines to escape such restrictions.

• A combination of envy and animosity toward landlords as a group has created a climate of public indifference to their plight.

One of the hallmarks of totalitarianism is the use of group stereotypes as a way of achieving certain ends. When Hitler said that “Jews are parasites sucking the lifeblood of their hosts,” he wasn’t talking about one or two individual Jews; he was talking about all Jews. The deliberate vilification of a whole class of people fosters the hatred that is the first step in a campaign whose ultimate goal is the destruction of that group, as the world to its horror eventually discovered.

When I hear local politicians calling landlords “greedy speculators gouging their tenants with unconscionable rents,” they are not talking about one or two individual landlords; they are talking about all landlords. (By an interesting coincidence, in the Nazi party newspaper, Vö1kischer Beobachter, Jews were condemned as “. . . foreign landlords who pocketed the money of German tenants.”) Landlords are capitalists, and the anti-capitalistic mentality prevalent in Hitler’s Germany may be found in America as well.

Propaganda has a powerful impact on public opinion. If you repeat something loud enough and long enough, a lot of people will believe it, no matter how preposterous the statement may be. When the Nazi press attacked the German Jews as vicious, unscrupulous, money-grubbing scoundrels—the same terms in which capitalists have been denounced for more than a century even the Jews began to have doubts. Coincidentally, those are the very same adjectives used today by American politicians and journalists to describe American landlords.

When the Village Voice headlines the “Ten Worst Landlords of the Year,” or former New York City Council President Andrew J. Stein’s lists of “The Dirtiest Dozen Landlords,” it seems to me that Herr Goebbels himself could not have planned a more effective propaganda campaign to discredit all landlords for the faults of a few.

Once the smear campaign has been effective, it is relatively simple to deprive the victims of their fundamental rights, and to do it in a tone of moral righteousness. After all, if New York landlords, or German Jews, are that despicable, they deserve to be treated as criminals.

In Germany, punishment for Jews arrived in the form of Adolf Hitler’s Nuremberg Laws of 1935, a set of statutes designed to “protect” the German Volk. The government deprived Jews of their rights of citizenship as well the right to own any business or property.

As a result of those laws and the tacit permission they granted, the legal restraints and civil niceties normally observed between fellow citizens broke down and the floodgates of prejudice were opened wide. It became a profitable game for anyone to cheat, denounce, discriminate against, or confiscate the property of Jews without having the slightest pangs of conscience or suffering any legal consequences.

In New York, punishment for landlords came about as a result of the Rent Control Law of 1943, a set of statutes designed to protect the city’s tenants from “rent gougers.” The government officially deprived landlords of the most fundamental tenet of property ownership: the right to charge free market rents. Imposed during the War, the law was justified as a temporary wartime necessity.

After the war, however, when the vast majority of such emergency statutes were repealed across the nation, New York’s rent control law, for various political reasons, was kept on the books. As a result of rent control and the tacit permission it grants, in New York City it is considered socially acceptable, if not morally praiseworthy, for tenants to cheat, denounce, discriminate against, or confiscate the property of their landlords without having the slightest pangs of conscience or suffering any legal consequences.

Most law-abiding New Yorkers would rather die than swipe a loaf of bread from their grocer; most would never dream of stealing a coat from their tailor. Yet these same people haven’t the slightest qualms about violating their contracts and illegally subletting their apartments, falsifying their true primary residences, withholding rent for years by means of convoluted legal tactics, demanding enormous sums of money from landlords to move, or complaining to any one of a dozen government agencies about trivial or non-existent violations in order to thwart and delay legitimate rent increases.

A similar thing happened in Nazi Germany. There was a segment of the populace who did not necessarily approve of Hitler’s treatment of the Jews, but who were all too ready to cash in on the results. They took advantage of the situation to enrich themselves at the expense of their Jewish neighbors.

I suppose it is an unfortunate failing of human nature, but when government gives people a license to steal, it takes a very highly principled person to resist the temptation. Our entire structure of political redistribution of wealth is based on an implicit recognition of that fact. In New York City, for example, there is no penalty for defrauding your landlord or for committing any of the actions listed above. There is only reward for the unscrupulous tenant. Yet landlords are routinely given stiff penalties including fines, treble damages, and jail sentences for relatively minor infractions of the law.

The Jew in Germany had no remedy in law; the courts were in Hitler’s pocket. Instructions to the police and Gestapo were well defined: The National Socialist state did not want the Jews, but it did want their property. The Jews had no choice but to abandon their property and flee—if they could.

The landlord in New York also has no remedy in law; the courts have upheld the city’s right to control rents even though it violates the property rights guarantee of the Fifth and Fourteenth Amendments. With government policy dedicated to making rental property ownership a losing proposition, many landlords had no choice but to abandon their buildings and lose their life savings.

Since the imposition of rent control, the city has confiscated in rem 20,000 such abandoned structures containing over 100,000 apartments; at the time perfectly usable apartments that could have eased the city’s chronic housing shortage and relieved the plight of the homeless. Instead, most of these buildings have turned into vacant wrecks giving refuge only to drug pushers, addicts, and prostitutes; mute testimony to the social cost of rent control.

Every election brings out an assortment of social-liberal candidates who try to outdo each other in currying the tenant vote by squeezing the landlord even harder. The imposition of commercial rent control as well as various proposals for permanent rent freezes and anti- warehousing legislation are typical examples of such “enlightened” civic thinking.

Set against a background of landlord bashing, political pandering, and tenant avarice, it is no wonder that every time the city holds its Rent Guideline hearings, the meetings are dominated by rowdy, mob-frenzied, Brownshirt-like demonstrations by highly organized tenant activists who shout down opposition speakers and attempt to disrupt the proceedings.

In a lawsuit filed by five major real estate firms against the Rent Guidelines Board, affidavits by two members of the RGB claimed that they were unable to perform their duties, because "throughout the meeting there were threats, intimidation, and harassment. This was accompanied by incessant and deafening noise, demonstrators, whistling, chanting and banging of chairs.”

I’m sure that none of the foregoing disgraceful situations was foreseen by those who originally drafted the rent control statutes. But illegal tenant activity, biased judges, hostile administrators, political opportunism, negative public opinion, and mob action against landlords are just as much in effect in New York as they were in Nazi Germany against the Jews and they have turned rent control into a national travesty.

Despite the overwhelming evidence of the financial and social damage of rent control laws, politicians in New York, Berkeley, and Cambridge, among many others, have succeeded in keeping alive this iniquitous system that most Americans repudiated years ago.

It is time we Americans were jolted out of our complacency and made to see rent control for the evil it really is: bigotry pretending to be benevolence, anti-capitalism pretending to be humanitarianism, and demagoguery disguised as democracy.

ASSOCIATED ISSUE

June 1993

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