Californians longing for the “Good Ole Days” of wage and price controls under President Nixon may get their wish.
Wage controls in the form of a series of minimum wage hikes just passed the California legislature.
Price controls in the form of rent caps have spread to suburbia.
Please consider Rent Control Spreads from Pricey San Francisco to Suburbs.
Last year, a raucous city council meeting over rent control in Alameda, population 75,000, resulted in two arrests. Farther north, city leaders of Sonoma County’s Healdsburg, population 11,000, approved voluntary guidelines to keep rent increases to 10 percent or less.
Tenant activists in Alameda and Richmond — a waterfront industrial town of nearly 110,000 — are fighting to place rent control on municipal ballots this fall. So are residents of Burlingame, a pricey, leafy city of 30,000 on the San Francisco Peninsula.
The burst of Bay Area suburban squabbles doesn’t surprise analysts. The median rental price in the five-county San Francisco metropolitan area for February was $3,350, up 10.5 percent from a year ago, according to Zillow. Wages, while high for Silicon Valley professionals, have not kept pace for many other people.
Economists, landlords and developers say rent control makes the situation worse by restricting supply, resulting in run-down apartments and driving market prices higher. Tenant advocates, however, argue that caps on increases and other renter protections are critical in a housing market that’s ousting seniors and families.
Three Bay Area ballot proposals would limit annual increases to the consumer price index or less, which would result in hikes in the low single digits rather than the double-digit ones that have renters clamoring for help. The measures also limit evictions to “just cause” so landlords can’t simply toss someone out for another tenant who can pay more.
Landlords say they need to recover costs to pay higher property taxes or for property improvements.
The California Apartment Association is trying to qualify a competing measure for the November ballot that would prohibit restrictions on rental prices in Richmond.
Thomas Bannon, the association’s chief executive, said he understands tenant concerns, but it’s not fair to ask landlords to shoulder the burden for a housing shortage.
“Rent control has never addressed that issue,” he said. “At best, it’s been a temporary fix for a very small number of units.”
Wage Control Floors
For my take on wage hikes please see Chart of the Day: California Minimum Wage Hike History
I though we had established that wage and price controls do not work, but here we go again.
Charles Edwards, a 77-year-old retired city gardener will be knocking on doors in Alameda to persuade voters to support a citizen initiative to cap rent increases. Last June, the rent on his one-bedroom flat increased 24 percent to $1,300, leaving him $289 a month for utilities, food and other expenses.
Charles Edwards waits for a train on his model layout in Alameda, Calif. AP Photo/Ben Margo
Rent Control Now!
Longing for Stagflation
Central banks are hell bent on forcing up prices amidst a backdrop of price-deflationary demographics, robotics, and other technological advancements.
As a result, people like Charles Edwards seem to be clamoring for Nixonian-style stagflation complete with wage and price controls. Expect this idea to spread beyond rents to healthcare, insurance, and other areas.
First we have a recession to deal with.
Mike “Mish” Shedlock
Mish,
I was listening to Bob Brinker today on AM radio as I was cleaning up my garage. He made some disparaging comments on commentators suggesting a recession was in progress and how these individuals were doing society a disservice by spreading such nonsense. A caller asked how things could be so great why were food stamps usage on the rise. He dismissed that callers question with nonsense I will not repeat. Interesting how the financial lampreys refuse reality, of course there is no money to made if you yell fire in the theater. By the way, thanks for your honesty Mish.
To rent or not to rent, that is the question.
Bloody idiots.
The conditions of the buildings these clowns are stomping their feet over, is such that there is likely an around 100 to 1 ratio of freeloaders to renters living in them. The freeloaders being predominantly of the cockroach kind.
What is keeping rental prices above market clearing, is zoning laws. Full stop. Period. What is keeping market clearing too high, is Fed and Government oriented asset pumping for the benefit of those in the almost entirely zero productivity, rent seeking in the crassest economic sense, “real estate” sector.
Go to city hall and have them flat out ban all and any zoning preventing builders from building up to 20 stories in every nook and cranny of the city, explicitly including current “single family zoned” enclaves where the politically connected live, and, tah-dah: problem solved. Immediately. Right now. High quality, modern buildings for a decent rent or purchase price. And a truckload of well paying jobs building them.
Instead of retaining a government junta solely there to protect the ability of a few well connecteds to charge $5K/month for roach motels, while pretending they are doing anyone some kind of service.
Wage and price controls indeed will not work UNLESS you allow rental merchants to establish their most competitive price first, and then implement a discount to prices thereafter and at the terminal end to the economic process, namely retail sale, and then rebate the merchant for his discounts. Then no economic agent is or can possibly be harmed by it. Implement a percentage discount that is higher than the rate of inflation for a given period and you have the Austrian dream of deflating prices and a roaring profit making economy. You heard it here first (unless your conditioning and habitual addiction to an incomplete orthodoxy closes your mind to it) . It’s called Wisdomics/Gracenomics.
The rebate check comes from a money tree that grows in your yard?
No, it comes ex nihilo from a sovereign central banking institution (and eventually from a constitutionally created arms length 4th branch of government) absolutely governed by the policy mandates to distribute a universal dividend and the deflationary retail discount percentage….just like the private self interested Banks do now.
This is the only way to have real inflation (wage increase + rent control).
Duh….
I noticed the signs the protesters are holding. Better the officials should make english the official language. Most countries have an official language, but not the US.
In Fremont, CA the “official” language seems to be Tamil, with Hindi a close second.
(Spanish speakers, “I feel your pain.”)
Do you think that people should not be allowed to express themselves in whatever language they see fit? That sounds quite xenophobic and fascist.
The fact that most countries have an official language is not a reason for anything.
Sometimes books are better than blogs for understanding an issue, such as wage and price controls. For example, James Grant’s excellent book, “The Forgotten Depression: 1921: The Crash That Cured Itself.” Grant, an excellent historian and writer, works in New York City, which has had rent control much longer than California. He knows how to distinguish sideshows like rent control from larger wage increase and price issues with deeper impacts lasting decades. Perhaps Trump has this understanding; certainly not Hilary, or any of the other candidates. Ron Paul had this understanding.
Rent control and these ballot measures have been part of California’s landscape for at least 40 years in the post-WW II era. In California history, rent control was a logical outgrowth of another more massive statewide price control, Proposition 13, a ballot measure which froze property taxes statewide. It is a tale of two price controls, one benefiting property owners and one benefiting renters. It is the difference between Chicago and Los Angeles.
The two price controls, on property taxes and rents, are deeply intertwined. That’s how politics work, each side gets something; and this has nothing to do with free markets, as it is the political process, democracy in action in both sets of price controls. Proposition 13 keeps Los Angeles from facing Chicago style property tax price hikes; effectively capping prices for some. Governor Brown and the Democratic state legislature wish to repeal Proposition 13, as it limits or caps state and local government pricing freedom over “their” citizens. Tax caps or limits are price controls. Should not government also be free from price controls? I suspect free market blogs would have to answer yes, even if the consequences were loss of freedom for citizens.
Proposition 13 puts property owners at the top, instead of state and local government. Renters are the serfs at the bottom of this medieval-style feudal state, whether roaches or professionals paying $3,000 per month. Bolshevism or free market ideologies, neither was the word from God like the 10 Commandments. Confusion in this regard leads to totalitarian solutions and tyranny. Perhaps not unlike where the USA sometimes seems headed at accelerating speed.
“Confusion in this regard leads to totalitarian solutions and tyranny. Perhaps not unlike where the USA sometimes seems headed at accelerating speed.”
Yes it does UNLESS the policy mandates I’ve described on this thread are implemented. Why? Because those policies are based on the concept of grace as in monetary Gifting. As explained these policies are NOT heavy handed, intrusive or manipulative price controls, but rather gift both the consumer AND businesses by using the digital nature of debt and the money system and so are actually productive of increasing individual freedom and systemic free flowingness and even produce the Austrian perspective that price deflation should be the condition of the economy. Freedom is freedom. A = A. The idea that government policy MUST be intrusive, manipulative and tyrannical is a generalization that is irrational. “Check your premises.”
I actually voted for prop 13!! The local and state gov of CA was hiking taxes on property without any control so prop 13 came about and won with a huge majority. When the property sells in CA now they can increase the taxes and all prop 13 did was stop gov from screwing over property owners. I laugh now when I see local newspaper and media calling property owners evil because of prop 13. They want to repeal it but the people will shoot them down and they know it if they put it on the ballot to vote to repeal.
Price control being put in place if for local agencies that subsidize local housing. What really needs to happen is gov to stop screwing with housing and the prices will fall.
Exactly! Government interventions…manipulations, create distortions that have lots of varying and some unpredictable results, of which they only pile more distorting policies which ultimately only succeed in creating a huge bloated mass of government agencies designed to impose their utopian intent. The one thing that is obvious is that they will NEVER back off. From their perspective there is only ONE true remedy and that is state ownership which is ultimately what they are effectively accomplishing through price controls. You do not own what you cannot control.
“I laugh now when I see local newspaper and media calling property owners evil because of prop 13.”
Prop 13 has been blamed for government revenue problems, but several times the state has run a revenue surplus, including currently.
The democrat politicians always want to increase spending, which winds up putting sufficient revenues in trouble when the economy turns down. Then they blame Prop 13 for their problems. Over spending during the good times is the problem. It can’t be maintained in a recession. They never want to learn that.
Correct yourself.
Taxes are price controls, therefore tax caps are not.
As usual, governments are at the trailing edge of economic progress. That said though, Vanguard puts the odds of a recession here at around 15%.
Election year, sitting democrat administration, democrat fed Cheif, and an annointed “My Turn” democrat woman leading in the odds makers polls,,,,can’t imagine TPTB allowing the stats to read “recession” anytime soon.
Self delivering Chinese food on the horizon!
http://www.nytimes.com/2016/04/04/technology/chinas-companies-poised-to-take-leap-in-developing-a-driverless-car.html?emc=edit_th_20160404&nl=todaysheadlines&nlid=2429990
Both New York state and California are raising the bar and again the subject of increasing the minimum wage is back solidly in the news. This solution viewed by many as an “easy answer” will fail to address the real pain being inflicted on society as a smaller and smaller percentage of our wealth goes to those languishing on the lower rungs of the economic ladder.
Unfortunately, much of the impact and pain of raising the minimum wage falls upon small business, the real creator of jobs and directly upon the heads of workers it is intended to help. The article below looks into how big business will benefit by replacing workers with robots and other problems this mandate creates.
http://brucewilds.blogspot.com/2016/04/raising-minimum-wage-addresses-wrong.html
Not if you do the reciprocal gifting policy of a (rebated back to retail merchants) macro-economic discount to prices. Gifting in a digital debt based money system is an extremely potent and powerful force.
Home owners in the San Francisco Bay Area are against both rent control and high density housing. Another words, NIMBYism. They want a country-style life but enjoy the dramatic rise in their home values due to supply and demand factors. Only through the loosening of building restrictions on developers can the housing supply be increased and rents stabilized.
Zero Hedge had a photo from someone who rented a box to live inside of within an apartment for 400 dollars a month.
For each action there is an equal and opposite reaction. Greenspan took the lending standard to zero and Bush created the Ownership Society, in order to create a record housing bubble. This was followed by a burst bubble and ZIRP. This has extremely distorted the housing situation in San Francisco. Rent control is an equal and opposite reaction to the current extreme, which has someone “living in a box” inside someone’s apartment.
Any market that is manipulated, manipulates back. Nothing occurs in a vacuum.
Well, that’s unfortunate. Especially for San Francisco, since they removed all their land wasting graveyards from the city during the original progressive era to reduce land costs and reburied those pioneering bodies in ethnically segregated plots in the City of the Dead, Colma, Ca. This was so the Chinese, Italians, Irish, and Jews would not have to mix and mingle in eternity, along with the paupers. Well, as an economic stimulus program for low tech gravediggers imported from South America, the state could require mandatory re-interments to desegregate all those expensive ethnic graveyards and achieve an equality in death what couldn’t be achieved in life. Truly, the state needs to produce more gravediggers and graves to reduce the costs of passing on.
“Central banks are hell bent on forcing up prices amidst a backdrop of price-deflationary demographics, robotics, and other technological advancements.”
Yeah, and not a chance economists will call out true culprit of situation … central banks blowing asset bubbles.
Won’t be pretty when it all goes Splat!
Speaking of going Splat!
Friday out with march vehicle sales. Expected range (from what I saw) was 17.1 to 17.3 million SAAR. Actual 16.57 million SAAR.
7 million Californians produce less than a $15 wage. Guessing about 4 million of them will be outta’ work in a coupla’ years.
Also guessing about another 2 million jobs will vanish because of all the businesses that will flee or simply shut down.
Tragic
Rent control won’t matter when the next mega-drought hits.
A bottle of water for $10.
Inflation is the bank’s war on their elders.