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Tags: nixon | wage | price | controls

Bernie's Plans No New Lease on Life for Rent Market

real property for rent and sale

Michael Dorstewitz By Wednesday, 18 September 2019 01:08 PM EDT Current | Bio | Archive

Sen. Bernie Sanders, D-Vt., who's vying for the Democratic presidential nomination, has a plan to dry up rental real estate nationally.

If elected he will push for national real estate rent control — with the emphasis on control.

Not content with his other multi-trillion dollar schemes, including Medicare for All and combating climate change, Sanders now wants to try out a system on a national scale that’s largely failed at local levels.

The self-described democratic socialist introduced his $2.5 trillion housing policy in Nevada over the weekend, which he claimed would address homelessness and place a cap on residential rent increases.

Sanders elaborated, "We have an affordable housing crisis in Nevada, in Vermont and all over this country that must be addressed,” he told an audience of about 100 people at a Las Vegas union hall. “For too long, this is one of those issues that we just don’t talk about. It’s just pushed underneath the rug."

He added that 18 million U.S. families pay housing costs in excess of 50 percent of their income. However, he neglected to say whether those 18 million families are forced into that position or chose to live beyond their means.

Sanders claimed his proposal could be financed by a tax on the assets of the top one-tenth of one percent of the wealthiest U.S. households, and would cap rent increases at one and one-half times the rate of inflation, or 3 percent, whichever is greater.

He typically offered little else in the way of specifics.

Economists generally abhor price control schemes, and for good reason — by setting artificial prices they ignore market forces and often create far more problems than the one they were meant to solve.

For example, former President Richard Nixon signed an executive order in 1971 freezing wages and prices, a gambit meant to combat inflation. But it was one that Nobel Prize-winning economist Milton Friedman predicted would end "in utter failure."

And it did. Farmers and ranchers refused to sell at artificially low prices, and supermarket shelves soon became barren.

As for rent, after stripping away obvious factors such as size, location, condition, and amenities, the cost of rent, just like any other commodity, is largely based on supply.

The greater the supply, the lower the value.

By placing an artificial cap on rent, fewer residential rental units would be available.

Landlords have to set rent hikes based on market forces, insurance and tax increases, maintenance costs, and tenant creditworthiness.

And at the end of the day he has to make a profit on his investment.

If a landlord is hamstrung on setting prices, he may simply sell the property, further drying up the supply of available rental units.

In addition, a landlord may increase rent to the maximum allowable during those years in which costs don’t appreciably increase and despite the market, as a hedge against those years when costs do sharply rise.

Last week Calif. Gov. Gavin Newsom signed a statewide rent control bill into law.

The Golden State is battling an escalating homeless problem — especially in Los Angeles and San Francisco. Rent control will only make it worse.

California’s draconian regulatory policies — especially environmental — have driven its median residential home value up to $544,900, according to the California Policy Center. Nationwide its $220,100.

That astronomical figure is the reason for California’s housing shortage. It’s also what, in turn, led to its high rental values.

Rent control will only make rental housing all the more scarce.

The disease and rat-filled homeless enclaves in California’s larger metropolitan areas will only spread, adding to the number of streets infused with garbage, used needles, and human waste.

Thanks to California’s policies, leprosy and bubonic plague are making a 21st century comeback in the wealthiest country in the world. Nonetheless, the governor was elated.

"CA just passed the strongest rent control package in America," Gavin tweeted.

"The rent is too damn high — so we’re damn sure doing something about it."

If those words sound familiar, think back to Jimmy McMillan, a colorful figure who founded the Rent is Too Damn High Party in 2005. He ran twice each for New York City mayor and New York state governor, primarily on that single issue.

Jimmy McMillan He lost each time. The same can be expected of Bernie Sanders.

Prior to the third round of Democratic presidential debates, Meghan McCain warned her co-hosts on ABC's "The View" that every time a presidential hopeful leans a bit further to the left, "Trump’s ads are writing themselves."

And they do. Each time they mention free college, socialized medicine, open borders, and more freebies for illegal immigrants, a new ad is written. Now we can add rent control to the list.

Michael Dorstewitz is a retired lawyer and has been a frequent contributor to BizPac Review and Liberty Unyielding. He is also a former U.S. Merchant Marine officer and an enthusiastic Second Amendment supporter, who can often be found honing his skills at the range. To read more of his reports — Click Hee Now.

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Sen. Bernie Sanders has a plan to ruin the rental real estate market. Rent control will only make rental housing all the more scarce.
nixon, wage, price, controls
Wednesday, 18 September 2019 01:08 PM
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