Category: Price Controls

In Florida, enacting rent control isn’t easy. Landlords in Florida can’t raise rent during the term of the lease. My tenants sign a lease for a year, and the rent is laid out in the lease. That is the amount they pay for that year. When the lease is up, we can negotiate for another year, but that deal is separate from the year before.

To restrict the new lease, Florida statute 125.0103 is pretty explicit. There are a number of steps that have to be followed.

1. The city has to declare a housing emergency. Such governing body makes and recites in such measure its findings establishing the existence in fact of a housing emergency so grave as to constitute a serious menace to the general public and that such controls are necessary and proper to eliminate such grave housing emergency.
2. The city puts rent control on the ballot.
3. The measure must be approved by a majority of the voters in that city.
4. The rent control doesn’t apply to seasonal rentals or to “luxury rentals.” A luxury rental is defined as a rental that would have cost more than $250 in 1977. There is nothing in there about adjusting that amount for inflation, but even if a court does so, according to the US inflation calculator, that would today be a rent of $1,222. There are virtually no rentals for that amount.
5. The rent control is only in effect for one year.
6. To go for another year, the entire process has to be repeated.

Even so, Orange County decided to go for it back in April. In August, the county moved to include it in the next election. Yesterday, a judge approved the measure to be on the ballot in November. The judge ruled that the landlords who sued could not prove that they would suffer harm merely because the measure is on the ballot because the measure may not pass.

I imagine that it will pass. There are a lot more grifters than there are landlords, especially in blue Orange county. I couldn’t find the wording of the proposed rent control ordnance. I imagine that there will be court cases to decide the amounts, which rentals it will apply to, and more. This case will be an important one to watch, as it will have a HUGE effect on not just the Florida rental market, but the Florida residential real estate market as a whole.

Rent control will be on the Orange County, Florida ballot in November. You can always count on Democrats to put “get out the leftie vote” items on the ballot. Things like legalizing weed, rent control, free shit.

The bill would restrict rent increases to the rate of inflation or 5%, whichever is less. While I don’t own any property in Orange county, this sort of socialist insanity is dangerous. Let me use my own rental as an example:

So I own a home that I rent out for $1850. That would cap any rent increase at $92.50 per month, or $1100 a year. As I posted last month, my property taxes are up 10%, my landscaping costs are up 15%, insurance costs up 21%, and interest (in dollars) on the mortgage is up 18% year over year. No one caps my expenses.

If this were to come to pass, I would have to be creative in making up the shortfall. Say, increase the rent by the maximum amount, then start adding fees like washer and dryer rental, landscaping fees, parking permit fees, etc. The lease would plainly say that they are not part of the rent, but are still required. I don’t know, I would have to see the final law and talk to my lawyer.

This won’t end well for landlords OR tenants. Socialist price controls never do.

This is why science can’t be trusted. Orange County, Florida’s commission hired a consulting firm to study whether or not putting rent controls in place would be productive. The consulting firm noted that rent controls wouldn’t work, mainly because the supply of rental housing is being overwhelmed by demand. They went on to say that capping rents would further reduce supply. In other words, basic economic theory.

The county government is not happy that the facts didn’t fit their version of reality and are demanding a refund.

“If (commissioners) saw that a consultant who was supposed to do fact-finding on rent stabilization was so biased as to say you’re getting outside attention, then we really should get a refund on this report,” (County Commissioner) Bonilla said. “Unfortunately, it looks like they were not ready to do the job they were hired to do, and they were too biased to provide a report that we deserved.”

Says the commissioner who is pushing for rent control

Now rent control is coming to Nashville. In city after city, we are seeing reports of 20, 30, even 40 percent increases in rents. Market forces are putting pressure on rents nationwide.

Governments have been trying to set maximum or minimum prices since ancient times. The Old Testament prohibited interest on loans, medieval governments fixed the maximum price of bread, and in recent years, governments in the United States have fixed the price of gasoline, the rent on apartments, and the wage of unskilled labor, to name a few. 

Price controls hold within them the promise of protecting groups that are hard-pressed to meet price increases. Like all price controls, rent controls are supposed to protect those who are renting when the demand for apartments exceeds the supply and landlords were preparing to “gouge” their tenants. But what price controls actually do is distort the allocation of resources. See Venezuela for the inevitable conclusion to that plan.

The unrealistic assumptions behind the logic of those who argue for price controls are amazing. The first of those assumptions is that hikes in prices apparently have no impact on consumers’ demand for goods.

Governments may not know much, but they do know how to produce a shortage or surplus. Price ceilings, which prevent prices from exceeding a certain maximum, cause shortages. If you mandate that a product be sold below its value, those holding that product simply refuse to sell. This spawns a black market where the product is sold at its new (even higher) value.

Price floors, which prohibit prices below a certain minimum, cause surpluses. That is, dictating that consumers buy a product for more than it is worth causes consumers to stop buying. The surplus means many can’t find jobs, which forces some to work (under the table) for an amount below that minimum. (See illegal immigrants)

The law of unintended consequences is at work always and everywhere. People outraged about high prices of plywood in areas devastated by hurricanes, for example, may advocate price controls to keep the prices closer to usual levels. An unintended consequence is that suppliers of plywood from outside the region, who would have been willing to drive in to supply plywood quickly at the higher market price, are less willing to do so at the government-controlled price. Thus results a shortage of a good where it is badly needed.

This entire cycle of inflating the currency before installing price controls is another means of increasing government power.

“Inflate the money stock; when prices rise, impose price controls to correct the situation. These controls lead to shortages which ‘require’ government intervention to assure appropriate use of the limited supply and to allocate it and even to control and nationalize the production of energy. The powers of political authorities are increased; the open society is suppressed.”

Armen Alchian, 1976

This entire exercise is a means of grabbing more power and control by a government keen on stealing private property.

Private property rights contain three key features: (1) the right to make decisions about the physical conditions and uses of specified goods, (2) the right to sell the rights of ownership to other people, and (3) the right to enjoy the resulting income and to bear the loss of the use decision.

Armen A. Alchian, Universal Economics

Read more here about the government’s motives.