Price Controls

Today, the minimum wage in Florida increased by $1 per hour. The minimum wage for non-tipped employees in Florida is increasing from $11 to $12. For tipped workers, the rate’s going from $7.98 to $8.98.

Minimum wage has increased from $8.56 per hour to $12 per hour in three years- that is a 13 percent annual increase. I still can’t go through a drive through without them screwing up my order, and in that same time period, the cost of a Big Mac meal has gone from $7 to over $12- which is a 23% annual increase.

At Denny’s, 2 strips of bacon, two link sausages, two eggs, and two pancakes. This is the breakfast that Denny’s calls the “Original Grand Slam.” Sold for $1.99 in 1997. By 2021, that same breakfast cost $9.49. That works out to an annual inflation rate of 6.7%. Now here we are in 2023, and that same breakfast is now $11.99, or a 26.3% increase in the past two and a half years. That’s a 10.5% annual increase.

Price and wage controls don’t work.

California is going to a fixed rate electrical billing system where electric rates are set by the household’s income level.

• Households earning less than $28,000 a year would pay a fixed charge of $15 a month on their electric bills in Edison and PG&E territories and $24 a month in SDG&E territory.
• Households with annual income from $28,000 – $69,000 would pay $20 a month in Edison territory, $34 a month in SDG&E territory and $30 a month in PG&E territory.
• Households earning from $69,000 – $180,000 would pay $51 a month in Edison and PG&E territories and $73 a month in SDG&E territory.
• Those with incomes above $180,000 would pay $85 a month in Edison territory, $128 a month in SDG&E territory and $92 a month in PG&E territory.

Setting aside the entire “make more/pay more” thing, this is really dumb. People will be paying between $15 and $128 per month for electricity, no matter how much they consume? Yep, that is EXACTLY what they are proposing.

Under the SDG&E plan, customers would pay a fixed price that covers most of the utility’s energy delivery service that would not change month-to-month regardless of how much electricity is consumed.  

I said to myself that there had to be a catch. It turns out that there is. This pricing scheme only covers the part of your electric bill that is sold via SDG&E.

 This portion of a customer’s bill, which is mostly related to the electricity purchased from natural gas, wind and solar plants, will continue to vary based on electricity usage. In San Diego County, nearly 85% of customers have their electricity purchased by local governments known as community choice aggregators or other entities – not SDG&E.

OK. This is just another grift, with the intention of redistributing money from one class to another, using socialism as cover.

California will be enacting price controls on gasoline within the next 4 months, with the expressed purpose of eliminating gas and oil from the state.

As I predicted this moths ago, communists always start by going after landlords before enacting price controls elsewhere. Price controls always fail. California is headed for disaster. If you are an oil company, there is only one way to beat this, but I don’t think that they have the balls to do it. The stated goal is to put the oil companies out of business, so Californians will switch to wind power. OK. Let’s do it:

This important legislation should be part of an all-out push to move the state to clean, renewable energy and off oil and gas

Stop selling all gasoline in the state immediately. Within 72 hours, there won’t be a cop car, city bus, fire truck, or National Guard vehicle moving in that state. No more food deliveries. No more goods moving anywhere in California. Give them what they want. Now they are dependent on wind and solar.

The law will be gone in less than a week.

But the oil companies won’t do it, and will participate in their own destruction.

Many cities have rent control laws that prohibit landlords from raising rent on their property. So they are finding ways around it. Landlords do all that they can to catch tenants breaking the terms of their lease so they can remodel the rental property in order to avoid the property being regulated by rent control laws. One way that they are doing this is through the use of surveillance technology.

The tenant is violating the terms of the lease by subletting, throwing wild parties, or otherwise endangering the property and the landlord has a significant financial incentive to catch them. When they get caught, they are evicted. This somehow makes the landlord into the bad guy, because making a profit is no longer seen as the proper goal of owning a business.

The left is using government to force business owners to accept fixed pricing while at the same time costs such as property taxes, insurance, and other costs eat into and eventually eliminate profits. So the market is doing what the market does- it’s finding solutions.

Price controls never work.

Voters in Orange County, Florida, the county where Orlando is located, approved a rent control ordinance during the November 8 election. The full text of the ordinance can be found here, but the relevant part of it reads:

(a) No landlord shall demand, charge, or accept from a tenant a rent increase for a residential rental unit more than once in a 12month period.

(b) No landlord shall demand, charge, or accept from a tenant a rent increase that is in excess of the existing rent multiplied by the Consumer Price Index for any residential rental unit except as otherwise allowed under section 25-388 of this ordinance.

This ordinance’s limitations on rent increases shall apply regardless of change of occupancy in a residential rental unit except as otherwise allowed under section 25-388 of this ordinance.

For now, the law can’t go into effect because there is pending litigation. If the court allows this law to go forward, there are some real issues here.

The leftists in NY state are blaming landlords for refusing to rent out apartments under the terms of rent control, and when they do rent them out, they fail to pay to maintain and renovate them. Landlords claim that the 2019 rent restrictions make it more cost-effective to keep an apartment vacant by keeping rents too low to cover the cost of repairs.

When a government enacts any sort of price control, they are setting the price at which a given product or service must be sold. If that price isn’t high enough to entice those who provide the product or service to sell, then there won’t be any available at that price. That’s why price controls don’t work.

That is true for anything that can be bought or sold- whether it’s widgets, oil, generators, or even housing. That’s what rent is- a person who can afford to purchase residential property buys that property, then rents it out at a profit to someone who can’t afford to purchase that property for whatever reason.

If a local government then sets the rent that may be charged for a residential property and that price is not sufficient to cover the cost of purchasing, maintaining, and administering the property, then there is no point in renting it out. This article paints landlords to look like they are hoarding because they are refusing to rent out apartments at the same rates that they were rented out for 20 years ago. It also attempts to blame landlords for not maintaining the apartments at these absurdly low rates.

Normally I wouldn’t care what happens in New York. They made the mess, they can deal with it. The problem here is that the idea is gaining traction in Central Florida. The Orlando area has managed to put rent control on the ballot. While I am not in the area affected by this measure, there are indications that it may catch on.

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.