In December, I did a post about rent control. I explained that there are all sorts of steps that property owners can take when the state attempts to control what they can charge in rent. It turns out that landlords in Los Angeles have done exactly that.
During the pandemic, LA passed an ordinance prohibiting landlords from raising rent from one lease period to the next. The definition of increase specifically excluded discounts when calculating base rent. The property owners used that. Let me explain:
The lease says that you can rent my property for $4,000 a month, but I will give you 4 month’s free rent per year, with the free rent being spread across the 1 year term of the lease. So the rent you actually pay is about $2,670 a month. The lease comes to an end, and you want to renew. When you do so, I tell you that I am only going to give you 3 months of free rent this year. That means you will pay me $3,000 a month. Even though you are paying me $330 more a month, I didn’t increase your rent, at least as far as the law is concerned. All I did was reduce your discount.
The tenants say that this is unfair, but I don’t see it as any more unfair than telling a property owner what they can charge for the use of their property. A landlord and a tenant agree to a lease for a one year term. The following year is a completely separate sale. Once the first year’s lease is concluded, that deal is complete. Now we are here to negotiate a completely different agreement.
Imagine if there were a law telling supermarkets that they cannot raise prices. Or a gas station that it can’t raise the price of gas. Or even a car dealership. It’s all been tried before, and price controls always fail in the end.
3 Comments
It's just Boris · February 18, 2022 at 10:02 am
The other aspect is, of course, producers stop making things if they know they will have to sell them for less than their cost of manufacture. Or retailers stop stocking items, landlords stop putting property up for rent, etc. for the same reason. If the manufacturer can make something and sell it for more than the cost of production to a reseller, but resellers aren’t legally allowed to sell for a profit, well, that’s how black markets form up.
why · February 18, 2022 at 1:37 pm
Its been in medicine for decades.
I did a revenue review in a private specialty practice in the early 2000s. Insurance pays for contracted or billed, whichever is lower. This is one reason the initial bill is so high. The individual practitioner rarely knows these contracted prices.
When I proposed giving cash-pay patients a discount (50%), it was balked at. So I did an insurance review- the highest reimbursement was UHC (United) at 40%. MCare, Aetna, and BCBS were in the lower 20s. MCaid paid me 11%, and Tricare paid 7%. Let that sink in…….
I had admin on the phone with MCaid for 2 hours on a bill ($75). I asked her to hang up. I paid her more money for those 2 hours than I would’ve recouped from MCaid ($8.25). How many businesses can stay in business selling their product at such low prices??
We quit seeing MCaid patients…….. We continued to see Tricare because of who they are……..
BobF · February 18, 2022 at 3:35 pm
As a full career retiree with Tricare for Life, THANK YOU.
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