The Huffington Post reports on two landlords in San Francisco that harassed and tormented their tenants over the course of 8 years. Already the story smells fishy. Why would landlords want to harass their tenants? Tenants pay rent, and landlords usually like being paid. Harassing customers is business suicide. For example, if Wal-Mart harassed everyone who walked into their store, their competitors (e.g.Target) would soon see a nice increase in customers even if their prices were higher.
Also, why would tenants put up with 8 years of harassment? If you walked into Wal-Mart and store employees followed you around berating you, you probably would not go back.
When normal market behavior does not occur, one can bet that government is involved. Of course, Huffington Post does not post the real story behind this one. Even a whiff of economic literacy is bound to have comments censored on their forums. The real culprit is government protections for tenants.
When governments pass regulations on businesses, this practice increases the costs of doing business. Landlords, when the cost to themselves is artificially increased, adapt to this by reducing the amount of product that they supply or increasing the price. San Francisco, with lavish protections on tenants (see here and here), has seen the effects of this. They rank number 3 in major cities for the percent of income that citizens pay for housing. On top of this, the government has imposed rent control.
With the government enforced “protections”, it is no wonder why landlords must badger and harass tenants to evict them from the properties. With the government created housing shortage, it is no wonder why tenants fight to stay in the rentals. There are not many options for relocation, and the price would be predictably higher.
From a rather well informed article in the New York Times:
The City by the Bay is going through one of its worst housing shortages in memory… The citywide median rental price for a one-bedroom is $2,764 a month, but jumps to $3,500 in trendy areas.
One reason for the shortage? Me.
I’ve recently joined the ranks of San Francisco landlords who have decided that it’s better to keep an apartment empty than to lease it to tenants…
Well, the clerk explained, because of the city’s troublesome rental laws, a tenant-free property is much more valuable.
A check of comparable recent sales in our neighborhood, in fact, shows that empty buildings are worth hundreds of thousands of dollars more than those with tenants, and with the current housing-price boom, that profit margin (on paper, anyway) increases each month.
That’s why we’ve joined the ranks of thousands of other small-time landlords here who will never rent again, adding to the city’s housing shortage.
Notice that government regulations have made rentals so burdensome that people are willing to pay hundreds of thousands of dollars just to not deal with renters! Maybe one day the Huffington Post will grow up and learn basic economics. I won’t hold my breath.