Letter from California

An archive of the weekly "Letter from Calfornia", written by Jim McCarthy.

Monday, July 12, 2004

Letter from California-July 12, 2004

Have you ever heard of a product called Cup-o’-Soup? Of course you have, but even if you hadn’t, you’d know what it was just from the name. Cup-o’-Soup? What’s that? Well, it’s a cup of soup. See, there’s some soup and it comes in a cup.
It’s nice when it works like that. Maybe Cup-o’-Soup has been so successful at providing bad meals for broke college students because the name is so simple. Or it could be because you can buy a month’s worth of truly awful soup for $1.78 and spend the savings on really cheap beer.
Too often, it’s just not the case. Names often conceal the real nature of something. For example, your cell phone company probably used to have a name like “AirPhone” or “Carolina Cellular.” I liked those because, again, the companies involved had something to say about what they did and the names just spit it out. Now, your cell phone company is more likely called something like “Triangulox” or “Velocitek.” At some point, these companies decided that they would no longer offer just one cingular product, cell phones, but instead would be broadening their verizons to include a wide range of t-mobile communications services. And in this bright future, who would buy an internet-connected toaster with a built in camera from a company with a name like American Telephone and Telegraph? Only people who still have telegraphs, the theory goes.
Still, as amusing as it is to make fun of cell phone companies, at least a name like Triangulox is simply meaningless instead of a flat out lie. Recently, my hometown newspaper, the Pasadena Star-News, reported on a potential ballot initiative in the city of Pasadena called “Fair Rents, Fair Profits.” Here’s a tip: whenever you see the word “fair” used to describe a potential new law, mentally pencil in the letters “un” before “fair” and nine times out of ten, you’ll have a better idea of what the people proposing the law have in mind.
Rent control. The proposed initiative would impose city-determined price limits on rent. In other words, the City of Pasadena would decide the maximum that can be charged for rent in many of the city’s apartments. Over the last ten years, Pasadena has been blessed with growth and redevelopment. Downtown Pasadena used to be a place you went for crack and to have an opportunity to try out your knife-fighting skills. Now it’s a place you can go for highly addictive $4 coffee drinks and a chance to try out your skills at getting a table at The Cheesecake Factory in less than 2 hours without resorting to knife-fighting. All in all, it’s an improvement, and as a result, people are willing to pay more to live here.
Crazy, eh? People will actually part with more money to live in a safe, pleasant area with a few attractions than they will to live in one where you can never be sure if thieves will rob you of your whole day’s crack dealing profits.
Enter rent control. The problem, a real one, is that as cities change, sometimes it gets harder for people near the bottom of the income scale to live there. As expensive houses and apartments get built, it causes the rest of the housing to go up in price and pretty soon some people just can’t afford to rent there. Rent control puts a simple and direct stop to it by capping the price. Is there a problem?
One foreign minister from a major country says there is. His nation’s capital dabbled with rent control in the 1970’s and lived to regret it, saying that as a result of rent prices being too low, the housing of the entire city fell into disrepair. Is the country in question the United States, where capitalism rules? Perhaps one of our semi-capitalist allies like Germany or Russia? Nope. None of them.
It’s Vietnam. Nguyen Co Thach, foreign minister for Vietnam in the 80’s, said that rent control had been worse for Hanoi than American bombing during the war. “The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents.”
So there you have it. An economic idea so bad that even the communist Vietnamese government dropped it like a bad 1000-year old egg. On the other hand, rent control has its famous capitalist defenders as well. Ed Koch, former mayor of New York, for example, thinks it’s just a peachy idea. In his 1987 book The Art of the Deal, Donald Trump, the man who proves that money and brains are no guarantee of good hair, explains why Koch might feel that way: “Koch has a very nice three-room rent-controlled apartment with a terrace in a beautiful part of Greenwich Village. He pays $350 a month, about a fifth of what it’s worth.” Take your current rent or mortgage payment and cut it by 80%. You like the number you came up with? Now you know why Koch likes rent control.
But let’s look at it from the other way too. You might not be thrilled with your per hour or per week salary, but what if Ed Koch wanted to start paying you $4 an hour instead of $20? And what if the government made it illegal for you to charge more than $4 an hour for your services in the city you live in? What would you do?
You’d leave. Unfortunately, Pasadena has an extremely low percentage of mobile homes, so they’re staying where they are. Economists estimate that New York City’s rent control program led to 30,000 apartments being abandoned every year between 1972 and 1982. That’s enough to house all of Pasadena in just four short years.
If there’s anything that makes rent cheaper, it’s miles and miles of abandoned buildings.
And just think of how quickly you’ll get a table at the Cheesecake Factory.


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