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Tenants and landlords

Matthew Yglesias and Megan McArdle argue about the economics of landlord/tenant laws in D.C., a topic I know nothing about. But it did remind me of a few stories . . .

1. In grad school, I shared half of a two-family house with three other students. At some point, our landlord (who lived in the other half of the house) decided he wanted to sell the place, so he had a real estate agent coming by occasionally to show the house to people. She was just a flat-out liar (which I guess fits my impression based on screenings of Glengarry Glen Ross). I could never decide, when I was around and she was lying to a prospective buyer, whether to call her on it. Sometimes I did, sometimes I didn’t.

2. A year after I graduated, the landlord actually did sell the place but then, when my friends moved out, he refused to pay back their security deposit. There was some debate about getting the place repainted, I don’t remember the details. So they sued the landlord in Mass. housing court and won triple damages. The funny thing was, the landlord was the editor of the Harvard Law Review. (But, no, he was not Barack Obama.) At the time, I told my former roommates that they should write up the story and send it to the local newspapers: President of Harvard Law Review Loses Lawsuit, etc etc.

3. During my first year in Berkeley, California, I lived in what I think was an illegal dwelling–a little one-bedroom house in somebody’s backyard. It was fully functional with gas, plumbing, and electricity, but it didn’t have its own house number–my mail came in the same mailbox that was used for the main house (where the landlord lived).

I also had some sort of illegally-spliced cable TV that worked most of the time. A few days after moving in to the place, I’d had a busy Monday at my very first real job. I got home, cleaned up a bit, then at 9pm I sat down on the couch to relax and watch some Monday night football. I turned on the TV, and . . . the game was ending! I’d forgotten that things start earlier in California.

Anyway, I was happy in that house but eventually had to leave when I got a cat. Actually, the landlord told me I could keep the cat for an extra $50/month in rent, but I did some searching and found a larger place in a more convenient neighborhood for about $75/month less so I left. There was a bit of a disagreement about the security deposit–par for the course, I guess. My landlord was a real clown, but the funny thing is that she and I got along fine until that little dispute.

4. Getting back to Massachusetts . . . several years later I knew somebody who owned a house that she rented out. At some point she had a difficult tenant who sued my friend for triple damages. I knew enough about the case to be pretty sure that my friend was in the right here, and it was pretty clear that the housing court was seriously biased in favor of the tenant. The flip side of case #2 above, I guess.

22 Comments

  1. wcw says:

    Without reading a word of the argument, I posit that McArdle is wrong. My rules for her are the flip side of DeLong's for Krugman: 1, remember that Megan McArdle is wrong; 2, if your analysis leads you to conclude that Megan McArdle is right, refer to rule #1.

    I have seen a lot of bad landlords, but my experiences will never top Lakireddy Reddy, who was one of my wife's first landlords in Berkeley.

  2. Will says:

    "In-law" apartments like the one you describe are actually quite common in Berkeley. There's nothing illegal about that.

  3. Phil says:

    You forgot to mention the name of the Harvard Law Review president who lost the lawsuit: Barack Hussein Obama. It definitely makes the story better.

    Also, you have that nice story about the electric company doing work outside your building that caused a surge that destroyed your stereo. You sued in small claims court, and the judge didn't even listen to the whole story because "it's a little guy versus a big guy, and the little guy should win" or something. You were pleased with the verdict but appalled by the reasoning. You could tell that one.

    I have a friend who is a landlord who has had some terrible problems, and I have friends who had problems as tenants, too. (You could tell the story about your pots and pans in Paris, in fact.) My sense is that unscrupulous people who are willing to work the system (or evade it) can get away with significant abuse, whether they're tenants or landlords.

  4. derek says:

    I suggest that lawyers more often resort to law, or allow the dispute to go to law without folding or negotiating, because they know it mostly works out for them. Losing the occasional case would be just part of the price for taking it to the wire more often.

    Similarly, people who let arguments degenerate to the point of violence win more arguments. They also get the occasional punch in the face, but they know most people will back down rather than risk being the punchee, so it's a win on average.

    Are there statistics on whether lawyers and law graduates go to law, or allow themselves to be dragged to law, more often than other folks? I assume their study of the law defuses the normal fear of getting involved in courts, so they have a more "yeah? bring it!" attitude than average.

  5. Lest I become a renter again (I currently own), I’ll post this anonymously.
    I had a miserable landlord who refused to make repairs (including a window broken by his employees while working on an upstairs unit and a kitchen sink that would flood when my neighbors did laundry). After my upstairs neighbors moved out, they didn’t get their deposit back. As such, I moved out with zero notice and zero cleaning.
    There has to be some game theory involved with the deposit. If tenants think they can get a deposit back, there’s incentive for the landlord to cheat and not give the deposit back, since recovering damages requires effort on the tenant’s part. But, a tenant who expects no deposit returned will have no incentive to comply with the terms of the deposit. By the miserable landlord refusing to cooperate in the first stage of a prisoner’s dilemma, other tenants were able to avoid cooperation in future stages.

  6. Andrew Gelman says:

    Will: Whether or not such apartments are legal in Berkeley in general, I don't think my particular apartment was legal. I'm guessing it was a converted building that had never been approved by the authorities (checking the building code, etc.) but I don't know for sure.

    Phil: I assume you're kidding, but for the benefit of others: No, the Harvard Law School student in question was not Barack Obama.

  7. Phil says:

    No, I wasn't kidding, it definitely makes the story better if you tell people it was Barack Obama.

  8. Andrew Gelman says:

    Phil: I agree it makes the story better if I tell people it was Obama, but it wasn't Obama. I mean, sure, I could tell all sorts of great stories if I were willing to make things up, but that would be cheating, no?

  9. Sebastian says:

    I mean, sure, I could tell all sorts of great stories if I were willing to make things up, but that would be cheating, no?

    That depends…
    http://mw2.merriam-webster.com/dictionary/se%20no

    I think, though, what would make this a not so great "made-up" story is that the fact that Obama actually didn't have a lot of money while he was at Harvard is pretty well known.

    And what wcw says.

  10. Steve says:

    Like that time you went into his shed and found his prayer mats and birth certificate faking machine?

  11. BrianD says:

    Well, I guess I would be the one who could tell you stories. I used to own a bill collection agency that specialized in working for landlords. Most of our work was for property management companies, who more or less understood the law, but occasionally, we would work for individuals who rented out the odd house or something.

    Both landlords and tenants in these situations often end up with completely outrageous ideas of what is legally possible for them to get away with, and I often felt more like a mediator than a bill collector. For a tenant, it can be a major headache; for a landlord, it can be a financial disaster. If you want to rent a home, get an apartment; if you feel like renting out a place you own, DON'T.

  12. Andrew Gelman says:

    Sebastian: My story has nothing to do with Obama and nothing to do with whether he had a lot of money. The landlord was somebody else.

  13. Michael says:

    Think about it, people — why would he keep denying it was Barack Obama unless he were hiding the fact that it was, indeed, Barack Obama?

  14. Phil says:

    Sebastian points out that Obama didn't have much money when he was at Harvard…which of course raises the question, how could he afford to own a building to rent out? I'd say that makes the story even better!

    Andrew, everybody knows, and has always known, that your landlord was not Barack Obama.

  15. A. Zarkov says:

    Andrew, why would you expect the president of the Harvard Law Review to be able to handle a case? In general law students know little about litigation. They get mostly theory, not practice in law school. My daughter was a successful student at a brand name law school, and she called me for help with her landlord problem she had as an L1. Fortunately I knew exactly where to go for the right information and the whole matter got settled promptly.

    Even many law professors have no idea of how to handle a case. Law school exists primarily to provide jobs for law professors. At one time one could join a law firm as an apprentice, and then after about five years take the bar exam. Today law school does not even prepare students for the bar, that's why their graduates have to take bar review courses.

  16. A. Zarkov says:

    Almost every economist agrees that rent control, or a set of laws that severely restricts transactions in the rental market, does no one any good. Such laws hurt both owners and renters and actually decrease the amount of rental stock available. Rent control laws tend to create shadow markets where one has to pay huge "key fees" to get a unit. Such laws almost always result deteriorated housing. I came across this tidbit in an article on rent control here. It quotes Vietnam's Foreign Minister Nguyen Co Thach,

    Addressing a crowded news conference in the Indian capital, Mr. Thach admitted that controls … had artificially encouraged demand and discouraged supply…. House rents had … been kept low … so all the houses in Hanoi had fallen into disrepair, said Mr. Thach.

    “The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and that we must change policy,” he said.

    Berkeley, Santa Monica, and San Francisco have particularly draconian rent control laws. In the city of Berkeley UC students can vote, so unsurprisingly rent control even applies to single rooms in someone's house, or did at one time. I remember Berkeley in the days before rent control, where I had no trouble finding an apartment.

  17. wcw says:

    BrianD, in re 'if you feel like renting out a place you own, DON'T,' — why? My father rented out several homes for years as a tax strategy, and never had a problem. Then again, he made sure he knew and scrupulously followed the law, and he carefully picked tenants by pricing slightly below market. Yes, over the course of a few decades he ran into a couple deadbeats, but once you've scrupulously followed the law, getting the eviction, lien sales and garnishments you want turns out to be awfully easy.

    A. Zarkov, adherence to party line is a poor replacement for analysis or fact. Finding an apartment hasn't been a problem in California since vacancy decontrol took effect in 1999. Rents in San Francisco are lower today in real terms than they were in 2002, deflating by CPI ex-shelter. Rent control distorts markets, I guess, but so do zoning laws, building codes, Prop 13 and the mortgage interest deduction, to name just a few. You seem like a smart guy under all that ideology. Try facts, data and analysis next time.

  18. Its so weird reading this. My experience is very different. Growing up in poor neighborhoods in California, everybody just knows that they have the overwhelming advantage vis-a-vis landlords and banks.

    Im told constantly that if I stop paying my rent/mortgage I could stay in my house from anywhere from a minimum of 3 months to possibly one year. A large amount of savings. And there is essentially nothing the landlord/bank could do about it.

    I also know many friends who have done just that. And there was little their landlords could do about it. In other words, given my experience, McArdle's post looks obviously right. Yglesias grossly naive.

  19. Andrew Gelman says:

    Hispanic: I think things vary a log from state to state, and also among different areas within a state. Also, individual experiences vary. And there's a natural tendency to generalize from the stories one's heard. Hence different people end up with different perspectives. Person A could be "obviously right" about one place while being "grossly naive" in describing someplace else.

    Wcw: "once you've scrupulously followed the law, getting the eviction . . . turns out to be awfully easy." Maybe more in some places than others.

  20. A. Zarkov says:

    wcw writes,

    " … adherence to party line is a poor replacement for analysis or fact."

    Evidently you failed to read the article by Walter Block that I linked to. He wrote,

    The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners Milton Friedman and Friedrich Hayek on the “right” to their fellow Nobel laureate Gunnar Myrdal, an important architect of the Swedish Labor Party’s welfare state, on the “left.” Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

    Wcw also writes,

    "Finding an apartment hasn't been a problem in California since vacancy decontrol took effect in 1999. Rents in San Francisco are lower today in real terms than they were in 2002, deflating by CPI ex-shelter. Rent control distorts markets, I guess, but so do zoning laws, building codes, …"

    I only wrote about the difficulty in finding an apartments where draconian rent control is effect: Berkeley, San Francisco, Santa Monica, not the whole state of California. Although you seem to be agreeing with me because you imply vacancy decontrol, helps make more apartments available. However, I think a more important driving force was the housing bubble which started in 1999. Large numbers of renters became owners freeing up apartments. One would expect real rents to decrease under such circumstances.

    Rent control and building codes do distort markets, but serve a definite and positive public purpose. Rent control does not. Rent control hurts everyone. Even the socialists understand that, but you don't.

    Finally wcw writes,

    "You seem like a smart guy under all that ideology. Try facts, data and analysis next time."

    This thread is about landlords, tenants, and rent control. But you seem to want to personalize the matter by an Alinsky like attack on me. Believe it or not, you can express yourself without getting personal regardless of what Saul recommends.

  21. wcw says:

    Andrew Gelman, in what jurisdiction is there difficulty for landlords to get evictions when the law says they should? My secondhand experiences here are all in California. Is there any data on this anywhere? I have no idea, myself, but I have heard a hundred believable stories like this one, and almost none that stand up to scrutiny from the opposite perspective. I have, however, heard plenty of stories where the landlord did not follow the law, and then became incensed when their tenants availed themselves of their full legal rights in response.

    A. Zarkov, nice pullquote. It doesn't speak to the errors I corrected. Vacancy decontrol has been California state law for over a decade. Pace further bloviations about 'particularly draconian rent control' the amount of rental stock available in the cities you cite has not decreased by the measure that matters most, real price. Shadow markets and "key fees" are historical curiosities at best, partisan tropes at worst. Leaving aside the interesting perspective on universal suffrage, I'll note that eighteen-year-olds generally can vote in the cities in which they live, not just in the city of Berkeley. And just like the mortgage interest deduction and Prop 13, rent control serves a positive public purpose. Any or all may nonetheless be abysmal public policy.

  22. Jim says:

    It's nice to hear that some states favor tenants. Especially for college students, where I feel so many of them are taken advantage of. I have lived in several cities, and gone to several different universities, and I've been absolutely amazed at what some landlords try to get away with around the country. Some charge EVERY tenant that goes through the house for the same problems. i.e. "oh these rugs need to be replaced, we'll have to deduct it from your deposit". But then they don't replace them, and charge the next tenant for the same exact thing when they move out.

    In one place I lived, there was literally a 1-2ft hole in the ceiling of one of the bedrooms. And because that was the top floor of the house, it opened up to the bottom of the roof, which also had holes. So it was freezing in the winter, and water always came in freely when it rained. By the way, this was a gradual falling ceiling, not drunken antics, but the landlord refused to fix it. He just assume students won't fight them on it, and typically they're right. I would have sued, but I wasn't on the lease, and it wasn't my room. I heard a couple years after we moved out that this home, and the other houses that were on either side (and owned by the same person) were all condemned.