“Dublin’s landlords would rather put their properties on Airbnb than rent to local families,” wails the strapline to an article by John Harris in the Guardian called “30,000 empty homes and nowhere to live: inside Dublin’s housing crisis”.
To give him credit John Harris has never been one to do all his reporting from a swivel chair in Kings Cross. He was one of the few Guardian writers to foresee a Leave victory in the EU referendum, having co-authored with John Domokos a well-regarded series of video and written reports from some of the most depressed parts of the UK. Now he is talking to people struggling to find somewhere to live in Dublin. Here is how he describes the situation:
For want of a flat with a secure tenancy, the two of them have lived here for almost two years, in what the Irish government calls a “hub”…
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I pay £95 for a single night’s stay (including a £43 “cleaning fee”), which highlights why whoever owns it has decided to rent it out in this way. The same move has been made by scores of other landlords: in August 2018, there were reckoned to be 3,165 entire properties listed on Airbnb in Dublin, compared with only 1,329 available for long-term rent.
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The city is smattered with key boxes for Airbnb apartments. A stock line among activists demanding action from the government gets to the heart of all this: in 21st-century Dublin, they say, homeless families stay in hotels, and tourists stay in houses.
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To make things even more difficult, her landlord then decided to sell up, which forced her to suddenly confront a private-rented housing market in which the monthly rent for anything similar was well over €1,500 (£1,300).
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I am sure this is all honestly reported. But I think Mr Harris might be failing to see what is in front of his nose. All else being equal, most landlords prefer long term tenants to short term ones. A nice steady sum arriving in the bank every month makes for an easy life – and for a relationship of mutual trust to grow between landlord and tenant. In contrast, short term lets carry many risks: that the tenants will not look after the place, having little incentive to do so; that they will get into arrears with the rent or skip without paying it, and, most obviously, that the property will sometimes be vacant and earning you no money.
When most of the landlords in a place are seen to flee the predictability of the long term market for the uncertainty of short term lets, or even more perversely for the sheer unrelenting work involved in “turning over” a property every few days for each new AirBnB customer, there is usually a two word explanation. I did not see those two words anywhere in Mr Harris’s article, though this sentence came close:
Central Dublin – along with 20 other areas of the country – is now classified as a “rent pressure zone”, which caps annual rent increases at 4%, but politicians and activists claim this gets nowhere near tackling the causes of skyrocketing housing costs.
The missing two words were, of course, “rent control”. I don’t know Dublin. I don’t know its housing laws. But as soon as I saw that line “For want of a flat with a secure tenancy” I knew that rent control was at the bottom of this story. And so it proved. It took me only a few keystrokes to find this report by Fiona Reddan in the Irish Times:
That was written in January. It is now December. Judging from Mr Harris’s description, it looks like rent controls in Dublin “worked” exactly as rent controls usually do. If he had happened to read Ms Reddan’s prescient article from eleven months ago (I suppose it would be asking too much for him to have read Henry Hazlitt’s even more prescient words on rent control, written with reference to New York in 1961 but eerily applicable to Dublin in 2018), he might have had a somewhat better idea as to why the 4% cap on rent increases fails to tackle the causes of the crisis, as he sees it. Answer: it is one of the causes. Ms Reddan writes,
If you’re wondering why the much-vaunted rent controls, first introduced this time last year, are having so little impact on stalling price growth, consider this investor’s tale.
He had a house rented out close to Dublin that was bringing in €1,300 a month – far below the market rates, which were more than €1,800. Stymied by the rent controls, which limit rent increases to 4 per cent a year (and 2 per cent a year for tenancies in place before the end of 2016), when his tenants left he was looking only at marginal increases in his rent.
So what did he do? Sold this property and bought the one next door. Previously owner occupied, it wasn’t subject to rent controls, which meant that he could slap a new, higher rate of €1,900 on it. The difference in rent quickly covered his legal and stamp duty costs.
It seems a shame to carpet bomb Dublin
Just another example of “Play stupid games, win stupid prizes”.
No doubt Diocletian thought his Edictum de Pretiis Rerum Venaliumlium (Eng: “Edict Concerning the Sale Price of Goods”) was a good idea at the time, but the intervening 1716 years doesn’t seem to have improved the quality of wits any and I don’t see Irish wits being any better or worse than those across the water here in the UK.
Economics 101: “Incentives matter“*
* – …and disincentives more so.
Regarding the Pedant-General’s comment, in these days of Twitter mobs ever-ready to seize on any remark that they can construe as “hate speech”, I think it worthwhile to say that the P-G is making a reference to a famous quotation by the Swedish economist Assar Lindbeck, who despite being a socialist himself, said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”
Perceptive fellas, these Swedes.
Let me say for the record that rent control DOES work. It just doesn’t work in the way that you are measuring it. Does it control rent and keep the cost of housing down? No of course not. What it does do is make the politicians who impose it look good and the landlords look bad. Ultimately, it works because it gets politicians re-elected, and empowers government agencies.
Anyone who thinks government doesn’t work is mistaken. Re-election rates are in the high 90%s, and government departments grow in budget, size and power relentlessly. The civil service and politicians use these metrics to measure the success of their programs, not the general welfare of those on whom they predate and victimize. Few businesses could claim such success rates. Government programs in general, and rent control in particular are extremely successful programs as long as you use the metrics used by the people who institute them.
It is all part of the delusion of democracy — the idea that politicians and bureaucrats, people who are generally among the most self serving, self agrandizing, sell-their-grandmother-for-a-mess-of-pottage, slimeballs, are somehow looking out for you, or are sacrificing themselves for your best interests. Yup, that is why they are crawling over each other’s dead bodies to get power — because they are so philanthropic and self sacrificing that they want to give their all to serve you….
Not sure about Dublin but a related problem in many jurisdictions is landlords finding it extremely difficult to evict unruly or deadbeat tenants due to government regulations.
Rent control works out pretty well, in the short term, for the people who are already living in a place.
It’s also a big disincentive for them to leave – a friend managed a place in Berkeley, CA, which had (and from what I can see still has) rather Draconian rent control. The students who were renting when the scheme was enacted never left, forcing new students at the university to commute from further away. The people I met there seemed sort of… stunted. They refused to take any job which would have them moving out of that golden rent-controlled apartment, as the monthly rent been falling behind inflation by a percent or two a year for at least two decades. But sometimes the next job is a stepping stone to bigger things. Forty year old guys who would probably have otherwise gone on to have successful careers and families were still single and wearing Grateful Dead t-shirts to work at the local bike shop.
I’m sure some of that is just survivor bias, but still, the incentives are perverse.
My line of work means I mix with more than my fair share of ‘liberals’, some of whom advocate all sorts of state control like nationalisation and rent controls.
They see no problem in freely selling their own labour to the highest bidder, they tell of how much the price of their houses have risen and they boast of how their children earn good money in various private sector occupations like the law and accountancy.
I just keep quiet. There’s no point pointing out their hypocrisy.
A number of years ago, my wife’s family made a pilgrimage to central Ireland, to the birth village of the matriarch who emigrated in 1912 to America. As there were ten of us, we found and rented a restored 18th-century manor house in Thurles that the owner had brought back from a burned-out shell. We spent a very nice evening with the owner and his family, during which he confided in us that he loved to rent to Americans as they never damaged anything and left the place neat and clean. When renting to the Irish, he said that he removed all the valuable antiques first.
This, from Fraser, must surely be Samizdata’s quote of the day:
“Anyone who thinks government doesn’t work is mistaken. Re-election rates are in the high 90%s, and government departments grow in budget, size and power relentlessly. The civil service and politicians use these metrics to measure the success of their programs, not the general welfare of those on whom they predate and victimize. Few businesses could claim such success rates. Government programs in general, and rent control in particular are extremely successful programs as long as you use the metrics used by the people who institute them.”
I’ll second Raymond’s nomination of Fraser’s comment. Ladies and gentlemen, your public choice lesson for this week.
It ought to be the masthead. Every elected official in his second or later term, top tier civil servant, Admiral, and General lives by it.
I can’t believe everybody missed the obvious reason why the words “rent control” don’t appear in Harris’s column:
It’s not “rent control“, it’s “rent pressure“.
Duh.
😛
Going further than Raymond and Gene, I think Fraser Orr’s comment absolutely needs to go viral. Who knows, it may even cause liberals, at least the more thoughtful ones, to stop and wonder.
Thomas Sowell defines the science of economics as “the study of cause and effect”. He also states that he first began to question his early-20s marxism through noticing that the do-gooders he was working with seemed indifferent to checking the actual effects of the changes they caused. Over time, he came to realise that they were very indifferent (and moved very far from his aged-20 opinions).
So while part of the problem is what Fraser Orr (December 1, 2018 at 5:13 am) said – government programmes succeed very well in benefitting those who run them – I think the indifference often comes first. Or, to put it another way, the youthful virtue-signalling pose was really about benefitting the poseur’s self-esteem and social standing from the start – and therefore signalled that, later in life, the choice Fraser describes would be made.
Several things not mentioned in article:
– rent control
– builders’ preference for other construction as housing construction is low(er) margin
– contribution of Govt regulations e.g. energy efficiency requirements adding to high cost of new housing
– “homeless” numbers including immigrants from poorer EU and 3rd world countries who are on Social Welfare
– Govt decision several years ago to ban “bedsits” which were usually grim but provided housing for those at the bottom of the ladder (including students who preferred to spend their money on drink rather than waste it on comfortable accommodation). This took several thousand rental units out of the Dublin housing market
Irrelevant but compulsory Guardian material:
– reference to Church-run Magdalene homes.
Also, most people in Ireland aspire to own a house. As a result, renting has rarely been the norm long term for those in good employment and was associated with the poor and with students or young workers up from “the country”.
There is, accordingly, a woeful culture of appalling behaviour on the part of landlords and tenants which scares off many people who might otherwise rent out under-occupied property.
@Niall Kilmartin
the do-gooders he was working with seemed indifferent to checking the actual effects of the changes they caused.
I actually think this is part of the same thing. I read recently about a woman (in Sweden I believe) who heard an Afghani was being deported on a particular plan to Turkey. So she bought a ticket, got on the plane and refused to sit down, preventing departure, until the Afghani was removed. Her purpose was to save the man from deportation.
Of course the very next day they deported him on a different plane. However, no doubt this young woman felt very self righteous, despite the fact that she had massively inconvenienced a bunch of people who had paid for the airline’s service, and despite the fact that her protest had no real effect.
But she felt good about herself and no doubt was lionized among her friends.
So these sorts of virtue signalling have many people who receive the benefits, the self righteous feeling of the person doing it, the adulation of those who see it, and undoubtedly the voter support of those who align with the feeling agenda. The fact that it doesn’t make any difference, or actually makes things worse doesn’t matter and doesn’t affect this positive feedback loop in any way.
Humans in general believe what it is convenient and useful to believe not what it is actually believable to believe. Virtue signalling to connect with and strengthen connections with your social group are far more useful things that abstract facts. Whether this specific man ended up in Afghanistan will make absolutely no difference to this woman’s life. However, I don’t doubt the virtue signalling will be greatly beneficial to her.
A simple example is the fact that over half of Americans believe the world was created in seven days. The evidence that that is not true is overwhelming. However, how long it took to create the earth makes almost no difference to most people in their day to day lives. What does matter A LOT is being accepted and connected and intellectually aligned with the people in their church. Being part of that group is very valuable. And the building of the us/them barrier that such a social group depends on is vital. So it is FAR more valuable to leave their intellectual rigor at the door of the church.
And BTW it is worth addressing the question of mendacity. Was that really her plan? Did she make that calculation in a mendacious manner. No doubt some people do, Kristen Gilibrand jumps to mind immediately. But I think for most people it is rather subtler than that. Why we decide things is a complex web of interacting factors, conscious, subconscious, unconscious, habitual, deliberate, calculated and uncalculated.
People also have a spectacular capacity for self delusion. Convincing themselves that those convenient facts are in fact believable. What is the saying: if you torture the data long enough it will eventually confess? Creationists are an obvious example of this. But it is just as true in politics where, for example, manifest examples of communism failing are met with the data torturing response: “yeah, but they didn’t do communism right”, or some other justification. The point being not to find the facts but to justify the predetermined facts.
OK, I guess I just rambled too much.
Not exactly rent control, but kinda related…
Many, many moons ago I had a co-worker who had clubbed together with some friends to make their fortune in real estate. They bought an apartment building in Boston, got a great deal (so they thought)…then it turned out that with the housing laws in Boston, they could almost never evict someone who would not pay their rent. It took a year or more to actually get a court order to evict, followed by months of trying to get the order enforced. And the whole time they were paying lawyers fees and collecting nothing.
The only people who paid the rent on time were the drug dealers ;).
Then the police showed up and accused them of running a drug den and demanded that they get rid of the dealers. When they tried to explain the situation to the police, they were told – “That’s your problem, not ours” get rid of them…
They finally sold out at a loss of tens of thousands of dollars to someone else who had gone to a few seminars and thought they were on the path to an easy dollar.
That said, I did work a summer for the Tenants Organization of Evanston (just north of Chicago), and heard and saw many horror stories of landlords who did not do squat about things that were real problems.
So maybe the solution is two fold. Ease up on the landlords ability to evict, and do what can be done to encourage an ‘oversupply’ of housing.
Just a thought…
@ Fraser Orr – just one nitpick. You wrote
‘A simple example is the fact that over half of Americans believe the world was created in seven days.’
Not so. The number of Americans who believe in some form of ‘young-Earth creationism’ is now less than 40%, with those believing in a literal 7-day creation being some smaller sub-set.
https://news.gallup.com/poll/210956/belief-creationist-view-humans-new-low.aspx
More to the point, as you say, this reflects only what people tell pollsters. There are few areas of human conscience where what people say they believe differs more from what they show they believe than religious dogma, and this is a prime case in point. Like Catholics with matters like birth control, or transubstantiation, the number of adherents who actually completely and utterly believe this as literal truth is actually quite small – most profess these beliefs as a matter of social usage and group identification, rather than as a matter of actual, factual condition.
llater,
llamas
It’s almost as if there are cast iron laws of economics which can never be broken!
On the one hand the Irish government imposes Rent Control (and many other controls) – but on the other hand it invites in people from all over the world, indeed it INCITES them to come with government benefits and “public services”.
This does not work in California – where demand is also increased by enticing people in from the Third World with government benefits and public services (alas that the far left courts struck down Proposition 187 – which would have stopped this madness) and supply is artificially restricted by government regulations, and it will not work in Ireland either – the bad times are just getting started (things will get worse and worse).
A sad end for Irish Nationalism (the Irish of the South have allowed their nation to be snatched from them) – although I am certainly not an unbiased observer, as I am a Unionist (indeed I was in Ulster only last week – a place that has its own problems).
lamas
Not so. The number of Americans who believe in some form of ‘young-Earth creationism’ is now less than 40%, with those believing in a literal 7-day creation being some smaller sub-set.
OK, thanks for the correction.
More to the point, as you say, this reflects only what people tell pollsters.
That is true on a few levels, and that is why I wanted to reply to your comment. For sure there are some people who just plain lie to pollsters, and there is also a selection effect that some, who express conversational views will often say nothing.
However, there is an important, deeper thing here. What does it even mean to “believe” something? Believing is not binary, black and white. It is more a degree. How much do you believe something. And the curious thing is, from my experience, the degree to which someone believes something is often situationally dependent. In some circumstances you hold more firmly to your beliefs than in others. And some beliefs are very lightly held. Which, btw, is another reason why opinion polling is a very poor measure of things. “Do you think President Trump is doing a good job.” My answer to that is complex and nuanced, but I only have two checkboxes: yes and no. And here is the crazy thing, it also depends on how I am feeling, or who I just talked to, or if I just paid my massive tax bill (which I just did), or whether I just saw that sob story about some poor immigrant.
Belief is a very fluid thing. But this is just part of the point I made earlier. Our beliefs are not arrived at by following a logical set of algorithmic steps, as if we were implementing Donald Knuth’s description of computer sorting algorithm. Rather, our brains are messy neural nets of many input parameters, lots of data state, many feedback loops, and complex weighted graphs. Our decisions are not made by a logical set of steps but rather buy a kind of simulation through the net of various possibilities and situations attempting to find a lowest possible disagreement function, something that is often unstable. Decisions, beliefs, opinions are messy and not particularly strongly based on logical analyses of data. For some people who have taken the time to really think things through this is less so, but even for those people that only applies to a small subset of opinions they hold.
And, back to the situational thing, it is also a fact that humans have a remarkable capacity to compartmentalize. It is how, for example, fundamentalist Christians can often operate in areas of science that are quite contradictory to their belief system. For example, in the area of evolutionary science such as virology. The ability to compartmentalize what they see with their eyes and what they profess in their catechism, is quite remarkable, and really a considerable evolutionary advantage. It is possible, for example, to find flimsy justifications (“I believe in micro evolution not macro evolution” for example) and to allow oneself to accept this by choosing not to examine it too carefully.
And by no means do I mean to pick on fundamentalist Christians particularly, it is an intrinsic part of life. For example, political beliefs strongly suffer from this effect. And, to use a more commonly shared experience of this, so do romantic relationships. When you meet that perfect person you can only see their excellent qualities. You are blind to their obvious faults, and even in some cases where they can’t be ignored, you come up with all sorts of flimsy excuses for them, and don’t examine them too hard. Over time, of course, in something as intimate and intense as a romantic relationship such a thing cannot be sustained, but evolution has designed a mechanism, nostalgia and bonding, where the putative perfection of the match is replaced by a rather longer term more stable mechanism, namely the bonding of shared experiences, investment, resources, family and affection.
So blindness, compartmentelization, double think, illogic, flimsy excuses, averting one’s eyes from the obvious, all of these are actually pretty useful evolutionary tools that we have developed. In large part because of the extremely strong bonding, herding and tribalism effects that are central to the survival of we, weak naked apes. I’d say a strict ability to think things through logically of only of recent development in the human psyche both as a tool and as a useful idea.