The Outstater

January 28, 2022

‘WHEN THE RENT isn’t paid, there’s trouble,” is a line from a Hemingway novel I remember for some reason. Perhaps it is because paying the rent is where the rubber meets the road in our economic system — an ugly absolute unlike the softer irritants of inflation, interest rates, Internet fees, etc. As such, it is the bane of those who imagine they can change the world with a sweep of the legislative hand.

That was the story of a bill this session that, according to a journo-activist at the Indianapolis Star, “would have put the state in step with 45 other states by implementing tenants’ rights to enforce basic habitability standards in their rental homes.”

There’s a lot to unpack in the Star’s treatment of this issue, particularly the assumption that the unfettered workings of the rental market do not sufficiently punish landlords with uninhabitable square footage. There also is a naive acceptance of politically constructed tenant “rights,” a fanciful concept outside the contractual relationship of a basic rental agreement.

Please know that the Star in this regard conforms to what is all the rage in newsrooms. Young journalists see this issue as Pulitzer material, their ticket out of Indiana to somewhere significant. You can expect exposés of real and exaggerated landlord abuse to crop up regularly on the front pages.

But there is little eagerness to dive deeper into the economics of renting and, specifically, what happens when government steps between landlord and tenant, when it enforces legislatively defined “standards.”

I can save the Star some time there: You get either New York’s rent control (expensive or rationed) or Chicago’s Cabrini-Green (free but unlivable). Stuck between is the mom-and-pop landlord renting to lower-income and sometimes desperate tenants, the ones who make teary fuel for the anecdote machine.

It is only the small landlords who invest in the lower segment of the market. They do so in hopes of building a retirement nest egg or some degree of financial independence or even generational wealth. Those all are worthy goals in this society.

Look, I’ve seen their books, and the operating margins will not survive much more erosion from regulations. Distant corporate landlords can better take advantage of tax and other incentives, and they can move up the property ladder or otherwise reduce their exposure to troublesome regulations.

What was proposed, then, would have discouraged the very landlords most attentive to tenant complaints while eventually reducing the number of bargain rentals. Clearly, a better understanding is needed of the role of personal responsibility and the dynamics of private property, which, by the way, is an actual “right” dating back eight centuries to Magna Carta.

To be honest, on this issue there are no solutions only trade-offs, as Thomas Sowell is fond of saying.

But paying rent may be the typical journalist’s total experience with serious economics. Moreover, he or she has been taught that the world is one big happy family where contractual boundaries are meaningless. Property? Too few tell school children these days why it is not OK to slip a match-box car into their trouser pockets and take it home.

I asked an economist friend to expand in that direction. “In our twenties,” she said, “we should begin to consider that every adult we encounter is not a parent willing to serve us. Will such persons ever give up declaring what is due them and be grateful for the efforts of those trying their best to deliver a service? And if a person grows up learning only to criticize, will they avoid producing anything that others can criticize?”

Let’s hope that doesn’t prove out in Indiana. For like it or not, in an adult world, “affordable” housing ends up being what both tenant and landlord can in fact afford. Childish wishing recast as legislative folly does not change that. — tcl


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