Tag: Oregon

Oregon’s Rent Control Bill Would Ultimately Please Nobody

The Oregon Senate has passed a rent control bill that would limit annual rent increases to 7 percent above the annual change in the consumer price index.

This sort of legislation is, in the longer term, likely to please nobody.

In markets where rents are rising faster than earnings, but slower than this cap, groups representing tenants will complain that the price restriction is not tight enough to help tenants financially.

In markets where demand for rental property is growing rapidly relative to supply, the controls will bind and bring the negative effects we’ve seen from rent control historically: reduced incentive to bring new supply to market (and so rising underlying market prices), a misallocation of properties, a lock-in of tenants reducing labor mobility, and a worsening in the quality of properties available.

So why introduce the legislation?

The stated goal of its proponents is that it’s a defense against so-called “economic eviction.” That is, to guard against instances where tenants face steep unforeseen rent hikes, that suddenly makes living in a rented property unaffordable.

To give these tenants more security and certainty, many polities around the world are experimenting with new forms of “rent regulation.” Most common is for the introduction of fixed term tenancies, say for three years, during which rent increases are linked to some inflation measures. Between tenancies, landlords can adjust rents as they wish.

Over time, these forms of regulation allow rent levels to track market fundamentals. They can still have some of the negative effects crude rent controls bring in the short-term, especially in overheating markets. They also tend to have to be coupled with other regulations that ensure security of tenure, restricting landlords’ rights to evict within tenancies. This change in who bears the risk might reduce the supply of available property, as might the perception this type of regulation was a precursor to more stringent regulation.

Overall though, these forms of rent regulation are not as damaging as first-generation price controls. By construction, they cannot improve overall affordability and will likely raise market rents. Their use really entails a trade-off: providing more time-limited security for existing tenants, at the cost of economic inefficiency and lower investment in the rentable housing stock.

The Oregon Senate’s bill - with a high but crude cap on annual rent increases – is quite different. The bill does contain some new restrictions on evictions, including prohibiting a landlord from terminating month-to-month tenancy without cause after 12 months of occupancy.  But the rent control cap proposed suggests policymakers also desire to signal to renters that they are concerned about general affordability within tight city markets too.

The stark truth is this: the only policy means of ensuring that both perceived problems are minimized is to set land-use planning and zoning regulations such that housing supply is responsive to new demand. Fail to recognize that, and the rent controls advocated will either result in disappointment and demands for tighter controls, or else exacerbate the relative scarcity of supply in tight markets.

Oregon is notorious for its land-use regulations. My colleague Randal O’Toole has long explained how extensive urban growth boundaries create severe restrictions on building outside of cities. This leads to demand substitution into the restricted urban areas, driving up the price of land and, ultimately, housing. And in recent decades it has been getting worse:  Vanessa Brown-Calder has noted that between the years of 2000 and 2010, Oregon added more land-use regulations per capita than 43 other states.

Little surprise then that, dividing the median house price by median income in each of Oregon’s three biggest cities, Demographia’s Median Multiple Index finds two to be severely unaffordable (Eugene with a multiple of 5.6 and Portland at 5.2) and the other merely seriously unaffordable (Salem at 5.0). For context, using these calculations there are just 13 severely unaffordable metropolitan markets in the whole of the U.S.

The best way to make housing more affordable and to lessen the prospect of abrupt rent hikes is to reform these cost-inflating rules on land use. In the absence of that, rent control amounts to little more than trying to muffle the message that rental and house prices are screaming about the relative scarcity of land developable for housing.

Tentative Steps Away from the Gas Tax and towards a Better System

The state of Oregon recently began a pilot program with 1,000 drivers, which charges those drivers a fee based on the miles they drive, rather than a gas tax. Several states are looking closely at Oregon’s experiment. This could mark the beginning of a major change to a much better way to finance our roads.

The states care about Oregon’s experiment because the gas tax is a lousy user fee that doesn’t come close to capturing the true cost a driver imposes on the state when he drives, whether via the wear and tear his vehicle causes to the highway, the congestion his presence on the road exacerbates, or the pollution his car emits. An optimal user fee would attempt to capture each one of those and charge a fee based on where a person drives, how much he drives, the amount of congestion on the roads he is on, and his car’s emissions. Oregon’s simple experiment captures none of that—it consists solely of a 1.5 cent per mile charge, coupled with a fuel tax credit—but with today’s technology a more advanced system could easily be implemented.

The advantage of having a sophisticated user fee for drivers is that it could dramatically lessen congestion on a road: if you charge a high fee when roads get crowded, people will postpone trips, carpool, work at home, or take mass transit. Since the majority of auto pollution comes from cars stalled in traffic, the reduction in smog would be significant. Such a user fee would also help states reduce how much infrastructure they have to build by smoothing out demand.

The complaint against such schemes is that they have the potential to invade privacy—a valid concern, but one that can be addressed with adequate regulation, and an open source software system that can be examined by anyone to determine if it is sufficiently secure.

Oregon Legislature Repeals Laws of Supply & Demand

Like the apocryphal story of the state legislature that passed a law dictating that pi equals 3, the Oregon state legislature has passed two laws that pretend the laws of supply & demand don’t exist. The difference is that, in reality, no state legislature ever did pass a law saying that pi equals 3, but Oregon’s legislature is totally ignoring basic economic principles.

First, earlier this week, the legislature passed a new minimum wage law increasing the minimum to as high as 14.75 per hour in the Portland area by 2022 (with lower minima for other parts of the state). This will supposedly be the highest in the nation, but only in the unlikely event that no other state raises its minimum wage in the next six years. However, after adjusting for the cost of living, Oregon’s new minimum wage probably is the highest in the nation even before 2022.

Proponents claim the minimum-wage law will improve Oregon’s economy by putting more money in the hands of its residents that they will spend in Oregon businesses. The new minimum wage “is going to be good for Oregon families and is going to add to consumer purchasing power that will benefit our small businesses,” Oregon’s labor commissioner told a reporter. That’s like warming the bed by cutting off one end of a blanket and sewing it on to the other end. If increasing the minimum wage does so much good, why not increase it to $15 right away? Or $50? Or $500?

A Western Film Noir

The more I read about the case of Dwight and Steven Hammond, the more convinced I am that their prison sentences are a gross miscarriage of justice. After conducting prescribed fires on their own land that crossed onto a few acres of federal grasslands, they were convicted of arson on federal lands, which under a 1996 anti-terrorism law carries a five-year mandatory minimum sentence.

The law says, “Whoever maliciously damages or destroys … by means of fire or an explosive, any … real property in whole or in part owned or possessed by, or leased to, the United States … shall be imprisoned for not less than 5 years.” The key word is “maliciously”: there is nothing malicious about starting a prescribed fire, something that is regularly practiced by thousands of landowners as well as the government itself.

In its opinion on the case, the Ninth Circuit concluded that a 2001 fire (which the Hammonds started on their own land but which escaped to federal land) was malicious because Dwight Hammond’s grandson and Steven’s nephew, who was a 13 years old in 2001, “testified that Steven had instructed him to drop lit matches on the ground so as to ‘light up the whole country on fire.’” This betrays a divide between urban and rural cultures. To urbanites such as the judges on the Ninth Circuit, “the whole country” means the entire United States.

This obviously makes no sense; no one would think that a teenager with a few matches could light the whole nation on fire. This is probably why some press accounts reported that Steven told the teenager to “light the whole county on fire,” but even that makes little sense: Harney County, in which the Hammonds live, is the largest county in Oregon and bigger than the entire state of New Jersey.

Ruralites use the word “country” to mean something other than “United States.” Instead, it means what urbanites would call “land” or “countryside” (another word used in some press accounts). Steven Hammond’s instruction to the teenager probably was intended to mean, “burn this entire field.”

No Good Guys in the West

There are no good guys to cheer for in the militia takeover of an Oregon federal office building on January 2. The ostensible issue is the re-sentencing of two Oregon ranchers–Dwight Hammond and son Steven Hammond–for arson, while the underlying issue is federal land ownership of much of the West.

The arson fires lit by the Hammonds in 2001 and 2006 may have actually represented sensible land management, but the Hammonds lost the high ground by their failure to coordinate with the government agency managing the land they burned. Prescribed fire is a tool used to improve wildlife habitat, increase land productivity, and control wildfire. The 2001 fire aimed at improving productivity, but the government says the ranchers didn’t bother informing the Bureau of Land Management (BLM) they planned to burn until two hours after they lit the fire. While they lit the fire on their own land, it escaped and burned 139 acres of federal land, but that burning probably did not do serious damage to the grassland and they put the fire out themselves.

The 2006 fire was more questionable. A wildfire was burning on BLM land near the Hammond’s ranch, so to defend their land they lit a backfire on their own land. That would be standard procedure except, again, they didn’t tell anyone and when their fire crossed over onto federal land it endangered firefighters who the Hammonds apparently knew were located between the wildfire and their backfire. Due to severe fire hazards, the county had a no-burn rule which the Hammonds apparently violated, but this was hardly a terrorist act.

For these actions, they were sentenced to a year in jail, which possibly was appropriate considering they endangered people’s lives. But the federal government, citing an anti-terrorism law that sets a mandatory minimum sentence of five years for arson on federal land, demanded that they be re-sentenced. Having already served the first year, they were scheduled to be re-incarcerated for four more years after the New Year. It is always disturbing when the federal government uses laws aimed at foreign terrorists to oppress citizens who have political differences of opinion with government policy. The Hammonds, who have paid $400,000 in fine related to the fires they lit, probably should not have been re-sentenced to four more years in prison, but that’s a problem with mandatory sentencing laws and overly aggressive prosecutors, not federal land management.

Oregon Libertarians to Obamacare: Don’t Fence Me In

Ben Nanke, a 20-year-old aspiring songwriter and filmmaker from Salem” was none-too-pleased to see the glossy odes to Obamacare that will run in Oregon at a cost to taxpayers of some $9.9 million. Who can blame him? The videos claim Obamacare will make you healthier and live longer, even though there is zero reliable evidence that’s the case, and much evidence to suggest it won’t. Also, that had better be his own guitar that Matt Sheehy is getting wet.

 So the libertarian Nanke and his friends composed and cut a video for “Don’t Fence Me In,” their own love letter to Oregon, and freedom. Here’s what Nanke wrote at the video’s YouTube page:

As native Oregonians, we found it strange that a large-scale, federally-funded ad campaign is trying to twist the meaning of “the Oregon Spirit.”

Quoting the Oregonian - “Mark Ray, co-owner and creative director of North [who created the ad campaign], said the initial ads are to ‘create almost a hello’ sort of vibe, while stressing an ‘Oregon pride, Oregonians take care of themselves kind of thing.’”

We agree, and believe that “Oregonians take care of themselves” means exactly that. We take care of ourselves. No government mandates, no tax penalties, and no manufactured marketplaces. We love seeing our fellow Oregonians happy, healthy, and strong, which is why we don’t want to see our state fenced in by government-controlled health care.

A sampling of the lyrics, and the full video follow.

Long ago the wagons traveled past the cliffs of the Gorge

We watched the sagebrush trails become I-84

It’s not that I don’t care, it’s that I’ve seen it before

We say “oh, don’t fence me in.”

You say, “ooh, it looks mighty innocent”

but follow the trail, you know it’s gonna derail

I say “ooh, we’re all going to pay for this”

We’ve travelled quite a long road, and we know where this goes

You say it’s time for a change from the Oregon range

Rugged individuality gives way to rain and trees

So don’t tell the people of Oregon that we don’t care

Don’t fence me in. (Don’t fence me in)

We Aren’t Exaggerating When We Rail Against Threats to Economic Liberty

Oregon officials told a 7-year-old with a lemonade stand that she needed to obtain a temporary restaurant license or incur a fine.

I’m rendered speechless, but Josh Blackman exploits the “teaching moment”:

If you are generally opposed to any notion of the right to pursue an honest living, ask yourself, why does it bother you so much that this little girl cannot sell lemonade. Then, ask yourself what you think about other regulations that stifle the entrepreneur. This story does not tug on our heart strings simply because she is adorably selling lemonade for 50 cents a cup (suggested price) at a fair. It tugs on our heart strings because the state is unnecessarily clamping down on this little girl’s ability to make some money.

More from Tim Sandefur.