Legendary free market economist Milton Friedman once said, “Governments never learn. Only people learn.” The law of unintended consequences has reared its ugly head in Seattle, where politicians approved a new ban on landlords running criminal background checks on prospective tenants. Although the Seattle lawmakers may have good intentions and are patting themselves on the back, they prove once again that the road to hell is paved with good intentions.
Earlier this month, the municipal government passed the Fair Chance Housing ordinance, a new rule that accomplishes four things: prohibits landlords from turning away interested renters because of their criminal history, performing criminal background checks, requesting security deposits and charging higher monthly rent.
The Seattle Times reports that there are some exemptions to the legislation.
The only applicants who could be denied a rental are those who are on sex-offender registries. Buildings will still be required to explain to the government why they are not providing them with an apartment. Other exemptions include landlords renting parts of their own homes and sharing a bathroom or kitchen, primary leaseholders selecting roommates and owners of backyard cottages renting their properties.
Property owners argued in front of the council that they need to utilize these measures to properly safeguard their property and tenants. Proponents of the ordinance say criminals did their time and “deserve housing.” In the end, the legislation passed overwhelmingly.
Seattle Council member Lisa Herbold wrote in a blog post:
Landlords will still be able to screen applicants based on employment, credit scores, income ratios, or other criteria to ensure people will be good tenants. They’ll merely be unable to use criminal history when considering applicants, something no study has shown affects a person’s ability to successfully be a good neighbor or tenant.
And there lies the problem and the unintended consequence.
First, it will be riskier for proprietors to rent out apartments – why would they open their units to someone who has spent time in prison? This would likely cause these landlords to sell their properties, something that is already transpiring. Second, housing entrepreneurs that do continue to rent out properties will respond by enhancing the screening requirements, such as credit scores, employment records, monthly income levels and other factors.
Of course, because Seattle is the epicenter of social justice warriors, the West Coast metropolis has incorporated a series of social justice measures into the bill. The Seattle Office of Civil Rights will probe allegations of “adverse action” for benign infractions like denying requests to add another occupant to a lease. If the person is discovered violating these laws, they could be mandated to pay damages, provide rent credits and even attend anti-bias training courses – if they refuse to partake in these Orwellian re-education seminars, they can pay an $11,000 fine, which climbs to $55,000 if you commit two offenses within a seven-year period.
Why landlords are still operating rental properties in Seattle is befuddling. In recent years, the city has imposed a plethora of regulations, reports Reason magazine:
Seattle has already hit landlords with a raft of regulations on how they can use their property, including caps on move-in fees, strict limits on no-cause evictions for month-to-month leases, and requirements to accept tenants on a first-come, first-served basis. Despite (or perhaps because of) all this, Seattle has one of the priciest rental markets in the country and a worsening homelessness problem.
The government, whether at the state or local level, has intervened too much in the rental market over the last 80 years.
One of the biggest and most obvious negative policies has been price controls. From Los Angeles to New York, legislators have thought they could solve the problem of high costs of apartments by instituting rent controls. The common arguments in favor of this regressive action are usually distributive justice and economic fairness. The former works on the premise that it isn’t right for someone to be priced out of the housing market, while the latter is based on the idea that property owners simply count their rent checks all day long without doing any work.
Rather than aiding the impecunious or redistributing the wealth, superintendents generally do one of two things: take the rental units off the market or transform the apartments into luxury suites or offices.
Moreover, should the landlord keep the rental units on the open market, they will only perform the bare minimum, which consists of merely abiding by government orders. For the most part, whenever you come across an apartment building that looks run down, outdated and crummy, it’s likely due to rent control and the subsequent reality that the superintendent doesn’t want to do too much since it will hurt their bottom line.
Yes, price controls, housing regulations, and constant meddling may look like good optics for power-hungry politicians. Unfortunately, as the old adage goes, “bad economics makes good politics.” As usual, absurd market intervention only helps the politicians, benefits the special interests and enriches the bureaucrats, while the public gets shafted.