Monday, May 23, 2011

Rent control

The Washington Post reports from Portugal:
Down a cobblestone street in old Lisbon, in a neighborhood dotted with blooming jacarandas, Miguel Lesta, 72, lives with his elderly wife and 39-year-old son in a charming three-bedroom house. Together, the family earns roughly $2,000 a month. Their monthly rent: $28.

They have lived there for 40 years, their rent controlled by tenant-friendly laws established after the fall of King Manuel II and the birth of the republic in 1910.

Such laws have made the Portuguese housing market one of the most broken in the Western world, with longtime tenants facing only minuscule annual increases. Revised laws mean that new tenants must pay sharply higher market rates — other similar houses in the Lestas’ neighborhood are renting for $800 a month. But even current laws are so protective of tenants that it can take a decade to evict someone for failing to pay.

So many landlords here have simply decided to keep their properties vacant, peppering hilly Lisbon with abandoned eyesores and crippling the government’s property tax base. The housing market is so out of balance that it has become a major obstacle to labor mobility, with employers finding it incredibly hard to relocate workers or hire job candidates from outside the area.
Truly one of the most counter-productive laws out there, yet incredibly commonplace in various forms. The situation is worse in Bombay, where there are numerous instances of landlords simply ceasing to perform basic maintenance -- as it would actually result in a net loss of income -- causing buildings to collapse.

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