Bastiat’s Bastions

Kimberly Barrilleaux, a student in my Econ 211 class, sent me this New Orleans Times-Picayune article on a new type of rent control passed by the St. Bernard Parish Council (10/4/2006). As you can see by reading the article, St. Bernard has established a peculiar style of rent controls, not on the level of the rent charged, but instead on who one could rent to. In a parish where 93% of the homeowners are white, establishing an ordinance that denies homeowners the right to rent their homes to anyone but blood relatives (which the ordinance does), clearly keeps most non-whites from being able to rent in St. Bernard, unless they were renting their before the storm. This clearly violates the civil rights of anyone not kin to someone wishing to rent their St. Bernard homes out. The lawsuit charging a violation of the fair housing act and equal protection under the law is surely warranted.

Councilman Mark Madary nails the issue on the head. In the Times-Picayune article, Paul Rioux writes:

Madary…said St. Bernard can’t afford to turn away anyone who wants to invest in rebuilding the parish after virtually all of its 27,000 homes were swamped by Katrina.

“Without an infusion of outside investors to jump-start the recovery, you might be living next to a debris pile for a lot longer than you would like,” he said. “The longer the houses sit empty, the harder it is to convince people to come back.”

He said the ordinance also unduly restricts property rights.

“When you buy property, you buy the rights that go with it,” he said. “To go back retroactively and change those rights is unconstitutional in my opinion.”

This ordinance is a violation of the property rights of all current homeowners. It denies them the right to sell their property to those who would build rental housing in the area (as this potential market for their houses disappears) and to rent their homes out to the renter who would pay them the highest rent.

This ordinance constitutes a “takings” because the property owner is denied the market that was once part of their potential market. By reducing the number of potential buyers and renters, the demand for housing in St. Bernard is kept down, as is the incentive to build such homes for rental or speculative purposes. This ordinance limits housing and the future growth of St. Bernard.

To make matters worse, this ordinance is not a very smart move for politicians who wish to spend money raised through taxes. Rental homes are not given homestead exemptions and are completely taxed and their value is affected by the rental income they generate. Owner occupied housing, which is partially homestead exempt (for the first $75,000 in value), will generate less income as the housing demand is depressed by this ordinance, which reduces the values of all homes.

MC

This entry was posted on Wednesday, October 4th, 2006 at 12:09 pm and is filed under Katrina, Political Economy, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.