Newton’s third law of physics is that for every action in nature there is an equal and opposite reaction. This rule also seems to apply in the business world when it comes to regulating free enterprise.
That is, regulation always has unintended consequences, some predictable, others less obvious. And that rule is in play especially when it comes to government interference in the housing market, especially with recent federal, state and local moratoria on evictions.
For example, an obvious consequence of the draconian restrictions on new developments is a corresponding increase in housing costs. A less obvious consequence is the impact that rising housing costs tend to have on economic and social pressures leading to the demand for a higher minimum wage, which in turn increases inflation and has other consequences. economic impacts.
With all the efforts of social engineering, we are creating new problems. And the cycle continues like giving a mouse a cookie.
This does not mean that all regulations are bad. But that does mean that before we rush to stack more regulations, we should be think carefully about the costs and benefits. This is good government, and one would think that would make good sense.
But when it comes to the political science of rule-making, we find that there is a certain law of inertia at play, pushing for more and more regulation – with predetermined results in the process. mind. Whether it’s because regulators adopt a crusader mentality or because they follow the prevailing winds, it seems that bureaucrats are too often blind to the collateral damage of regulation.
Take, for example, the national moratorium on evictions pronounced by the Centers for Disease Control and Prevention last fall. Once again, the consequences are obvious. But there are also some startling implications that should have been sobering – if only the agency had stopped soberly considering the drawbacks of a nationwide moratorium on evictions.
While federal law requires agencies to seek public opinion before finalizing new regulations, it simply declared its moratorium on evictions without giving the public an opportunity to comment.
The supposed rationale for the moratorium on evictions was that there was a need to ban evictions in order to ensure that people had a place to weather the COVID storm. That is to say, the CDC deemed it important to provide adequate housing for families in difficulty. But of course, in its rush to pronounce this national moratorium, the CDC failed to address an important aspect of the problem. More specifically, the CDC did not take into account the impact of the moratorium on the national rental market.
The CDC has had ample time to solicit public comment since the pandemic began last winter. And if the CDC had bothered to seek public opinion (as required by the Administrative Procedures Act), it would have heard from many homeowners across the country. Had lawmakers followed the rules, the CDC would have learned not only that landlords depend on rental income to pay off their mortgages and other business expenses, but also that a disproportionate many landlords renting single family homes are what we might call family farms.
Indeed, since the launch of legal action against the moratorium in November, the Pacific Legal Foundation heard from countless individual owners who depend on rental income for their retirement income, to pay their children’s school fees and to cover their living expenses. We even heard from a homeowner who went without his prescription drugs during a time when she could not collect from a non-paying tenant.
But it’s not just the impact on homeowners that should have given CDC pause. The reality is that there is also a negative impact on low income families who need affordable housing. As counterintuitive as it may sound, eviction moratoria threaten to exacerbate housing affordability issues in the rental market and ultimately harm the very people they were meant to benefit from. So again, regulation has unintended consequences.
On the one hand, with a hot real estate market, landlords have a vested interest in withdrawing from the rental market. It’s like a choice between cake or death. You always choose the cake.
Seriously, why continue to rent out your house when the government imposes a moratorium that prevents you from enforcing your contractual rights as a landlord? Why run the risk of having someone squatting in your house when you could be selling, and at a time when the real estate market is booming? And what if, suddenly, landlords start to rationally exit the rental market in droves?
It is basic economics. As the supply of rental housing declines, rents inevitably increase. And ultimately, it compounds the problems for families who are already struggling to keep a roof over their heads. But of course, when in a hurry, the court argues that it was not concerned about the impact on affordable housing.
There are also other consequences that flow from it. If you are a landlord and know evictions are not on the table, you might require tighter credit checks on tenants or higher security deposits. These are rational responses to the moratorium policies on evictions. But they ultimately make it harder for low-income families to find housing. But don’t blame the owners when it’s the policy in question. Again, for every regulatory restriction, there is an equal and opposite (but not always anticipated) regulatory consequence.
But here’s the friction. Which company has a federal agency responsible for monitoring and tracking contagious diseases anyway declared a moratorium on evictions? Does the CDC really have that kind of power?
Well, it depends on who you ask. According to the Justice Department, it can issue any order it deems “necessary” to control the spread of contagious disease, which would mean it could reimpose business closure orders in any state that has lifted the restrictions. , or for that matter impose ordinances restricting any facet of American life.
But the problem with this view of CDC authority is that it is totally unconstitutional.
Federal agencies do not have inherent regulatory power. They can only impose regulation to the extent permitted by law. And three federal district courts have ruled that the CDC does not have the legal authority to impose its moratorium on evictions, with the first notice coming from The PLF trial in the Northern District of Ohio. But if the government is right and the CDC truly has unlimited authority to impose hat-trick regulatory orders, then there is a constitutional problem because Congress cannot just give a blank check to a party. federal agency to do whatever it thinks best. This is not the way we do law in America.
But of course, the broad view of its own regulatory powers is emblematic of a larger problem, which we might call the “rise and rise of the administrative state. ”
Certainly, the natural tendency of government is to expand its powers over time, which means further increase the regulatory thicket. And as we’ve seen, the problem with regulation is always that it creates more problems.
So let’s at least drop this fanciful idea that regulation is always the answer to the problem at hand. Regulation is only appropriate when authorized by Congress and is prudent only when the benefits outweigh the costs.