American • Seizing the Wealth of Landlords, One District at a Time
January 16, 2012
Seizing the Wealth of Landlords, One District at a Time
By Roger D. Luchs
The real property of the landlord class is being liquidated, slowly but steadily, in one odd corner of America, with the nation as a whole blissfully unaware of the slow-motion seizure underway. In Washington, D.C., before the very eyes of the world’s media, the rental property of landlords is being handed over to their tenants, step by careful step.
After Congress granted the District home rule in 1973, its elected officials found thumbing their nose at the city’s former overseers more rewarding than trying to run a competent and honest government. Since then, several city agencies and programs have been forced into court-ordered receiverships because of the District’s utter ineptitude in managing them. But that has barely made a dent in the psyche of local politicians. Although they often wax eloquent about how much they care about the District’s most vulnerable residents, the receiverships, scandals, and multiple screw-ups that have continued to plague the city for decades have exposed the utter insincerity that lies behind these pronouncements.
Although the District has been forced to clean up its act a bit, there remains a host of less publicized policy failures, destructive in their own right, that each year sap millions of dollars from the wallets of taxpayers, both local and nationwide. Keep in mind that Congress subsidizes D.C. operations each year and that that "fix" helps the city maintain policies which should have found their way to the circular file decades ago.
In 1970, shortly before the District was granted home rule, the United States Court of Appeals for the District of Columbia got the ball rolling by making the District a crucible for the Court’s own far-flung experiment in social engineering. Building on President Johnson’s Great Society endeavor, which relied on the newly-enacted Civil Rights Act and federal taxing and spending authority to address the lingering effects of slavery on the nation’s inner cities, the Court cast aside a centuries-old common law tenet and empowered D.C. tenants to simply stop paying rent if their landlords were derelict in correcting serious housing code violations in their units. Notwithstanding the fact that city officials had administrative mechanisms in place to enforce the local housing code, permitting tenants to withhold rent was, to the Court, a facile way of enriching tenants while casting local landlords as the villain.
Tenants soon started taking advantage of the Court’s largesse by withholding rent, even when only minor violations, or none at all, existed. And tenants also learned that when faced with bills they could not pay, they could simply stop paying rent, charge their landlords with failing to meet their obligations under the local housing code, and squeeze out a rent abatement, thus allowing them to make ends meet. All too often, tenants even manufactured their own code violations and called city housing inspectors to issue citations to their landlords. Despite the fact that these homemade code violations were obviously self-inflicted, housing inspectors were happy to go along with the gamesmanship. In fact, it became their job to do so.
Before long, District tenants also realized that there was money to be made in organized, building-wide rent strikes. The leverage created by such strikes left landlords with few alternatives but to settle with their tenants, in order to reinstate the flow of income needed to pay for building upkeep, to service loans secured by their properties, and to avoid the gargantuan legal bills that having to sue volumes of tenants at one time generates. Eventually, tenants also acquired the statutory right of first refusal to buy the buildings in which they reside and to assign that right to a developer in exchange for a quick cash payment. Over the years, then, District tenants have acquired something akin to an ownership interest in their landlords’ properties, courtesy of the United States Court of Appeals and the District’s elected officials.
As entrepreneurial as many District tenants have proven to be, however, the ultimate victims of this wealth-transfer scheme have been the tenants themselves and, more importantly, those who have refused to take part in city-sanctioned extortion of their landlords’ wealth. Without a steady stream of income, affected landlords have often had no choice but to cut back the level and quality of services afforded their tenants and have deferred or canceled plans to upgrade and improve their properties. None of this, of course, helps the city’s tax base. Plus, this scheme has caused the local court docket to skyrocket, necessitating the hiring of additional court personnel to handle the burgeoning caseload. Because many of these suits are contested, because of either real or contrived housing code issues or for other reasons, more and more judicial resources have had to be devoted to dealing with these disputes.
None of the above even takes into account that once Congress granted the District home rule, one of the City Council’s first acts was to institute rent control. It remains in effect to this day. The law is imbued with byzantine filing and regulatory requirements intended as traps for the unwary, and has provided tenants with additional tools with which to bludgeon landlords into submission. Indeed, the District spends millions each year to administer rent control and related tenant-oriented programs, in part because such spending buys votes and in part because hotly contested rent strike cases swallow up huge resources, some even taking decades to fully adjudicate.
If all of this seems to reek of Kelo, that is because it does. The natural consequence of redistributive policies such as those in place in the District is that government has been granted free rein to turn private property into a public utility, or worse. One key distinction, though, is that when Bridgeport exercised its power of eminent domain in the Kelo case, it was bound by an express constitutional requirement to pay "just compensation" to the property owners. D.C. landlords are not so lucky, notwithstanding the reality that the policies in question were devised for the express purpose of transferring the wealth of local landlords to District tenants — and they have succeeded in that regard.
It is especially troubling that the Supreme Court seems to have given such schemes its blessing. In the District, rent control was first adopted as a temporary World War I emergency measure, and the Court upheld it at the time just for that reason. Where is the emergency today? And why has the high court sanctioned such a taking when the housing problems that now exist are often the result of bad public policy and confiscatory measures such as those described here, which simply perpetuate the problems they purport to address? Add to this that local judges continually devise new obstacles to stifle landlords from evicting their tenants, and it is obvious what District officials, including some local judges, have in mind. Of late, in violation of its own ethical rules, the District has even started assigning its own attorneys to represent tenants in private disputes with their landlords, to assist them in obtaining rent refunds, damages, and other forms of relief.
One can only hope that sooner or later, Congress and the Supreme Court will get a whiff of all this. In the meantime, District landlords just grin and bear it. Given that the District’s most fervent advocate of tenants’ rights is a member of the City Council who has a life-sized poster of Che Guevara proudly displayed on his office wall, the vision at work, and the endpoint of it all, is clear.
Statistics: Posted by yoda — Mon Jan 16, 2012 3:03 am
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