The Perverse Incentives of Rent Control

Only a couple of weeks ago, within a period of a few short hours, an arsonist went on the rampage in the Castro District of San Francisco. The center of San Francisco's large gay community the Castro saw four fires that were intentionally set.

While no lives were lost 17 people were out on the streets homeless, having lost all their possessions and their homes in just a few minutes.

The Red Cross helped these people temporarily but, now they need more long term solutions. But they also just lost everything they owned so they have lots of expenses.

The wonderful people of San Francisco are trying to help them. They are holding fundraisers to help the people.

And now it appears that there are people with vacant apartments who are willing to help out the victims of these attacks. But rent control laws are getting in the way. The San Francisco Examiner says, "under San Francisco housing laws, a landlord cannot offer a below-market rent without them locking that unit into that rate" under the rental control laws. City Supervisor Scott Wiener said: "As a result of this risk and despite their desire to help, some landlords are hesitant to assist with short-term below-market rentals after a fire, earthquake or similar event." Wow, with laws like that it sure is a good thing San Francisco doesn't have to worry about earthquakes.

As I understand it, a landlord who, out of compassion for someone in unusual circumstances needs emergency short-term housing, and who offers that housing at below-market rent is then forced to continue offering that space at the same rent after the person he was helping moves out. In other words, the short-sighted rent control laws penalize landlords who try to show compassion to people such as the victims of these arson attacks. Supervisor Wiener is trying to pass emergency legislation to allow this sort of short-term rental without stripping the landlord of the right to get market rents for this apartment later.

Let me recount a story of the perverseness of rent control in San Francisco, that I personally know to be true. I was, in fact, told of this incident by the tenant in question.

This tenant was renting an "apartment" which amounted to the entire floor of a large building. His apartment had 7 bedrooms in it. I knew of the apartment but never knew the size until this tenant wanted me to sign a complaint against the landlord because the tenant had 21 cracked windows in his apartment.

This surprised me. I had a rather large apartment in the city myself. And, by my count, had only 23 panes of glass in total in the apartment. That's counting each window as having two panes. So I was shocked by the number of cracked panes and asked how many bedrooms he had. That was when I learned there were 7 bedrooms. Each would have its own windows, as would the lounge and the kitchen and the bathroom.

The conversation was quite enlightening. The tenant didn't work, he didn't need to. He used the rent control laws to make himself wealthy at the landlord's expense. He would rent each bedroom out for a couple of hundred dollars each. In addition he would spread the utilities bills between the tenants. The landlord, however, was only allowed to collect a much smaller amount for the apartment because it was under rent control. In effect the tenant was taking in $1200 in rental income on an apartment he didn't own. But he was legally free to sublease the rooms for any amount he wanted. The owner of the building, an elderly man, however was not so free. He was restricted to getting something like $700 per month for the entire apartment.

I suggested to the tenant that perhaps one reason the landlord was unable to maintain the building was that the bulk of income for living there went to the tenant and not the actual owner of the building. The tenant in question became rather agitated that I dared suggest that he clearly had no right to profit in renting out an apartment he didn't own, while the actual owner was forced to rent it out at rent-controlled rates.

The city did not manage to change the value of the apartment. They said it was worth $700 but the going rate was actually $1400. All the rent control legislation did was transfer that income from the actual owner of the building and gave it to someone who no investment and did nothing to earn it, but manipulate the law to benefit himself.

For an interesting drama/horror film about a man who uses San Francisco's housing laws to victimize a young couple see Pacific Heights. Trailer below.

October 17, 1989: 5:04 pm - San Francisco.

I can tell you precisely where I was on October 17, 1989 at 5:04 in the evening. Unlike thousands I wasn’t at the World Series game not far away. I was at my desk. I had just written a stinging letter of protest to the New York Review of Books. They had trashed a book written by two friends of mine, mainly by distorting beyond recognition, what was said in the book.

I don’t remember whether it was the rumbling sound I heard or the shaking that I felt which I noticed first. Perhaps it was both simultaneously. It almost felt like a wave of sound and motion coming at me from the south. As it hit my keyboard started bouncing around on my desk. I desperately tried to press the save commands to preserve my work but the screen turned a deathly black before I could. I was tempted to hang on to my chair but instead jumped up and stood in the doorway lest something fall on me.

It seemed to go on for minutes—but it didn’t. It was over in just a few seconds. The only immediate sign that anything had happened was that the lights were still out. I ran to the door and looked up and down the street. All the electricity was out; there were no traffic lights. In their “green” wisdom the city of San Francisco ran their mass transit almost entirely on electricity. In other words, they had built a system that couldn’t operate during an earthquake. Tens of thousands of people were stranded.

In minutes many of those thousands came streaming down the sidewalk, a constant flow of humanity trying to get home. Because I was standing there people started asking me if they could use my phone, they offered to pay. I refused such payments figuring it was the least I could do. Throughout the crisis the phones continued to operate, and in 1989 the cell phone was unknown. Soon a line formed inside my office as people waited their turn to check in with loved ones—just wanting the assurance of knowing they were safe.

Between callers I used the line to phone a friend in San Diego. He was able to fill me in on the news that I couldn’t get locally. I had learned the magnitude of the quake. It was thought to be 7.0, or 7.1 or 6.9. Any of the options meant it was big—it wasn’t “the big one” but it was big enough.

The first thing I noticed was that the shuttle services that took people to the airport and back were running up and down the street giving people free rides. I knew this was quite illegal as the government was anxious to protect their monopoly of “mass transit.” The shuttle services figured that no one would have time to enforce the law and that need surpassed bureaucratic regulations. About the only people who used the crisis for their own ends were the San Francisco police. Within a few minutes of the quake they turned up in the Castro, heart of the gay community, and started ordering the bars to close. Any excuse to harass the gays—that was the motto of the San Francisco police.

People coming in the store filled me in on something else that took place. They told me traffic in downtown was flowing relatively smoothly, in spite of all the marooned busses blocking the streets. Apparently the homeless and winos of the city picked themselves up off the sidewalks and doorways where they camped out and started directing traffic. That always amazed me, as they rarely seemed sober enough to find their own way around. Perhaps it was still too early in the day for them to have to have collected enough from panhandling for the rotgut bottles they bought on the cheap.

Word started coming in about the real disasters. The first I heard was “the bridge is down.” It was one of the most startling and shocking words I’ve heard. My first thought was that the Golden Gate Bride had collapsed—a truly horrifying idea, not just because of the loss of life it would entail but also because of the loss to the culture and beauty of the city. It was a monument to man, one that deserves to stand for centuries. Instead I soon learned it was the San Francisco Bay Bridge where a section of the upper deck collapsed onto the lower.

There were startling videos of a woman driving off the collapsed section. Apparently the government had some employees on the bridge directing traffic. And they were directing traffic into the collapsed area, not away from it. It was the beginning of a string of deaths directly related to state incompetency.

In terms of deaths, moving from lower to higher, we would have to go next to the Marina District. This area of the city had been literally created for the Pacific-Panama Exposition of 1915 to celebrate San Francisco’s rise from the ashes of the 1906 quake, which destroyed most of the city. The Exposition was built in an area of marshes and wetlands. San Francisco authorities had used landfill to build extra space for the fair. And when the fair was over they sold the new land to developers for housing projects.

Considering that the exposition was built due to the quake of 1906 you would think they would have been reticent about using landfill. Areas of landfill, when shaken violently, have a tendency to liquefy. All stability is lost. The landfill projects of 1915 were homes to thousands of people by 1989 and when the next big quake struck the Marina District liquefied and building after building crashed to the ground; many with their occupants still inside. But still the death toll here was mercifully low—four people.

The bulk of the deaths were all on the Cypress Freeway across from San Francisco in Oakland. This was a two-tier highway with an upper and lower deck. The state of California had also built it on landfill and it used designs that were known to the state to be insufficient during an earthquake. For years the government had said they would retrofit the structure but, like government is known to do, they procrastinated. The original architecture of the freeway was asking for trouble and at 5:04 on October 17th, 1989, trouble arrived. Within seconds the upper deck came crashing down on the lower deck taking the lives of 42 people.

Around the collapsed structure lived some of the poorest people in the Bay Area. There was poverty and there was crime. But that day there was heroism and decency. The people of the neighborhood flocked to the collapsed structure. With makeshift ladders they climbed into the rubble and started rescuing trapped motorists. One by one they pulled people out of the rubble, even though it was well known that a second quake, often a more powerful one, could follow the initial one.

Eventually government workers arrived and chased away people. Then the bureaucrats stood their scratching their heads as they decided whether or not to try and rescue people. The poor folk of the neighborhood merely snuck around the structure to the other side, where the bureaucrats couldn’t see them and continued rescuing people. Teams of people with rescue dogs arrived to help only to be rejected by the government emergency workers who argued it wasn’t safe enough to send the dogs in. I clearly remember at one point them announcing that they would conduct no further rescues having determined no one else could have survived. A day later a dehydrated man was pulled still alive from the rubble. He died that day in hospital. Had they not stopped the rescues officially he may well have lived.

Between the collapsed bridge, the Marina and the Cypress disaster, you have the bulk of the deaths in 1989 quake. All directly related to incompetent government action. Workers on the Bay Bridge directed cars toward the collapse, not away from it. The buildings in the Marina collapsed because the government had filled in wetlands in 1915 and sold that land to developers specifically so they could build housing. And the Cypress collapsed because of the combination of landfill for its foundation and a structure that the government knew was unable to stand a large quake—much as the government knew the dikes around New Orleans could not withstand a major hurricane.

I remained in my office for another hour before deciding to lock up and walk home. As I got to the corner one of the few gas busses in operation pulled up. It was jammed with people, as you might expect. The door opened and the bottom step inside was vacant. I hopped on until it reached Castro. Along the way I looked out the door window. From the Marina District I could see the smoke from the fires that had broken out. The fire department simply couldn’t respond that day. All the official reports I read later spoke of the hundreds of citizens who started battling fires before any official help arrived.

Throughout the city, the reports later showed, individuals, untrained in rescue work, climbed into buildings and brought out the wounded or helped those just too shaken up to know what to do. The police, who apparently had time to roust gay men from the bars in the Castro, said they were spread too thinly to help the public very much. That help came from the people of the city, not from those who rule them.


My apartment was total chaos. The entrance to the apartment was on the second floor, but the apartment was mostly on the third floor. The stairway was up to the flat was cluttered. Dozens of rare movie posters in frames had come crashing down onto the stairs. Glassware was shattered everywhere. Thousands of books from my library were in large heaps on the floor. A terrified cat was huddled in a corner fearful that it would be blamed for the mess. Bits of glass were being found everywhere for weeks afterwards.

It was getting dark and there was still no electricity. I had a couple of battery-operated televisions but needed batteries. My flat mate headed to the Walgreens to buy batteries and candles. He told me that when he got there it was pitch dark. The employees were at the door with flashlights. People queued up outside the door and one-by-one told the employees what they needed. The employees would take the flashlights and go inside hunting for what the people needed. Batteries and candles, however, were free. There was no charge at all, just people who lived in the neighborhood helping their neighbors in a time of difficulty.

With the batteries I was able to get both televisions working. With the candles we could start cleaning up the mess. One of the news stories that evening was that dozens of restaurants had banded together and opened up serving areas in the city parks. They used charcoal grills and propane stoves to cook. They announced that the lack of electricity meant all their food would go bad. So they decided to cook it all in the parks and give it away to anyone who wanted to eat.

There was little in the way of crime during this disaster. People were too busy helping one another. Strangers helped strangers. Accountants climbed into the destroyed homes of the elderly and helped rescue them when the police and fire department couldn’t. The poor in Oakland risked life and limb, and arrest, to pull the living from the rubble of the Cypress Freeway. Up and down the main streets the airport shuttles, in defiance of the law, gave people free rides, just wanting to help people get home to the people they loved.

Across the city housewives, students, and others had grabbed hoses to fight the fires that broke out while the city fire fighting system failed for the most part, much as it did in 1906. It was the homeless and the panhandlers who directed traffic that day.

Civil society rose to the task that faced it that October day. Government failed. What we got was bureaucratic edicts, which if obeyed, would have cost more lives. The vice president flew into town and got into a catfight with the mayor. They sniped at one another and tried to score political points while people were in mourning for the lives that were lost and trying to rebuild what they could.

Say what you will about the people of San Francisco. But when they were needed they rose to the occasion and supported one another. They should uncommon courage and common sense and they were the real heroes that day. Many of them, perhaps most, had faith in big government—and I can’t understand why they still do. But the bureaucrats and politicians failed them, much as they later failed the people of New Orleans.


Conservatives like to ridicule “San Francisco liberals” but I hesitate. As much as I oppose the modern liberal agenda, as a distortion of true liberalism, I can’t bring myself to deride the San Francisco liberal. My memory of their heroic deeds that October day are too strongly etched in my mind. I won’t forget the generosity of the stores handing out batteries and candles for free. I can’t ignore the way the restaurants fed people in the parks, or the way the shuttles ferried people back and forth. The image of the homeless and panhandlers in the intersections directing traffic won’t leave me. And the hundreds of people who risked their lives to climb into the rubble of collapsed buildings or the Cypress Freeway must always be remembered.

On October 17th, 1989, in the face of a disaster, government failed. The ideology of the people of San Francisco failed. But the people themselves did not fail. They proved to be courageous, caring, compassionate and capable. They were able to do what the political structure they had put their faith in, was unable to do.

San Francisco politicians ban Halloween party.

The most famous Halloween party in the world has been cancelled. The party was held on Castro Street in San Francisco. San Francisco is considered the gay capital of the world and Castro Street the epicenter of the capital.

The reality is that the area, while heavily gay, was never exclusively gay and I would say that a third of the residents were heterosexual even within the Castro itself -- with the number of straights rising quickly if one moved a few blocks in any direction.

Some years ago when I moved to San Francisco, the first apartment I found was on Castro, though it was slightly outside the “epicenter”. The apartment was small -- much too small but I loved the Victorian building. Shortly after that I discovered a very large apartment which was on the top floor of one of the buildings in the very heart of the Castro. The rent was rather reasonable, for San Francisco at least, especially since the flat occupied the entire floor. The lounge was double the size of most and had a huge bay window looking down on the street. And off that was the room I used as my office which also had a bay window that butted out over the street below as well.

So the Halloween party in the Castro wasn’t exactly something I could avoid. Well over 100,000 people would descend in various costumes and party, perhaps double or triple that.. And each year it seemed to get bigger. Even with the bedroom at the back of the flat the noise from the party filtered through easily. The street was far too compacted with people to go down, at least not for long. But I didn’t need to. I could watch all the festivities from my front window with no problem. And admittedly every Halloween I got little sleep due to the noise.

Because the party was where it was it has also attracted people from outside the neighborhood who wanted to come in and cause problems. Various gang types would descend in order to win some stripes by attacking people they assumed were gay -- often assumed wrongly I might add. On the other hand that was not relegated to Halloween alone. Two bus routes, the 22 and the 24, ran through the area and both went through some pretty rough areas of the cities. Thugs from those neighborhoods would hop on the bus and sit there in waiting until it got closer to the Castro. They would wait until someone they believed was gay got on the bus and the group of them would pounce. The bus driver usually tried to pretend he didn’t see anything and often the gang just remained on the bus while the victim staggered off seeking protection and medical assistance.

The city always tried to cope with the problem but was typically unable to do much without getting heavy handed. One Halloween I was headed to the flat when I found the surrounding streets had roadblocks with police at each of the main entrances. They were frisking everyone who entered and going through anything they carried.

I only had a briefcase but my view was that I had not committed a crime and their right to search my belongings was dependent on either “reasonable cause” or a search warrant. They had neither. I explained to the officers that they had a problem. They wanted to search me without cause and were preventing me from returning to my home. I also pointed out the obvious: they wanted to make sure I had no weapons that could harm others and I had an apartment that had butcher knives, hammers, screw drivers and other items that could easily inflict harm. In other words what good is it to search people who actually live on the street and can obtain a weapon from their home -- which was still immune to warrantless search -- George Bush eat your heart out.

The police were reasonable about it that evening. One of them figured out an easy solution. One officer would accompany me to the entrance of my building. Since I had the key to the entrance, and since there was only one apartment in the building (the ground floor was a restaurant and the second floor were offices) it was obvious that I lived there. When he saw me unlock the door and enter he was satisfied. The Bill of Rights was preserved, that night, at least for me.

Last year two gangs of youths from outside the Castro were in attendance and it seems they brought their own neighborhood conflicts to the party. They were yelling insults at one another (such class) and threw bottles at one another. One of them pulled a gun and started shooting. Nine people were wounded though none seriously. And the police were unable to do anything. The gunman is still free. At the time the Sheriff Michael Hennessy described it as “just one jerk with a gun who had an enemy there.”

The police didn’t check people for weapons because they said too many people were coming in and it would have added to the congestion.

This year the city just cancelled the celebration entirely. From downplaying the event to overreacting seems to be par for the course, when it comes to politics. Politicians either ignore a problem or switch into panic-mode and use sledgehammers to swat at flies.

This year the sledgehammer came down. Not only did the mayor cancel the party but the politicians did everything they could to shut down the Castro. First the subway lines will stop running at 8:30 p.m. and the BART station will close at 8 p.m. Next the streets will be open for traffic though the police seem to understand that traffic won’t get through as people will turn up anyway.

Next a petty politician, Bevan Dufty, started putting pressure on the 110 businesses in the area with liquor licenses to “voluntarily” close down. All the bars in the area, but one, will be closed. And the city plans to send in 600 law enforcement officials to control everything and everyone. As I said: killing flies with sledgehammers. The Democrats like to think Bush got hysterical. He did. But this is a Democratic administration in San Francisco that is literally closing down the Castro.

For decades the San Francisco police have yearned for the ability to shut down the Castro. I’ve seen that myself. I remember one night suddenly finding the police lined up across the street with batons ready to bash skulls. They marched down the street forcing everyone inside buildings and demanding they be locked in or face a beating. The excuse was an incident that book place elsewhere in the city.

When Dan White, a former cop, received a slap-on-the-wrist sentence for assassinating Mayor Moscone and gay Supervisor Harvey Milk, riots broke out at city hall. The police responded by swooping into the Castro, several miles away and peaceful, beating in heads and attacking gay bars.

So it is a bit disconcerting to see this mayor doing precisely what the police have tried to do for decades without success. Since Mayor Newsome is perceived as being supportive of gay rights he can trample on the Castro as much as he wants and the toadies to the Democrats, in the community, will praise him for it.

What had started as a neighborhood party did become an event that attracted people from outside the area who often wanted to cause problems. But between the sledgehammer approach and turning a blind eye to violence there is a lot of territory.

One possible solution would be to turn the event into a private party with tickets. That could be done easily as the main party was in a small area with four main entry points. Residents of the street, and actually there were never more than a few dozen people who actually had apartments on the top floors of the buildings right on Castro, could be given passes for themselves and maybe a few extra if they wish to have friends over. Tickets could be sold in neighborhood shops leading up to the event with the number of tickets limited to the capacity of the area. The reality is that 100,000 people crammed into that small area was a problem.

Using the pricing mechanism to ration access works for movie theaters so I don’t see why it wouldn’t work for the Halloween Party. If the price is sufficient to discourage low-life thugs (almost any price would do that) most the problem would be solved. Policing the entry points by admitting ticket holders only would allow the neighborhood to have its traditional party while keeping out trouble. And the proceeds from the sale of tickets could be used to fund the event with any left over going to neighborhood charitable causes, of which there are many.

Instead of thinking like entrepreneurs politicians think like bureaucrats. And the Halloween tradition in the Castro is a victim of that bureaucratic mentality. A few police officers at the entrance could handle the situation. And others would be stationed in the surrounding streets enforcing the normal laws. That would keep crowds from gathering on the streets leading into the Castro instead.

Certainly allowing the market to work makes sense. Having an entrance fee would allow the party to return to what it was meant to be -- a local celebration. It is unnecessary to cancel the event and if handled properly, which probably means having it privately run by a residents association or local businesses, it could generate enough revenue to cover the costs of the event and possible contribute to worthy causes. The local businesses would not need to close on one of the most profitable evenings of the year either.

Sometimes a fly swatter is all you need to kill flies.