Landlords With Benefits

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Today’s San Jose Mercury-News carried the story on the front page: “Is harassment the hidden cost of renting?” The problem can be quickly summarized: landlords with benefits.

Cindy Chau seemed to have it made. She paid $1,200 a month for a rentcontrolled, one- bedroom apartment in San Francisco — a city where tenants regularly shell out nearly three times that.

But Chau alleges living there came with a hidden cost not spelled out in any lease – a property manager who bombarded her with sexual text messages and persistent come-ons, once propositioning her in her own home while he was supposed to be fixing her sink.

“I just couldn’t go back to living there,” Chau said. “I didn’t feel safe.”

Economists know for a fact that setting a price below the market equilibrium price will inevitably create a shortage. Having short-circuited the price rationing mechanism, some other means of allocating the scarce good must be found. In the case of rent control,

  • large security and/or key deposits
  • mother-in-law apartments
  • political favoritism
  • subletting a rent-controlled apartment at a price above the rent controlled rate
  • letting the building deteriorate

and a host of other mechanisms come into play. Now another has been discovered.

Landlords with benefits are, in some cases, letting tenants live in apartments at a price of zero. That is, zero plus sex. It’s safe to assume the size of the rent reduction will be proportional to the quantity, type, and quality of sexual favors. And, like all non-price rationing mechanisms, this will be inefficient in the sense that different tenants will be asked for different favors for the same rent reduction.

Supply and Demand

Supply and Demand

Most economists will find this repugnant. But no economist will find it surprising.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.