On Saturday, September 9, I posted about a move by the Monterey City Council to tax providers of rental housing and use the proceeds to run a compulsory rental registry. By the way, I thought the average quality of the comments on my post was high.

Since then, I had time to think through what one of the more articulate city councillors, Alan Hoffa, said. I realized that there was a contradiction between some good reasoning he presented and the position he took. So I wrote this letter to the Monterey Herald and it was published today. I signed it “David R. Henderson, Economist,” but the editor dropped the “Economist” part. The rest of the letter was intact.

At the September 5 Monterey city council meeting on the proposed rental registry, council member Alan Haffa made a good case for exempting both auxiliary dwelling units (ADUs) and home owners who rented rooms. But his case is more general than he thinks.

He argued that he and other members of the council want to encourage more ADUs and more room rentals. That makes sense.

But note his implicit argument: subjecting providers of ADUs and rooms in homes to the rental registry regulations will discourage the provision of such housing. If Haffa understands that, does he not understand, as many members of the public tried to tell him, that subjecting other owners to the regulations will also discourage them?

The fact is that when you raise costs, as the rental registry will do, you discourage the activity being regulated.

David R. Henderson, Economist

Haffa makes his points starting at the 3:05:20 point of this video.

You might wonder why a small annual tax (the staffer’s estimate–at the 2:53:05 point–of between $30 and $80 bracketed my $50 estimate) and an invasion of privacy would discourage people from being landlords. On its own, there probably wouldn’t be much discouragement. But when the mayor and Hoffa say that they’re open to rent control, some landlords will reasonably conclude that this compulsory registry is the first step to rent control. My back-of-the-envelope estimate is that there are about 6,000 rental units in Monterey. If landlords took 5% of them off the market, made them into condos, and sold them, that would be a big loss in a tight market.

The pic above is of Alan Haffa.