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Notes -
Court opinion somewhat relevant to the culture war:
According to lawmakers: "New Jersey is consistently in the top three in the nation with the highest foreclosures. Our state also has the widest racial wealth gap in the country. Black and brown wealth is hemorrhaging through the loss of foreclosed property, and the people who live in the community often do not have deep enough pockets to even participate in the foreclosure process." "The current process favors companies that have the money to purchase property at sheriff sales and resell it for a profit." In response to these concerns, the state govt. enacts a law ensuring that, whenever a residential property is foreclosed on, a right of first refusal is granted to the owner, his next of kin, and his tenants (if the owner is an individual rather than a company), and a right of second refusal is granted to certain redevelopment-oriented nonprofits (regardless of the owner's identity). Normally, foreclosure results in an auction starting at an "upset price" (minimum/reserve price) set by the foreclosing lienholder (presumably the lender of the property's first mortgage). However, these two new rights of refusal allow the property to be purchased for the upset price without an auction. The lawmakers say: "This legislation will help to keep property ownership within the community." "This is what equity in systems looks like."
However, the new law causes problems because it often results in undervaluation of the property, so that junior lienholders don't get paid back. For example, in one of the cases consolidated here: A residential property with estimated fair market value of at least 680 k$ was foreclosed on. US Bank held a first mortgage for 281 k$, and PNC Bank held a second mortgage for an amount that I can't find in the court documents. US Bank set the upset price at 309 k$. PNC was prepared to bid the auction up to 401 k$, which presumably would suffice to pay off both mortgages. However, instead a nonprofit exercised its right of second refusal and bought the property at the upset price of 309 k$, paying off US Bank's mortgage but leaving PNC with substantially less than what it would have gotten at auction. In PNC's words: "The refusal to recognize other bids results in illegal lien-stripping and the illegal taking of substantial surplus that would have been realized, and the deprivation of PNC's property interest that would have attached to that surplus." (PNC also alleges that the nonprofit is a sham. It was created just a few days before the auction would have taken place, and is not registered as a nonprofit with the state govt. or with the federal IRS.)
The trial judge rules that the nonprofits' right of second refusal is an unconstitutional taking without just compensation, and the appeals panel affirms. The federal Supreme Court recently found that it is unconstitutional for the govt. to foreclose on a property for a 200-k$ tax delinquency, sell it at auction for 300 k$, and pocket the extra 100 k$. Likewise, if a property is encumbered with a 300-k$ mortgage, it is unconstitutional for the govt. to let a nonprofit buy it for 200 k$ and magically extinguish the extra 100 k$ of debt owed to a lender. (Nobody has invoked the owner's, next of kin's, and tenants' right of first refusal, so it technically is not at issue in this case. But if the right of first refusal is challenged in the future it presumably will be held unconstitutional under the same rationale.)
On the topic of 5th amendment violations
If this right of second refusal is an unconstitutional taking of the financial interests of the mortgage-holders, it seems pretty straightforward to me that rent control is an unconstitutional taking of the financial interests of property owners, and I have no idea how we've managed to get this far without a court ruling to that effect.
The Supreme Court has ruled unanimously that rent control is not an unconstitutional taking because the owner is renting voluntarily. He can just stop renting and sell the property if he wants to.
Not in NYC he can't. He has to buy out the existing tenants.
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The constitution says what the SCOTUS says it says, for better or worse, and for better or worse it does not regard restrictions on how you can use your property to be taking away of your property per the 5th.
If you buy a tenement because you believe (1) that people will pay rent to live in it and (2) that due to former fact, other people will want to buy it in the future, that is entirely speculative, and the government is under no obligation to compensate you if general laws make either or both of these untrue.
If the government disallows you to use your munitions factory to supply Saudi Arabia, you are not entitled to compensation due to the 5th. If the government decides that they do not want any brothels within the city limit, they do not have to pay you the difference to what you could have made if sex work had been kept legal.
If the government decides to institute 100% land value taxes so rational actors will be indifferent towards owning land (which I find personally a much nicer idea than rent controls), and property prices crash as a result, that is a business risk.
I think that there are some goods where capitalism is working very well (e.g. things with supply elasticity, e.g. shovels), and goods where markets do not work very well (e.g. things without supply elasticity, like land). People who are investing in the former are capitalists, and we might tax them but should keep in mind that they have an important ecological niche in society. People who are investing in the later are rent-seekers, and we do not need to be very careful not to step on their toes.
If you invest a million dollars into the production of shovels, that is honest capitalism. Nothing is preventing the next 99 guys with a spare million to also invest in shovels, and over time this will result in an effective supply with shovels.
Of course, it is hard to make money under honest capitalism. Perhaps you have a hunch that there will be a gold rush and shovels will be in high demand and you make a killing for a time, but if shovel production is very profitable, that means that more people will enter the market until that is no longer true.
This is why being a rentier is so much more comfortable. If you buy the best plot of land for one million, then the next 99 guys can not do the same, because nobody is producing new land in the middle of the city. This puts you in a very comfortable position.
On the other hand, while I would argue with a pitchfork-wielding mob that the shovel producer is actually important for the long-term health of the economy, I find it much harder to make a similar argument for the land-owner. There is no elasticity of supply for unimproved land. Where we might suffer a shovel to cost 100$ in the middle of a gold rush because it will result in the creation of more shovels, there is no benefit for society in the unimproved land being worth anything. If anything, it would better serve society if the gains from the fact that land is in limited supply were socialized. It might not directly lower rents too much though, rents need to be at a level where the supply and demand curve meet, after all.
Sure, the rentiers would find such an arrangement unfair, but to me that sounds like someone who bought stolen credit card numbers whining that they were revoked before he could recoup his investment.
That’s not entirely true. There can be regulatory takings where your use of the property is wholly frustrated. See Lucas v South Carolina Coastal Commission
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SCOTUS does not want to go down the path of acknowledging regulatory takings.
They did somewhat in Lucas v South Carolina Coastal Commission
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It seems to me that rent control is not as extreme because the landlord still gets to collect rent on his property and can apply to some pink board somewhere for rent increases. Of course I agree that rent control (and other price controls) are, generally speaking, bad public policy, but it's debatable whether they rise to the level of being a taking.
I think that the government is constantly interfering with property rights and that interference runs the spectrum from what is generally thought to be reasonable (e.g. you aren't allowed to build a factory in a residential neighborhood) all the way up to something that's clearly a taking (e.g. the government simply seizes your land). It's very difficult to draw the line, and that's what judges do -- exercise judgment.
And just what is a 'pink board' when it's at home?
Most of the search results were about insulation.
In my day, the word "pink" was slang for "somewhat communist." It meant someone who had communist leanings but who wasn't a full on Soviet.
So a board unlikely to be sympathetic to arguments of the form "$LANDLORD1 and $POTENTIAL-TENANT2 are richer than $CURRENT-TENANT3, therefore $LANDLORD1's desire for a fancy car to compensate for his anatomical shortcomings and $POTENTIAL-TENANT2's desire to move into the district that two decades ago he treated as more dangerous than Fallujah are more important than $CURRENT-TENANT3's desire to stay in the home where she has lived through the entire Elizabethan era while still being able to afford to taste something other than shame."
A board that treats competence and contributing to society in ways that people actually desire enough to pay for, pale skin, and indeed the ability to spell your own name as being spiritual defects and anatomical defects per your charming descriptor, decided that being able to use the fruits of your labour to improve your life and to make a new prosperous district mattered far less than the right to contribute nothing while defecting on your debts and shoving the costs onto other people.
Isn't bulverism fun?
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I assume it's a derogatory use of "pink" to mean "left-wing" (an older meaning of the word, but it checks out).
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This line of thinking is dangerous. Eventually you will start questioning ADA and Civil Rights Act
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