Essay Introduction

In "No Vacancies," the noted French economist and historian Bertrand de Jouvenel provides a devastating case study of rent control in post-war Paris. Writing in 1948, he describes a city where a month's rent costs less than a few packs of cigarettes, yet housing is virtually impossible to find for those not already established. De Jouvenel illustrates how "temporary" measures enacted during World War I hardened into permanent rights, destroying the incentive to build or maintain property. The result was a decaying city, a frozen market, and a legal system that effectively dispossessed owners, turning them into mere janitors of crumbling buildings while tenants waited for neighbors to die in order to secure a home.

No Vacancies

by Bertrand de Jouvenel

A DOLLAR a month will pay a wage-earner's rent in Paris. Our authority for this assertion is the Communist-dominated Federation of Labor Unions, the CGT. In setting forth its demands for a minimum wage to insure a decent living, it produced a worker's budget where the expenditure for rent was put at 316 francs. (In this analysis, all figures will be stated in dollars at the rough valuation of 300 francs to the dollar.)

Against this figure one may set the estimate of the conservative Union of Family Associations. Thinking in terms of families, this source sets the expenditure on rent, providing adequate space, at a dollar and a half for a man and wife with a child and an infant; for a family of six the expenditure on rent should go up to a little less than two dollars.

Such cheapness is amazing. In the CGT budget, rent is reckoned as equal in cost to transportation to and from work. To put it otherwise, a month's rent for an individual worker costs little more than six packages of the cheapest cigarettes. For a large family of six it costs as much as eleven packages of cigarettes (cigarettes, now unrationed in France, cost 15 cents a package).

Even in a worker's very modest budget such an expenditure absorbs but a small part of the income, 2.1% of the minimum income demanded by the CGT; as little as 1.2% of the income of a six-member family as calculated by the Union of Family Associations.

Against such estimated blueprint budgets we can resort to actual declarations of wage-earners canvassed by the French statistical services. It appears from their budgets that, on an average, rent makes up 1.4% of wage-earners' expenses; for white-collar workers rent goes up to 1.7% of total expenses.

In fact there are many rents lower than a dollar a month, rents of half-a-dollar are not uncommon, nor should it be believed that the lodgings are necessarily worse, for price and comfort, as we shall see, are unrelated.

Such low rents are not a privilege of wage-earners only. Middle-class apartments of three or four main rooms will frequently cost from a dollar and a half to two dollars and a half per month. Rents paid by important officials or executives range from $3.50 a month to $8 or $10 a month. There is no regular relation between income and rent. Rent seldom rises above 4% of any income; frequently it is less than 1%.

It is then not surprising that the Parisians spend on shows every month far more than they pay for three months' rent.

This may seem a very desirable state of affairs. It has, of course, its drawbacks.

While you pay no more than these quite ridiculous prices if you are lucky enough to be in possession, on the other hand if you are in search of lodgings you cannot find them at any price. There are no vacant lodgings, nor is anyone going to vacate lodgings which cost so little, nor can the owners expel anyone. Deaths are the only opportunity.

Young couples must live with in-laws, and the wife's major activity consists in watching out for deaths. Tottering old people out to sun themselves in public gardens will be shadowed back to their flat by an eager young wife who will strike a bargain with the janitor, the concierge, so as to be first warned when the demise occurs and to be first in at the death. Other apartment-chasers have an understanding with funeral parlors.

Bootleg Housing

There are two ways of obtaining an apartment which death has made available. Legally, if you fulfill certain conditions which give you a priority, you may obtain from a public authority an order of requisition; you usually find that the same order for the same apartment has been given to possibly two or three other candidates. The illegal method is the surest. It is to deal with the heir, and with his complicity to immediately carry in some pieces of your furniture. As soon as you are in, you are the king of the castle.

Buying one's way into an apartment will cost anywhere from $500 to $1,500 per room. At such prices you may also share flats which the tenants will agree to divide. As for wage-earners, they may as well give up the hope of setting up house; they have to stay with their families or live in very miserable hotels by the month.

In short, rents are very low but there are no lodgings available. Nor are any being built. And practically none have been built for the last twelve years.

There are some 84,000 buildings for habitation in Paris. 27.2% of these were built before 1850; 56.9% of the total were built before 1880. Almost 90% of the total were built before the First World War. Most of the supplementary building occurred immediately after that war; then it slackened, and by 1936 had practically stopped.

Parisian Plight

Even a very lenient officialdom estimates that there are about 16,000 buildings which are in such a state of disrepair that there is nothing else to do with them than pull them down. Nor are the others quite satisfactory.

To go into sordid details, 82% of the Parisian population have no bath or shower, more than half the population must go out of their lodgings to find a lavatory, and a fifth do not even have running water in the lodgings.

Little more than one in six of the existing buildings is pronounced satisfactory and in good condition by the public inspectors. Disrepair is spoiling even these.

Owners can hardly be blamed. They are not in a financial position to allow them to keep up their buildings, let alone improve them. The condition of the owners can hardly be believed. To take an example of a very common situation, here is a lady who owns three buildings containing thirty-four apartments, all inhabited by middle-class families. Her net loss from the thirty-four apartments, taxes and repairs taken care of, is eighty dollars per year. Not only must her son put her up and take care of her, but he must also pay out the eighty dollars. She cannot sell; there are no buyers.

When the owner tries to milk a little net income from his property by cutting down the repairs, he runs great risks. Another person postponed repairs on his roofs; rain filtering into an apartment spoiled a couple of armchairs. He was sued for damages and condemned to pay a sum amounting to three years of the tenant's paltry rent.

The miserable condition of owners is easily explained. While rents since 1914 have been at the outside multiplied 6.8 times, taxes have been multiplied 13.2 times and the cost of repairs has been multiplied from 120 to 150 times the 1914 price!

By Easy Stages

The position is, of course, as absurd as it is disastrous. An outsider may be tempted to think that only an incredible amount of folly can have led us to this. But it is not so. We got there by easy, almost unnoticed stages, slipping down on the gentle slope of rent control. And this was not the work of the Reds but of succeeding parliaments and governments, most of which were considered to be rather conservative.

The story starts with World War One. It then seemed both humane and reasonable to preserve the interests of the families while the boys were in the army or working for victory. So existing situations were frozen. It was also reasonable to avoid disturbances at the end of the war. The veterans' homecoming should not be spoiled by evictions and rent increases. Thus prewar situations were hardened into rights. The owner lost—"temporarily," of course—the disposition of his property, and the stipulations of law superseded agreement between the parties. This was only for a time.

But by the time the situation was reviewed in 1922, retail prices had trebled with rents still at their prewar level. It was then plain that a return to liberty would imply huge increases, an index to them being provided by rents in the small free sector, which hovered around two and a half times the 1914 rents. The legislator shrank from this crisis. Wages were by then three and a half times what they had been in 1914, and the expenditure for rent in the worker's budget had shrunk from something like 16% before the war to around 5%. In our times habits grow up rapidly: Instead of regarding rent as constituting normally one-sixth of one's expenditures, one took it now as being normally one-twentieth. Also, a "right" had developed, the "right" to dig in. Always very sedentary, the French now had struck roots in their rented lodgings.

The legislator decided to deal with this matter in a prudent, statesmanlike manner. So the tenant's right to stay in possession was confirmed but the rent was slightly raised. Successive increases were granted in further laws, all warmly debated. A new owner-tenant relationship thus took shape. The owner was powerless either to evict the tenant or debate the price of rent with him, the State took care of that price. The price rose but slowly, while in the meantime the field of regulation was successively enlarged to bring in such flats as had not been previously regulated. New buildings put up since 1915 were alone left unregulated to stimulate construction. This exception was not to endure for long.

The Fear Of Liberty

No systematic view inspired this policy. It just grew from the fear of a sudden return to liberty which seemed ever more dangerous as prices stepped up. And, of course, if one must control the price of rent, one could not allow the owner to dismiss tenants, because in that case he might so easily have stipulated secretly with the new tenant; so rent control implied necessarily the denial of the owner's right to dismiss.

What then happened to rents under this regime? In 1929, with retail prices more than six times what they had been in 1914, rents had not yet doubled; the real rents, the rents in terms of buying power, were less than a third of what they had been before the war.

Lawmaking went on, no single subject has taken up so much of the time and energy of Parliament. But the improvement in the condition of the owners, when it occurred, was not the work of the lawmakers. It was brought about by the economic crisis which lowered retail prices. Thus by 1935, rents then being up to almost three times their prewar level, retail prices were down and the owners obtained almost two-thirds of their prewar real income. Or they would have obtained it had not the Laval government then decided on a cut of 10% in rents as one of the measures designed to bring down the cost of living and implement a policy of deflation.

When the Popular Front came in, in 1936, the process of devaluations started again, retail prices soared, and the real income from buildings crumbled from year to year.

Then came World War Two. The return to liberty which had been devised for 1943 was, of course, dismissed, and all rents were frozen, including this time those of recent buildings which had till then escaped.

Since the Liberation, an order in council of 1945 and two laws in 1947 have intervened, bringing up to 119 the number of laws or quasi-laws on the subject since 1918. The new laws have provided for increases jacking up rents. The lodgings built before 1914 can now be rented at prices 70% above the 1939 price. But while rents increased 1.7 times, retail prices increased more than fourteen times. In other terms, the buying power of rents was set at 12% of its 1939 level, already greatly depressed as we have seen. The buildings put up since 1914 were more severely treated on the assumption that the ruling rents in 1939 had been more adequate. The permissible increase was set at 30% as against 1939, thus keeping the buying power of rents at 9% of what it was before World War Two. It was further specified for the buildings dating back to 1914 or earlier, which comprise as we have noted nine out of ten buildings, that their rent should in no case be more than 6.8 times the 1914 rent. This, in spite of the fact that retail prices were then 99.8 times as high as in 1914.

In short, owners of new buildings have been allowed to get in terms of real income less than a tenth of what they got before World War Two.

Owners of old buildings, that is, nine-tenths of all buildings, have been allowed to get in terms of real income either 12% of what they got in 1939 or a little less than 7% of what they got in 1914—whichever is least, the law took care to specify!

The Price Predicament

If on the other hand a builder were now to put up apartments similar to those in existence, these new apartments would have to rent for prices representing from ten to thirteen times present rent ceilings, in order to reward the costs of construction and the capital invested. According to an official source, a report of the Economic Council, a wage-earner's apartment of three small rooms and a kitchen now renting for $13 to $16 a year (!) would have to be rented for $166 to $200 a year; and a luxury apartment of 1600 square feet floor space would have to be rented for $55 to $70 a month, comparing with a present price of $14 to $17 a month. Quite obviously, as long as the buildings in existence are as low priced as they are, it will be psychologically impossible to find customers at prices ten or twelve times higher, and hence construction will not be undertaken.

Such is the spread between the legal and the economic price of lodgings that even the most fervent advocates of freedom are scared at the prospect of a return to freedom; they shudder at the thought of a brutal return to reality. They feel that if the right to dismiss tenants and the right to bargain and contract with them were restored, evictions could not be executed, the whole nation of tenants sitting down to nullify the decision. The thing, they say, has now gone too far, the price of rent is too far removed from the cost.

Hence the strange plans which are now being considered by the French Parliament. It is proposed to maintain a right of occupation, a right to retain one's lodgings, and it is proposed to come to a "fair price-fixing." That is, the true service value of every flat would be fixed according to floor space, the value of the square meter being multiplied by a coefficient according to the amenities, situation and so forth. Thus the "fair rent" would be ascertained. But it would not be wholly paid by the tenant. He would benefit by a special subsidy, an inflationary measure of course, as are all subsidies. Nor would the greater part of this fair rent be paid to the owner. It would be divided in slices. A slice to correspond with the cost of upkeep would be paid in to the owner, but to a blocked account to make sure it did go for repairs. A much bigger slice for the reconstitution of the capital would not go to the owner at all, but to a National Fund for Building. Thus the dispossession of the owners would be finally sanctioned. They would be legally turned into the janitors of their own buildings, while on the basis of their dispossession a new State ownership of future buildings would rear its proud head.

Road To Ruin

Possibly the French example may prove of some interest and use to our friends across the sea. It goes to show that rent control is self-perpetuating and culminates in both the physical ruin of housing and the legal dispossession of the owners. It is enough to visit the houses in Paris to reach conclusions. The havoc wrought here is not the work of the enemy but of our own measures.

About the Author

Bertrand de Jouvenel is a noted French author and lecturer in history and economics. "No Vacancies" was first published in 1948.

Attribution

de Jouvenel, Bertrand. "No Vacancies." In Essays on Liberty, Vol. 1, 146-157. Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc., 1952.