Name: officially recognized by the government. Therefore, these

 

Name: Yao Liu

Course: Econ 4597.01

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Date:1/29/2018

First Homework Assignment

Underground
economy comprises the exchange of goods and services that are not officially
recognized by the government. Therefore, these operations are not subject to
taxation. Although dealings in this economy include income from citizens in
self-employment, most underground economy transactions involve shadowy
procedures in contraband and other illegal substances. Formal corporate players
may also engage in unsanctioned businesses, for example with the intention of
evading government control. The controversies regarding rent regulation in the
United States’ real estate market has triggered fears of the deliberate
involvement of landlords in the underground economy. In this connection,
several suspicious fires have destroyed buildings in rent-regulated neighborhoods,
raising concerns among stakeholders in government and insurance companies
regarding their cause.

The
inferno that ravaged several buildings in the Mission District area of San
Francisco created fears of the impact of rent-regulation by the government in
certain jurisdictions. The landlords received the blame for deliberately
burning the property in a bid to flush out rent-controlled tenants and resell
the building for high profits. Moreover, state governments have engaged in
several conflicts with landlords over rent-regulation. It is the duty of the
government to provide housing to all the citizens (Brady 15). However, the enormity of this task constrains the
state to partner with the private sector in meeting this basic need. In a bid
to provide affordable housing, several states have a rent-regulation rule that
cushions citizens from exploitation by landlords. For instance, the Condominium
Conversion Statute of 1983 protects specific categories of tenants from
reckless eviction by landlords. The statute provides that landlords must issue
an eviction notice lasting at least a year for their tenants. The eviction
notice period is longer for the handicapped, the elderly, and tenants in the
low-income bracket (“The Massachusetts Condominium Conversion Statute, Chapter
527 of the Acts of 1983” 1). Landlords find these government strictures
unfriendly to their business projections and may resort to illegal actions to
force the tenants out of the premises.

Rent
wars in Massachusetts have pitted tenants against landlords since 1971. Renters
staged demonstrations and succeeded in influencing the City Hall to enact rent
control laws. However, the landlords overturned this provision through lobbying
and abolishing rent control through a statewide ballot (“The Massachusetts
Condominium Conversion Statute, Chapter 527 of the Acts of 1983” 1). The rent
wars dominated the state politics for over twenty-five years as opposing camps
struggled to elect their sympathizers in political office (Brady 15). The current arson scenarios
experienced in several states imply underhand dealings among property owners.

Rent regulations deny landlords the liberty to charge market rates for their
houses, which leads to diminished profit margins. Homeowners have previously
used political processes to influence de-regulation, but most of these efforts
have failed to overcome the political pressure to provide affordable housing
for citizens.

The
increasing fires in low-cost housing neighborhoods are attributed to the
schemes of landlords to indirectly evict tenants and re-sell their houses for
high prices. Insurance companies also have a role to play in the fires; when
the houses burn, the landlords place a claim for compensation from these
companies (Brady 15). Most of the houses
that experience fires are old buildings where the landlords are compelled by
the government regulations to charge limited rents against their wish.

The
underground economy in the housing sector thrives because of the pricing
conflict between the government and private entrepreneurs. Whereas the former
is driven by the service provision goal for the welfare of its citizens,
private homeowners engage in this sector to make profits. The government must
protect the citizens against the exploitation by profit-hungry landlords and
also consider the profitability of the homeowner. The government can regulate
rents for the citizens by completely considering investing in the housing
business. In this regard, the state can charge minimal rents as a service to
the citizens. However, most state governments do not have the capacity to fully
provide housing, and for this reason, the private segment is a critical partner
in this sector. Therefore, the government must engage in consultation with
private players in the housing sector to achieve reasonable rental income
regulations.

Works Cited

“The
Massachusetts Condominium Conversion Statute, Chapter 527 of the Acts of 1983”. New England Real Estate Journal, 25 May,
2012.

Brady, James. “Arson,
Urban Economy, and Organized Crime: The Case of Boston.” Social
Problems. vol. 31, no.1, 1983, pp. 1-27.

 

 

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