Tag Archives: Regulations

Could Pop-Up Hotels Solve Disaster Housing Shortages?

I read with interest a recent piece in Businessweek about an innovate company that has managed to make something akin to a hotel food truck:

This year, Snoozebox Holdings is shipping 40 to 400 stackable containers to house guests at events including Le Mans, the Edinburgh Festivals of plays and concerts, and the G8 Summit. The prebooked rooms are equipped with flat-screen TVs, Wi-Fi, and running hot water.

Who would want to stay in one of those, you might ask? The company, Snoozebox, has already found some markets for its product.

snooze

The answer is, mostly, rich people. However, like with most innovations, what starts as a toy or luxury for the rich (telephones, VCRs, televisions, internet) usually becomes pretty affordable and widespread.

Take the devastating tornado that recently ravaged Oklahoma. Or the one in Joplin, Missouri. Housing is one of the most needed commodities in the wake of natural disasters. Could Snoozebox, or its competitors save the day and provide a market-based solution to help people in need?

While the obvious answer is yes, the reality is probably not. Or at least not anytime soon.

Whenever an innovation disrupts the current natural order, vested interests often use the law and politicians in an attempt to stifle competition. Economists call the former “creative destruction” (good) and the latter “rent seeking” (bad).

Creative destruction, in the form of the Uber car service or food trucks, is really great for consumers. Their competition — well established taxi cabals and brick-and-mortar restaurants — don’t see it that way. They get politicians to enforce laws that would inhibit any competitor from setting up shop, and if the laws doesn’t exist for that purpose, those interests usually push politicians to pass them.

Let’s rewind the clock to a day after the tornado hit Oklahoma. You work at Bomblebox, a fictional competitor of Snoozebox. Oklahoma would be an ideal place to offer your services to a populace coping with disaster. Hotels are overbooked, people are cramped in the houses of friends — often far away from the site of their former home. There’s a natural market for the Bomblebox.

Could Bomblebox drive a couple of trucks over and set up shop somewhere? In this hypothetical, it’s unlikely.

Each of the fifty states has their own laws and regulations governing hotels and lodging. And it’s unlikely that a company not already licensed to do business there could get all the t’s crossed and i’s dotted before the window of opportunity closes.snoozebox-exterior-sunshine

Second, local hoteliers, their trade groups, and other interest groups would probably object. There are a ton of ways they could do this:

Would Bomblebox’s products be up to snuff with Chapter 285 — the part of Oklahoma law that regulates lodging establishments?  Is the plumbing consistent with the Oklahoma Plumbing License Act? Is the electricity system consistent with the Oklahoma Electrical Licensing Act? Does each unit “maintain at least one lighting fixture suitable for reading”? Do all the bathroom floors have “impervious floor surfaces?” Is the sewage disposal system consistent with “regulations adopted by the Oklahoma State Board of Health?” I don’t know.

Remember, these laws are for your safety. Created, supposedly, to protect you — but they also often serve to protect the current natural order from competition.

You get the point.

The time and money it would take to ensure compliance would probably guarantee that such a plan wouldn’t get past the research phase. There are a lot of questions to answer just to drive a box that people would pay $400 a night to stay in while watching a race or stay at a festival like Bonnaroo. Put another way, if people are willing to pay that much to stay in a box at a race or a festival, my guess it’s probably good enough for  to stay in after the wake of a disaster.

But that’s not how regulation and the natural order operate. Mutually agreed upon and beneficial transactions, even under extenuating circumstances, are often illegal outright. You’re not necessarily free to transact with others as you see fit. While FEMA does provide disaster assistance — think FEMA trailers —  some people probably would be willing to pay more, and could afford to get something a little nicer than a crappy camper because for their well being they want the comforts of home.

Let’s pretend for a second that Bomblebox is a Missouri company, and has plans to do business all over the southland to help people recover from disasters, and provide housing during political conventions and festivals.

Could Bomblebox then, had it complied with all the varying laws regulating hotels and motels, go into business? Again, the answer is probably not.

Ill-advised price gouging laws in each of the states would likely prohibit Bomblebox from charging the market rates necessary to make it profitable. And thus, local hoteliers and the government — which also hates competition — would likely object and prohibit the “evil” Bomblebox corporation from helping people at a time when they need it most.

What about renting (or selling) house-like version of the Bomblebox? At first glance, that might appear to be a better option.

But, again, the complex web of laws and regulations would make that difficult, and in addition to hoteliers, the competitors of the natural order (RV makers, prefabricated home makers) would likely throw in a monkey wrench to complicate things.

In my lifetime, we’ve seen creative destruction move at an amazingly fast pace. The days of radio-dispatched cabs that come because of a call from your home phone or payphone are over. We’re in the Uber era now, where my smartphone will get me a black sedan in mere minutes. Instead of having to go and wait in a long line to get a Georgetown cupcake, food fad fetishists can be satisfied by a 3 minute walk to Farragut Square where multiple food trucks offer similar (and often better) products with shorter lines and often at lower prices. Or, if you really have your heart set on Georgetown cupcake, Seamless can deliver it for you.

Generally speaking, our regulatory system and laws are outdated. Uber is discovering that first hand across the country, most recently in Los Angeles. The byzantine shackles of a outdated laws and regulations that keep cities (like my hometown of Cleveland) from returning to their former status of greatness exist all across the country in various degrees.

What keeps them there is politicians who cater to the special interests, and who see themselves as wizened sherpas of the regulatory Mt. Kilimanjaro rather than people whose job it is to make their constituents’ lives easier through good policy, not political dependency.

Going forward, the cities and states that recognize the burdensome constraints of outdated regulations and laws are the ones that will prosper. They’ll have the Ubers, the food trucks, and — when times are tough — people willing to provide innovative solutions to help them in their time of need.  Their citizens will lead happier, better lives, and bounce back from adversity faster than their friends in the cities and states whose leaders who let archaic policy and outdated thinking rule the day.

Few people argue for no regulations at all, but the people who think that deregulatory advocates believe this are often the very politicians who say “everything is fine.” Odds are, it’s not. And the joke’s on you if you believe them.

 

 

 

George McGovern

With former Senator and Presidential candidate George McGovern on life support tonight, I thought I’d share this op-ed he wrote in 1992.

A high school young Republican friend of mine told me earlier today:

“He goes to the diner by my apartment. I see him there every now and then. Was still sharp this summer.”

In all of the tweets I’ve seen from liberal fans of his, I haven’t seen many people talk about this op-ed he wrote, giving perspective to his years as a Senator and politician from an older man in the private sector.

It is a great read. McGovern’s prognosis isn’t promising. A dedicated public servant, America owes him gratitude.

A Politician’s Dream Is a Businessman’s Nightmare

(BY GEORGE MCGOVERN) JUNE 1, 1992 | Wall Street Journal

`Wisdom too often never comes, and so one ought not to reject it merely because it comes late.’ — Justice Felix Frankfurter.

It’s been 11 years since I left the U.S. Senate, after serving 24 years in high public office. After leaving a career in politics, I devoted much of my time to public lectures that took me into every state in the union and much of Europe, Asia, the Middle East and Latin America.

In 1988, I invested most of the earnings from this lecture circuit acquiring the leasehold on Connecticut’s Stratford Inn. Hotels, inns and restaurants have always held a special fascination for me. The Stratford Inn promised the realization of a longtime dream to own a combination hotel, restaurant and public conference facility–complete with an experienced manager and staff.

In retrospect, I wish I had known more about the hazards and difficulties of such a business, especially during a recession of the kind that hit New England just as I was acquiring the inn’s 43-year leasehold. I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender.

Today we are much closer to a general acknowledgment that government must encourage business to expand and grow. Bill Clinton, Paul Tsongas, Bob Kerrey and others have, I believe, changed the debate of our party. We intuitively know that to create job opportunities we need entrepreneurs who will risk their capital against an expected payoff. Too often, however, public policy does not consider whether we are choking off those opportunities.

My own business perspective has been limited to that small hotel and restaurant in Stratford, Conn., with an especially difficult lease and a severe recession. But my business associates and I also lived with federal, state and local rules that were all passed with the objective of helping employees, protecting the environment, raising tax dollars for schools, protecting our customers from fire hazards, etc. While I never doubted the worthiness of any of these goals, the concept that most often eludes legislators is: `Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape.’ It is a simple concern that is nonetheless often ignored by legislators.

For example, the papers today are filled with stories about businesses dropping health coverage for employees. We provided a substantial package for our staff at the Stratford Inn. However, were we operating today, those costs would exceed $150,000 a year for health care on top of salaries and other benefits. There would have been no reasonably way for us to absorb or pass on these costs.

Some of the escalation in the cost of health care is attributed to patients suing doctors. While one cannot assess the merit of all these claims, I’ve also witnessed firsthand the explosion in blame-shifting and scapegoating for every negative experience in life.

Today, despite bankruptcy, we are still dealing with litigation from individuals who fell in or near our restaurant. Despite these injuries, not every misstep is the fault of someone else. Not every such incident should be viewed as a lawsuit instead of an unfortunate accident. And while the business owner may prevail in the end, the endless exposure to frivolous claims and high legal fees is frightening.

Our Connecticut hotel, along with many others, went bankrupt for a variety of reasons, the general economy in the Northeast being a significant cause. But that reason masks the variety of other challenges we faced that drive operating costs and financing charges beyond what a small business can handle.

It is clear that some businesses have products that can be priced at almost any level. The price of raw materials (e.g., steel and glass) and life-saving drugs and medical care are not easily substituted by consumers. It is only competition or antitrust that tempers price increases. Consumers may delay purchases, but they have little choice when faced with higher prices.

In services, however, consumers do have a choice when faced with higher prices. You may have to stay in a hotel while on vacation, but you can stay fewer days. You can eat in restaurants fewer times per month, or forgo a number of services from car washes to shoeshines. Every such decision eventually results in job losses for someone. And often these are the people without the skills to help themselves–the people I’ve spent a lifetime trying to help.

In short, `one-size-fits-all’ rules for business ignore the reality of the market place. And setting thresholds for regulatory guidelines at artificial levels–e.g., 50 employees or more, $500,000 in sales–takes no account of other realities, such as profit margins, labor intensive vs. capital intensive businesses, and local market economics.

The problem we face as legislators is: Where do we set the bar so that it is not too high to clear? I don’t have the answer. I do know that we need to start raising these questions more often.

Link: http://1.usa.gov/jO4SHw

George Stanley McGovern (born July 19, 1922) is a historian, former United States Representative, Senator, and Democratic presidential nominee. McGovern lost the 1972 presidential election in a landslide to Richard Nixon. As a decorated World War II combat veteran, McGovern was known for his opposition to the Vietnam War.

Crony Capitalism in Saint Louis?

Stl Food Truck Map

See this map? Imagine if you, as a Saint Louisan wanted to get food from delicious food trucks for lunch. Reason informs us:

The text is a little hard to read, so let me help you out. Vendors can’t park in the red parts. Or the blue parts. Or the yellow parts. Also, stay away from hydrants and bus stops.

The Post Dispatch also notes:

City officials emailed a map Thursday to about 20 food-truck owners and operators that details the large portions of downtown that are off-limits for them to park.

The updated map draws a 200-foot no-parking-zone around every brick-and-mortar restaurant in the Downtown Vending District, which runs roughly from 18th Street east to Interstate 70/55 and from Cole Street south to Chouteau Avenue.

The trucks also are not allowed within 200 feet of other types of street vendors or within several blocks of Busch Stadium, America’s Center and the Edward Jones Dome. A previous version of the map included suggested areas where food trucks could park; the new version does not.

In short, Saint Louis has been bought by restaurants who don’t want you to have the choice of food trucks. That’s how I see it. Businesses cozying up with government to stifle competition is crony capitalism, and it is wrong.

SLU Alumni and famed restaurateur, Chris Sommers tells the Post Dispatch:

“Like any new industry or trend, as soon as everyone jumps in, the regulations follow, which often makes sense. In this case, I think the city is over-regulating,” Pi Pizzeria owner Chris Sommers said. “They do need to protect existing businesses, but the 200-foot rule plus the silly Cardinals and Convention Zones are too much.”

Of course, I agree with him that the regulations go too far, but disagree that it’s the role of any government to “protect existing businesses.” Sommers’s politics are a tad different than mine, though.

Sommers’s Pi Pizzeria (which is in DC) also operates food trucks both in Saint Louis and in Washington, D.C. — so for him, he has potentially conflicting interests. 

WHAT DO YOU THINK? Vote and sound off in the comments…

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UPDATE: Thanks to the Show Me Institute  for the link. Check out their story: Papa John’s and The Case of the Over-Regulated Food Trucks

Regulating Homelessness

Well, some of America’s liberal Mayors sure are giving it the old college try. I was outraged to read in Bloomberg Businessweek this morning on the metro about Houston Mayor Annise Parker and Philadelphia Mayor Michael Nutter (both liberal Democrats) efforts to crack down on private groups helping the homeless. Of course, what article about Mayors going nuts with regulations would be complete without a reference to New York Mayor Bloomberg?

This isn’t to say that liberals are the only bad guys here, it’s just that they are often the worst offenders. And let’s face it, there aren’t many conservative Mayors of big cities, where homelessness tends to be more prevalent.

For people who supposedly care so much about the impoverished, these Mayors have an odd way of showing it. Many liberals believe that government should regulate out of existence things they consider “bad” or “not good.” However, it would appear they are now pushing for regulations to extinguish privately run efforts to help the homeless. This is wrong.

The article does a very good job at painting a picture for readers: heartless elected officials versus caring activists. I think it misses a point that we’ll get to later: competition with government.

Some key takeaway facts from the article:

  • There are restrictions on sharing food in at least 23 towns and cities in the U.S.
  • New York City prohibits private donations of food to homeless shelters as part of a policy partly aimed at ensuring meals are nutritious.
  • Philadelphia’s mayor last week instructed the parks department to issue a regulation in 30 days banning outside feeding in all city parks, with exceptions for picnics and permitted events.
  • Houston this month considered making those who feed the homeless register, banning the storage or preparation of food in private homes and requiring that one person obtain food-safety training. Fines would have been as much as $2,000.

The article largely focuses on the Mayors’ supposed interest in the public good and public health. Clearly, these are two responsibilities of local government, I get that. But it’s hard not to conclude that these liberal mayors are using regulatory power to make feeding and helping the homeless both harder and more costly.

However, there aren’t many facts out there to support the need for such regulations. Typically, at least at the federal level, there is a cost benefit analysis completed and usually a written record of why the regulation is needed. Cities don’t always have those requirements, and can regulate willy nilly and at the arbitrary and capricious whims of the Mayor and the council.

There has not been a compelling argument made by proponents of these regulations, in my view, to justify them.

“It’s a red herring,” Randall Kallinen, a civil rights lawyer in Houston who has organized opposition to the city’s plans, said in an interview. “They can’t provide one example where someone got injured or sick. This is really a way to push homeless out of downtown.”

Public good? Really? All of these cities had (or sanctioned through permits) Occupy Wall Street protests. (Eventually, there was sort of an ad-hoc nationwide crackdown, but some are still there.)

Ask yourself this: what’s a greater public good — hippies and miscreants destroying public and privately owned property to demonstrate their lack of economic understanding, or neighbors getting together to help homeless neighbors? The choice is pretty clear to me.

I agree with Randall: It’s a red herring.

Competing with Government is a quick way to get regulated out of business.

I have a different theory:

These Mayors care more about control and money than they do the homeless.

I’m not saying these three Mayors don’t care about the homeless. Rather, I’m saying they care more about their city’s power and ability to get federal and State funds than they do the homeless. It’s not unreasonable to think that.

Combating homelessness is something the federal government (and State governments) devote a fair amount of money toHUD offers grants, HHS offers grants, the Education Department offers grants, the VA offers grants.

All of these grants have strings, and those strings (while attempting to prevent fraud or achieve certain goals) have costs that make the intended help less efficient. Costs that make private entities more efficient at helping the homeless.

It should come as no surprise that State and local politicians want to hamstring private entities in an effort to make the competition “fair” or biased in the government’s favor.

From McKinney-Vento to the HEARTH Act, the government has certainly devoted a lot of resources and bureaucrats to combat homelessness.

I’m not saying they shouldn’t, but put yourself in the Mayor’s chair for a second:

  • Private groups are raising funds and doing things to help the homeless.
  • This can diminish the needs of the homeless for government services, and thus, less of a need for federal grants and city employees administering those programs.
  • Patronage is not dead, and anybody who tells you otherwise is either uninformed or a liar.
  • Mayors love control, and doling out favors. After all, they’re politicians.

Helping the homeless is a noble goal, and I think it’s despicable that these mayors are using regulations under the guise of public good and public health to retard the ability of private groups to help the homeless when they’ve demonstrated practically no need for them.

I hope that readers will encourage their elected officials to stop pursuing policies to harm good people like Brian Jenkin’s efforts to help the poor.

Jenkins equates Mayor Nutter’s recent policy proposals as “an attack on the poor.” He is right. Maybe the etymology of Nutter’s last name is rooted in some historical and subliminal truth: He’s nuts. 

YOUR TAKE:

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Sound off in the comments  below.