“Those who cannot remember the past are condemned to repeat it.”
The life of Reason; 1906
Think for a second what it means to be a tenant living in premises that municipal bylaws hold to be illegal. You have no rights and you have no voice because – according to law – you shouldn’t be living there in the first place.
This is the way that some rooming house operators profit from illegality. And for some Toronto City Councillors, that’s where the issue ends. When they vote to keep rooming houses illegal, they are voting for tenants to live illegally.
But there is much we can learn from past examples of illegal real estate.
Like speakeasies during the Prohibition era in Canada, rooming houses (multi-tenant accommodation) share a common past.
They both share the identity of having been or still being illegal premises.
And when a place-based entity becomes a legal piece of real estate, all sorts of good things can happen.
Our goal is to show how rooming houses might follow the course taken by speakeasies when consumable alcohol was legalized.
First of all, let’s ask about the underlying reason for making a home or house illegal. The main reasons are:
- to address negative aspects of a substance or an arrangement ;
- to curtail consumption of a substance; or
- to curtail an arrangement by allowing no legal use and imposing civil, summary or criminal penalties.
But governments make decisions in the longer run where the good of making something legal is better than the harm done by making it illegal.
In this sense, speakeasies are a ‘natural experiment’ as to what can happen when a piece of real estate goes from being illegal to legal.
We start by noting the fact that when real estate is made illegal, it often makes it hard-to-manage and lucrative.
Consumable alcohol was made illegal in Ontario in 1918 and made legal again in 1927. As a national policy, Prohibition may have been too short-lived in Canada to result in long-lasting influences.
But Prohibition lasted for 13 years in the United States between 1920 and 1933. During this period, venues for illegal drinking multiplied, surpassing the number of legal bars in pre-Prohibition times.
“In New York City alone, there were 35,000 illegal drinking establishments, as estimated by the New York City police department.49 This estimate of speakeasies in New York City doubled the number of legal drinking establishments that had previously existed before the start of Prohibition”
Many more people started drinking when alcohol was made illegal and they drank more. Like the classic game of whack-a-mole, speakeasies were incredibly popular and profitable, making them impossible to regulate or shut down.
“In the early years of Prohibition, when agents pursued enforcement with some zeal, patrons needed pass cards or passwords, but corruption and inertia took over fairly quickly… Everywhere else, the speaking was anything but easy. In cities like New York, San Francisco, Detroit and New Orleans, the game ended almost before it started, and bars operated with the merest pretense of discretion.”
On December 5, 1933, the Eighteenth Amendment was repealed by the Twenty-First Amendment, marking the end of Prohibition in the states. Speakeasies then gradually died out.
“With its repeal via the 21st Amendment in 1933 came an end to the carefree speakeasy and the beginning of licensed barrooms, far lower in number, where liquor is subject to federal regulation and taxes.”
Author Daniel Okrent notes in “Last Call: The Rise and Fall of Prohibition” that the 21st Amendment “made it harder, not easier, to get a drink” because along with legalization came regulations on closing hours, age limits and Sunday service.”
It should be noted that speakeasies only lasted in places where alcohol consumption was still banned
Similarly, in areas where rooming houses are kept illegal, the shelter-seeking tenant must collude with the operator to avoid enforcement.
This is why illegal rooming house operators are so hard to shut down. When the fundamental economic relationship between customer and operator provides advantages to each (low rent and high profit), both are in the business of avoiding enforcement (capture) for differing reasons.
For the really ‘bad apples’ among the illegal operators, the advantages of illegality are almost narcotic. What’s not to like?
- High profit margins from illegally high numbers of tenants
- Non reporting of income for tax purposes
- High overall rental revenue
- No protections for consumers- tenants
- Frequent safety and code violations
- Exploitation of tenants; and
- Inexpensive upkeep
In contrast, rooming houses that were first legalized in 1974 do not suffer the above problems to the same degree. In fact, the lives of tenants in legal rooming houses are more stable, they have more rights and landlords are clear about their responsibilities they have while having the benefit of operating openly.
The end to the illegality of consumable alcohol did not bring chaos. Rather, the legalization of this product came with even stricter regulation and licencing policies with which operators were forced to comply. Although we do not conclude that legalization can end all illegal practices, bringing legalization certainly increases safety for consumers.
In short, speakeasies died out fast and were replaced by something better following legalization. The point is that if we learn the lessons of history, we don’t need to repeat them.
Rooming houses have been kept illegal for decades except for the former city of Toronto; it is time that we stop voting for the status quo and start voting for a functioning future. Again, it is not legalizing what-is, but what-could-and-should-be.
John Stapleton and Yvonne Yuan -September 23, 2021