The Rent is Too Damn High Party

All you free market Ayn Rand fanatics and your free market delusions....

MHA wrote: All you free market Ayn Rand fanatics and your free market delusions....

Pls post some proof of your theories on the NYC rental market

Mamacita wrote: ....I want to marry a shoe

DSW had some cute ones when I was in there the other day. I took a pair home with me, and we've some intimate moments, but no marriage yet.

Meanwhile, let's up the conversation a few grade levels....
http://en.wikipedia.org/wiki/Rent_control

The Unintended Consequences of Rent Control
Mises Daily: Wednesday, August 05, 2009 by Art Carden

Suppose that you want to destroy a city. Should you bomb it, or would it be sufficient just to impose rent control? It's a bracing question at first, but some economists have argued that the two are roughly equivalent. When the price of rent is held below the market-clearing level, shortages emerge and the housing stock rapidly deteriorates.

Those who advocate price controls often do so on the basis of their views on distributive justice. It isn't right, they might argue, that someone who has lived somewhere his entire life should be priced out of his neighborhood; nor is it right for fat-cat landlords to enjoy high rents simply because a lot of people want to live in New York or San Francisco. The typical rent control proposal is based on the assumption that the same amount of economic activity will take place but with a different distributional outcome. That is, the same number of apartments will be provided, and they will be provided to the same people and in the same quality. The only difference, according to rent control advocates, is that the hapless renter won't have to line the landlord's pockets. Any change in the housing stock is then viewed as a moral failing on the part of the landlord.

According to rent control advocates, landlords aren't working for the high rents they enjoy. They are just sitting around, watching the prices increase. This view, however, ignores the information-transmitting function of prices. A building can be used for many different things. It can be used for rental housing. It can be used for condos. It can be used for office space. It can be torn down, and the land can be used to grow crops. Prices tell us the most valuable use of the building and land. Under rent control laws, the signals are distorted.

The reality of rent control is far different from what its advocates envision. A September 13, 2008, article by the Mercatus Center's Eileen Norcross in the Wall Street Journal discusses rent control in New York City, and she suggests that this is a lesson that is worth repeating. Norcross tells us about the digs occupied by New York congressman Charles Rangel. Mr. Rangel "occupies four rent-stabilized apartments in a posh New York City building." He lives in three and uses a fourth as an office. Because of rent stabilization, we cannot tell whether those apartments would be better used to house several families instead. Mr. Rangel is able to use valuable resources, at below-market prices, to the detriment of would-be New York City residents.

Norcross reports that there are 43,317 apartments in New York City controlled by 1947 rent control laws and 1,043,677 "rent-stabilized" units; in total, she tells us that this is about 70 percent of New York City's housing stock. Originally, rent control was a temporary program aimed at helping people find places to live in New York City without paying exorbitant rents during World War II. Now, over sixty years after the war has ended, rent control still dominates the market.

At the height of the debate over whether capitalism or socialism was the most productive way to run a society, Ludwig von Mises argued that government intervention begets further government intervention. When rents are held below their market-clearing value, people take rental units off the market or convert existing units into condominiums, luxury housing, or offices. Something like "key money" might also emerge, whereby the rent is held artificially low, but the landlord demands a massive payment to rent the apartment's key. Other enterprising landlords have attempted to get around the restriction by providing "furnished" apartments, for which the tenant pays the controlled rent but must also pay a marked-up price to rent the apartment's furniture. Government officials and landlords find themselves in an endless cat-and-mouse game of regulate-and-evade that has created its own legal infrastructure in the form of the New York City Housing Court. The court has fifty judges and handles over three hundred thousand cases annually.

When will they learn?
Rent control also destroys landlords' incentives to maintain the housing stock. With rent control in place, people are lined up for housing, and therefore, the landlord can discriminate on the basis of who will take the most meager accommodations. Eliminating a landlord's ability to enjoy the return from investing in higher-quality housing means eliminating the landlord's incentive to invest in basic upkeep.

So which is worse, rent control or bombs? On the Mises Institute's website, Pace University economist Joseph Salerno has a video lecture on prices, in which he offers a compelling visual exercise. He shows his audience pictures of destroyed urban areas and asks whether these are areas that have been subject to rent control or whether these are areas that have been bombed. It isn't easy to tell, but the lack of difference suggests a tragic but predictable irony. When a city is bombed, it is destroyed by people with evil intentions. When a city is subjected to rent control, it is destroyed by people with good intentions.

http://mises.org/store/Forty-Centuries-of-Wage-and-Price-Controls-P566.aspx

Ah, the capitalist cycles of boom and bust.

Many argue that the cycles are larger and more frequent when the market is restricted, such as New York City's housing market.

RE: people being priced out, the opposite arguement is usually made when one looks at the long term.
http://economylessons.blogspot.com/2010/04/economy-lessons-what-rent-control-does.html

I guess several decade of a false housing boom have some people fooled into believing that those things are sustaining themselves.

If a housing shortage persisted once restrictions were lifted, the arguement could also be made that the market would create opportunities for essential employees to live locally (like police officers, fire fighters, teachers, etc) by paying them more or by creating specific housing for them.

....re: those service workers. If (post-reform) they continue to be priced out of the local market, the arguement is that the market will either build additional housing and transit to accomodate them (or, depending how you look at it "the wealthy that uses their services").

....but the whole conversation is moot. The various forms of rent control and subsidized housing aren't going away anytime soon. This dysfunction will outlive us all.

Are we destined to be a city set up like third world ones where the poorer working classes live 1-2 hours outside the city and largely only wealthy people live in city limits?

Nah, the urban ghetto is uniquely American. It would be unpatriotic to attempt change it. We tried urban renewal, it failed too.

Doesn't every city argue it is unique?

....isn't a favorite past time of New Yorkers to dismiss research from everywhere else because it wasn't written in NY?

As New Yorkers, are landlords somehow exempt from the basic traits that influence human behavior .....such as profit maximization? or, um, survival?

Will REBNY just say "yea, housing for poor people is good, let's just give up our property rights?"

OR
"hey, even though we can't make any money on affordable housing without DHCR support, let's build it anyway?"

OR
"I'll continue to accept Section 8 even though I can make more money by dropping out"?


http://www.rebny.com/
http://housing.ny.gov/ (DHCR was folded into this marco agency a few months ago) http://nysdhcr.gov/index.htm

Can we really believe that policies such as rent control can be implemented with no negative effects? ....and that our pathetic (Albany!?) representatives can mitigate the effects of capitalism without causing even more problems?



ah, boom and bust. Some will try to stop the cycles, but the smartest will adapt to them as they occur.

vaportrail wrote: You've got it right whynot. The rent is too damn high because of rent stabilization. Basically, there is no incentive for developers to build housing stock that would rent for less than $2,000 unit.

Actors like Mr. McMillan getting a public forum is a new low for our democracy. His rhetoric is ridiculous and listening to his answers to most of the questions was depressing. "Bulldoze the mountains . . ... . for the children". .. . come on people, we can do better.

AMEN...

So I guess it's cool for some developer to get property tax abatements for like, 20 years, and then they build some god-awful structure to house the wealthy urbane elite for hundreds of thousands of dollars. So the neighborhood is robbed of property taxes for the sake of the wealthy who don't want to pay them. How in heaven's name, is the free market free when the game is rigged from the beginning?

It ain't. The rent is too damn high.

MHA wrote: So I guess it's cool for some developer to get property tax abatements for like, 20 years, and then they build some god-awful structure to house the wealthy urbane elite for hundreds of thousands of dollars. So the neighborhood is robbed of property taxes for the sake of the wealthy who don't want to pay them. How in heaven's name, is the free market free when the game is rigged from the beginning?

It ain't. The rent is too damn high.

Can you find a post before this one that said that such a practice would be "cool"?

I totally agree that the game is rigged, but it's rigged on both sides. I am on a project at a housing project where 30% of the units house someone who is employed. That means 70% of the units are wholly subsidized by the gov't. Is that "cool"? If we're gonna call out the game being rigged, let's call everything out from the top to the bottom....

whynot_31 wrote: As New Yorkers, are landlords somehow exempt from the basic traits that influence human behavior .....such as profit maximization? or, um, survival?

Will REBNY just say "yea, housing for poor people is good, let's just give up our property rights?"

OR
"hey, even though we can't make any money on affordable housing without DHCR support, let's build it anyway?"

OR
"I'll continue to accept Section 8 even though I can make more money by dropping out"?

Your points about rent control etc are good ones that I don't know much about. But rent control is hardly the main reason for the steady push of poor people further and further out.

whynot_31 wrote: Can we really believe that policies such as rent control can be implemented with no negative effects? ....and that our pathetic (Albany!?) representatives can mitigate the effects of capitalism without causing even more problems?

The 'problems of capitalism'? Extremely unequal tax breaks for developers is precisely the opposite of capitalism. And yes, if the electorate demanded it of our leaders, or if the leaders showed more leadership, we could indeed make our tax incentive programs fairer.

whynot_31 wrote: ah, boom and bust. Some will try to stop the cycles, but the smartest will adapt to them as they occur.

That's a nice saying but when you're working two jobs and not making enough to take your kids to the doctor, I'm not sure how that's relevant.

I have yet to see a reasonable suggestion of what will stem the current "cycle" we're on, other than another financial & crime collapse like we saw in the 70s.

_ _ _ _ _ _ _ _

CTK wrote: am genuinely unaware of any policies that have helped to drive up rents + property prices in NYC. All I know is that it's one of the most desirable cities in the world to live in, as well as one of the most dense, with real estate prices that reflect that.

I agree that this is a factor, but the city also skews its tax policy to make private high end development by far the most attractive option. That is neither capitalism, free market, nor fair to other segments of the city, which also happen to be the segments with the smallest voice in almost all aspects of society.

CTK wrote: As great as that feels to say, ultimately it's a pretty hollow statement. There is no crime in the city looking to attract the wealthiest and most talented people in the world, and the fact that it's still able to is reflective of its value & breadth of opportunity. The idea that the city has little concern for poor people is absurd given the amount of public housing and general assistance that is afforded to the city's poor. Not to say they have it easy or that things couldn't be done, but I'm unaware of any truly widespread efforts to flush the city's poor into the rivers.

No, the fact that its still able to is due in a large part, among other factors, to our tax policy. To ignore this is to deny reality. It's not a crime to focus all policy on attracting the rich, but I sure wouldn't call that good or representative government.

I think w/r/t to tax policy and development, the city indeed has little concern for the poor, especially compared other cities here and around the world.

CTK wrote: If there are unfair laws in place that swing things one way or another (like rent control or tax perks for developers), those should be wiped out..

completely agree. this is largely my point.

I'd have to get more familiar with the tax breaks than I am, but I'd say reforming them will go a long way.

Like actually holding developers to "affordable housing" commitments, and perhaps redefining "affordable housing" itself.

whynot_31 wrote: so, being that we all amazingly agree on something (i.e.The market ain't free) should we go toward more regulation or less?

....as CTK alludes, sitting back and letting the folks in rent control die off isn't working because we keep subsidizing new construction.

It's a tough call.

To a degree, I totally understand why the city favors high end development. There's just no profitability in building affordable housing with the costs of land and construction here, and even at the high end it takes tax abatements to even make it worth it. As a consumer, why would I go for a brand new building when I could get + renovate a condo/co-op in an old one? So to keep the construction $$$s flowing in, the city had to sweeten the pot to bring new prices into a competitive range with those for existing properties. So in a way the city created a bubble.

But the bubble has popped. I think it's long been time for the city to level the playing field. They should do away with the regulations.

On the lower end it's a much tougher call because of the fact that getting rid of public housing means mega displacement. That also gets into questions of the causes and solutions of poverty, which are no quick thing to examine.

Still though, I'm at a loss as to what obligations the city has to it's poor. In cases where poor people are being displaced for high end developments, I think there's a justifiable & clear case to be made for them. But as far as the changes in demographic of neighborhoods like the LES, Williamsburg, etc... I think everything that's happened is natural. Crime went down, people felt safe enough to move in, the neighborhoods became more desirable & were able to charge more rent. Seems wholly reasonable & organic to me.

For the city to have artificially held down rents & property prices would have been absurd and would have done way more harm than good.

whynot_31 wrote: even if such change is "evil" (a point of view I don't agree with), I don't see the government as being powerful enough to stop it.

Almost 10 years have gone by, and they haven't managed to build even a basic a memorial at the WTC.

....what makes someone think they can stop the forces of capitalism?

In what's probably the most dog-eat-dog city in the country?

I'm still curious to hear proposals for how to make NYC real estate prices fair, and what would constitute fair real estate prices in NYC.

That nexus does not exist when it comes to real estate. The price is set by realtors who gather together and plot to maximize what they can get by any unethical means necessary. They create demand by constantly making attempt to control supply.

The Rent Is Too Damn High...

Cool The Kid wrote:
I am genuinely unaware of any policies that have helped to drive up rents + property prices in NYC. All I know is that it's one of the most desirable cities in the world to live in, as well as one of the most dense, with real estate prices that reflect that.

CTK - Bloomberg purposefully set out to build a "luxury city" out of NYC. His vision necessarily included expanding housing units for the wealthy. His plan set out to achieve that in two parts:

1. A massive rezoning that newly allowed for luxury residential buildings in poor areas (i.e., Downtown Brooklyn, Williamsburg, Harlem, Chinatown, etc.) while also protecting wealthy areas from this kind of development.

2. Massive tax breaks that encouraged development of such luxury buildings. Developers received an exemption from all property taxes on the value added to building sites from new construction for as many as 10-15 years. Such tax exemptions ran into millions of dollars.
http://www.nyc.gov/html/dof/html/property/property_tax_reduc_421_a.shtml

Also, I have had many conversations with poor people who think NYC is an awful place to live, too crowded and too expensive. They stay because of the jobs here.

krowonhill wrote: [quote=Cool The Kid]
I am genuinely unaware of any policies that have helped to drive up rents + property prices in NYC. All I know is that it's one of the most desirable cities in the world to live in, as well as one of the most dense, with real estate prices that reflect that.

CTK - Bloomberg purposefully set out to build a "luxury city" out of NYC. His vision necessarily included expanding housing units for the wealthy. His plan set out to achieve that in two parts:

1. A massive rezoning that newly allowed for luxury residential buildings in poor areas (i.e., Downtown Brooklyn, Williamsburg, Harlem, Chinatown, etc.) while also protecting wealthy areas from this kind of development.

2. Massive tax breaks that encouraged development of such luxury buildings. Developers received an exemption from all property taxes on the value added to building sites from new construction for as many as 10-15 years. Such tax exemptions ran into millions of dollars.
http://www.nyc.gov/html/dof/html/property/property_tax_reduc_421_a.shtml

Understood. I don't necessarily disagree with the luxury zoning (what exactly constitutes a luxury building? And why haven't developers moved to develop low/middle income housing?), I do think the tax breaks were dubious and unnecessary.

krowonhill wrote:
Also, I have had many conversations with poor people who think NYC is an awful place to live, too crowded and too expensive. They stay because of the jobs here.

Have you been anywhere where poor people said they loved to live?