Posted on 09/05/2002 3:08:39 PM PDT by shrinkermd
Democratic gubernatorial hopeful Carl McCalls housing development plan is hopeless. | 26 August 2002
The Democratic gubernatorial primary in New York State has lacked substantive ideas; the candidates bland platforms neither inspire support nor engender much criticism. Given Carl McCalls recent proposal for sparking new housing development in Gotham (and throughout the state), maybe thats a good thing. McCall has tried to position himself as a centrist, but his housing scheme is practically Soviet: it calls for new government entitlements that, if put into effect, would further depress Gothams already painfully anemic housing market.
McCalls housing scheme hinges on expanding New York Citys rent control regime so that it once again covers the wealthy, rolling back a 1997 change in housing regulations that ended rent control for Gotham tenants who earn more than $175,000 a yearor whose apartments rent for more than $2,000 a month. McCall argues that the 1997 rule, known as luxury decontrol, is hurting New Yorkers by reducing the number of apartments under rent regulations and thus driving up rents.
In fact, luxury decontrol is exactly the kind of reform necessary to spur long-term housing development in the city. Rent control for the rich snuffs out potential new construction, because wealthy tenants, whod have the money to buy or lease newly built housing, instead stay put in their deeply discounted apartments. Why should they move and give up such a great deal, even if their apartments might be bigger than they need or less state-of-the-art than theyd ideally like? Better to keep the cheap apartment in the city and use the monthly savings to pay off a mortgage in the Hamptons.
This lack of demand from prosperous but subsidized tenants is one reason why housing construction in New York, which averaged 35,000 units a year in the 1930s, before rent control went into effect, now averages a measly 10,000 units a year. Its also why only 28 percent of Gothamites own their own homes, less than half the national average. McCalls proposal would just set these patterns in concrete.
To solve the very problem that rent control helps createa lack of investment in new housingMcCall wants government to bankroll more housing development. Hed try to get the feds to guarantee investments by pension funds in subsidized housing construction, and he calls for more government partnerships at all levels with nonprofit housing groupswho of course go gaga over them, because the subsidy money goes through their hands. But theyre bad ideas. Investments in subsidized housing rarely pay off for pension funds. And subsidized housing is a lousy way to get sustained new housing construction, since it doesnt generate additional capital through profits for new housing investment. Instead, each new project requires new subsidiesif government funds are available. If theyre not, no new housing.
Aside from helping him win political support from housing advocates, whove now endorsed him, McCalls proposals leave untouched the real causes of New Yorks lethargic housing market. They dont address the citys tortuous zoning and building codes, its hefty taxes and fees, its construction union featherbedding, and organized crimes heavy influence on the construction industryall of which help make housing construction up to 40 percent more expensive in New York than in any other U.S. city. New Yorks housing woes wont improve until someone tackles some of these problems and sets the market free.
There is no "problems with solutions", like they say so often on the left, only trade-offs. Someone will benefit, and someone will pay the cost of that benefit.
That doesn't necessarily mean that it's always wrong to do so. Only that both sides of the question should be considered.
And I'm very pleased that the question has been raised here.
As for me, I say displace. The costs to fixing housing pricing are much higher in terms of reduced quality of life, than anyone has addressed here.
Apart from those undocumented costs, there are decades of data available to how fixed housing costs raised overall housing costs and reduced availability in New York. I can personally remember acres of abandoned buildings in Queens (which by the way are all re-occupied since rent controls have been grandfathered away) because the landlord couldn't justify the costs of occupation.
And in spite of the nonsense said earlier, there is not an endless supply of people willing to pay X to live in the south Bronx. They will only pay X for housing which meets their expectations of the value of X, so supply and demand will (of course) work in New York, as it does everywhere. Manhattan is an island, and Staten Island obviously is an island. Even Brooklyn and Queens are on the Island of "Long Island". But the problem of limited floorspace was solved with the invention of the elevator, so supply of housing has continued to expand in New York City, even though the space available has (for the most part) not.
But the argument over fixed housing costs is moot. It has been settled by history. And history has sided against Keynes, and with Hayek.
Government economic controls don't work the way they are intended. And that obvious if you judge them by their result instead of their intent.
There are many factors governing what out-of-towners are willing to pay for rent, also, such as going salaries, the state of the economy in general, and demographics (large graduating classes cause rentals to go up).
As for the schools: The situation is that NYC (and Washington) has an elite worker class, served by minorities. Because NY is a magnet city, the influx of very qualified college grads is constant. Why should an employer (absent federal laws, of course) hire a poorly prepared high school grad when she can hire an Ivy Leaguer? Thus the kids have nowhere to go but service jobs, to make sure the elite have their packages delivered, their tables bused, etc. Having nowhere to go tends to stifle incentive to do well in school. Even graduates of the city colleges (open admission until recently, with remedial classes) are poorly prepared in comparison with someone from New Trier High School.
During the 1997 crisis in rent protections, someone coined the phrase "economic cleansing." That is what a lot of people would like.
Also, New York is an island but that has nothing to do with it. It is also made of granite, so massive foundations are not necessary in order to build skyscrapers. Mother Nature has already supplied the foundation. That is why NYC looks the way it does. Theoretically, there is unlimited housing here, as opposed to places where the height of buildings is regulated, like Fire Island and Aspen.
If you said that the people who live in the less desirable Manhattan neighborhoods would be so inconvenienced as to justify the cost that everyone else must pay for rent control, I would say you have a valid point. But complaining that east siders would have to move to the South Bronx is nonsense, because as soon as those respectable if somewhat less wealthy people made that move, those neighborhoods would become respectable if somewhat less wealthy, and cease to be the cesspools that they are now.
As for your mention of the endless supply of new housing in Manhattan, dont you imagine that might offset your alleged endless demand mentioned in other posts?
As I said earlier, history has already declared subsidized housing an abysmal economic failure. And arguing against it, is like arguing against the tide. It does no good, sometimes annoys others, and only makes you look like you don't know what your talking about.
do you mean to tell me that you really believe the problem with the New York City schools is that there are no opportunities in New York?! Why then do you have all of those out of towners heading to New York City, for the view of Brooklyn?
Honestly, I've never heard a more ridiculous statement in my life.
And I'm not arguing against them. Where TF did I do that?
When you say "the cost everyone else must pay for rent control," you show not only that you were ignorant before this thread started but also that you haven't learned anything from it, or at least answered my point that no, not everyone pays for it. Not even the landlords pay for it, being the only class of businesspeople who get a guaranteed increase every year, no matter what the economy is doing.
As for the neighborhoods, if you think all that has to happen for a brand-new neighborhoods to exist is for disparate people to move there from all over the place, you really know nothing about neighborhoods.
And I never said there was an unlimited supply of housing. It does not keep up with demand, forcing housing costs higher, and that is because it is limited by factors other than the existence of rent regulations.
Once again, for the thread-reading-impaired, NO ONE IS SUBSIDIZING THESE RENTALS. There is a reason why the housing court in NYC is so pro-tenant, and that is the rapacious landlords who would ship their mother to the heart of the most crime-ridden slum if they could get market rate for her apartment.
I'm a little tired of repeating myself, so I'm going to try to stay off this thread and get some work done.
There are mitigating factors to all constitutional principles, however. The government does not have the right to feed the starving either, according to the Constitution, or to subsidize college education. Sometimes compassion and humanity win out over the draconian application of principle. I don't believe in totally unregulated capitalism. It's too severe. I believe in having as few regulations as possible.
Your humanities degree is showing.
I get really tired of educating people in basic economics, but your known well, and not a DU disrupter so I'll go over it for you very slowly.
Everyone subsidizes rent controlled apartments. That's the way economics works. The cost of everything else is higher (in this case, all other housing), to make the cost of the rent controlled apartments artificially lower. To believe otherwise is like trying to deny the law of gravity.
The landlords pay for it because their rent increases are set at a maximum, but their costs are not. It also reduces the number of uncontrolled apartments available, allowing them to make up the difference lost on the rent controlled spaces by charging more on the uncontrolled ones. (That pesky law of supply and demand again,... I assure you, it does work in Manahattan)
We haven't seen anything like that in New York in a few years, but what exactly do you think happens when a landlord is guaranteed no more than a 4% per year increase, and the union laborers hes required to hire demand a 9% increase in wages? What happens when all of the costs associated with being a landlord outpace the fixed increases?
And by the way, there isn't a single landlord anywhere in this country anyway, that is ever guaranteed an increase in rent. If the people move away, and there is no-one else to rent the place, where is his increase then? (OK, I promised I'd go slow,... he doesn't get one.)
The arguments you make only make sense if you specifically ignore some other part of the machine. Not only are you arguing like a socialist, but your spouting the classic, "hate the rich" (rapacious landlords) argument.
(By the way, I'm having a little bit of trouble with the idea that a well known freeper is pointing at the New York State court system and saying "See?! If they do it the way they do, it must be the right way." I guess if you live long enough you really do see everything.)
Tell me you have a rent controlled place and that you want to keep it that way, and I'll say fine. Tell me you would rather have everyone else pay extra to preserve the character of the community, and I'll say fine. Tell me that you have pretty much any personal stake in the idea of rent control and I'll admit that you have a valid point. Just because I value preserving the integrity of the community less than you doesn't mean I'm right, so if you point is focused on how we value these non-quantitative assets, Ill happily concede.
But trying to tell me that no one subsidizes rent control is like telling me that the sky is red. You're insisting that something regarded as a basic fact by anyone with a little knowledge of contemporary economics is not true. Your trying to insist that virtually all of the economic community has been fooled into believing that these silly free markets are good for us. And I think you had better re-think your position.
You might also want to read Free to Choose by Milton Friedman, or virtually anything by Thomas Sowell. If you dont believe the things I say, maybe youll be willing to let them show you the error of your ways.
Classic? I don't agree. Sure it is the most commonly propagated. But many writers dating back to Frederick Bastiat, all the way to Angus Black (author of "Radical Economics" I think 1972), and on to Milton Friedman, as well as Thomas Sowell (both of who you named), have written about how these arguments have aided the rich in getting richer, weakening the middle class and further crippling the poor.
A wealthy land lord is always in a position to profit off any system. While a middle class property developer or landlord faces absolute devastation if a few elements in a plan fail. Unexpected costs have to result price increases. The rich don't have to worry about such costs, they just move some capitol around to make up the difference, and still get their alloted price increases. That is not the case for budget strapped single property developer or owner.
There are lots of "hate the rich" free enterprisers out there, who view all these anti-progressive policies as being designed to aid the rich in the name of helping the poor.
I wonder, are New Yorkers (the natives) so backward, that they actually think it better to have work done by the less competent, so long as it is done by long time natives? It seems to me that any progressive thinking individual always wants the best, regardless of where they are from.
But the truth of the argument is, we should both know better than to try and educate someone who believes that the law of supply and demand is somehow suspended at the Hudson river, and magically resumes again in Long Island City.
And FYI, I still work in Manhattan, I only moved out because of the birth of my daughter and the abysmal schools, so I feel qualified to continue to comment on the natives. I can assure you that the residents always want as high a quality as can be delivered for the price, and that applies to everything. The arguments that Firebrand is making are far more typical of the political left with all its inherent hypocrisy and contradiction, and are not shared by any of the people I know who continue to call Manhattan home.
When you have a housing market driven by 20-something year olds trying to get to the top of corporations, law firms and banks and brokerage houses, prices are capped at the total combined salaries of about a half-dozen yuppies sharing a 2 bedroom apartment. It is not a family friendly environment and long term social stability does not result.
You can endlessly describe as socialists or communists those who believe that it is ok to engage in a bit of social engineering in order to encourage family stability.
But the problem is really complex, there is no free-market anyway because of all sorts of other political social and economic factors, and the freemarketeers are as self-deluded as the communists who want everything given to the poor.
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