Rent Outta Shape
What the Stuytown and rent ruling fiascoes mean to New York City
- In many cases, rent control appears to be the most efficient technique presently known to destroy a city except for bombing.
- Rent control has in certain western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.
- That great sacred cow — Rent Control — is a textbook case of Economic stupidity.
It is no surprise that free market economists would oppose rent control, root and branch. It is, however, a bit man bites doggish that even economists with sterling left wing credentials would oppose it too, and about as bitterly. The sources of those three quotes? Assar Lindberg, from The Political Economy of the New Left; liberal Swedish economist Gunnar Myrdal; and the New York Times' own Paul Krugman.
Why the consensus? It's because this law, which supposedly helps impoverished tenants, actually does the opposite.
Every so often, saner elements in government try to repeal rent stabilization's stranglehold on New York City. But they inevitably fail. Just this week, two frightening developments further cemented its place. First, Tishman Speyer walked away from their investment in Stuyvesant Town, mainly because it was not allowed to increase rents. Second, a State Supreme Court ruling said that some 300,000 rent-stabilized residents had their rents illegally raised. We're talking an extra $45—$85 a month, on rents under $1,000.
Wouldn't we all like such protections? Alas, the court ruling simply illustrates the benefits certain New Yorkers get from winning the housing lottery — and how the rest of us pay for it.
If you're just moving to New York City, big dreams and ideas in your head, living in Manhattan will cost you, on average, $2,253 a month for a studio and $3,026 for a one bedroom. Pricey. If you're in the middle class, you're probably railing against the rich Wall Streeters and greedy landlords who are keeping you from making it in Gotham.
Except the average rent for the city in 2008 was only $950 a month.
How is this possible? Because 48% of rental housing is stabilized, meaning increases are regulated, and another 2% are rent-controlled, meaning increases are almost non-existent. Another 14% of units are public housing and other projects.
February 1, 2010
Dr. Block [send him mail] is a professor of economics at Loyola University New Orleans, and a senior fellow of the Ludwig von Mises Institute. He is the author of Defending the Undefendable and Labor Economics From A Free Market Perspective. His latest book is The Privatization of Roads and Highways.
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