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September 24, 2003

Rent Control Increases Housing Costs

Now, in principle I think rent control is great-- people shouldn't be driven out of their homes because the neighborhood gets richer and they don't. Landlords getting the profits from increased real estate values is a bit of a scam to begin with since they are benefitting from social progress in a neighborhood, not their own efforts (go read Henry George).

And I don't buy the conservative arguments that rent control prevents developers from building new housing. First, in places like New York City, new housing is exempt from rent control. Second, developers want to build far more housing than they are allowed to in the City, so the argument doesn't hold water at all.

There are some moderately interesting studies by folks at the Manhattan Institute that benefits don't flow to the poorest residents, but that's mostly an argument for reforms in the rent control formulas.

No, in principle and in a lot of historic practice, I think rent control is a great and needed thing. It's not sufficient unto itself, but as long as other public policy encourages new housing to be built to assist those who don't already have rent controlled apartments, rent control is fine.

They've Got Theirs: Unfortunately, I've become more convinced over time that rent control leads a lot of people to opposing building new housing and supporting restrictive zoning laws. If rising rents in their neighborhood was a personal threat, they'd be marching in the streets to encourage more housing to relieve demand and push rent prices down.

But with rent control, they face no threat of their own rent rising. They've got theirs, so new housing can only block their views, so they lose any incentive to support new housing.

On this one, the economics of rent control are fine in my opinion, but the politics of it are creating a form of NIMBYism that is making New York City even more unaffordable. New York has a housing crisis that is making it uninhabitable for poor families and hardly livable for the middle class.

The Housing Crisis: Here are some numbers from Housing First!

  • More than 500,000 renter households (one-quarter of all renters) continue to pay more than 50% of their income for rent.
  • In April 2003, more than 38,000 people had no alternative but to live in shelters each night.

    I don't want rent control repealed--- I think it's too vital to many families that depend on it. But when I see those benefitting from it trying to pull up the affordable housing ladder behind them by blocking new housing for others, it really does outrage me.

    When there are no more homeless families in the shelters and working families aren't paying half their wages for housing from where they then have to commute an hour on the train to their jobs in Manhattan-- then I'll have some sympathy for preserving "context" zoning or other NIMBYish gentrification programs. Until then, I basically oppose all anti-development zoning in the City.

    Update: City Comforts thinks "anti-development" zoning is too vague. I think I was relatively clear in the other linked post that my objection is to height restrictions and any zoning that try to limit the amount of housing produced per square foot. The reality is that given the costs of land in New York City, restricting the height of a building means that the fixed costs of the land has to be divided among fewer apartments, driving the costs up per apartment. So height restrictions are a very direct enemy of affordable housing.

    City Comforts wants to argue that local owners and renters "have an absolute ethical, legal right to protect what they believe is theirs." I contest both propositions. I think it is immoral for the haves to protect their interests-- sustained only by the community support of rent control-- at the expense of others who are in a worse off position. And legally, they have no basis to oppose such development-- there is no legal loss if local development makes your property less valuable, just as there is no legal obligation to turn over the increased value of your home to the community if it becomes more valuable due to civic improvements.

    I'm not the enemy of all zoning in every instance, but nine times out of ten, in both suburbs and cities, it has become a tool of the haves to zone out the influx of the have-nots.

    Posted by Nathan at September 24, 2003 05:26 PM