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Year 2008

Retail Rent Control

Thanks to Bill Nelson for tipping me off to the article from The Villager (NYC): Retail rent control? A city councilmember planned to introduce a bill this week that will require small businesses and landlords to submit to arbitration in negotiating lease renewals if both parties can’t agree on a fair rent. The far-reaching measure, sought by Upper Manhattan Councilmember Robert Jackson and deemed by some as a form of commercial rent control, would set regulated increases not subject to landlords’ whims. The language of the proposed legislation — which mirrors a similar bill introduced in 1988 that fell one vote short of Council approval — looks to preserve small businesses in the current commercial landscape by prohibiting both short-term lease renewals and “rent gouging by greedy landlords.” According to the measure, lease renewals would be set at a minimum of 10 years unless otherwise agreed upon, and arbitration would only be triggered if either party disputes the law’s set rent-increase rates. Those rates, the proposed plan indicates, allow for no more than a 3 percent rent increase the first year; no more than a 15 percent increase by the last year of the lease over the previous lease; and no more than 3 percent incremental increases each year of the lease. The legislation would be applied on a case-by-case basis to all commercial tenants across the city, including manufacturing businesses, nonprofit organizations, performing arts and theater groups, retail establishments, service businesses and professional medical offices. When asked about the measure’s chances of success, Jackson’s chief of staff, Susan Russell, said she believes “the provisions are reasonable,” but acknowledged the language is subject to tweaking. “I think that this is something that’s worth sitting down at the table and talking about,” she added. Supporters claim that, in the current climate, […]

Market Meltdown and Bailout Videos

Wow! This market is a mess. As a great follow up to his posts at CafeHayek on government’s intervention in the housing market, Russell Roberts discusses the situation and bailout with reason.tv: Also… Here’s the video from an Economics forum discussion at MIT (my Alma mater) on Wednesday: The US Financial Crisis What Happened? What’s Next? And another forum at USC. [HT Richard’s Real Estate and Urban Economics Blog]

Cook County (Chicago) Sheriff Won’t Evict in Foreclosures

Cook Co. sheriff won’t evict in foreclosures from Associated Press Cook County Sheriff Tom Dart says he’s ordered his deputies to stop taking part in evictions of properties that have been foreclosed upon. Dart says the change goes into effect Thursday. He says the decision comes because many of those being evicted are people who’ve been faithfully paying rent and didn’t even know about the foreclosures. Dart says he thinks he’s the first sheriff in a major metropolitan area to stop such evictions during what’s become a major foreclosure crisis around the nation. Dart says the number of mortgage foreclosures in Cook County has skyrocketed this year and that he expects that number to climb much higher. — It’s really tragic that renters who have otherwise valid lease contracts, lose that right because of their landlords’ failure. But, I don’t have the same sympathy for the defaulters themselves. What do you think will result from this move? Will banks stop foreclosing in Chicago without the rule of law on their side? Will defaulters squat?

Glaeser: Let Housing Prices Fall

Ed Glaeser gives three compelling reasons why the government should end their infatuation with high housing prices. (Nonetheless, some of the same politicians speak through the other side of their mouths about promoting housing affordability): Why We Should Let Housing Prices Keep Falling There is a superficial attractiveness to policies that seem to promise an end to falling housing prices, but there are three reasons why these proposals don’t make much sense to me. First, the government has no business trying to make housing less affordable to ordinary Americans. There is no reason to hope that middle-class Americans should pay more for any basic commodity, whether that commodity is coffee or oil or housing. Government should be fighting to reduce supply-side barriers and make housing cheaper, not trying to inflate prices artificially. Second, most of these proposals seem likely to be expensive failures. The government just doesn’t have the tools to rewrite the laws of supply and demand. If the cost of building a home in Las Vegas is $150,000, and there are no restrictions on building, then all the credit policies or bailouts in the world aren’t going to permanently keep prices above $150,000. Finally, these policies all have the common feature of getting the government further entrenched in the operation of the housing market, and this creates all sorts of long-term market problems. I would have thought that recent events at Fannie Mae and Freddie Mac, for example, would have made Americans recognize the costs of having government-sponsored enterprises play mortgage lender to the nation. I would have hoped that the history of public housing would have made us wary about spending huge amounts of tax dollars to get into the business of public property management. The current crisis may imply a need for more federal regulation of […]

Sun Sets on Culture of Congestion

The New York Sun has decided to close up shop. To Market Urbanists, the greatest casualties are Sandy Ikeda’s blog, Culture of Congestion and Ed Glaeser’s articles. Sandy’s work has inspired me to read Jane Jacobs’ books (starting with The Death and Life of Great American Cities), and I plan to post some of my thoughts on what I’ve read so far. If you haven’t already, please check out the archives of Sandy’s and Ed’s writings. Ed Glaeser has begun to write articles for the NY Times’ Economix blog. Hopefully, Culture of Congestion will rise again soon.  I’ll keep you posted. Also, check out: Batesline – Sun sets

Russell Roberts on Government Intervention in Housing

Russell Roberts of George Mason University, CafeHayek, and Econtalk wrote of series of Cafe Hayek posts on the various federal interventions in the housing market: Housing markets without the benefit of hindsight Fannie reaches its goals–sort of Zero Down! Fannie and Freddie’s other mission Section 8 Bill cared too Affordable equals “subprime” Calm down And don’t forget Andrew Cuomo Shiller and fundamentals The role of the CRA It’s not the CRA No money down, revisited Bear Stearns, the CRA, and Freddie Mac Stiglitz on the crisis

Portland Ideas??

I’m visiting Portland, Oregon for 5 days through next weekend for a wedding. It’s my first time there and I hear it’s a great city. What are the must-does to get the genuine urban experience? What are Portland’s specialty foods? What neighborhoods should I make sure I visit? Any new developments I need to see to witness what ways Portland is growing? Or should I say “smart” growing? Update: Who knows of the best locations to witness the most dramatic examples of Portland’s Urban Growth Boundary?

Parking Minimums Hamper Development and Affordability

Thanks to Dan and Benjamin for separately tipping me off to this link: AP: Cities rethink wisdom of 50s-era parking standards Like nearly all U.S. cities, D.C. has requirements for off-street parking. Whenever anything new is built — be it a single-family home, an apartment building, a store or a doctor’s office — a minimum number of parking spaces must be included. The spots at the curb don’t count: These must be in a garage, a surface lot or a driveway. Parking requirements — known to planners as “parking minimums” — have been around since the 1950s. The theory is that if buildings don’t provide their own parking, too many drivers will try to park on neighborhood streets. In practice, critics say, the requirements create an excess supply of parking, making it artificially cheap. That, the argument goes, encourages unnecessary driving and makes congestion worse. The standards also encourage people to build unsightly surface lots and garages instead of inviting storefronts and residential facades, they say. Walkers must dodge cars pulling in and out of driveways, and curb cuts eat up space that could otherwise be used for trees. “Half the great buildings in America’s great cities would not be legal to build today under current land use codes,” said Jeff Speck, a planning consultant. “Every house on my block is illegal by current standards, particularly parking standards.” Opponents also say the standards force developers to devote valuable land to parking, making housing more expensive. “We’re forcing people to invest in spaces for automobiles rather than in spaces for people,” she said. “There’s no way to recover that use.”

Happy Park(ing) Day 2008

I guess I must not be hip enough to have known about this beforehand, but there’s a very interesting citywide event happening here in New York today called Park(ing) Day. All throughout New York City, people are reclaiming parking spaces for their street-side enjoyment. It’s a very novel idea that helps convey a very important economic point: the opportunity cost of public parking spaces. Of course, the users are gladly feeding the meters, so who could complain? Who says we can’t let the market decide the highest-and-best use for the spaces?! parkingdaynyc.org Here’s a video from last year’s event:

WSJ: Rent Control Is the Real New York Scandal

In case you didn’t catch it last weekend, Eileen Norcross wrote an excellent piece on rent control in New York. She touches on Charlie Rangel’s four rent control apartments scandal, some history of rent control in New York, the destructive results of rent control, vast inefficiencies caused by rent control, and moves to further subsidize low and middle income housing in New York. I found this paragraph to be particularly startling, and I would bet that the vacancy rate for stabilized apartments is well below the overall vacancy rate: New York has a city-wide vacancy rate of just 3% — and when good rent-stabilized apartments come on the market, you have to either know someone or pay someone (a broker, for example) to get it. The result is that many renters who pay below-market rents are reluctant to move — because it’s too difficult to get as good a deal elsewhere in the city. Thus, economists Ed Glaeser and Erzo Luttmer estimate that 21% of the city’s renters live in apartments that are bigger or smaller than they would otherwise occupy. The controlled rents certainly don’t increase the number of affordable apartments. This demonstrates the hoarding effect, which we can see hampers mobility and the ability of a location to adapt to market shifts. Norcross agrees, ending the rent control regime will be a step towards solving New York’s housing shortages: There is a better way to address the lack of reasonably priced housing in the city. If Rep. Rangel, Gov. Paterson and all the other well-to-do New Yorkers lost their rent-controlled or rent-stabilized apartments, there would be a loud public outcry to loosen regulation and allow more new construction.

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