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NY Rent Control Revival

In an act of pure legislative idiocy in the face of overwhelming consensus among economists against rent control, the New York State Assembly started the ball rolling to strengthen rent regulation. NY Times: The Democratic-led Assembly passed a broad package of legislation designed to restrain increases on rent-regulated apartments statewide. The legislation would essentially return to regulation tens of thousands of units that were converted to market rate in recent years. In addition, the legislation would reduce to 10 percent, from 20 percent, the amount that a landlord can increase the rent after an apartment becomes vacant; limit the owner’s ability to recover a rent-regulated apartment for personal use; and increase fines for landlords who are found to have harassed their tenants as a way of evicting them. The legislation would also repeal the Urstadt Laws’ provision that in 1971 effectively took away most of New York City’s authority to regulate rents and transferred it to the state. Opponents of the legislation are concerned that the New York City Council, known for its pro-tenant leanings, would enact laws that are unfavorable to landlords. Expect some amazingly ignorant quotes from legislators while this is debated: Linda B. Rosenthal, an assemblywoman who represents the Upper West Side, said that unless rent-regulation laws were changed, middle class people were at risk of being driven out of the city. Actually, rent control drives out the middle class, making housing only affordable to the rich and beneficiaries of subsidies and rent controls. New housing will be nearly impossible for middle class tenants to find. Plus, for those who favor one particular class of people over others, rent control increases class tensions… “Pretty soon we’re going to end up with a city of the very poor and the very rich,” Ms. Rosenthal said. “Our social fabric […]

Redistribution

Discussing Ithaca, New York’s plan to increase permitted density and reduce parking minimums, I can dig what Matthew Yglesias says : The distributive impact of parking minimums is to redistribute income from people who don’t own cars to people who do own cars—not to shift income from poor to rich. A rich family will probably have at least one car for every family member who’s at least 16 years old. A family of more modest means will probably own fewer vehicles. More generally, while I’m obviously not a hard-core free marketers, it does make sense to consider a free market position our default position. Mandating the construction of extra parking doesn’t reduce harmful environmental externalities. Rather, it generates them. It doesn’t help the neediest members of society, it makes it more difficult for them to afford housing. It doesn’t correct important information deficits—people are perfectly capable of asking whether or not a house they’re considering buying or renting comes with a reserved parking space. — Update: here’s a follow up.

The Story of I’On: Struggles of a New Urbanist Project

  I recently googled upon a post at a blog called “Rub-a-Dub” that mentioned a land development project in Mount Pleasant, SC called I’On. I imagine the developers of the I’On “Traditional Neighborhood Development” (TND) community are sympathetic with Market Urbanism, as they named streets after John Galt (of Ayn Rand’s Atlas Shrugged), free-market economists Ludwig Von Mises and Thomas Sowell, as well as urbanist writer Jane Jacobs. (ironically, Jane Jacobs Street doesn’t have sidewalks) Who says New Urbanists and free markets can’t mix?  (well, I’m sure we all can name at least one such person…) What I found interesting was the story of the development shared in the comments of the post by Vince Graham, Founder and President of the development company.  The story really conveyes the struggles developers go through to get projects through the approval process; especially when the standard 20th century, auto-centric layout is being challenged by innovative development solutions. The reason why there is only single family homes and a limited amount of commercial space in the neighborhood is due to unfortunate compromises necessary to get the neighborhood approved through the arduous political process. Here is a summary: A Summary of the Political Background and Permitting History for I’On. Background:The traditional walking neighborhood of I’On is located on a 243-acre infill site in Mt. Pleasant, SC located 5 miles from Charleston’s historic district and 3 miles from the Old Village of Mt. Pleasant. The site is surrounded by conventional subdivision development of the 1950’s, 60’s, 70’s, and 80’s. Approximately 60% of I’On’s acreage was originally comprised of former agricultural fields, 30% was 30-40 year old hard wood growth, and 10% took the form of three man made lakes. The design workshop for I’On took place in May of 1995. I’On received approval in March of […]

Talking points on the housing bubble

By Sandy Ikeda Last week I spoke to a standing-room-only crowd of students and faculty about the current economic and financial turmoil.  I shared the podium with three of my colleagues, who range all the way from far to the left of Barack Obama to very, very far to the left of Barack Obama.  Needless to say, they all blamed, to a greater or an even greater degree, “the free market.” Now, I do think it’s possible in principle for wide-spread mal-investments to occur in an unfettered market.  (F.A. Hayek writes about the possibility in his Monetary Theory and the Trade Cycle, which you can read online here.)  But enormous speculative bubbles, of the sort we’ve just witnessed in the housing market, are typically the result of government interventions and policies. So in my talk on this highly complex issue I tried to make three points:  (1) the immediate cause of the financial panic on Wall Street was the housing bubble with its sudden rise in mortgage defaults; (2) the free market, which stands for minimal government and the absence of privilege or discrimination, did not create this bubble; and (3) government (and Fed) policy and pressure did, by undermining lending standards across the board and pushing lending rates artificially low. This blog has already referenced Russell Roberts’s fine collection of blog posts on the problem, and if you’re already familiar with the issues then obviously there will be nothing new here for you.  But I think it might be useful to have a list of “names and dates” that make the above case.  The following is not meant to be exhaustive (e.g., it doesn’t even mention important international factors), but is only an outline of the major legislation and policies relevant to the housing bubble. (Caveat:  My expertise in […]

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 […]

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

Econtalk Podcast: Shiller on Housing and Bubbles

Shiller on Housing and Bubbles Robert Shiller of Yale University talks with EconTalk host Russ Roberts about the current housing mess and related financial market problems. Shiller argues that the decade-long run up in housing prices was a bubble where speculative fervor outweighed any economic fundamentals. He also discusses the genesis of the Case-Shiller housing price index and his idea for how it might be used to reduce risk in the mortgage market. Note: This podcast was recorded on September 5, 2008, days before Secretary of the Treasury Paulson put Fannie Mae and Freddie Mac into conservatorship.

Housing + Transportation Affordability Index

affordability in New York City Play with the HUD-Brookings Institution’s new index maps here: The Housing + Transportation Affordability Index, developed by CNT and its collaborative partners, the Center for Transit Oriented Development (CTOD), is an innovative tool that measures the true affordability of housing. Planners, lenders, and most consumers traditionally measure housing affordability as 30 percent or less of income. The Housing + Transportation Affordability Index, in contrast, takes into account not just the cost of housing, but also the intrinsic value of place, as quantified through transportation costs. I enjoyed playing with the maps to see the interplay of accessibility and affordability. In New York, some very accessible places are not-so affordable, such as many areas of Manhattan. Same goes for upscale parts of Chicago. At the same time, very affordable housing locations in exurbs become less affordable when considering transportation costs. I plan to spend more time investigating how they produce the index. [tip of the hat to Peter Gordon]

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