Sunday, January 04, 2004

Rent Control II

Anyway, my below post on rent control has taken some hits largely because I was trying to speak in generalities and was therefore not being clear.

To respond, I don't currently believe that NYC's rent control program has any serious negative impact on the housing supply. Once upon a time that was likely the case, but the slow and steady decontrol over the past 30+ years has made rent control a small part of the issue. I do think rent control is generally bad bad policy, but that doesn't necessarily mean that once its imposed the appropriate policy is sudden and total decontrol.

I also don't think rent stabilization is particularly bad policy - the allowable annual rent increases are fairly high and probably do little to distort the housing market. They smooth out spikes and prevent landlords from screwing captive tenants in NYC's fairly sticky market.

Nor do I think all efforts to preserve "neighborhood character" are bad. I just think that often such efforts are simply designed to restrict the housing supply and preserve land/property values for existing owners. Restricting supply is one way to keep the price up.

However, there are plenty of places in Manhattan where adding some taller buildings here and there - sometimes true high rises and sometimes simply adding a couple of floors - would be possible and desirable. People argue that developers build highrises, and turn around and charge top dollar for them. Of course they do. But what I submit is that Manhattan's problem, overall, isn't that it has too many high rise apartment buildings but that it has too few. A way to bring the price down is to increase the overall supply of the housing stock. Even increasing the amount of high end housing stock will, to some degree, lower prices in the lower end market. Obviously, it's necessary to increase not just the square footage but the overall number of units. But, a sharp increases in the number of housing units over a relatively short period of time would cause prices to drop. You need supply to increase faster than demand.