But commenter Muzzybelly takes the contrarian position:
Rent control is only bad policy if you look at it from a narrow angle.
Rent control saved New York. The city could have completely emptied in the 60s and 70s like many other American cities, but it did not. Rent control and stabilization gave too many people an incentive to stay. The stage was set for New York to re-emerge in the 1990s, in a way that no other hollowed out American city possibly could.
Yes, rent control has its problems. Also, it has been implemented somewhat unintelligently at times. Parts of the Bronx were devastated when money-losing buildings were torched for the insurance money by cash-strapped owners.
But for those of you who know New York, think back to the East Village and Alphabet City of the 1980s. It was a disaster. Practically the whole area was junkie town, crime was so high, shops went out of business. And to the north was Stuy Town, a huge hulking mass of middle-class workers who didn't get pushed out of the city they way they did in Pittsburgh, Cleveland, Detroit, St. Louis etc. Those middle-class workers kept the East 20s and 30s in business, and allowed the East Village to be able to recover.
I like me some contrarian economics, but I think this theory has a bunch of problems:
- Rent control was not implemented differently in the Bronx and Manhattan, so why did it result in buildings being torched only in the Bronx? This points to exogenous demand as the important factor, not rent control.1
- Why did rent control only "save" Manhattan south of 96th Street and a tiny sliver of Brooklyn? Arguably, because those were the only places where people had apartments below market prices in the 1960s . . . but this doesn't explain why the market price didn't fall, as it did in many parts of town, rendering rent control regulations moot.
- Stuyvesant Town was not the only rent controlled/stabilized building in the general area. It was, however, the one next to the subway stop.
- New York's geography tends to tell a pretty compelling story; there is a fairly hard limit on how many people can enter Manhattan in the morning, set by the carrying capacity of its bridges and tunnels. New York also had a much more built out suburban surrounds by the 1950s than most cities, thanks to its extensive rail network, which made "white flight" more costly to the flyers. This shows up in the fact that New York's cheap exurban housing is now often found in places like the Poconos, three hours away.
Having grown up in New York, when I look at Stuyvesant Town, I don't see some extraordinary island of prosperity that helped "save the city" through its rent control. I see a very large apartment building complex on the edge of affluent neighborhoods like Grammercy Park, convenient to the subway and other amenities. The neighborhood I grew up in looked very similar without benefit of huge rent-controlled complexes--we were the transitional edge between the affluent West Side, and Harlem. But most of the buildings in my neighborhood had been taken out of rent control and gone co-op. I could as easily credit New York's salvation to the end of stabilization as hundreds of thousands of units went co-op or condo. But I doubt that's the correct explanation, either.
1 For the purposes of this post, I am treating rent control and rent stabilization as the same
Rent control saved New York. The city could have completely emptied in the 60s and 70s like many other American cities, but it did not.
Cities aren't worth saving in and of themselves. If NYC would have failed in the absence of rent control, then it should have failed.
The reason cities were failing in the 60s and 70s was an explicit policy of subsidization that drained money from urban areas, and redistributed it to suburban and rural areas. That policy still continues today. Cities that succeed do so in spite of that drain. New York City loses an estimated $20b a year to the federal government and upstate communities.
It sounds to me like it is less of a contrarian defense of rent control than a contrarian attack on Broken Windows policing. New York City was not saved because of Guiliani's aggressive policing, but because rent control kept the middle class from moving away. But at least the argument recognizes the primary beneficiaries of rent control!
Actually, it's an endorsement of Broken Windows policing theory. The same theories I am using here were the theories that underpinned the idea of cracking down on petty crimes. When people leave the city, it falls apart. And to the extent that squeegie men decrease the quality of life, they just help to encourage people from leaving. But if they've already left in the first place, as in Pittsburgh, Broken Windows can't work.
Have you been sold a bill of goods on Giuliani? I never reflexively hated the guy like some of my liberal friends (in the 90s, that is; since about 2004 he's been a complete *** in my opinion). But he was not the messiah. A lot of positive developments were underway before he took office (including a recovery in the city's finances).
That's not to say that he did nothing right or didn't contribute to the recovery. He did. The Times Square renovation, in particular, was hugely good for New York, and the people who used to whine about Disney-fication . . . well, they never made much sense. Same with breaking down the petty porn industry -- i.e. peep shows and porn theaters.
Some people talk as if there was this sudden change in New York. That the world was bad and getting worse, until Rudy emerged to show everyone the light. That's silly, in my opinion.
Just off on a tangent, but isn't the collapse of the petty porn industry one more thing that can safely been blamed on the internet? Has it survived anywhere?
I don't have any idea. Strip clubs still do plenty of business. If the strip clubs serve $50 steaks they are "gentlemen's clubs." If they have $2 beers and the girls moonlight as streetwalkers, they are petty porn. Have those gone away? Is an internet video a substitute for a peep show?
I have consumed approximately $10 worth of pornography over the 20 years of my adulthood. I bought one Penthouse when I was a teenager, and it just made me depressed. Why did I want to see what I wasn't getting? So I'm about the farthest thing from an expert on this subject as there is.
"Yes, rent control has its problems. Also, it has been implemented somewhat unintelligently at times."
So- all that's needed in order to get central planning to work properly is to figure out how to make sure Really Smart People are always in charge?
Rent control is not central planning. It's also not helpful for many cities and in many different economic climates. Suburban sprawl, for instance, wouldn't much be helped by rent control.
If I was designing the laws of New York today from scratch, I would not include it.
But I think it gets a bad rap. It is often held up as the Worst Policy Ever, and I don't think that's true.
You don't think is right. You need to bring much more to a fight than your gut feelings.
Rent control IS central planning - it is the CONTROL of a sector of the economy by bureaucrats and legislators with no regard for actual market demands and needs, only with how effectively people can bribe or agitate politicians.
How do you get rent control not being central planning? It's like a textbook case.
However for "worst policy ever" it doesn't get a look-in compared to say "launch surprise attack on the USA at Pearl Harbour" or "allow these nice white men to settle in our country".
Do you have any idea what central planning is? It is not the same thing as a price control.
Highway construction is centrally planned. The armed forces are centrally planned. New York real estate is not. Price controls are not. Or are you going to tell me that Medicare and regulation of public utilities is also central planning?
Having lived in London (England) during the end of rent control there, I have a very clear impression that its ending resulted in a better supply of dwellings and more efficient mainatenace of the building stock. It was one of the ingredients in London "re-emerging during the 1990s" (or, in London's case, starting in the 1980s).
Rent control saved New York. The city could have completely emptied in the 60s and 70s like many other American cities, but it did not. Rent control and stabilization gave too many people an incentive to stay.
Hey, as someone who lived in NYC during the whole period at issue, let me mention some of the people I know/knew personally who responded to that incentive to "stay" in their rent control apartments.
1) A waiter who inherted a three-bedroom apartment from his parents and lived in it by himself, all alone, for the decade I knew him.
2) In a verge of bankruptcy building, a professionally unemployed guy who had two rent controlled apartments, one of which he lived in for virtually nothing, the other of which he rented out as a long-stay hotel for profit to support himself. (Please don't suggest that the landlord should have sued him for having two apartments and illegally renting one out -- believe me, the landlord tried).
3) In the same building, another professionally unemployed guy paying $100 a month rent (this in in Chelsea, Manhattan, market rent >10x that) on disability who travelled the country playing the horses at various race tracks, keeping his rent controlled apartment to stay in when in town.
4) In another verge of bankrutpcy building just north of Washington Square, on Fifth Avenue, an NYU professor paying $200 a month (again market rent about 10x) for when he wanted to stay in the city for an evening, rather than commute to his home on Long Island.
5) In that same building, a 70+-year-old sweet little old lady paying $200 a month for the penthouse six-room, two-bedroom plus veranda, plus private elevator, apartment. She had half of it closed off because she didn't want to clean it. She effectively became the building's landlord when the elevator broke and by law the building had to fix it. Historic building, custom elevator, parts had to be made by hand, huge expense. She said, literally: "I've saved so much money living here that I'll loan you the money to fix my elevator, for a mortgage on the building".
5a) Same building, a lower half-floor apartment, half the size of the one above, with a family of four (parents and young kids) in it paying >$1,000 a month rent. They and the little old lady talked about swapping apartments taking their current rents with them. Win-win for the tenants. The Rent Control Board said, "No, not allowed" so they had to stay where they were.
6) A guy who bought a small apartment building 30 years ago. Because he couldn't make money from tenants, every time one moved out he expanded his personal living space into the vacant apartment, or set it up as an apartment for a kid or other family member. Eventually he turned the entire building into a family residence.
7) Charlie Rangel, I don't know him personally, but he's had four rent controlled apartments, plus a house in NYC, and another in DC, simultaneously.
I can go on and on -- but do we begin to see the point? This is just one person's anecdotes. Do we see all the aparments **off the market** for those who need one above?
The *delusion* that Muzzybelly and all like him buy into is that rent controls somehow help the middle class & less fortunate, by keeping rents down for them.
Wrong, rent controls *increases* market rents for those people.
Rent control helps those who **already have apartments**! Period. The longer they've had them the more it helps them.
The data is very clear. Rent control is REGRESSIVE. The core political base of rent control is lower Manhattan where *rich people* organize to keep their controlled apartments -- people who are older, have higher incomes, and have been in their apartments for many years, compounding their *rent savings.*
The people who are screwed by rent control are the younger, lower-income people, especially with young kids, who *need* apartments, who must go into the market to find one.
Rent control slashes the apartment stock -- not only are buildings abandoned (devastating the Bronx didn't help any) but existing apartments are hoarded off the market as in the cases above, and huge number of buildings are converted into expensive co-ops that are not subject to rent control rules.
Slash the apartment stock and what happens to the price of apartments for those who *need to get one*??? Up, up, up!
In other cities without regulated housing prices, the market rental price = the average rental price.
In NYC, with rent regulations, the market rental price is *far greater* than the average rental price --- those who already have apartments exploit those who are looking for apartments, as well as landlords.
Of course, those *who have* always think, "We are the virtuous core of the city, where would the city be without us? Therefore, we are morally entitled to put our hands into everybody else's pockets. After all, we do it for their good!"
And the Muzzybellys of the world agree and organize with them to make it so.
You don't know anything about what the muzzybellies of the world agree with. Please don't put words in my mouth.
I don't buy into any delusion that rent controls help poor people or anyone else if a city is stable. They don't. For many of the reasons you state.
All I am saying is that rent control is an automatic stabilizer. Sort of like unemployment insurance. When a city starts to fail, rent control slows the process to give the city time to recover. That's valuable, and it's an effect that isn't captured by narrow studies of the housing stock. Those studies don't easily account for what might have happened had there been no rent control.
That was my whole point all along.
When a city is in the process of failing, one key index of that failure is out-migration. Fewer people in a city lowers demand for housing and rents fall. In a failing city, rent control would appear to be, at best, an irrelevance. For the case of a pre-existing, and ongoing, regime of rent control, I fail to see how a failing city is "stabilized" in any way merely by the continued existence of said controls.
Now if you're saying that sudden decontrol in the midst of an established trend of failure and out-migration might accelerate both, I can see a certain logic there. Especially if the spread between controlled and market rents is so vast as to provide significant opportunities for increased rents, for at least a time, even in the face of a general pattern of out-migration and overall decline. A place like NYC might well empty out faster under such circumstances. Is that what you had in mind?
I'll give you another example from my own experience (I was born and raised in New York, 1959-1981: my parents lived in New York from 1957 to when my father died in 1999).
A friend of mine had a rent-controlled apartment all the way up by the Cloisters (on Dyckman Street). He moved to Austin during the computer boom there (he worked for Tivoli Software before they were bought out by IBM) and stayed there three years. During that time he continued to pay for his NYC apartment full-time because he evaluated that as the cheapest alternative to staying in hotels or any other alternative when he came to visit.
Separate subject: in 1960, when my parents bought the apartment in which I grew up, they paid $18,500. In 2000, after my father died, it went for just under $400,000. Think the persistence of rent control had no bearing on that? Think again.
In 1960, the Dow Jones was at about 500. In 2000, it was at 12,000. So your parents' apartment underperformed the Dow. Is that because of the persistence of rent control?
And anyway, lots of factors affect real estate prices other than rent control.
Lots of people keep a pied-a-terre in the city, rent control or not. Madonna kept at least one place in New York all while she was living in London. How many days a year do you think Bono stays in his fancy co-op penthouse? And it's not just famous people either.
Most people who keep a 2nd home in NY or any major city do it because they're wealthy enough to afford the expenses of 2 or more homes. It's a lot more unusual for that to be cheaper than staying in hotels.
Market distortions always come at a price.
Megan writes: There is almost no economist consensus so complete--left to right--as that rent control is "the best way to destroy a city's housing stock short of aerial bombardment".
I think you're taking too narrow a view of aerial bombardment. Sure, it results in the rapid detioration of the housing stock but it has inredible benefits in terms of fostering a sense of community and bringing people together.
Let's not let simple economic consensus distract us from the larger issues inherent in human living situations. When you look at the overall picture, you'll see that aerial bombardment is an integral part. Just look at the wonderfully vibrant urban communities throughout Europe that were developed through intense aerial bombardment.
In fact, one might argue that America's sad urban history would have been avoided through the simple expedient of periodic aerial bombardment.
In fact, one might argue that America's sad urban history would have been avoided through the simple expedient of periodic aerial bombardment.
Aerial bombardment is pretty much a central government function and at a time of the critical problems in NYC there was antipathy towards the Feds intervening in self-inflicted local problems, hence the famous "FORD TO CITY: DROP DEAD" headline. There were libertarian- and market-oriented attempts to privatize the bombardment by creation of incentives to the owners of the buildings. This resulted in the hiring of independent contractors to bombard the money pits with small incendiary devices. It had mixed results as I recall.
I think this post is clever and funny, even if it's taking a swipe at me. Cheers.
I meant it much more as some fun than as a swipe at you. (Heck, I don't even know you!)
Glad you enjoyed and good on you for having a sense of humor.
I'm curious how much effect sticky zoning laws have on the lack of housing stock in NYC. In my neighborhood in Brooklyn there are plenty of empty factories and warehouses that developers would LOVE to convert into housing units, but my understanding is that changing the zoning is such a cumbersome process that can take years (if you can get it done at all) so most of the buildings stay empty and a few are converted illegally (and later have the tenants kicked out due to unsafe conditions, which to me has always begged the question, if it is unsafe to live in, why would it be safe to work in?)
As someone who lived for a couple of years in an office that was NOT zoned for residency... "safe" means "meets the convoluted rules set by a multilayered system of different govt departments and politicans." Offices and factories and warehouses all have a different tapestry of rules to meet, and the chances of them happening to accidentally match a different category is remote.
Nothing to do with actual risk in any way.
(I wish I was still in that office. It was great.)
I live in a converted factory building, and it is the best place I've lived so far in the city. Still has plenty of problems though, not the least of which is the fear that you will be kicked to the curb when the DoB comes calling. As they did to a neighboring building a few months back.
Still my broader question is why so much red-tape in getting areas where the industrial use has long since vacated converted into residential housing. There is obviously a lot of demand, and plenty of developers who would be willing to do a "proper" conversion if they could get the zoning permits.
Office/commercial space doesn't usually have sufficient plumbing for residential space. Illegal conversions don't always follow building codes.
Getting these sorts of zoning and planning changes through the various boards and commissions which govern them is the primary value-add of most developers in coastal cities, particularly skeezy people like Donald Trump.
Just curious, other old cities like San Fran, DC, and Chicago also survived the 60s/70s. Did they have rent control? I'm ignorant...honestly looking for an answer.
On the face of it, the diff between NYC and Pittsburgh, Detroit, Cleveland, Gary is that NYC still had a reason for being (advertising, culture, Wall Street) and the other cities did not.
I don't know about San Fran and DC, but Chicago has never had rent-control. For a massive eye-opener, check out rents in Chicago's nicest neighborhoods compared to New York's. What would these go for in Manhattan, for example:
http://loopapts.com/cms/?p=82
http://www.chicagoapartmentfinders.com/search_apartment_rentals_detail.asp?listing_table=multiple_listings&listing_id=157&record_number=4
San Fran survived the 60s and 70s because of the Haight and the Castro. Any flight to suburbia was more than matched by the thousands of gay people who valued the gay community.
I don't know very much about Chicago. Did its job base fall apart? My understanding is that the biggest employers have long been meat-processing, insurance and agriculture (not the growing, but the trading, financing, transport, storing, contracting etc). I don't think those industries were hit hard in the 60s and 70s, so maybe there was little stress on Chicago. Meanwhile, it was able to offload most of its problems onto Gary.
The idea that cities have no reason for being is, to me, a strange way of looking at things. Pittsburgh is now prosperous, because it has reinvented itself as a good location for corporate headquarters and middle office functions. It could have done that years ago. But it first had to rebuild its population base, especially of skilled people. A very long process.
I don't know if Pittsburgh could have benefited from rent control. Rent control can't help if the entire economy falls apart. I doubt rent control could have helped Flint, Michigan. There were too many people who had non-transferble skills from an industry that died.
San Francisco has "rent control" or "rent stabilization"--a Landlord CANNOT raise the rent more than per year: http://www.sfgov.org/site/rentboard_index.asp.
San Francisco was "saved" because it constantly draws the young and the hip, some of whom move out when they learn how to do basic math, just go live in Golden Gate Park when they get hooked on H or Meth. They are then replaced by other young and hip soon to be junkies.
San Francisco had (and still has) rent control on occupied units. There is a softer, and less-well-enforced cap on vacancies, which means that once a tenant leaves, the rent resets to the market rate. Which is higher than it would have been in the absence of any controls at all, as rent control artifically depresses turnover.
"Empty out"? Because without rent controls landlords would prefer empty $3000/mo apartments to rented $2000/mo apartments?
Here's the big logic flaw:
If the city was emptying out then rents would have fallen anyways (because landlords like it when their buildings are full), giving people the exact same incentive to stick around.
It's not a logic flaw. It's just the market is complicated, because it is non-linear.
Think about restaurants for a minute. Suppose there is a restaurant that serves good food, but its prices are too high. Pretty soon, few people eat there because they can't afford it. So then the restaurant lowers its prices. What happens?
Well, maybe everyone comes back. But if you're walking by a restaurant at 8:00 on Friday, and you see there is nobody in there, do you decide to eat there? I know a lot of people who assume that an empty restaurant likely serves crappy food. So people won't go in, even if the prices are now reasonable. Suppose prices are lowered even more. Well, now some people are going to want to eat there. Like bums. This clientele doesn't really solve the restaurant's problems, does it? Nobody wants to eat where bums eat. The restaurant is doomed.
What happened in that example is path-dependence. The lowering of prices did not come in time to save the restaurant, because its demand had already been permanently altered. The story of urban decay is very much like that. Lowering rents after a neighborhood starts to fall off doesn't help. It just attracts transients who in some ways add to the neighborhood's problems.
Rent control is a way to prevent the demand from falling off in the first place, and preventing the downward spiral from even beginning.
" It's just the market is complicated, because it is non-linear."
And you think politicians, who owe their jobs to being able to figure out which people they should be giving stuff to for free in order to keep winning elections, are going to be able to sort all that (the "complicated, non-linear" stuff) out in a way that doesn't involve favoring the people they want to keep getting votes from?
You're awfully trusting.
I don't see where muzzybelly has claimed this to be the case. Sure, it's entirely possible -- nay, probable -- that a poltician with lots of constituents who enjoy rent control protections is going to be solicitous to their interests. Just like a politician who represents hunters will be keen to keep gun rights vigorous, or a one who represents vintners may be tough of cheap wine imports.
In other words, I think it's pretty clear that rent control doesn't foster pareto-optimality. But the notion that pareto-optimality might not (always, at least) be consistent with stable urban population doesn't strike me as very far-fetched. To put it another way, perhaps GDP would have been marginally higher had New York City's population not stabilized -- as it did -- in the 1980s (and eventually resumed growing again), due to the effects of rent control. I've never been a fan of the policy, mind you (as Megan says, it tends to be the sort of thing that generates opposition from both left and right), but the idea that rent control gave a lot of New Yorkers a reason to stay on in the dark years probably has something to it. Perhaps without the existence of the subsidy of rent control, New York City's decline would have reached a tipping point, and the city's years of decline would have been more severe, and lasted longer, than proved to be the case.
Megan, thank you for treating my comments respectfully. As you point out, I'm being contrarian on this point. And you make good points as well.
As for the Bronx versus Manhattan, I think of it in terms of a more sequential process of urban decline. Rent control cannot stabilize any neighborhood if the job base is devestated. I believe that rent control prices were set at level that would allow a building owner to make a decent return when the building is fully occupied. But if half the tenants move out because their jobs disappeared, the building loses money, and if rents can't be raised and new residents can't be attracted, the building is a money sink. Note that this can happen without rent control, and I would be surprised if all the buildings that were torched were rent controlled. Rent control just accelerates the process.
So there was urban blight in the Bronx. Loss of jobs. Robert Moses' Cross-Bronx. Etc. The question is whether the decay will spread or not, and this is where rent-control comes in. It is a super-inducement to stay. Not only do you benefit from lower prices, but also giving up an RC apartment is an irreversible decision. If the city bounces back and you want to return, you're out of luck.
So rent-control can be thought of as a firewall of sorts. It prevents blight from spreading. Think about the decision process of a rational actor. If there are drug dealers and gangbanging on your corner, you probably want to get out if you can, even if you're only paying $100 a month. But if there are drug dealers 15 blocks up, and you're only paying $100 a month, then the costs of leaving are higher, and you stay. And by staying, you help stabilize the neighborhood.
I have recently done some study of urban decay for an academic paper. Gradual decay through positive feedback absoluely was a contributing factor in many US cities -- including New York. When people leave a neighborhood, it starts to crumble, and then more people want to leave etc. etc. Rent control is not a savior. But I definitely think it was a contributing factor in New York's ability to recover from its 1980s despair.
I get what your saying, but it seems like it still has a flaw in most cases. Its possible their was a positive effect in Manhattan alone, but I doubt it would justify rent control any place. It seems like the problem is that the people most likely to stay would be either low-skilled people who don't think they have a chance of getting a much better job anywhere, or retirees etc who live on fixed incomes. Neither group is going to be highly beneficial to the local economy in terms of skills or in helping the government's tax base. And its likely that the negative effects(lack of housing stock), will outweigh the positive effects if the city starts to recover. Bottom line, their is probably a better policy to prevent blight when cities begin to empty out.
muzzybelly,
I think this was a much clearer explanation of your position.
If I may paraphrase: Rent control acts as a huge anchor on social/demographic change. If your ship is powering on towards its destination, an anchor is not desirable. But if your ship is being dragged towards the rocks, then an anchor is really good to have.
Thank you. I don't know if that's a perfect summary, but it seems fairly apt. And a lot simpler to understand than some of my technical mumbo-jumbo.
bombloader, there may indeed be better policies to prevent blight. I'm not an expert on urban policy. All I'm saying is that rent control gets a really bad rap because it's not being viewed in a bigger picture.
But to address your point, first, it's not close to being true that only low-skilled people stay in rent-controlled places. For one thing, the choice for many wasn't to stay in Manhattan or move to Florida, but to stay in Manhattan or move to Westchester without changing jobs.
Second, labor mobility isn't only a question of the magnitude of skills, but also their portability. If you worked in advertising in the 1980s, you could be fabulously skilled but also tied to New York. In the 1960s, if you worked in stock trading, you were tied to New York. There was nowhere else to go.
Third, it's a common myth these days that low-skill people are somehow bad for an economy. They aren't. They are good. They still provide goods and services for consumption. Nobody would want to live in a city if there were no grocery store clerks, taxi drivers, garbage collectors, postal carriers, etc. Anyway, apartments occupied by low-skill people are a lot better then empty apartments occupied by crack dealers.
I have recently done some study of urban decay for an academic paper. Gradual decay through positive feedback absoluely was a contributing factor in many US cities -- including New York. When people leave a neighborhood, it starts to crumble, and then more people want to leave etc. etc.
Yes, well that process seems entirely obvious -- the decline of a neighborhood can feed on itself. BUT...that's not what you're claiming. You're claiming that such declines are triggered first by spikes in rents that begin to drive vacancies. Do you have any evidence that this happened anywhere -- particularly in cases where American lost large fractions of their population and decayed (Cleveland, Detroit, St Louis, Buffalo, Cincinnatti). Pittsburgh may be doing better now, but it's population is still less than half (334,000) what it was at its peak (676,000). What evidence is there that initial price spikes had ANY role at all in triggering the emptying of these and other cities?
Keep in mind that the population peaks for these cities were reached around 1950 and that the exodus was fairly slow at first and picked up steam gradually over the course of 2-4 decades. Also note that relatively healthy cities like Boston and Philadelphia have lost a quarter of the populations since their peaks, so even cities we don't think of as decayed have significantly fewer residents than they used to (and they lost all the population during a time when the U.S. population almost doubled).
No, I'm not claiming anything about a spike in rent. New York has had rent control since the 1940s. In the 1960s and especially 1970s and 1980s, there was a huge decline in the job base. That, along with a not-unrelated surge in crime, and some rather ugly racial animosities, caused people to start leaving the city in large numbers, and caused many neighborhoods to decline.
The issue is how far the city would fallen had rent control not existed to incentivize so many to stay. I contend its decline would have been far worse than it was. I may be wrong.
Pittsburgh is a good example of what could have happened to New York, but didn't. Rent control played some role in that, I think, although many other differences between the cities played a role as well.
I don't think of Philly as a healthy city, but that's neither here nor there, really.
muzzybelly
When BulgingBracket wrote above that you need to bring to a fight than your gut, I take it (based on the rest of his post) that he meant using fact free ideological blather as a form of evidence and argument. You, unfortunately, have brought facts, sound reasoning, a recognition that your point is not necessarily universal but depends on contingent variables, and the good manners and good sense to recognize that some of those you disagree with have some facts and perspective in their favor. That sir will never do.
Thank you. Sometimes I have the bad manners to point when those who disagree with me have no facts in their favor at all. Maybe people think the same of me on this issue. Oh well.
The internet will be the death of us all, eventually. Soon we will have no public discussion or exchange of ideas. Just name-calling, straw men and intentional mischaracterizations. No newspapers, just Glenn Becks and Keith Olbermanns. No intellectuals or experts, just bloggers.
It's an interesting argument, but I'm still not convinced. Every time you posit a factor to explain some anomaly--say, the differences between Manhattan, Brooklyn, and the Bronx--it seems to have adequate explanatory power without rent control. I.e. people in jobs like acting stayed in Manhattan because they needed to be close for auditions; people whose jobs had left, left (or didn't, and sank into poverty).
I'm OK with that. I don't think my contentions here are the gospel truth, and they are somewhat speculative. As long as people are thinking about it and don't think I'm a goober for having proposed it, I'm happy
My apologies if I implied that low skilled people were somehow bad for the economy. I only meant that most industries require a lot of skilled people, so if you can't keep them you're screwed no matter what. You're right, the level of specialization of skills matters too. But I stand by my last point, you don't want it to be hard to find an apartment if you're trying attract people to your city to revitalize it. I can't see rent control being anything but a negative in this aspect. As to which is better, empty building or apartment occupied by rent controlled tenants, I think it depends on whether they're are alternate uses for the land. It might be better in some cases if the landlord could tear down the building and sell the land to somebody that was going to build a factory or office building. BTW, I think you attracted some of the flak you got initially because your first post needed clarification. The follow ups made it clear that you were making a fairly narrow case for the possible benefits of rent control. You weren't just another commenter attempting to rehabilitate a bad economic idea with more bad economic reasoning. This blog gets its fair share of those.
I think I agree with most of your post. The only thing to quibble about is when you say that a city is screwed if they can't keep the skilled people no matter what. That is of course correct. But if the skilled people are very rich and can fly high above the blight, then they will tend to stay until things get so bad that they can't even get off the ground. So the trick in the 60s-80s was keeping the middle class around, and lower middle class around.
I probably shouldn't have written the first line about "rent control is only bad policy if looked at from a narrow angle." I meant to contrast narrow -- i.e. focus only on housing stock per es -- with a view that looked more broadly at the entire social dynamics of the city. But it wasn't a very good expression of that idea. Alas.
So did MetLife build StuyTown when the area was rent controlled?
Yes. They also had a 25-year propery tax exemption and gerrymandered school districts (the kids who lived on the same block as PS 40, where I went, were in another "district"). The result was a waiting list of prospective tenants that was long even by NY standards, which served as a marvelous discipline on tenants, and really lowers a landlord's costs.
I can't believe no one mentioned it yet, but aren't lease agreements the private equivalent of rent control? The landlord and the tenant sign an agreement in which the tenant agrees to rest the residence for a certain period of time, while the landlord agrees not to raise the price during that time. The tenant gets stable rent, while the landlord get the security of an occupied residency. Everyone wins, and not a single politician is involved.
Having been a housing consumer in NYC, I can tell you that one major drag is all the complications rent control brings. In Chicago I find an apartment by looking in the newspaper (or craigslist, etc.), using a free (meaning landlord funded) apartment search agency, or just going to the neighborhood I want to live in and walking around looking for "For Rent" signs. I know what to expect price wise, in a rough cost per bedroom per neighborhood metric. Nice, simple, easy. In Manhattan, jeez, what a drag. Your friend pays $X in a building. But the apartment next to him is $2X and a little smaller. Turns out his roommate got it from his sister who got it from her grandma. It seems like just to get a place you gotta know somebody, or know somebody who knows somebody, or pay for an apartment broker, or live way the hell away from Manhattan. Nuts to all that hassle.
There was something like competing communist dining tables at CCNY, Trotskyite and Stalinist. I think the rent control idea was in part to unite the muzybellys of the world around the communists who provided a 'good' that the uncaring capitalist system couldn't.
In practice, this led in part to the problems you and others describe. The situation in the USSR was that you had to have a permit to live in Moscow. Rent control is a kind of license to live in NY. There were women who stayed in temporary boarding houses at the edge of the city and worked in the city and were exploited for lack of a permit. Some would commit suicide in their desperation for lack of a place to stay.
I was a housing consumer in Chicago for four years, and now in New York City for a decade. I live in a rent stabilized apartment in Stuyvesant Town -- a one bedroom with my wife and two six year olds. We couldn't afford to live in Manhattan otherwise.
First of all, to compare Chicago and New York City is a mistake. The key factor in cost is location, location, location, and, while Chicago is a great city, it is not a world-class city in the same league as New York, London, Paris, etc. That rents are significantly cheaper in Chicago is because less people want to live in Chicago.
Further, comparing the rent stabilization situation in cities other than, maybe, London to New York City is also a mistake. The city is simply too massive in terms of population and square miles and its historical significance too entrenched for one law, even one as significant as rent stabilization, to have game-changing effect.
What I believe is indisputable is the strength of a neighborhood depends on a mix of people being present, from a variety of backgrounds and professions.
Given the international desire to live in New York City, and especially Manhattan, this prized neighborhood diversity is not attainable without some manipulation.
Rent stabilization might be too strict, but some imaginative and not oppressive control of the rent market is necessary in New York City.
Fair enough. I wasn't talking about actual rent cost, more about the utterly confusing rent hierarchy. Me, I like a clear easily understandable market, rather than an opaque one with little exceptions and curlycues everywhere. Retaining neighborhood diversity ain't worth it to me. Then again, I also think the only thing NYC has over Chicago is a much higher level of pretension. So we is different ;)
Oh and a better subway. NYC is much better with the subways.
But rent control is the reason no one has built anything other than luxury housing in New York basically since the seventies--they won't build anything that will be attractive to controllers. So you have an affordable apartment, and other people can't live there at all.
Maybe you can answer my earlier question which is was StuyTown built before rent control? StuyTown seems like the kind of thing an insurance company ought to build. High capital cost rent space, usually they probably build office buildings, that provide ideally an above bond rate of return. I wonder if they would have invested in it if their return was limited by rent control. Once built however it can be expropriated in part by rent control w/o their having much recourse except to sell it to somebody who (thinks) they would be better politically at getting market value.
This thus seems a proxy for the health care debate. A lot of investment has gone into health care. By various rent control schemes the government can expropriate the value of the investment. Although that will lower new investment, those paying a 'lower rent' will be pleased.
Our contrarian does not consider the impact of a frozen-in-place population on the dynamics of the New York City economy.
While the frozen-in-place were enjoying their below-market rents and their second homes purchased with the surplus, the business core of New York City had to confront the impacts of limited housing availability on their ability to operate. Many national businesses found that it became almost impossible to rotate people in and out of New York City locations because reasonably priced housing was not easily available and the schools were unacceptable.So many of those firms moved out in the 80s,either to suburban locations or to other metropolitan areas.
The City of New York paid the price through the limited property tax yield from those who were frozen-in-place. New York City ended up having to pursue tax-the-businesses strategies for its revenues,strategies that were also part of the departure scenario. Manufacturing sprinted away as the City in the Sixties tripled the tax impact on in-city manufacturing. Energy-intensive businesses fled when the City loaded property taxes on their utilities. These impacts on blue-collar employment produced the hollowing out of the working class neighborhoods in the Bronx and Brooklyn.
There were many other forces at work as jobs were relocated,to be sure. But the City's need to depend on business tax yield accelerated the flight.
There was another effect on the City's schools. There were clearly fiscal impacts as the City struggled to finance the schools. But there were also support issues. The frozen-in-place lost their interest in the schools as soon as their school age children passed into college years. There was no population turnover in the core middle class population to continuously focus attention on the schools and to argue for the taxes that would pay for better schools. Only the co-oping of rent controlled and rent-stabilized buildings in the 70s and 80s created some basis for population mobility and renewed interest in the New York City schools. But the tax system biases towards residential properties still leaves the public fisc of New York City very vulnerable to the kind of an e3conomic crisis that we now face.
There are some very insights there. You are right that the in-city mobility is an issue in rent-control as well, and it can create distortions with some harmful effects as well as positive ones.
However, the narrative you are telling here has its timeline wrong. You make it seem as if there were frozen-in-place in the 1950s and 1960s; there may have been some, but not a lot. There hadn't been time yet. Businesses fled the city for the same reason businesses fled every American city. It wasn't because of rent control or property taxes. I'm not exactly sure what energy-intensive businesses you are talking about, but manufacturing fled the city because they had better shipping options, expandability and reliable energy supplies outside the city. That has nothing to do with taxes.
I don't understand your comments about the schools at all. I find that dubious at best. Are you suggesting that, at the height of the Baby Boom generation's child rearing years, the city was filled with their parents? I don't think so. And that the middle class lost interest in their grandchildren's education?
Omigosh. I've stayed with a friend in a 1 bedroom in Stuyvesant Town a few times. He's single and lives alone. You live in one with 1 wife and 2 6 year olds?
Me, I, decadently, live alone in Upstate NY in a 2 bed 1.5 bath apt in a well-tended 18th and 19th century building with 12 foot ceilings. I do live in the new (1860s) wing. I'm sure I pay at most a third of your rent - which includes heat.
You live in an international city. I can afford to visit them - sometime for months at a time.
De gustibus non disputandum est.