Rent deregulation, believe it or not, raises market rate rents. The conservative Manhattan Institute, in their study of deregulation in Boston, showed that, following deregulation, landlords invested in improvements to attract market-rate renters. Landlords always seek their highest rent that the renter is willing to pay. Where there is any competition, the result of deregulation is better quality housing but higher market rents.
Market rates only go down if demand goes down -- if people leave the city or excess housing is built. Rent regulation in NY doesn't hinder construction -- new units are typically unregulated anyway. And the city's population increases, not decreases. It's not even certain that in a tight market like NY, landlords would even invest widely in improvements.
Regulated rents actually help to depress market rates, although renters who pay exorbitant rents wish it weren't so. We'd all like to be able to blame the regulated renters because it seems so unfair. But the source of exorbitant rents is not regulation, but the profit motive of landlords and NYers' own desire to live here -- we are the market that sustains those rents.
The market value depends on three general factors: demand, supply, and the aggregate available funds for rents. If regulated renters are paying less than their available rent funds (the excess of which presumably goes into the goods and services economy), when they are forced to pay more, they will increase the aggregate funds available for rents, since most of those renters are tied to the metropolitan area by work or family. Once deregulated, they will raise rents wherever they go in the area and that trickles up to the luxury rents.
Paul Krugman some years ago blamed regulation on San Francisco's tight rental market. He was clearly unaware that inclusionary housing was mandated in San Francisco, hindering construction. Krugman admits in his article that his judgment was cursory and immediate and not a result of any investigation. Had he known that inclusionary housing was mandated there, he would no doubt have come to a very different conclusion.
Inclusionary housing is not mandatory in NYC. I hasten to add that mandatory inclusionary housing in a super-high market like NYC would probably not unduly hinder construction.
Saturday, March 26, 2011
Sunday, March 20, 2011
Rent regulations good for New Yorkers?
Market-rate renters in New York complain that they pay exorbitant rents because their regulated neighbors underpay. In their justifiable anger, they imagine that if regulated neighbors paid more, market rates would ease down.
Unfortunately, markets depend not on cost, but on demand. When an entire neighborhood destabilizes and goes market rate, demand actually increases. Market rates increase. All rents go up.
Rent deregulation doesn't lower market rates with a housing flood, it just displaces a whole lot of long-time community residents, upscaling the neighborhood and spreading present and future transiency. Renters also lose their legal protections against landlords and landlord harassment, which also adds transiency. Deregulation is the landlord's wet dream. Landlords get all the cards, renters none.
It's been studied by no less a deregulation advocate than the conservative Manhattan Institute, summarized here. The study itself here.
More regulation means less investment, not higher market rents. Real estate disinvestment in NY? Not likely. Not a worry. Increased investment raising rents? That's a true worry for anyone who isn't in real estate.
Want to save communities and affordability for all New Yorkers? Tell the governor to include stronger rent regulations in the state budget. You can call his office at 212-681-4580
When a city deregulates, the aggregate money available for rent actually increases. Those who were underpaying now will pay more they were paying with few exceptions. If they squeeze into lower-income neighborhoods, they raise rents there. Meanwhile, those who now see an opportunity to live in tonier neighborhoods, pay up the exorbitant market rates, which keeps the market rate rents up. The aggregate demand increases all over the city, unless people stop liking the city and leave. When the aggregate money for rent increases, rents increase, as long as people stay in the city. Why do you think landlords so much want to deregulate the market? To ease your market rate rents? Wake up!
Unfortunately, markets depend not on cost, but on demand. When an entire neighborhood destabilizes and goes market rate, demand actually increases. Market rates increase. All rents go up.
Rent deregulation doesn't lower market rates with a housing flood, it just displaces a whole lot of long-time community residents, upscaling the neighborhood and spreading present and future transiency. Renters also lose their legal protections against landlords and landlord harassment, which also adds transiency. Deregulation is the landlord's wet dream. Landlords get all the cards, renters none.
It's been studied by no less a deregulation advocate than the conservative Manhattan Institute, summarized here. The study itself here.
More regulation means less investment, not higher market rents. Real estate disinvestment in NY? Not likely. Not a worry. Increased investment raising rents? That's a true worry for anyone who isn't in real estate.
Want to save communities and affordability for all New Yorkers? Tell the governor to include stronger rent regulations in the state budget. You can call his office at 212-681-4580
When a city deregulates, the aggregate money available for rent actually increases. Those who were underpaying now will pay more they were paying with few exceptions. If they squeeze into lower-income neighborhoods, they raise rents there. Meanwhile, those who now see an opportunity to live in tonier neighborhoods, pay up the exorbitant market rates, which keeps the market rate rents up. The aggregate demand increases all over the city, unless people stop liking the city and leave. When the aggregate money for rent increases, rents increase, as long as people stay in the city. Why do you think landlords so much want to deregulate the market? To ease your market rate rents? Wake up!
The future of Chinatown?
Detailed account of what's happening in Chinatown from Roland Li of Real Estate Weekly.
Lots of perspectives included, but Jones' comment about affordable housing advocates being against commercial incubators requires unpacking. On the one hand, her "commerce" is a misleading euphemism for development. Anti-gentrificationists in Chinatown do not oppose all commerce, they oppose the out-of-scale development that will transform and gentrify Chinatown, displacing the current community. On the other hand, affordable housing advocates are not at all opposed to development: they are the most enthusiastic proponents of development in Chinatown, aside from the developers themselves. Cross subsidies for market-rate development provide the only means of new affordable housing units. That's the debate in a nutshell. Wisest comment: CWG chair Mae Lee.
Lots of perspectives included, but Jones' comment about affordable housing advocates being against commercial incubators requires unpacking. On the one hand, her "commerce" is a misleading euphemism for development. Anti-gentrificationists in Chinatown do not oppose all commerce, they oppose the out-of-scale development that will transform and gentrify Chinatown, displacing the current community. On the other hand, affordable housing advocates are not at all opposed to development: they are the most enthusiastic proponents of development in Chinatown, aside from the developers themselves. Cross subsidies for market-rate development provide the only means of new affordable housing units. That's the debate in a nutshell. Wisest comment: CWG chair Mae Lee.
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