Few people have heard of the War Emergency Tenant Protection Act, at least not by its formal name. However, New Yorkers do know it by its more common name: rent control.
Rent control in New York City began in World War I as an emergency measure. It ended in the late 1920's when the war was over and the markets were roaring. During World War II, New York passed the War Emergency Tenant Protection Act as a temporary measure to keep workers and soldiers from being priced out of the city. As with most "emergency" laws passed during wartime, this "temporary measure" never left. Rather, it served as a permanent increase in government control over the free market.
62 years later, there are still 43,317 apartments with rents fixed at their 1947 prices. Another 1,043,677 units are rent stabilized with property owners forced to place a rent ceiling at $2,000 per month. So much for a free market; 70% of New York's rental apartments are still under rent control or rent stabilization. So much for keeping prices affordable; New Yorkers are still unable to buy houses. Maybe if prices were allowed to increase, there would be further incentive for the construction of new apartment complexes. Increase supply to bring down prices. Nope. That makes too much sense. Let's do the opposite.
The government still rallies for more affordable housing. On March 14, 2007, Mayor Bloomberg and the Housing Preservation and Development (HPD) announced a "major milestone". Their $7.5 billion plan to preserve affordable housing in the city was underway. Mayor Bloomberg, who donates his time to the city and works for no salary, had done it again. He donated $7.5 of his $20 billion personal fortune; that's over 1/3 of his total net worth. Well, not exactly... If that had been the case, I would have whole-heartedly commended Mr. Bloomberg for his altruism, however misdirected it was. Of course, it wasn't really his money, it was your money.
"The City is on track to reach our goal of creating enough affordable housing for 500,000 New Yorkers, more than the entire population of Atlanta," said Mayor Bloomberg.
Although it will inevitably decrease the quality of living of New Yorkers without decreasing prices, Bloomberg still supports affordable housing. It's so important, that Bloomberg felt it was necessary to redistribute some more wealth in favor of it. After all, it would be unreasonable to suggest that people who can't afford to live in New York City move elsewhere.
According to the 2000 census, 1.3 million people commute to work in Manhattan every day, more than doubling the boroughs nighttime population. In addition, the U.S. Census Bureau's American Community Survey found that New Yorkers had the longest average commute time in the country at 30.4 minutes.
A previous survey found that New York City led the nation in 'extreme commuters' (workers 16 and over who travel 90 minutes or more to work) with 5.6%. The New York City metro area had 6 of the top 7 counties for extreme commuters.
That's what should happen. Rather than being subsidized by other New Yorkers, those living in government enforced affordable housing, should move to the suburbs and commute like 1.3 million other commuters.
Affordable housing however, might come back. It will happen the only way it can, by allowing the free market to operate.
According to the most recent Case-Shiller home price survey, home prices in New York City have dropped by 16% since their high in June 2006. This wasn't out of the blue. People saw it coming, including Bloomberg himself. On a 2006 radio show, Bloomberg announced that, "The real estate market is slowing down dramatically and we're going to have a problem down the road". There was an obvious bubble, and it did what bubbles do - it popped.
Now that home prices are declining, the federal government is stepping in and doing all it can to stop the plummeting home values. With Treasury Secretary Tim Geitner at the helm, mortgage rates are at the lowest rate since records started in 1971. So far this hasn't helped, which is probably for the best. It seems we haven't learned that people shouldn't be buying houses that they can't afford. Since it seems that his plan isn't working, we're likely to see some more government action. After all, prices are too low.
The government is beginning to act like my 18-month-old niece. She has a favorite toy. It's whatever I'm playing with. Just like Emily, the government wants whatever it doesn't have. Housing prices are too high, too low or just right. It can't be both too high and too low at the same time. The government clamors for affordable housing, while at the same, it tries to increase the value of homes. Rather than trying to pin the tail on the market, the government should remove its blindfold and take its turn at musical chairs. The free market will do what it does best: smooth the market and find the right price.
Label:
US Government Influence on Housing in New York City
Rent control in New York City began in World War I as an emergency measure. It ended in the late 1920's when the war was over and the markets were roaring. During World War II, New York passed the War Emergency Tenant Protection Act as a temporary measure to keep workers and soldiers from being priced out of the city. As with most "emergency" laws passed during wartime, this "temporary measure" never left. Rather, it served as a permanent increase in government control over the free market.
62 years later, there are still 43,317 apartments with rents fixed at their 1947 prices. Another 1,043,677 units are rent stabilized with property owners forced to place a rent ceiling at $2,000 per month. So much for a free market; 70% of New York's rental apartments are still under rent control or rent stabilization. So much for keeping prices affordable; New Yorkers are still unable to buy houses. Maybe if prices were allowed to increase, there would be further incentive for the construction of new apartment complexes. Increase supply to bring down prices. Nope. That makes too much sense. Let's do the opposite.
The government still rallies for more affordable housing. On March 14, 2007, Mayor Bloomberg and the Housing Preservation and Development (HPD) announced a "major milestone". Their $7.5 billion plan to preserve affordable housing in the city was underway. Mayor Bloomberg, who donates his time to the city and works for no salary, had done it again. He donated $7.5 of his $20 billion personal fortune; that's over 1/3 of his total net worth. Well, not exactly... If that had been the case, I would have whole-heartedly commended Mr. Bloomberg for his altruism, however misdirected it was. Of course, it wasn't really his money, it was your money.
"The City is on track to reach our goal of creating enough affordable housing for 500,000 New Yorkers, more than the entire population of Atlanta," said Mayor Bloomberg.
Although it will inevitably decrease the quality of living of New Yorkers without decreasing prices, Bloomberg still supports affordable housing. It's so important, that Bloomberg felt it was necessary to redistribute some more wealth in favor of it. After all, it would be unreasonable to suggest that people who can't afford to live in New York City move elsewhere.
According to the 2000 census, 1.3 million people commute to work in Manhattan every day, more than doubling the boroughs nighttime population. In addition, the U.S. Census Bureau's American Community Survey found that New Yorkers had the longest average commute time in the country at 30.4 minutes.
A previous survey found that New York City led the nation in 'extreme commuters' (workers 16 and over who travel 90 minutes or more to work) with 5.6%. The New York City metro area had 6 of the top 7 counties for extreme commuters.
That's what should happen. Rather than being subsidized by other New Yorkers, those living in government enforced affordable housing, should move to the suburbs and commute like 1.3 million other commuters.
Affordable housing however, might come back. It will happen the only way it can, by allowing the free market to operate.
According to the most recent Case-Shiller home price survey, home prices in New York City have dropped by 16% since their high in June 2006. This wasn't out of the blue. People saw it coming, including Bloomberg himself. On a 2006 radio show, Bloomberg announced that, "The real estate market is slowing down dramatically and we're going to have a problem down the road". There was an obvious bubble, and it did what bubbles do - it popped.
Now that home prices are declining, the federal government is stepping in and doing all it can to stop the plummeting home values. With Treasury Secretary Tim Geitner at the helm, mortgage rates are at the lowest rate since records started in 1971. So far this hasn't helped, which is probably for the best. It seems we haven't learned that people shouldn't be buying houses that they can't afford. Since it seems that his plan isn't working, we're likely to see some more government action. After all, prices are too low.
The government is beginning to act like my 18-month-old niece. She has a favorite toy. It's whatever I'm playing with. Just like Emily, the government wants whatever it doesn't have. Housing prices are too high, too low or just right. It can't be both too high and too low at the same time. The government clamors for affordable housing, while at the same, it tries to increase the value of homes. Rather than trying to pin the tail on the market, the government should remove its blindfold and take its turn at musical chairs. The free market will do what it does best: smooth the market and find the right price.
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