Demystifying housing shortages in NYC

The New York Times seems puzzled that the laws of economics insist on fulfilling their pronouncements:

East Harlem has been undergoing a resurgence for two decades, yet the neighborhood is still pockmarked with four- or five-story walk-ups where the ground-floor stores are bustling and the apartments above are devoid of life. Their windows are boarded up, blocked up or just drearily empty, torn curtains testifying to no one’s having lived there for years.

Although the vacancy rate in Manhattan hovers at 1 percent, at least some of the landlords of these sealed-up buildings — hundreds of them exist in pockets across the city — are deliberately keeping their buildings mostly vacant, content to earn income from first-floor commercial tenants rather than deal with the trouble and expense of residential tenants.

In some cases, city housing officials say, landlords are waiting for a revived economy to raise rents so that it makes financial sense to repair plumbing and electrical wiring. In other cases, landlords are “warehousing” apartments for the moment that a deep-pocketed developer comes along, as has happened in the blocks just north of 96th Street, East Harlem’s southern boundary. In still other cases, it is simply mystifying that apartments would be left vacant for decades, particularly since East Harlem has been a magnet for Mexican and other Latino immigrants, as well as young strivers looking for cheap space.

This phenomenon is hardly “mystifying” and can be explained almost entirely by basic economics:

Rent control, like all other government-mandated price controls, is a law placing a maximum price, or a “rent ceiling,” on what landlords may charge tenants. If it is to have any effect, the rent level must be set at a rate below that which would otherwise have prevailed. (An enactment prohibiting apartment rents from exceeding, say, $100,000 per month would have no effect since no one would pay that amount in any case.) But if rents are established at less than their equilibrium levels, the quantity demanded will necessarily exceed the amount supplied, and rent control will lead to a shortage of dwelling spaces. In a competitive market and absent controls on prices, if the amount of a commodity or service demanded is larger than the amount supplied, prices rise to eliminate the shortage (by both bringing forth new supply and by reducing the amount demanded). But controls prevent rents from attaining market-clearing levels and shortages result.

Insistent that they can shirk economic law, politicians impose such impertinent regulations and yet somehow retain the capability to be perplexed when they fail. Certain that the regulations were just not enacted correctly or emphatically enough, they forge ahead with all due petulance seeking new government action to solve the problem:

City officials have met with some landlords, like the real estate firm known as Ross & Ross that owns many empty buildings under several corporate names. RuthAnne Visnauskas, the deputy commissioner for development at the city’s Department of Housing Preservation and Development, urged members of the Ross family to consider loan programs offering incentives for rehabilitation. Family members said they would “take it under consideration and come back to us,” but never did, Ms. Visnauskas said. Simon Rosenfeld, president of one of the Ross companies, declined to comment when reached by telephone.

The ignorance of basic economics then continues ad nauseum.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s