Tag: Housing

The Rent Is Too Damn Low

 

New York Governor Andrew Cuomo signed the grandly titled “The Housing Stability and Tenant Protection Act of 2019” into law last week. Its extensive amendments to the earlier law passed with lopsided majorities in both the state Senate and Assembly after progressive lobbyists stormed the legislative beaches in Albany. They pitched their campaign as a fight between good and evil—between rich landlords and strapped tenants. They emphasized the precarious position of some tenants facing eviction, but ignored the huge windfalls given to those fortunate tenants who occupy stabilized units that rent for only a fraction of their market value.

The implicit economic assumption behind the reforms was that the protection of tenants under the Act would result in a simple wealth transfer from rich (or undeserving) landlords to poor (or deserving) tenants, with no collateral consequences to the quality of housing stock or the rate of new investment in rent-stabilized units.

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Nicole Gelinas and Howard Husock join Seth Barron to discuss New York’s landmark rent-regulation law and its potential impact on housing in the city and state. Lawmakers in New York recently passed the toughest rent-regulation law in a generation, imposing new restrictions on landlords’ ability to increase rents, improve buildings, or evict tenants. The bill made permanent the state’s existing […]

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Economics 101 in Labor and Housing Markets

 

A few simple premises of economic theory have the power to generate a wealth of powerful and instructive insights. Nowhere is that more true than with the law of supply and demand, which starts with two basic assumptions: as the price of a good increases, so does the supply—and as the price increases, the demand starts to fall. In an unregulated market, when the downward-sloping demand curve crosses the upward-sloping supply curve, the market is in equilibrium—the point where supply meets demand at a given price.

The only task for a government under this austere model is to make sure that various contracts, whether for labor, housing, or any other good/service are fully enforced, while leaving the terms of those agreements to the parties themselves. Happily, this system of freedom of contract is self-regulating, so that the price or wage of particular goods and services can quickly adjust to changes in supply or demand, or both. A dynamic market thus always moves to reestablish an equilibrium in the face of unanticipated external changes.

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Thoughts on Today’s Vietnam

 

I am returning from Vietnam today, after a visit that stretched from Saturday through Tuesday. Literally. The flight arrived at midnight Friday, and the flight out departed at 2:00 am on Wednesday. I am writing this at the Transient Lounge in Seoul Airport, an amenity deserving a post of its own. My flight for the U.S. departs after a nine hour layover here.

I was in Vietnam visiting the family of my middle son’s fiancee, they had the engagement ceremony over the weekend. Since most of her family will not be able to visit the U.S. when she and my son get married, the engagement ceremony was done in lieu of the wedding for the Vietnamese relatives. To protect their privacy, I will hereafter refer to her as Vietlady and my middle son as Pipeliner (since he designs oil and gas pipelines).

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A Different Take on America’s Housing Crisis

 

In my recent podcast with Lynn Fisher, we discussed America’s affordable housing crisis in mainly economic terms. Demand is too high, supply is too low, therefore roll back regulations on land-use and zoning and allow the market to work. As Fisher put it, if cities start “allowing townhomes and duplexes and places that were originally single-family homes to be redeveloped into 20 unit buildings, I think you would see the market take care of itself.”

This answer came in the context of San Francisco, infamous among US cities for its cost of living, which economists see as a major drag on growth: excessive costs keep people from moving to these cities where they’d be far more productive. But a previous podcast guest, Joel Kotkin, offered a much different opinion when we discussed this topic. Here’s a brief, lightly-edited excerpt from our conversation:

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Howard Husock joins Seth Barron to discuss the Fair Housing Act, racial discrimination in residential neighborhoods, and efforts to reinvigorate the law today. This year marks the 50th anniversary of the passage of the Fair Housing Act, the landmark legislation signed by President Lyndon Johnson aimed to end housing discrimination and residential segregation in America. More

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The Hobbit-hole is a tubular, subterranean dwelling, built into a hillside. Hills are of course a scarce resource in a dense city, especially in a place like Hong Kong, which is naturally hilly, but very built up. Architect James Law has come up with an ingenious urban solution for those craving that tubular, subterranean feel: […]

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California’s Single-Family Home Gridlock

 

In his excellent article, “The Great American Single-Family Home Problem,” Conor Dougherty, an economics reporter for the New York Times, offers a riveting account of a heated land-use dispute in Berkeley, California. In 2014, a real estate developer purchased a dilapidated home at 1310 Haskell Street in an estate sale. But his plan to rip that structure down to put three modern single-family homes on the lot met with intense local resistance. The neighbors claimed that the new homes would reduce street parking, block sunlight, and change the character of the neighborhood for the worse. Lawsuits delayed construction for several years even though that project complied with all local zoning ordinances. The story illustrates the fatal pathologies that grip land-use regulation in the United States.

In the short run, such regulations produce notable local victories. They slow down the projects and raise the costs of new construction, dulling the ardor of the hardiest developer. But these local victories can become regional disasters, as an acute housing shortage raises the prices of existing units to unaffordable levels, leading first to long commutes over clogged highways and then to outmigration by small businesses and individuals who cannot tolerate the grind. In response to this impasse in California, Governor Jerry Brown has backed a set of administrative reforms designed to prod wayward local governments to expedite issuing building permits. But it is highly unlikely that piecemeal reforms of this nature will make the slightest dent in the current housing crisis, partly because they are often packaged, as Dougherty notes, with proposals to subsidize affordable housing and demands that construction workers be paid prevailing (i.e. union) wages.

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US Home Prices Are Higher Than When the Financial Crisis Started. Here’s Why This Isn’t Worrying.

 

The 10-year anniversary events of the 2007–2009 Global Financial Crisis keep on coming. And this one is a biggie: It was a decade ago tomorrow, August 9, that investment bank BNP Paribas froze two of its funds because it could not value them, blaming “complete evaporation of liquidity” in the subprime mortgage market.

And in a new report, the firm Capital Economics notes that there are a few similarities between now and then:

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In this AEI Events Podcast, Jay Powell of the Board of Governors of the Federal Reserve System joins AEI’s Stephen D. Oliner to discuss the critical need to reform the housing finance system. During his remarks, Governor Powell emphasizes the potential systemic risk from a housing finance system that continues to be dominated by two […]

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Anti-growth Housing Policy May Have Seriously Damaged the US Economy for Decades

 

In a dynamic economy, finance, ideas, people, and other resources flow to their most productive use. It’s an economy of constant disruption and change. Companies rise and fall, begin and end. Workers change jobs, moving if they must. Social mobility is high, and hopefully income growth, too. Misallocation of resources is the enemy of growth and opportunity.

But in his new book, “The Complacent Class,” Tyler Cowen describes modern America as a society that is “more risk averse and more set in our ways, more segregated … sapped … of the pioneer spirit that made America the most productive and innovative economy in the world.”

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The Affordable Housing Crisis

 

Housing policy has become yet another flashpoint in these highly polarized times. Much of the controversy swirls around President Donald Trump’s nomination of Ben Carson, a distinguished neurosurgeon, as Secretary of Housing and Urban Development. HUD operates a wide range of subsidized federal housing programs that impassioned critics of his nomination are sure Carson will dismember. His chief vice in their eyes is his lack of direct experience working in the housing area. In a real sense this is a mixed blessing. On the one hand, these programs must be managed—and, ideally, by someone competent and somewhat knowledgeable in the field. On the other, his greatest strength is that from an outside perspective he understands that many of these programs must be cut back or shut down. There is some overstatement in the charge that HUD is a socialist program. But there is much truth to the claim that many of its programs have seriously aggravated housing difficulties around the country, especially for the most vulnerable groups.

The key challenge is to choose the correct path for housing reform. Many of Carson’s critics think the proper line is to require new developments to save a proportion of units for low-income residents, which will ensure, they claim, “that economically diverse neighborhoods and housing affordability will be preserved for generations to come.” The implicit assumption behind this position is that government agents have enough information to organize complex social institutions, when in fact they are slow to respond to changes in market conditions and are often blissfully unaware of the many different strategies that are needed in different market settings. No one wants to say that governments should not lay out street grids and organize infrastructure. But they operate at a huge comparative disadvantage when it comes to real estate development on that public grid.

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California’s Needless Housing Crisis

 

shutterstock_517304740Everyone agrees the most attractive areas in California suffer from a housing crisis that calls for drastic action. The difficult question is deciding what should be done. Many of the challenges are embodied in the small California town of Mountain View, population 80,000, which should be basking in sunshine as the home of Google. But instead the town is mired in discord and controversy over a set of well-entrenched anti-growth policies concerning housing. The tight supply of housing has raised the price of the median home to about $1.4 million. Rents, too, have skyrocketed, resulting in the displacement of many long-term tenants—teachers, nurses, and tech employees—who have to endure long daily commutes to work or find jobs elsewhere. Mountain View is now the proud home to numerous mobile home parks, occupied by individuals who crave access to the city—and who reportedly drive Teslas and Mercedeses, no less—but who lack the means to purchase or rent ordinary housing.

The situation in Mountain View has provoked two distinct responses. The first of these was the approval on November 8 of Measure V, a rent control statute that turns Mountain View’s rental market into a regulated public utility, complete with its own five-member board. The ordinance exempts all units built after February 1, 1995. But for the covered units, it rolls back rents to their October 2015 levels, and then limits rent increases going forward to between 2 and 5 percent, with allowances for higher increases if justified by extraordinary costs. The tenant groups that support the statute seek, without explicit acknowledgement, to secure a massive wealth shift in their favor, without discouraging future development. In so doing, they ignore the costs to other potential residents who put a higher value on those units, which will lead to a misallocation of available units whose number is kept artificially low by a wide range of entry constraints. The administrative costs of running this system for their exclusive benefit will, moreover, be borne by everyone inside the city. It is also likely that the threat of a new rent control law will weigh heavily on the market for exempt units, and will retard the ability to build new units as well.

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New York’s Self-Inflicted Housing Crunch

 

shutterstock_152494718People who live in New York City know that its frenetic pace can induce anxiety. In part, that angst stems from living in a highly congested city brimming with energy. But there’s also the anxiety from New York’s crazy-quilt pattern of land use regulation, which a New York Times editorial recently labeled “High-Rise Anxiety.” The unease stems from the many overlapping restrictions both on new construction and the utilization of existing facilities. These regulations have created a two-tier system in which some prosper handsomely while others scramble to make ends meet.

The current housing crunch in New York, and in other cities like San Francisco, is attributable to the complex set of prohibitions and subsidies that shape these markets. Under the modern administrative law system, private property rights are of little consequence when a developer is trying to build. What matters ultimately is that all of the relevant “stakeholders” have a right to participate in an endless negotiation process before anything gets done. The de facto presumption is against changes in both new and existing housing markets. The building permit is the unit of political currency, and each requires enormous inside connections, patience, and luck to obtain. It can take developers many years to obtain their precious permits, if they get them at all.

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Banning Hamburger: Housing Codes in America

 
shutterstock_242818684
Mulberry Street in New York City’s Little Italy, ca. 1900.

If a liberal observes that rich people are eating steak, while poor people are eating hamburgers, the obvious solution is to ban the hamburger. It sounds silly, but if you apply this rule, for example, to the minimum wage for teenagers, it all comes into focus. It is “obvious” that people should not be underpaid — and so we must forbid low-paying jobs. Steak or bust.

Do-gooders doing evil is hardly a new phenomenon. New immigrants to the United States in 1900 could find a place to drop their heads for seven cents a night. It was not remotely nice, but it was cheap. The average hourly wage was 20 to 30 cents, meaning that a person could sleep for 20 minutes of work. Think about that: Can you imagine having a bed to sleep on for a few bucks?

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Are the Clintons the Real Housing Crash Villains?

 

Bill-Hillary-ClintonBy Lawrence Kudlow and Stephen Moore

We are going to reveal the grand secret to getting rich by investing. It’s a simple formula that has worked for Warren Buffett, Carl Icahn, and all the greatest investment gurus over the years. Ready? Buy low, sell high.

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First a movie recommendation: I finally watched The Big Short (I know, I’m behind) which detailed several risk-hardy investors who, in 2007-08, bet against the housing market. Since I watched the movie, I am now of course an expert who can share his opinion about the financial crisis. One of the takeaways was how obvious the signals […]

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More on Housing, Inequality, and Economic Growth

 

twenty20_ed1a3b03-c953-4f77-ae69-d5b73c72acc8-e1460750194459As I wrote in my latest The Week column, inequality worriers should take a hard look at what’s happening in US cities. Turns out poorer Americans who live in some of the country’s most unequal places, such as New York and San Francisco, have some of the best longevity outcomes.

Researchers speculate that “low-income individuals who live in high-income areas may also be influenced by living in the vicinity of other individuals who behave in healthier ways.” Behaviors were found to correlate more closely with longevity than access to health insurance. As I also noted, “Economists on the left and right have begun to deeply examine how zoning regulations and other regulatory barriers artificially inflate home prices in some high-income cities.” Including such as New York and San Francisco.

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A mayoral candidate is coming over, with his team, to hear ideas that will help him stand out in a very crowded field. The below are the bones of my proposal. Ricochetti – help me out! The Problem: More

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Silicon Valley, New York City are Holding Us Back

 

NYCHA_Logo_480x480Big cities, we’re told, are engines of productivity. And that’s mostly true. Regions with capital and a high concentration of technological innovation — places like California’s Silicon Valley — employ people, drive economic growth, do all sorts of good stuff, right?

Well, not so much. And the reasons they’re lagging are interesting. Thanks to Greg Ferenstein, I found this study, from the University of Chicago, that says that it all comes down to… regulation. Land use regulation, at that. From the study:

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