Why The Rent In NYC Is Too Damn High

The rent in New York City is too damn high.

New York Magazine has a story titled “There Are More Manhattan Apartments for Rent Over $15,000 Than Below $2,000.” The story is short, but it highlights how expensive it has become to live in New York City:

An analysis of exclusive listings on the site On-Line Residential* conducted by The Real Deal found that there are more rentals priced at $15,000 a month and above than $2,000 a month and below. But before you start calculating how much it would cost to commute from Binghamton, there was one bit of hope for bargain hunters in the real-estate magazine’s report: The Upper East Side has a surprisingly large number of affordable apartments — more renting at $2,000 or less than all of the neighborhoods south of Central Park combined. Just don’t expect any of those apartments to be within a 15-minute walk of a functioning subway stop.

The reason for this is rent control. New York has had rent stabilization laws for years, and the New York City Council voted 7-2 to freeze one-year rents. When this happened, Joseph Strasburg, president of the Rent Stabilization Association, told the New York Times, “The reality is landlords will now have to forgo repairing, maintaining and preserving their apartments, which will trigger the deterioration of quality, affordable housing [New York City Mayor Bill] de Blasio pretends to care about.”

Strasburg is right. While the idea of keeping rent in check may sound like a good idea, the actual economics of it are catastrophic.

Economist Thomas Sowell points to San Francisco as a case study for rent control laws. San Francisco passed their rent control laws in 1979 to deal with inflation, and in the following decade construction of new multifamily housing declined by 32 percent. The average rent of one bedroom apartments in San Francisco is $2,965 a month and two bedroom apartments face an average rent of $3,853 a month. Rent control has not made living in San Francisco cheaper.

“In New York, people living in rent-controlled apartments have included the president of the New York Stock Exchange and even Hollywood stars who keep such apartments to use when they happen to be in town.”

Thomas Sowell

Sowell cites a Cato Institute study showing that cities with rent control laws had higher advertised rents than cities that didn’t have rent control. The reason for this is because, as an overwhelming number of economists point out, “A ceiling on rents reduces the quantity and quality of housing available.” This is because an artificial price ceiling causes a shortage in goods. Naturally, rent controls cause a shortage in housing, and then politicians have to modify the laws to unregulate luxury housing. As Sowell explains in this video, the resources that would have gone to build more affordable housing for lower income people instead go to luxury housing that that only the wealthy can afford:

Sowell writes, “Studies in both Cambridge, Mass., and Berkeley, Calif., showed that ‘rent-controlled apartments were concentrated among highly educated professionals.’ In New York, people living in rent-controlled apartments have included the president of the New York Stock Exchange and even Hollywood stars who keep such apartments to use when they happen to be in town.”

New York City faces a housing shortage. In an editorial, the New York Post wrote, “The rent laws have taken a million units off the market, with tenants (rich ones, too) hoarding their bargains. That’s half the city’s rental stock off-limits to newcomers, the poor and others who don’t win rent-reg lotto. And that drives up rates on nonregulated units.”

The Post then called for deregulating the housing market. Given the fact government intervention has caused the rent to be too damn high in New York City, that would be the right thing to do.