A friend of mine who lives in New York recently sent me this interesting article: “The Perverse Effects of Rent Regulation.” And he sent it to me, because he wanted me to take note of this stat:
There are, effectively, two rental markets in Manhattan. Roughly half the apartments are under rent regulation, public housing or some other government program. That leaves everyone else to compete for the half with rents determined by the market.
50% is a big number. I would never have guessed that the New York rental market would be split in such a way. But it is split because it’s fairly clear what would happen if it weren’t:
“Poor people would be priced out of Manhattan,” he says. “Period.”
This, as the article argues, could threaten the diversity that has made New York the economic and cultural hub that it is today. But at the same time, there are a number of important questions: Is 50% the right split? And are the control mechanisms in place the right kind of mechanisms? Should rent controls be attached to people as opposed to apartments, which is how it’s typically done today?
Diversity is hugely important and there will always be a portion of any city’s population that cannot afford market rents. But intuitively, and I could be wrong, 50% seems high. It seems high because these types of rent regulations achieve the exact opposite for the balance of the market that has to pay market rents: their apartments become more expensive.
I’ve been having a lot of discussions lately about affordable housing and rent control always comes up. I think that in a lot of cities there needs to be some sort of intervention in the market to keep them from becoming homogenous playgrounds for the rich. But I also believe that many policies–which may sound great in theory–can have unintended market consequences. These need to be seriously looked at.