Is the Rent Too Damn High?
I was out of the country when Jimmy McMillan of the Rent Is Too Damn High Party put on his gubernatorial debate performance, and have only just now gotten around to subscribing to his newsletter. As best I can tell, Mr. McMillan’s platform is that New York City rents are too damn high and that’s forcing poor people out (this handy, rather hypnotic video explains things, such as they are, better than I can).
New York City’s rents, relatively speaking, are too damn high. Most New Yorkers, native or transplants, feel that reality at some point, some way, whether personally or through the horror stories of family and friends.
But what makes the rents too damn high for New Yorkers? And are they, in fact, even so, all things considered?
A few theories:
Rents Are Too Damn High Because of Stabilization
It’s understandably propogated by landlords and some brokers (and some right-leaning thinktanks), and seems intuitively to be true. After all, flood the market with the 1 million (or thereabouts) stabilized apartments in the city and that’s 1 million more apartments available to the populace at large, rather than held closely by stabilized tenants only. More supply slakes demand. Prices come down.
But! Beyond intuition, the theory doesn’t hold practical, real-world weight. I wrote a column in 2007 about a study of the end of stabilization throughout the Boston area last decade. The results, for tenants, those formerly stabilized and those always market-rate, were not pretty. From my column:
In 1994, Massachusetts ended rent regulations on most apartments. Boston and its suburb Cambridge were among the state’s few municipalities that still had wide-scale controls on apartments that kept rents below market. In Cambridge, two-thirds of apartments in buildings with at least four units were regulated.
Within a few years of deregulation, rents were way up, especially in Cambridge, a city of about 100,000 where tenants are similar socioeconomically to those in New York and where the housing stock is also similar. …
Five years after Massachusetts voters ended rent regulation … in Boston, Brookline and Cambridge,” began a New York Times article from July 2000, “rents have taken sizable jumps, the cities are spiffier and less pockmarked by deteriorating neighborhoods and many poorer people have been forced to move to communities farther from the urban core. … [A] leading landlord in Cambridge found that rents for his company’s formerly controlled apartments have doubled.
Please remember: I’m not debating whether ending stabilization in New York would improve buildings, neighborhoods, etc. I’m arguing that ending it would not, in fact, lower rents. Think about it in that Freakonomics sort of counterintuitive, everything-you-thought-was-right-was-wrong way: Landlords, given the opportunity, would understandably up rents. And why not? Demand would likely remain high, stabilization or not.
Which leads me to a second theory….
Rents Are Too Damn High Because of a Scarcity of Housing
This is a perennial problem in New York and the fault of no … well, many people, actually, including insurance firms, landlords, incompetent mayoral administrations of the past, criminals, etc. It’s an old tale familiar to most New Yorkers: The city entered a steep and, at the time, seemingly irreversible (even inevitable) decline in the 1960s and 1970s, and that decline took the rental housing stock down with it. “The Bronx is burning” and all that jazz as landlords torched buildings to collect insurance rather than maintain what had become moneylosers.
The thing of it is, though, is that research has emerged that this was no inevitable housing-stock decline. Landlords and insurance companies deliberately disinvested in several parts of the city, in what turned out to be a successful attempt to drive residents to the suburbs, where newer, more expensive housing was going up like mad. Yes, yes, it sounds so conspiracy theory. But it’s not. (The latest research comes in Jonathan Soffer’s new bio of Ed Koch, which I will review in next week’s Observer. In that, Mr. Soffer explains how not only the private sector pulled out of places like the South Bronx and central Brooklyn well before crime started to spike, but that mayoral administrations abetted the flight of capital–and people–by letting services slide.)
Well, however the city got to where it got, there were and remain too few apartments for too many people. Note, I’m not talking about for-sale housing, like the co-op conversion wave of the late 1980s or the condo-building boom of the middle of this past decade. The fact is new rental development remains an event in New York City (look at the hearty reception of Bruce Ratner’s Frank Gehry-designed 8 Spruce Street in Manhattan–by the way, love seeing that as I go over the Manhattan Bridge in the mornings; a beautiful skyline addition!), a rarity that developers are skittish to undertake because of the costs and the paltry returns relative to building condos.
Which leads me to a third theory, which likely explains everything better than anything…
Rents Are Too Damn High Because People Love New York City and Keep Moving Here
Here’s some stats from another column I wrote in 2007 (whatta year!):
These permit numbers at least look impressive. In 2006, 30,927 housing units were green-lighted; in 2005, 31,450. These were the busiest years since 1972-and that year, as City Hall points out, was busy only because of subsidized-housing construction.
But even the heartiest home-permit numbers pale against New York’s population growth. So hold the champagne: The home-building boom isn’t nearly loud enough.
In the six years from 2000 through 2005, the city added more than 205,000 New Yorkers, according to city estimates based on census data.
In the seven years from 2000 through 2006, 159,209 home-building permits were approved.
It’s supply and demand, kids. The surest way for rents to come down in New York is for New York to stop being a desirable place for the young and the restless. You want cheaper rents, move to a dying city (Philly, Detroit); or to one woefully unpopular with creative types or with little FIRE in their economic bellies (pretty much the entire country west of here, east of California and south of Chicago); or to a city that doesn’t welcome creative types (one of those mid-size ones with an alt-weekly and a couple of music clubs, maybe a craft beer bar, but little else to do on the weekends save get the Sunday Times).
That, ladies and gentlemen and Mr. McMillan, is why the rent is too damn high in New York: It’s a popular place to live, but with not enough housing, really, for everyone who wants to live here (and a big reason for that is the deliberate disinvestment of the 1960s and 1970s).
But that does not answer the original question: Is the rent too damn high?
Comparatively, hell no. New York is a world city and in debates like these has to be compared to other world cities; and not necessarily to other American ones, even big ones like L.A. and Chicago.
World cities like Moscow, Hong Kong, Tokyo and London routinely dwarf New York in surveys of apartment rents. In the Russian capital, for one, half of available apartments might rent for more than four grand at any one time.
KVARTIRNAYA PLATA SLISHKOM VYSOKAYA, CHERT VAZMI!