"> Maybe you can escape from this problem by making the city wholly dependent on government-built housing."
Rent control + massive public housing investment is how the Swedish model has traditionally been supposed to work, although the latter has not survived past the social democratic era.
> Maybe you can escape from this problem by making the city wholly dependent on government-built housing.
This seems to be what Singapore did, and it worked. The vast majority of citizens live in HDB (public, government-built) housing and they seem to be managing the affordability problem better than most other “top” world cities.
However, it’s clearly not a 1-1 comparison because Singapore’s government has unusually high levels of state capacity, much greater than that of NYC’s government. It is also sovereign, so it can muster far more tax revenue on its own without adding onto state and federal tax burdens.
Highly recommended reading: Lee Kwan Yew’s “From Third World to First” which explains in impressive detail the decisionmaking behind all of Singapore’s policies during his 40+ year tenure.
He has an incredible ability to see through ideological blinkers and implement the best policy for the situation, which is why he ended up a free market icon after starting out as a socialist.
But he’s not dogmatically free-market; he instituted thoughtful government interventions in housing and healthcare to keep costs low.
Singapore is still largely run on his blueprint and it clearly worked.
"In this case, we try to avoid the supply problem by only applying a rent freeze to pre-existing rent-stabilized units. The problem with doing this is that future suppliers are not retarded. They know that these exact same policies would likely be applied to anything they build at some point in the future, and the more they observe policies like this getting enacted, the more they expect this to happen. To deal with the cost, they’ll either raise their own rents or opt not to build anything at all."
A few comments on this -1) there really has not been a ratchet of more apartments getting swept into price controls. The last apartments involuntarily placed into rent stabilization were built in 1973 and there has not been any expansion in the last 50 years. 2) Landlords/developers do not raise rents to pass on additional costs. They charge as much as they can regardless of costs. Landlords are greedy! They don't just try to cover their costs. 3) Developers are still building as much as they are legally allowed in almost all cases. The limits are usually zoning or the availability of new sites. There just aren't any examples of developers building anything less than the maximum legally allowed by zoning because of rent control.
I say this as a long time hardcore Build More Housing YIMBY. We need more housing and we need it almost any way we can get it. YIMBYism is gaining popularity, but it is still something the majority of the electorate is deeply suspiscious of, and we need to be practical about expanding the tent. I think the knee jerk Econ 101 opposition to rent control is cutting off a lot of potential allies and compromises and deals we could make with the left. I would be happy to trade some form of expanded rent regulation for other pro-housing initiatives (zoning, historical preservation, local reviews) that I think are more important bottlenecks to new supply.
> 2) Landlords/developers do not raise rents to pass on additional costs. They charge as much as they can regardless of costs. Landlords are greedy! They don't just try to cover their costs.
I don't think this is true. Even in the case of a monopoly with inelastic demand, additional costs are passed on to consumers, not just absorbed by suppliers. I would expect them to bear much of the cost but not all of it.
That rent stabilization hasn't been expanded in a long time is reassuring, but I don't know how much of a comfort it is without any rules binding the hands of the local government. Ultimately this is more of an empirical question I don't have any studies of.
"> Maybe you can escape from this problem by making the city wholly dependent on government-built housing."
Rent control + massive public housing investment is how the Swedish model has traditionally been supposed to work, although the latter has not survived past the social democratic era.
> Maybe you can escape from this problem by making the city wholly dependent on government-built housing.
This seems to be what Singapore did, and it worked. The vast majority of citizens live in HDB (public, government-built) housing and they seem to be managing the affordability problem better than most other “top” world cities.
However, it’s clearly not a 1-1 comparison because Singapore’s government has unusually high levels of state capacity, much greater than that of NYC’s government. It is also sovereign, so it can muster far more tax revenue on its own without adding onto state and federal tax burdens.
Fascinating! I had no idea.
Highly recommended reading: Lee Kwan Yew’s “From Third World to First” which explains in impressive detail the decisionmaking behind all of Singapore’s policies during his 40+ year tenure.
He has an incredible ability to see through ideological blinkers and implement the best policy for the situation, which is why he ended up a free market icon after starting out as a socialist.
But he’s not dogmatically free-market; he instituted thoughtful government interventions in housing and healthcare to keep costs low.
Singapore is still largely run on his blueprint and it clearly worked.
"In this case, we try to avoid the supply problem by only applying a rent freeze to pre-existing rent-stabilized units. The problem with doing this is that future suppliers are not retarded. They know that these exact same policies would likely be applied to anything they build at some point in the future, and the more they observe policies like this getting enacted, the more they expect this to happen. To deal with the cost, they’ll either raise their own rents or opt not to build anything at all."
A few comments on this -1) there really has not been a ratchet of more apartments getting swept into price controls. The last apartments involuntarily placed into rent stabilization were built in 1973 and there has not been any expansion in the last 50 years. 2) Landlords/developers do not raise rents to pass on additional costs. They charge as much as they can regardless of costs. Landlords are greedy! They don't just try to cover their costs. 3) Developers are still building as much as they are legally allowed in almost all cases. The limits are usually zoning or the availability of new sites. There just aren't any examples of developers building anything less than the maximum legally allowed by zoning because of rent control.
I say this as a long time hardcore Build More Housing YIMBY. We need more housing and we need it almost any way we can get it. YIMBYism is gaining popularity, but it is still something the majority of the electorate is deeply suspiscious of, and we need to be practical about expanding the tent. I think the knee jerk Econ 101 opposition to rent control is cutting off a lot of potential allies and compromises and deals we could make with the left. I would be happy to trade some form of expanded rent regulation for other pro-housing initiatives (zoning, historical preservation, local reviews) that I think are more important bottlenecks to new supply.
> 2) Landlords/developers do not raise rents to pass on additional costs. They charge as much as they can regardless of costs. Landlords are greedy! They don't just try to cover their costs.
I don't think this is true. Even in the case of a monopoly with inelastic demand, additional costs are passed on to consumers, not just absorbed by suppliers. I would expect them to bear much of the cost but not all of it.
That rent stabilization hasn't been expanded in a long time is reassuring, but I don't know how much of a comfort it is without any rules binding the hands of the local government. Ultimately this is more of an empirical question I don't have any studies of.
He scares the Hell out of me.
Excellent article.