Friday, September 22, 2006
The Berserkonomics of One Rent-Stabilized Apartment Building
This is a link to the article that Devin Segal mentioned in class, on the effect of price ceilings and rent control in NYC. Thanks Devin.
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2 comments:
i guess i am just another mind pushing for less government control, but i am entitled to my views, right? it seems to me that the wonderful thing about free markets is that they come to an equlibrium. right? well lets look at it. the thing is when we look at it from above the government should stay the hell out of business, they get the federal reserve, so why do they need apartments and cheese to. but then when it comes down to it and we look at the ppl who cant afford houses, or the ability to make cheese, then maybe the government has place. the point i am trying to make is that; the economy as a whole is generally not in need of price floors and celing, but it is the individuals and bussiness that need them. and everyone has a right to an apartment that they can afford, right?
I think that price controls are horribly inefficient. It is true that they do help some people, and those people, sadly, will be negatively affected by their demise. Yet the destruction of price controls would, in the greater scheme of things, benefit the economy. In an example such as this, the NYC rent controls ruin the renting industry for just about everyone, tenants and landlords alike. The landlords cannot hope to make a living off of the rent-stabilized old-timer tenants, so they must depend on new and incoming renters to make up for the difference. This drives the market price for new rentals up even higher than it should be, and greatens the disparity between established and new tenants in terms of what they are paying for rent. People searching for an apartment to rent are negatively affected by the overpriced new rates. The landlords are negatively affected because they are making less than they deserve, not getting the full reward for what they posses, which is indeed a highly valued resource.
These price controls also remove the incentive for the sellers (landlords) to improve their products (apartments) in order to obtain greater profits for superior goods. They know that they can't charge existing renters any more for the improved apartments, and that the new renters will pay more anyway, because the shortage that the control creates makes the price of an apartment artificially high. Therefore, why bother improving facilities if it will bring little or no monetary gain? Because of this, all of the renters are negatively affected, new and old alike. To me it seems that any tampering with the natural state of the market economy is unproductive, unfair, and even immoral.
Now, surely if the rent controls are eliminated, there will be many old-time New-Yorkers who will be forced out and off the island, but this is the sad reality of the market system. Nobody said the system was kind. People might argue that without price controls the city will lose all its low-income residents, and so will have no one to sweep the streets. But then low paying jobs will gain demand, and the pay will rise, either giving incentive to commute into the city or giving those people the money needed to live there. Whatever happens, I think the city will be in a more natural and efficient economic balance if rent controls are eliminated.
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