Roosevelt Island Mitchell Lama Island House Residents Urge NY State Governor Andrew Cuomo and RIOC To Support Affordable Housing and Preservation Privatization Plan - $20 Million To RIOC, $15 Million More For NY State, RIOC Board Meeting In Executive Session This Afternoon To Discuss
Image of Roosevelt Island's Island House EntranceAmong the items on the Agenda for today's 5:30 PM Roosevelt Island Operating Corp (RIOC) Board of Directors Real Estate committee meeting is:
... 3. Chair’s Motion for Executive Session to Review and Discuss the Status of Privatization/Affordability Plan and Ground Lease Extension for Island House.As reported in post earlier this week:
... Not much is known publicly about the Island House privatization because these discussions are held in Executive Session meaning that that they are secret. More information on RIOC and NY State Executive Session policies from previous posts....We now know a bit more about what is happening with Roosevelt Island's Mitchell Lama Island House privatization. An Island House resident describes their privatization plan as:
The Island House affordability plan preserves 400 units of housing, allows existing tenants to choose to buy or continue to rent at affordable rentals with NYC Rent Guidelines Board increases. No one would be kicked out. Furthermore, it involves paying the State (DHCR and ESDC) $35 million, which is a substantial payment for an affordable housing development. Compare the $11 million payment for Octagon in its 500 units of market-rate housing, or the zero dollars proposed by the Rivercross privatization.Below is:
- letter dated December 19, 2011 from the Island House Tenants Association to NY State Governor Andrew Cuomo urging support of affordable housing and Preservation Privatization Plan,
- January 3, 2012 Island House Tenants Association Newsletter updating residents on the plan,
- December 8, 2011 Notice of Intent To DHCR withdrawing from Mitchell Lama Program by Island House owner David Hirschorn of North Town Phase 11 Houses and
- January 10, 2012 DHCR's Notice of Owner's Filing of Notice of Intent to Dissolve.
Island House Tenants Association letter to Governor Cuomo:
Re: Affordable Housing & Preservation PlanJanuary 3, 2012 Island House Tenants Association Newsletter:
Island House – Roosevelt Island
Dear Governor Cuomo:
I write to thank you and your staff, especially Leecia Eve and Tony Giardina, for the hard work they have done in moving forward the Island House Affordable Housing and Preservation Plan to a point where few, if any, substantial issues remain. Now we need your help to bring to closure the multi-year negotiations that will if consummated, protect our interests and those of future generations of Island House residents, but if left to languish, would expose the tenants to significant jeopardy despite many years of hard work and cooperation among the landlord, tenants, DHCR and other NYS agencies.
Working under the auspices of DHCR for several years, the tenants and owner have crafted a groundbreaking Plan that, first and foremost, secures aggressive rent protections and affordability for tenants who wish to stay and not purchase their apartments while allowing tenants who wish to buy their apartments the opportunity to do so at a 65% discount below market pricing, with additional provisions to ensure affordability for future generations of purchasers. This Plan was overwhelmingly endorsed by the tenancy in a building-wide vote in September 2009.
Through the efforts of your Office for Economic Development, which has been engaged for nearly a year, the tenants and owner have recently agreed to substantially modify the previously agreed upon Affordability Plan in a way that is projected to result in payments to RIOC of over $20,000,000. This is in addition to the $15,000,000 or more that will be paid to ESDC from increased real estate tax payments under the Plan. In addition to these payments aggregating in excess of $35,000,000, ESDC will also be promptly repaid the full outstanding mortgage of $20,000,000.
But all of this is in jeopardy; having waited for many years, the owner has just filed its notice of proposed dissolution with DHCR, the first step in converting the building to a market rate rental. While he has made it clear that his intention is to proceed with the Affordability Plan -- should the Plan fail, he does have the right to withdraw in favor of a market rate plan. This would be a disaster for the tenants.
Accordingly, we implore you to direct the State agencies necessary for the implementation of the Affordability Plan (RIOC, ESDC and DHCR) to take immediate action to complete the approval process and immediately enter into the requisite lease modification agreement (a draft of which has been in State hands for nearly a year).
The revised Plan, as most recently negotiated by your staff, strikes a proper balance and provides New York State with substantial revenues while also preserving the State’s dwindling affordable housing stock and allowing low and middle income families a once in a lifetime opportunity for home ownership. There is just no reason that this deal should not be implemented now.
We look forward to joining you in announcing the State’s success in preventing the loss of middle income housing through this creative and pro-active public private partnership.
Please do not hesitate to contact me if you require anything further.
Very truly yours,
Island House Tenants Association, Inc.
Update on Island HouseIsland House owner North Town Phase 11 Houses Notice of Intent to withdraw Island House from Mitchell Lama program:
First of all, Happy New Year to you and your families.
We wanted to update you on where things stand with our affordable housing and preservation plan. Over the last couple of years, since winning the overwhelming support of the tenancy for the Island House Affordable Housing and Preservation Plan, we have been working to resolve what revenues the state will receive under the plan prior to getting final RIOC Board approval on the ground lease extension required by the Roosevelt Island Operating Corporation. We have reached a critical point in this process.
The good news is that, overall, the process is moving but we are concerned that we are at point where it may be stalled in this last stage. The owner has spent the last few months negotiating additional payments the State is seeking from the plan directly with Governor Cuomo's office. Attached is our recent letter to the Governor urging his support and we deeply appreciate the efforts of his office, as well as our local elected officials.
It is now critical that we keep the momentum going. Over the last few weeks, together with the Governor's office and the Dept. of Housing and Community Renewal (DHCR), the owner has been working directly with RIOC's CFO Steve Chironis to move ahead with a ground lease vote as soon as possible. We are concerned that RIOC may unduly delay the process of presenting the plan to the RIOC board to get an expeditious vote and allow an offering plan to be submitted to the Attorney General's office for his review.
There is an added urgency, as the owner has officially notified DHCR his intent to file to begin the process of removing the building from Mitchell Lama, per the attached letter. In itself, this is an expected part of the process required for the transition out of Mitchell-Lama to the Affordability Plan and in his letter to DHCR the owner makes clear this is his preference.
That said, if the ground lease process fails, the ownership also makes clear that they reserve the right to option B, which is proceeding with a plan to turn the building into a market rate rental. That would be a disaster for us. While obviously we and DHCR would fight any attempt to implement option B, the reality is that we may not succeed in ultimately preventing that scenario in a worst case situation.
We have spent four years negotiating and getting an unprecedented level of support and approval from every key state agency that recognizes the unprecedented protections and affordability our plan represents for current and future tenants of Island House. We are doing all we can to ensure that RIOC understands the ramifications of not acting swiftly — especially at a point where interest rates remain low providing additional affordability for buyers — including mobilizing the tenancy to express our collective frustrations in the next few days and weeks if the process stalls. We are closer than we have ever been to finalizing a process that has already taken too long, and it is time to ensure that the hope and promise of affordably protecting our homes becomes a reality.
and DHCR's Notice of Owner's Filing of Notice of Intent to Dissolve.
More on the privatization of Roosevelt Island Mitchell Lama building from previous posts here and here. Also here is letter dated February 26, 2010 from Roosevelt Island's Rivercross Mitchell Lama Coop Board to Empire State Development Corp explaining the proposed Rivercross privatization plan. There does not appear to be any similar payment to RIOC in the proposed Rivercross Privatization as the $20 million dollar payment described in the Island House Privatization.
32 comments :
In this case I think RIOC should use its tremendous latitude and reevaluate the interpretation of its mission which is to promote a mixed income residential community (i.e., no one has defined what that means). I am and any new york city resident other than those getting a unevenly distributed reduction in housing costs should be in favor of privatization of the Mitchell Lama Building or any building that falls under rent stabilization/control/affordability rules.
Affordable house deals/regulation contributes to shortages in housing, the development of black markets, decreased supply of future housing, deteriorating quality of housing, non-price methods for housing distribution (i.e., discrimination), inefficient uses of housing, and added costs to new renters to the benefit of long term renters.
Why should any of us feel bad that some on the island may be subject to market pricing, when that is what all of us are subject to anyways? New York City is an expensive place to live, if it wasn't it wouldn't be New York. Just because you think something should be a certain way doesn't mean you can make it so.
http://online.wsj.com/article/SB122126309241530485.html?mod=googlenews_wsj
Yeah, I can just see the wealthy real estate developers licking their chops at the idea of tearing down all the projects (and RI - the regulated part of RI - is a project) and replacing them with luxury housing. And as for the tenants of the affordable apartments that were torn down?
That is the big mystery - what do the rich intend to do with all the poor New Yorkers, those on fixed income, those unable to find work, etc. Oh - they're not going to have their fixed income either because the rich don't want to pay taxes to support Social Security and Medicare? OK, then what will the rich do with the penniless elderly, disabled, those unable to find work with no possibility of getting any government benefits (or "handouts" as the rich would say)?
This is exactly the recipe for revolution, with the rich simply saying: Well, you can't afford to live here; or, no, you can't get an old age pension anymore, that's socialism; or, you can't get unemployment insurance anymore - too bad if you were laid off; or, you can't get a rent stabilized apartment anymore, too bad if you can't afford a luxury apartment - there is no such thing as any government program anymore to assist you.
This dog-eat-dog world of the "survival of the fittest (or richest)" this is exactly the kind of thinking that produced Hitler, whose first target in Germany in fact was the murder of the long-term disabled.
I thought we had put fascist, heartless, murderous thinking behind us, especially when fascism was smashed at the expense of over 50,000,000 lives in WW2. But look at Trevre's heartless comment - a reflection today of the same sort of selfish, heartless fascism. Trevre's thinking is also the opposite of what organized religion teaches us, which is to extend a hand to neighbors in need. Of course, as we know, Hitler also vigorously prosecuted including killing men and women of conscience.
Trevre certainly picked the wrong place to live: Roosevelt Island was named for FDR, the brave President who triumphed over fascism. If it wasn't for FDR, and the other Allied leaders, we'd all either be dead, or speaking German, or slaves to the Teutonic "herrenfolk". Or maybe that's what folks like Trevre would prefer...
*American* fascism with all the elderly and the disabled just - done away with, so that the real estate developers can finally make a great profit building and renting only *luxury* apartments.
Something else to consider, as an example of the rent regulations actually help the city. If I lived in a market rate apartment, only the landlord would benefit. Because I live in the equivalent of a rent-stabilized apartment, I can eat at restaurants, go to movies and the theatre, have museum memberships and buy some clothes. In other words, my disposable income gets spread around instead of just going to the landlord.
Affordable housing measures are great in a bubble, but if you consider
their effects within any city they are the perfect example of negative
unintended consequences. I listed those negative consequences above.
These are well documented in any urban area that promotes affordable
housing and you can't dispute the data.
The worst of these
negative consequences is the reduction of new housing construction,
limiting the supply and therefore increasing the costs on all
non-affordable housing, essentially cancelling out any benefits from
affordable housing regulations.
While FDR may have done many
important things, we should not blanket all his actions as helpful or
positive. In fact some of his affordable housing policies led to
increased racial segregation like the creation of the Federal Housing
Association, the same association partially responsible for the economic
mess we are in today. He didn't know what we know now and it was a
different time, but now that we know through data that these policies
are harmful, not helpful we shouldn't be supporting them.
You
are living in a world where you believe you can just make rules to make
things right for everyone, but you can't. You are living in the world
that our current congress lives, where you can have your cake and eat it
to, instead of making the tough decisions that need to be made.
And
by the way you can't just win an argument by comparing a person to
Hilter, nice try though. Sticks and stones can break my bones but words
can never hurt me.
You are right, partly, but you are ignoring the proven negative effects of rent control which lose to any benefits gained by you "spreading" your savings around. Landlords don't just sit and make money by doing nothing, they have costs they must pay as well and support a entire segment of the economy. They have gone to the effort of saving enough money to build a place like New York City. Just like anything there are some rotten apples but in general the world would be a lot worse without landlords or more appropriately property managers.
You are right, partly, but you are ignoring the proven negative effects of rent control which lose to any benefits gained by you "spreading" your savings around. Landlords don't just sit and make money by doing nothing, they have costs they must pay as well and support a entire segment of the economy. They have gone to the effort of saving enough money to build a place like New York City. Just like anything there are some rotten apples but in general the world would be a lot worse without landlords or more appropriately property managers.
I see what you did there, and wow, it was amazing how you just made the jump from being against rent stabilization to Nazi Germany. By the way, the Island was named after FDR as it was designed to be accessible for disabled people (as FDR had Polio and was disabled himself).
Anyways, to the topic at hand, I think that it has been pretty well proven that housing projects do not work very well for multiple reasons, and Section 8 (as discussed on this very blog) does not work well, either, as it gives no incentive for someone to better themselves and make more money. As for the elderly, a responsible person should be saving on their own, and, for the record social security is not really socialism. It is a forced retirement fund that you pay into to get out of it after retirement, just like any other retirement plan. The issues it has now is that our politicians have basically ransacked all of our money in it and replaced it with IOUs.
That said, if people can not afford market rate in an area in Manhattan, then they should simply move to a more affordable area in say Queens, New Jersey, the Bronx, Brooklyn or given northern Manhattan. I personally am for mixed income developments that are a collection of low income, middle and market/high income apartments, like the Mitchell Lama system provides. However, you also have to realize as per the rules of the Mitchell Lama program, the building as the right to exit after the tax breaks/incentives expire after 20 years. With out this promise to the 'rich developers', there would have been no incentive to even make these buildings in the first place.
Lastly, hat off to your excellent troll, again, the anti-afforable housing = Hitler was pretty brilliant. Just to let you know though, Hitler came to power mainly because of the economic hardships in Germany that was imposed by the Allies after WW1. Because of these sanctions, the DM inflated so heavily that you literally needed a barrel full of DMs to buy a simple loaf of bread. From this economic poverty Hitler was basically able to leverage nationalism to come to power to 'restore Germany'. It had absolutely nothing to do with the rich or capitalism, and in fact, it could probably be argued that if the Triple Entente had not so severely punished Germany for the war (via the Treaty of Versailles) and let capitalism take its course naturally, there would not have been the insane inflation and poverty in Germany that ultimately led to Hitler's rise to power and the fall of the republic/democracy. Obviously there were many other causes to his rise (I wouldn't want to over simplify things), but I feel I have already given enough of an actual history lesson here as it is.
So it's back to "survival of the fittest" or the "law of the jungle" as far as Trevre is concerned - and he readily admits it.
He obviously approves of not giving any kind of break to the disabled, elderly, and those unlucky enough to be unemployed through no fault of their own.
Luckily, society has progressed from Trevre's antiquated, 19-century thinking so that there are some safeguards, protections, programs and the like to rein in greedy landlords and developers. Starting in the late 19th century, the US had to go through long years of having reformers write housing regulations in response to the slums from which landlords were all too happy to extract extortionate rents - a struggle which in some ways was a continuation of the movement that smashed slavery in the US.
However, in Trevre's opinion, slums are OK as long as someone can afford them, since Trevre swears that anything a landlord does is OK. If it was up to Trevre, we'd all still be living in hovels, unsafe, with no light or air, and being charged rents up the kazootie -- all because it's improper to "control" the landlord. Landlords can and should charge whatever the market can bear, even if it's outright highway robbery for sub-standard units, Trevre believes. And of course, we'd only have ourselves to blame if there's any problem with our slum dwelling - since the landlord, the epitome of the market, is *always* right as far as Trevre is concerned.
Let's remember - this is a democracy (still). Dismantling certain social programs remains highly unpopular, especially with those most likely to vote.
Nobody wants to upset the apple-cart - especially those with the most to lose. The rich nibble around the edges, trying to weaken programs, but in the end, even they know they can't entirely get rid of them, even with looming budget deficits at all levels of government. The solution? Return to Eisenhower-era tax brackets - with no gimmicks and loopholes for corporations.
The Republicans always get the benefits of their self-perpetuating class in the form of improved education, entree to the "right" organizations and positions, but in the end, they know enough not to dismantle a system that has in fact worked rather well to keep them well-protected and insulated from the "lower classes". If the system of benefits, subsidies, and regulations were dismantled, they - the 1% - know they would undoubtedly have only themselves to blame for whatever follows..
Just as a technical note, we do not have a democracy, the United States of America is a Democratic Republic, and the is a big difference there.
Landlords get money from the government in addition to the rents plus they get tax benefits. They don't really lose out at all. I personally believe housing should not be a pure market commodity. In its importance it is up there with health care and education and the government must step in to provide affordability because the free market fails in these things (and that, I believe, has been proven just as well).
None of our social problems we have nowadays can be reduced to Democrats vs. Republicans. As recent history showed it doesn't matter who's at the helm - this country keeps going down the drain.
Actually it hasn't been proven, and while you "personally" believe it that doesn't make it so. If you can find any proof of its benefits feel free to present it.
Where does all the hostility come from? I didn't say we need to deregulate the housing/building code (that is what keeps housing up to standards preventing the creation of slums in most cases).
And I sort of agree with you on taxes, although this is not really germane to the topic.
Also it is the system of subsidies, affordable housing, and complicated regulations that have made the "1%" what they are. You are arguing for and against the very same thing in the very same sentence.
Trevre, your missing a good number of points on Roosevelt Island and the City's housing market. First, let's take bakgwailo's point: we're a representative democracy, i.e., there is wide support for housing regulation as presently exists.
Second, the WSJ had it's facts presented all wrong. It says "about 70% of the city's rental apartments are either rent controlled or rent stabilized". Gee, no one is preventing anyone from building market-rate housing, so why isn't there a glut of market rate housing? Because it's not what a majority of the City wants.
The WSJ article says "The regime has also incentivized builders to put up more luxury units --
a result met with policy gimmicks such as tax incentives for builders
of affordable housing and landlords who keep units in rent stabilization". Again, no one is stopping developers from building market rate housing, what is going on is: the developers are looking for a variety of breaks, so government entities say "You want a tax break, then you'll have to do something that adds social value".
That's a matter of debate that's been going on for a long time. I guess I should've said that it has been "proven" just the same as it has been proven that rent regulations has negative impacts. There is no way to absolutely say "this is right" or "this is wrong".
I was surprised to see those numbers but Frank (and the WSJ) is correct. The majority of rentals is rent regulated in NYC (http://www.housingnyc.com/downloads/research/pdf_reports/10HSR.pdf, pages 3 and 4). IMHO, housing needs to be regulated by the government because it is impossible for people to make decisions that are completely in their own self-interest. Renting an apartment is not the same as picking out a TV. It just cannot be the same.
There is a lot more proof that rent control hurts rather than helps. Here is the best summary of this proof that I know of.
http://www.cato.org/pubs/pas/pa-274.html
The Cato Institute? Isn't that a conservative think-tank?
Next, we'll be hearing that all forms of assistance such as Food Stamps, unemployment insurance, disability benefits, workman's compensation, should be "reformed" - not just housing laws.
If conservatives ran the country, we'd be back in the 19th century - heck, they'd probably re-legalize slavery - maybe this time to include people of all races - the ultimate "convenience" for big business, wherein they can simply stop paying not only for pesky benefits (such as sick and vacation days off) but even a paycheck to workers, as they work them to death, all the while laughing all the way to the bank...
Aside from having to fight the most costly war in terms of US casualties to end the horror of slavery, countless lives of brave union activists were lost in the struggle to win benefits such as sick pay, the normal-length work day, the abolition of child labor, etc. It was greedy, amoral employers that made these bloody struggles necessary - and every victory was bought with precious US blood.
Like I said in a previous post, atrocious housing conditions were outlawed, as were extortionate rents when rent regulation laws were implemented.
There is no way the US public is going to agree to give back hard-won peoples' victories in housing/labor/
equal rights etc., no matter what a conservative rag like the WSJ or a conservative think tank like the Cato Institute says. Not when these rights were won at such a price - the highest price of them all: Courageous lives, laid down to deliver the down-trodden from the minions of evil landlords and greedy slave-holders and employers.
You, Trevre, can argue until you are blue in the face, but these programs, which were hard-won and which were needed in order to protect those not in the rich class (meaning - most of us) from unscrupulous landlords and employers, these programs and protections will never be relinquished.
Labels, labels. Conservative, liberal, I something is a good idea that everyone benefits from it should be supported. You should read the article it is pretty good, It is possible to discuss one idea without dragging in every other gripe you have had in the whole world. So far all you have done is assume because I have an opinion based on a lot of evidence that affordable housing is more harmful than helpful that I am many other terrible things. You don't have to agree but it would do you good to give other people the benefit of the doubt before cutting them down. We are all more alike than we all think we are. No hard feelings on this end.
The mission statement of the Cata Institute:
"The mission of the Cato Institute is to increase the understanding of public policies based on the principles of limited government, free markets, individual liberty, and peace. The Institute will use the most effective means to originate, advocate, promote, and disseminate applicable policy proposals that create free, open, and civil societies in the United States and throughout the world."I wouldn't expect anything else from them but showing evidence why rent regulations do more harm than good.
Trevre, you point to a deeply flawed 1997 study on rent control at the Cato Institute, which equates gasoline price controls (and subsequent shortages) to rent controls, among other problems.
Trevre, it would help us understanding your thinking: do you believe the reasoning in this report?
Cato-Flawed Thinking #1: Staying in the same apartment for 20 years is not hoarding
Here's the excerpt:
"Hoarding occurs
when consumers buy supplies for future use as well as
present consumption. When uncertainty about future
supplies becomes general, consumers will begin to
stockpile. During the 1979 "gas shortage," for
example, entertainer John Denver was reported to be
building two 100-gallon gas tanks on his Colorado estate.
Ordinary motorists reacted the same way by "topping
off" their tanks at gas stations. The U.S.
government hoarded oil with the Strategic Petroleum
Reserve. Although hoarding may benefit individuals or
countries, it also puts upward pressure on prices. When
people buy for future use as well as present consumption,
supplies will be tighter and prices on the shadow market
will be driven even higher. Or, in the case of oil, if
rationing-by-waiting is already in effect, gas lines will
stretch even longer.
But the ability to hoard depends on the logistics and
durability of a product. Oil is consumed only once and
must be stored in facilities that are not easily or
inexpensively obtainable. During a famine, food can be
hoarded, but it must be stored under special conditions
to avoid spoilage.
Housing is one of the most durable commodities. A well-constructed building can last more than 100 years;
many buildings in Europe are centuries old. Housing can
be consumed today and still be consumed 10 or 20 years
later. And with government holding prices low through
rent control, a tenant who holds a rent-controlled
apartment has a strong incentive to stay in it his or her
entire life, even passing it on to descendants. Hoarding
of housing is not only possible, it can become the
natural order of things."
The flaw in this is the description of hoarding. If a person occupies an apartment this year and that same person occupies the same apartment for next 20 years, then that person is "hoarding" according to the Cato Institute. In fact, that person is NOT hoarding, they are consuming a resource at the normal rate of consumption for one person. Now if everyone were each renting multiple apartments (just like everyone topping their gas tank), that might be problem, but that's not happening (at any significant level), especially considering that housing cost is typically 1/4 to 1/3 of monthly disposable income in rent control apartments.
Cato-Flawed Thinking #2: Rent Control causes Low Vacancy Rates
While there might be a correlation between cities vacancy rates and rent control (Dallas high vacancy and no rent control, New York low vacancy and rent control), the report infers that rent control causes low vacancy, but does not explore the opposite idea: when low vacancies occur, then rent control becomes necessary. In other words, Cato is blind to the idea that some circumstances require rent regulation. (And considering that they believe rental units are similar to the commodity gasoline, their thinking is particularly naive.)
There are many other problems, too, with the Cato report. My guess is that the writers have not actually lived in an urban city to see first-hand why rent regulations might be necessary.
Trevre, you point to a deeply flawed 1997 study on rent control at the Cato Institute, which equates gasoline price controls (and subsequent shortages) to rent controls, among other problems.
Trevre, it would help us understanding your thinking: do you believe the reasoning in this report?
Cato-Flawed Thinking #1: Staying in the same apartment for 20 years is not hoarding
Here's the excerpt:
"Hoarding occurs
when consumers buy supplies for future use as well as
present consumption. When uncertainty about future
supplies becomes general, consumers will begin to
stockpile. During the 1979 "gas shortage," for
example, entertainer John Denver was reported to be
building two 100-gallon gas tanks on his Colorado estate.
Ordinary motorists reacted the same way by "topping
off" their tanks at gas stations. The U.S.
government hoarded oil with the Strategic Petroleum
Reserve. Although hoarding may benefit individuals or
countries, it also puts upward pressure on prices. When
people buy for future use as well as present consumption,
supplies will be tighter and prices on the shadow market
will be driven even higher. Or, in the case of oil, if
rationing-by-waiting is already in effect, gas lines will
stretch even longer.
But the ability to hoard depends on the logistics and
durability of a product. Oil is consumed only once and
must be stored in facilities that are not easily or
inexpensively obtainable. During a famine, food can be
hoarded, but it must be stored under special conditions
to avoid spoilage.
Housing is one of the most durable commodities. A well-constructed building can last more than 100 years;
many buildings in Europe are centuries old. Housing can
be consumed today and still be consumed 10 or 20 years
later. And with government holding prices low through
rent control, a tenant who holds a rent-controlled
apartment has a strong incentive to stay in it his or her
entire life, even passing it on to descendants. Hoarding
of housing is not only possible, it can become the
natural order of things."
The flaw in this is the description of hoarding. If a person occupies an apartment this year and that same person occupies the same apartment for next 20 years, then that person is "hoarding" according to the Cato Institute. In fact, that person is NOT hoarding, they are consuming a resource at the normal rate of consumption for one person. Now if everyone were each renting multiple apartments (just like everyone topping their gas tank), that might be problem, but that's not happening (at any significant level), especially considering that housing cost is typically 1/4 to 1/3 of monthly disposable income in rent control apartments.
Cato-Flawed Thinking #2: Rent Control causes Low Vacancy Rates
While there might be a correlation between cities vacancy rates and rent control (Dallas high vacancy and no rent control, New York low vacancy and rent control), the report infers that rent control causes low vacancy, but does not explore the opposite idea: when low vacancies occur, then rent control becomes necessary. In other words, Cato is blind to the idea that some circumstances require rent regulation. (And considering that they believe rental units are similar to the commodity gasoline, their thinking is particularly naive.)
There are many other problems, too, with the Cato report. My guess is that the writers have not actually lived in an urban city to see first-hand why rent regulations might be necessary.
Other than these two, what are the "deep" flaws in the article? A deep flaw should be readily apparent should it not? Yes the majority of the arguments made in the article support the negative effects of rent control I previously described. Give me another source that argues the opposite, I don't even care where it is from, I won't disregard solely based on origin.
#1 - They are using the comparison to petroleum as an analogy to illustrate the concepts associated with hoarding , but they admit it is not a perfect analogy. It is hoarding for three reasons. First they (rent controlled apartment owners) often secured the rent at significantly below a market price. Second they are staying in the apartment because they are paying a rent significantly lower than the market rate for that apartment almost indefinitely into the future (i.e., rent control). And third they lose nothing if the price of rent drops below what they are paying (whereas if you buy any other commodity, there is always a risk you may not be able to sell it/use it for a cheaper price in the future).
#2 - All the other arguments support that rent control doesn't increase vacancy, and why would it? Why would fixing the price of something lead to increasing supply? Its like saying raises minimum wage increases employment levels, it doesn't. This goes against basic laws of economics. Show me a case where rent control has improved housing and provided a larger supply of it. You won't find it because it doesn't exist.
Finally which king is deciding who is eligible and who is not for a rent controlled apartment? Shouldn't we give the rent controlled apartments to those with the lowest income and worst luck? Do you think any NYC bureaucracy can determine unbiasily who has this worst luck? If you owned a rent controlled apartment would you agree that someone worse off that you deserves it more and therefore you would move out to let them have it? I bet you wouldn't. Maybe you would argue we need to build more rent controlled housing to help this person. Who would pay for this, you? We would run out of bricks and mortar before you served 1% of the demand for these cases. No matter how bad off you are I could always find someone worse off than you, who deserved the rent control more which makes it impossible to define who deserves it and who doesn't. This point alone should be enough for anyone to not be in favor of continuing to support the regulations which are discriminatory.
My point is not that those in rent controlled apartments are bad people, it is that the policy on the whole negatively effects everyone not in a rent controlled apartment.
Either there's not enough affordable housing or employers are not paying employees enough to afford luxury housing. Those are the two explanations for why housing regulations are needed.
Under the present system, the landlord and the employer are king (with some regulations of course, but by and large we live in a society with at-will employment/pay scale and basically at-will housing, wherein landlords can pick and chose tenants and set rents to as high as the market can bear). Thus, the "balance of power" will always need to be leveled - either by unionization or employment regulations, or by housing regulations including anti-discrimination housing and credit laws.
Landlords and employers are not in business for humanitarian purposes. Far from it: By and large their sole reason for existence is to amass as much money as possible as quickly as possible for themselves, their families, their descendants. This money is not "recycled" into job creation - unless you consider having several residences filled with expensive art works in nice suburban areas or even private jets somehow to be "job creation" which it is not. There is no "trickle down" from the extravagant multiple mansions of the rich. If it were possible to re-enslave us and thus save having to pay wages, employers would do so.
Employers have no "ethics" - neither do landlords. Landlords would and do charge whatever the market can bear, and landlords have been known to "disappear" tenants living in rent-controlled apartments out of greed - so that the apartment can then be de-regulated.
Thus, under our present system, which is only slightly moderated or made more fair by means of employment and housing laws and regulations, the ordinary Joe is both underpaid for his work and constantly in danger of being laid off, and overcharged for his housing - when he is lucky enough to find anything he can possibly afford.
As well, it is a fact that landlords hoard empty apartments, deliberately in order to keep the supply of apartments low and thus jack up apartment prices even more. When landlords do this - hoarding vacant apartments to increase the scarcity of housing - Trevre approves, since Trevre thinks anything landlords may do such as overcharging on rent, providing substandard housing, harassing and even murdering tenants in rent-controlled apartments in order to get the unit vacated and deregulated, is OK.
Under our present system, if it weren't for our laws reining in the insatiable greed of landlords and business owners, citizens would be powerless - just like in the 19th C before the laws were implemented and housing and employment conditions and terms were abysmal.
Anyone who calls for abolition of housing and employment laws (just to mention a couple of areas of legislation of the many that protect the people from greedy businessmen) should probably go back to their exclusive cigar club where they can grouse with their fellow well-fed reactionaries over fine cognac about "the good old days" when they could exploit tenants and workers in an entirely untrammeled, merciless, and fascistic fashion.
It should be interesting in any case. Roosevelt Island isn't the only place facing this problem. Almost a million other apartments are under similar conditions and it is going to the supreme court this year.
http://www.nypost.com/f/print/news/opinion/opedcolumnists/man_home_is_the_government_castle_lAFJ8CnFxUel212XI32t5M
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