Tuesday, August 12, 2014

Why Is the Rent Too Damn High in New York? Don’t Blame Housing Supply

Pulling the housing affordability debate out of the theoretical clouds at Pacific Standard magazine.

Theme: Housing affordability geography.

Subject Article: "Recent Owners’ Equivalent Rent Inflation Is Probably Not a Blip."

Other Links: 1. "Fleeing New York and San Francisco for ‘Cleveland’."
2. "Housing Affordability and Supply Side Economics."
3. "Demographics: 1; Gentrification Hysteria: 0."
4. "Gentrification: white people following white people."
5. "Where Have All of New York City’s Small Builders Gone?."
6. "Affordable Housing: Geography of Supply and Demand."
7. "Superstar Neighborhoods and the Concentration of Wealth."
8. "Turning Real Estate Market Fundamentals on Their Head."
9. "Superstar Cities."

Postscript: One of the conclusions from the Cleveland Fed analysis of Owners’ Equivalent Rent (OER) inflation, "High vacancy rates do not appear to slow OER inflation down appreciably". That's not a ringing endorsement for increasing housing supply in order to make rents more affordable. Theoretically, increasing supply makes sense. Practically, it may not work. The Fed's analysis is hardly definitive. It still beats the unfounded policy suggestions coming from supply-side ideologues.

1 comment:

Jaja said...

I have two criticisms of your Pacific Standard article. First, even if the vacancy rate has stayed the same, it doesn't mean that demand hasn't changed. Most of New York City has a low vacancy rate and had a low vacancy 1995. If you go to http://projects.nytimes.com/census/2010/map, you can see that most of the city has less than 10% vacancy rate, including Brownsville and much of the South Bronx. In fact, some of the highest vacancy rates are in Midtown, which has one of the highest demands. Therefore the correlation because vacancy and demand is not always straightforward.

Also, housing prices in New York City are high even in the non-gentrifying neighborhoods. If you go to http://public.tableausoftware.com/profile/zillow.real.estate.research#!/vizhome/shared/ZDGWJDK74 you can see that housing prices in even the least desirable New York City neighborhoods are significantly higher than in New Jersey. The influx of immigrants has driven up housing prices even though most of the immigrants are low-income. Obviously supply is not really an issue in most other cities, but in New York City it would contribute to affordability even in the non-gentrifying neighborhoods.