Maggie's Farm

Photo is from this East Village (11th St) 2 BR, 1000 sq. ft condo for sale for $1.8 million.

Megan McArdle wrote this: How New York Could Get More Affordable Housing. I have a few reactions to her post, none of them disagreements.

First, I think she is mainly talking about Manhattan real estate. There is a lot of NYC outside of Manhattan, and the prime fashionable neighborhoods of Manhattan (and Brooklyn) will never be "affordable" to the middle class because, given the barriers to new construction, demand will always outstrip supply. Even so, there are reasonable neighborhoods in places like Inwood, Harlem, Washington Heights, Spanish Harlem, Little Italy.

Second, there are few free markets in housing in NYC except at the higher end (ie condos in the 2+ million range). Even there, it's not really a free market because the barriers to entry for builders are so high (legal, regulatory, community review, architectural boards, time, political dealings, etc). Donald Trump, with his huge legal teams and political connections, can get that sort of thing done, but there are few of him and, even so, supply will never catch up to demand.

Third, NYC's approach to "affordable" housing since WW2 has been housing projects for the poor and rent control and/or entire rent-controlled developments (eg Stuyvesant Town or Tudor City) for the middle class. The former destroyed neighborhoods and was a catastrophe, and the latter (ST as an example) is bankrupt. Furthermore, rent control, instituted temporarily as a post-war adjustment, now has a huge and vociferous constituency (of course). The more recent efforts are to require some time-limited below-market rentals in new construction.

Altogether, many things conspire to keep rental and condo prices high, even out in the boroughs. Since massive deregulation will never happen in NYC, supply will never catch up with demand because NYC is a world-wide magnet for the energetic, the prosperous, the young, and for those who just want a toe-hold in the greatest and most interesting city in the world. (And if supply ever did catch up with demand, a lot of people would lose a lot of money.)

Government helped create the problem - if it is a problem. The Dems want to fix their problem with even more controls and takings. Typical.

My final thought is this: High prices mean high demand. That's a problem few city centers have these days. It's a good kind of problem to have. It's like when I hear people complain about parking in my village, and feel I need to remind them that there are tons of towns where you can park anywhere downtown - but would you want to live where nobody wants to go?

For another example in the Boroughs, here's a Brooklyn house that just sold.