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Jimmy McMillan, the memorably coiffed founder of the Rent is Too Damn High Party who ran an entertaining mayoral campaign in 2013, is set to be evicted from his rent-stabilized East Village apartment. The issue at hand is that McMillan's landlord charges him with not actually using the apartment in question as his primary residence. The deeper issue here is that, even though McMillan is right — the rent is too damn high and housing in general is excessively expensive — the kind of regulatory solutions he favors such as the very laws that kept his rent well below market rates at less than $900 per month do more to promote legal wrangling than housing abundance.
Rationing scarcity
The kind of rent control laws that are a prominent element of housing policy in New York City and a few other places are a kind of bête noir of free market economics of a certain vintage. Most of these criticisms are outdated and overstated. But it is still true that rent control is not an effective solution to the problem.
Manhattan is a nice place to live, and it's clear that all else being equal, well over 1.6 million people would enjoy living there.
But currently, Manhattan only contains enough houses for about 1.6 million residents. Under those circumstances, any policy framework is going to lead to a situation in which many people who would enjoy Manhattan living are denied its pleasures. The "free market" solution is to ration access to these dwellings by price — the richest will get to live there. The Jimmy McMillan solution is to ration access by rationing — a handful of lucky individuals will be allocated apartments at discount rents. Rationing creates a strong financial incentive for recipients of discount apartments to illegally sub-let them at market rates (what McMillan seems to be accused of) and also creates a strong financial incentive for landlords to kick tenants out on trumped-up pretexts (what McMillan is accusing his landlord of doing).
The alternative: abundance
What should be on the policy agenda is a very different approach. Increase the number of people who can afford to live in Manhattan (or San Francisco; or Arlington County, Virginia; or Santa Monica, California; or New Jersey) by increasing the number of houses allowed by the zoning code.
An abundance-oriented approach is compatible with subsidies for low-income families and other strategies. But under any framework for rationing — whether by price, by lottery, or anything else — abundance reduces the strain and stress of the situation by reducing the scarcity. Abundance also creates a double economic windfall of middle class construction jobs, and a larger tax base. This raises wages and incomes and creates the opportunity for more provision of municipal services.
The challenge is devising an institutional framework that would generate abundance.
City- or county-level politicians are accountable to the voters who already live there. That means they primarily cater to the interests of risk-averse middle-class homeowners who want to avoid change at all costs and who don't mind expensive housing. As a secondary matter, they give some concern to lower-income renters who already live in town, and may help them out with some rent control. Newly arrived renters and the millions of Americans who don't move to a higher-wage-but-more-expensive city don't have much clout.
The best way to address these problems coherently would be for a higher level of government — most likely state legislatures rather than Congress — to step in and take account of the broader interest in enhancing the housing supply. Otherwise, the country's high cost areas are doomed to an endless cycle of litigation and regulation.
