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RENTS FOR ONE-BEDROOM APARTMENTS IN MANHATTAN HIT A RECORD HIGH OF $5,100 IN
JULY. HERE’S WHY

TOPICS:Brad PolumboHousingNew YorkReal EstateregulationsRent

August 16, 2022

By Brad Polumbo

Think your rent is too damn high? Well, taking a look at the latest figures out
of Manhattan might make you feel better by comparison.

In July, the average rent for a one-bedroom in Manhattan rose to $5,113, CBS
News reports. That’s an astounding $1,000 more than a year ago and a new record
high. These levels of rent are astronomical and impossible for all but the most
affluent New Yorkers to afford.

But before you blame capitalism or greedy developers, let’s take a deeper look
at how rents in New York City got so out of control.




THE BASICS OF RENTAL MARKETS AND SUPPLY & DEMAND

How are rental prices determined in the first place? Well, in a free market,
supply and demand interact to reach a price. If there’s far more demand for
housing than there is supply in a given area, rents will be high, at first. But
those high rents will encourage more developers to come in and build housing,
increasing supply and ultimately bringing the price down.

Yet in places like New York City, local governments have made that adjustment
impossible through restrictions on supply. The result of artificially
constrained housing supply in a high-demand area is as predictable as it is
perilous: high prices and a housing crisis.


HOW HAS NYC RESTRICTED SUPPLY?

There’s a long and complicated history of government meddling in New York City’s
rental market. But here are a few of the biggest ways local officials have
hindered the market’s ability to provide affordable housing.


1. SINGLE-FAMILY ZONING & HEIGHT LIMITS

Through zoning, the local government has declared that large swaths of the
city’s property may only host single-family residences. This doesn’t make much
sense in a city with millions of people.

According to the advocacy group Open New York, “Roughly 15% of New York City’s
land area is still zoned as single-family-only land, banning apartments or
multiple-unit dwellings of any size, including those with only two units.” These
restrictions are highly inefficient and prevent the development of large-scale
housing, like apartments, that could greatly increase the supply compared to a
single home.


EASIEST WAY TO GET YOUR FIRST BITCOIN (AD)

So, too, arbitrary restrictions on height limits remain in place on many NYC
properties. These force landlords to provide fewer apartments per lot than
they’d otherwise be able to, fueling the affordability crisis and pricing New
Yorkers out of homes, often in the name of scenic beauty or protecting special
interests.


2. HIGHLY RESTRICTIVE PERMITTING PROCESS

New York City’s government has made it very hard to get approval to build new
housing.

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“New York City housing permitting has cratered to lows not seen since the Great
Recession, and it’s not for lack of demand,” housing policy expert Nolan Gray
told me. “NYC [has] had some of the strictest zoning rules in the country,
making it hard to legally build much of anything.”

Look, for example, at the below graph showing how much housing (relative to
population) various cities have permitted in recent years. You’ll see New York
City at the very bottom.

Image Credit: housingdata.app


THIS WAS PERFECTLY PREDICTABLE

With the supply of new housing so blatantly throttled, it’s no surprise that
rents have skyrocketed. It’s exactly what the laws of economics predicted, given
the myriad government restrictions on NYC’s housing market.

But, unfortunately, many unknowing onlookers may look at the egregious $5,000+
rent rates popping up in Manhattan and blame the market, when, in fact, it is
the government’s constraints on the free market that are to blame. They might
even respond to the manifest injustice of this affordability crisis by
supporting more of the nice-sounding, big-government policies that got us into
this mess.





Yet, hopefully, people can look deeper and see the real root causes at play
here. Because New Yorkers will continue to suffer until policymakers wake up—and
finally free the rental market once and for all.

Source: FEE

Top image: Pixabay





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