Tuesday, 5 November 2013

A lesson for London from New York - it's about housing supply


 Here's Scott Bayer talking about New York:

Meanwhile, the housing that zoning does allow is faced with substantial barriers. New developments must pass through the planning commission, the city council, and often-reactionary community boards, and undergo environmental and code reviews that last years. Economist Randal O’Toole says that this approval process, which goes hand in hand with substantial lobbying by developers, adds $312,000 in costs per home. Such “planning penalties”—defined as the price of navigating bureaucracy—are major expenses alongside New York City’s already-high land and construction costs.

And while we're about this, the solution doesn't lie in rent controls or other such regulations - they will just constrain supply making the matter worse - here's more on New York:

...officials have imposed various price controls on developers that practically every economist—from Milton Friedman to Paul Krugman—agrees are counterproductive. Rent control, an imperishable World War II policy, has led to widespread apartment under-maintenance by landlords who see minimal potential profit. Requirements that developers receiving height bonuses provide affordable units, so as to be “inclusionary,” force them to either raise prices on market-rate units or demand government subsidies, to cover losses. Both measures discourage supply: Rent control does by preventing tenant turnover, thus delaying the replacement of old buildings with new ones; affordability mandates do the same by lessening profits, a strong recipe for inaction.

Yet rather than face the truth - there simply aren't enough houses in London (of any sort of tenure) - people blame the problem on landlords, foreign buyers, lack of government funding and probably aliens.


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