Latest / The Mark Simone Show / Ken interviews Senior Fellow at the Manhattan Institute Allison Schrager.

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Ken interviews Senior Fellow at the Manhattan Institute Allison Schrager. · The Mark Simone Show

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  Speaker 1: Now nine till noon weekdays the mark simone show on
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  Speaker 1: 710 wor guest hosting for mark today here's ken rosato
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  Speaker 1: it's so good to be with you on a friday
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  Speaker 1: you know many liberals love to throw around the word
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  Speaker 1: affordability affordability especially when it comes to home affordability probably
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  Speaker 1: the single most high, if you will, the highest cost
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  Speaker 1: that we have. Well, their solution, have the government order
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  Speaker 1: landlords to charge a fixed amount for rent. We call
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  Speaker 1: it New York rent control, right? And Mayor Mamdani's own
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  Speaker 1: rent guidelines board voted seven to one recently to freeze
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  Speaker 1: the rent for a million rent stabilized apartments, lofts, and hotels. Now,
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  Speaker 1: if you're the renter, you think, all right, that's pretty
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  Speaker 1: darn good. But the reality is, That makes housing availability
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  Speaker 1: practically non-existent because nobody's going to leave their rent-controlled apartment
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  Speaker 1: for a unit that will continue to escalate in price.
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  Speaker 1: It also forces up the price of other units throughout
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  Speaker 1: the city. Well, to talk more about this is somebody
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  Speaker 1: who knows a lot more about it than me, economist
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  Speaker 1: and Manhattan Institute senior fellow, Alison Schrager, to help us
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  Speaker 1: better understand. Good morning, Alison.
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  Speaker 2: Morning. Thanks for having me.
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  Speaker 1: Well, thank you for coming back on. We were supposed
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  Speaker 1: to have Allison on a couple of weeks ago, and
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  Speaker 1: then this little thing called the Mangione trial happened, and
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  Speaker 1: that blew up, and we had to ask Allison to
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  Speaker 1: come back another day. I appreciate your patience, so thank
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  Speaker 1: you for that. Why doesn't rent control actually help keep
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  Speaker 1: prices for rent low? Because doesn't it actually impact availability
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  Speaker 1: for everybody else?
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  Speaker 2: Yeah, and that's part of the problem. If you live
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  Speaker 2: in a rent-stabilized apartment, obviously you do end up with
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  Speaker 2: lower rent because your landlord can't increase the rent despite
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  Speaker 2: the fact we're in a rising cost environment. The problem
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  Speaker 2: is it increases price for everyone else. Part of it is,
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  Speaker 2: as you said, people are less likely to move, and
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  Speaker 2: you end up with this sort of disconnect of maybe
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  Speaker 2: you're an older couple. At one point, you got a
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  Speaker 2: three-bedroom apartment that was rent-stabilized. You raised your kids there.
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  Speaker 2: And now it's cheaper to stay there than to maybe
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  Speaker 2: move to a one-bedroom apartment now that your kids are
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  Speaker 2: out of the house. So you end up with a
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  Speaker 2: couple and a large apartment. In the meantime, you have
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  Speaker 2: families who can't find a new apartment. So that ends
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  Speaker 2: up increasing costs for everyone. It also discourages new developers
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  Speaker 2: with any incentive to build. I was just talking to
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  Speaker 2: a real estate developer last night who has been trying
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  Speaker 2: to get new projects and he can't get any financing
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  Speaker 2: because everyone feels like this is an environment that's just
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  Speaker 2: not going to be friendly to developers. You're asking landlords
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  Speaker 2: to lose money on all of these units, which also
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  Speaker 2: means if they do have a market rate unit, they
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  Speaker 2: have to increase costs on that to cover the others.
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  Speaker 2: it's really just a big mess and it's not like
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  Speaker 2: there's any mystery. You know, politicians have been trying this
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  Speaker 2: for years. It's been a lot of cities and it
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  Speaker 2: consistently increases in higher prices and less availability.
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  Speaker 1: Well, to reinforce what you're saying, Allison, the average monthly
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  Speaker 1: rent in Manhattan just skyrocketed to nearly $ 6, 700 a month.
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  Speaker 1: That's up 10% from last year. Inventory dropped down over 20%
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  Speaker 1: in Manhattan compared to the same time last year. That's
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  Speaker 1: a massive amount when you have increases in numbers of people.
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  Speaker 1: And the rental vacancy rate is now at near historic lows.
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  Speaker 1: And that, of course, creates fierce competition and bidding wars.
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  Speaker 1: So when a free market economy isn't allowed to be
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  Speaker 1: a free market economy, it doesn't work at all, right?
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  Speaker 2: Yeah. I mean, I can only assume, like, these people
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  Speaker 2: knew what they were getting. I think the important thing
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  Speaker 2: with that statistic is that's the rent for new units,
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  Speaker 2: for people coming in. Average New Yorkers actually pay as
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  Speaker 2: much lower because you end up with all these have-and-have-nots.
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  Speaker 2: You know, there's a million rent-stabilized units. Those people are
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  Speaker 2: paying much less. But if you want to enter the
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  Speaker 2: New York housing market, you're going to pay a huge premium. So,
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  Speaker 2: I mean, I think it's like there's not a lot
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  Speaker 2: economists agree on. I was actually in Aspen with a
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  Speaker 2: bunch of very left-wing economists when it was announced that
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  Speaker 2: this rent freeze was going to happen, and we were
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  Speaker 2: all horrified because this is something that happens again and again,
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  Speaker 2: and it doesn't work, and it doesn't help people. And, like,
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  Speaker 2: a lot of these policies, they tend to often sort
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  Speaker 2: of penalize lower-income people more because a lot of people
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  Speaker 2: who have rent-stabilized units are actually middle- or high-income people. Mm-hmm.
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  Speaker 1: Isn't the best way to do this, it's supply and demand.
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  Speaker 1: Lower the restrictions on landlords. Give the incentive to build
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  Speaker 1: more units. Make it more affordable for developers to come
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  Speaker 1: in and give them incentives, maybe tax breaks, etc. Am
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  Speaker 1: I just a naive moron? Or by doing that, wouldn't
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  Speaker 1: that increase the availability of units in the market and
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  Speaker 1: therefore bring down the price?
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  Speaker 2: No, it really is that simple. You know, this isn't
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  Speaker 2: like a complex economic problem here. It really is that
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  Speaker 2: simple in that rents are high in large part because
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  Speaker 2: there's not enough supply. And also the other part is
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  Speaker 2: all these regulations and distortions from all these sort of
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  Speaker 2: price controls. So if you just got rid of a
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  Speaker 2: lot of these distortions and then made it more economical
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  Speaker 2: to build more housing, that would be how prices would fall.
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  Speaker 2: I mean, this is what we're seeing in cities like
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  Speaker 2: Austin or Houston, where it is much cheaper to rent.
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  Speaker 2: Because there are these arcane restrictions on supply.
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  Speaker 1: 710WOR, the voice of New York. Ken Rosato in on
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  Speaker 1: the Mark Simone Show with economist and Manhattan Institute senior
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  Speaker 1: fellow Allison Schrager. With just a minute or so left here,
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  Speaker 1: I just wanted to quickly tap into the Mamdani market concept.
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  Speaker 1: Wouldn't it be more... beneficial to say lower income New Yorkers.
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  Speaker 1: If the mayor came up with an app and gave
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  Speaker 1: lower income New Yorkers an app that had coupons that
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  Speaker 1: you could scan at say the cash register of existing supermarkets.
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  Speaker 1: So you wouldn't have to create a one or two
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  Speaker 1: or $ 300 million infrastructure of city-owned markets. If you truly
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  Speaker 1: wanted to distribute food at a lower price to New
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  Speaker 1: Yorkers who can't afford it, wouldn't that make more sense?
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  Speaker 2: It would make so much more sense. I mean, we
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  Speaker 2: already have a food stamp program, and if the city
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  Speaker 2: feels that's inadequate and they're having cuts to it, they
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  Speaker 2: can further subsidize it. I think he's also concerned about
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  Speaker 2: the fact that some grocery stores don't sell enough healthy food.
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  Speaker 2: The evidence is that that's what people want to buy,
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  Speaker 2: and that's why that store is stuck. So there's also
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  Speaker 2: programs to try to encourage people to buy healthier food.
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  Speaker 2: There's all sorts of things we could do that are
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  Speaker 2: a lot less expensive and better targeted to the people
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  Speaker 2: who need help.
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  Speaker 1: It just makes sense. I know on the one side,
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  Speaker 1: he's saying there are food deserts, areas that don't have
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  Speaker 1: available markets. Then on the other side, he's saying he
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  Speaker 1: needs to build the markets where there are markets to
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  Speaker 1: force the other markets to lower their prices. But when
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  Speaker 1: markets are working on a margin of 3%, how much
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  Speaker 1: can they lower their prices realistically when the city is
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  Speaker 1: only able to lower its prices by stealing tax dollars
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  Speaker 1: and subsidizing?
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  Speaker 2: Well, now he's saying he's going to give those stores
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  Speaker 2: extra money. I mean, it is just madness. And there
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  Speaker 2: aren't food deserts in New York. I mean, like, you're
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  Speaker 2: in a very dense city with a lot of commercial.
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  Speaker 2: I mean, there are food deserts in America, but they're
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  Speaker 2: not here.
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  Speaker 1: You might have to walk two blocks, damn it. Alison Schrager, economist,
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  Speaker 1: Manhattan Institute senior fellow. We've got to have you on again.
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  Speaker 1: You were fantastic. We appreciate you taking the time. Thank
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  Speaker 1: you for having me.
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  Speaker 2: Thank you.
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  Speaker 1: 710WOR, the voice of New York, partly cloudy today right
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  Speaker 1: a bad weekend. And we will take your calls next.
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  Speaker 1: Ken Rosato in for Mark on your Friday.
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  Speaker 2: 710WOR.