Governing By Gimmick

New York City has a big-time housing shortage, and has had one for decades. So much so that a penny-ante demagogue named Jimmy McMillan ran a campaign for mayor a couple times based on one slogan.

The rent is too damn high!

A rational actor can easily trace the source of the shortage to excessive government meddling in the housing market. Rent control and rent stabilization laws skew the market in a variety of ways: distorting rents, keeping inventory off market, preventing redevelopment of aging buildings, and discouraging tenants downsizing when they no longer need bigger apartments. Zoning laws also prevent development of underutilized properties. Affordable housing mandates discourage builders. Regulations and draconian limits on recouping expenditures created tens of thousands of "ghost apartments" that sit empty because the economics of updating them to current codes make no sense for their owners.

A rational politician could look at all this and say "let's undo the things our predecessors have done that create this housing shortage."

Unfortunately, in a city full of voters who have been brainwashed into thinking that a - capitalism/greed are at the root of the problem, b - only government action can fix things, and c - results need to be near-instant, or at least "good intent" needs to be instantly apparent, solving the problem rationally is mostly a non-starter. I say "mostly" because, while screwing rent control (the prime culprit) is political death here, rezoning can be accomplished. Not without much sturm und drang, histrionics, gnashing of teeth, and payoffs to a zillion special interests, but it can be done.

Since breaking the rent control death spiral is impossible, deregulating is expecting the leopard to change his spots, and rezoning is an arduous process, a politician needing to show he or she is "Doing Something!!" is left looking for "somethings" that can survive the local political landscape.

Behold, the newest gimmick from our Best-and-Brightest, a plan to offer funding to single family landlords so they can build Accessory Dwelling Units (ADUs) on their underutilized properties. As in, convert that basement or garage or attic space into an apartment, or build a cottage in your back yard.

Starting out as a 15 unit pilot program, the "Plus One ADU Program" relies on a $2.6M state grant matched by money from the city's tax coffers. It limits who can apply with an income cap, limits the rent the landlords can charge, and limits who can rent those new units via another income test. It is being marketed as support for "granny flats," aka properties owned by aging New Yorkers who either don't need the full size house any more or need some sort of income stream in order to afford keeping those homes.

As Howard Husock writes in the NY Post, it's bribing a handful of New Yorkers to build housing.

It's a stunt, one that the mayor and the governor can point to when election time rolls around again so they can claim they "Did Something!!" about the housing shortage. Without doing any heavy lifting. Nothing's easier than spending Other People's Money on show-boating and gimmickry.

Meanwhile, the sources of the shortage remain intact. Rent control and its less ambitious cousin rent stabilization go unchallenged (pending two cases under Supreme Court petition for certiorari). Amok regulators keep squeezing property owners and developers out of building more inventory. Zoning changes that would open up space for more units to be built happen too rarely. In short, none of our Best-and-Brightest want to do anything that might liberate the market forces that would help alleviate the problem.

We all know they don't believe in the market. But, unlike Santa Claus or the Tooth Fairy, not believing in market forces doesn't relegate them to irrelevance. I paraphrase Yakov Smirnoff in noting that market forces always find you. This is why rent control schemes don't work. This is why trying to zone or regulate things into existence doesn't work. Government coercions don't produce desired outcomes, because they fail to take into account the behavioral changes they induce.

Because too many of us have been inculcated (just read the opening paragraph of this bit of leftist garbage if you want to make your blood boil) and conditioned into thinking that market forces, rather than government, are evil, our politicians get away with reinforcing that fallacy and governing by gimmick.