Submitted by Jason Pappas, Dec 4, 2006 16:47

The high price isn't labor, land, or demand; it's regulation. If the height of buildings is restricted, as you believe it must, where are people to go? There are restrictions in every community and on undeveloped land. You can't have greater supply if you have restrictions. And, as you note, with population increasing (by about 10% per decade) you'll have to build higher in the city and/or allow more than just single family homes in the suburbs.

It's the zoning and environmental laws that add the cost by limited supply in the face of demand. The demand is a give. It's supply that's lacking. Supply can meet demand if the approval process is eliminated or trimmed to a few weeks and there are liberal zoning laws. A workforce can be trained, etc. But Manhattan saw it population double time and time again without these problems until the last fifty years.

Why build for the poor? I used to live in a six bedroom apartment in Washington Heights when I was a student in City College of New York (CCNY '73) that was clearly built for a rich family. What used to happen when there were fewer regulations is that housing would be passed down to the poor and often very good housing. But if you don't allow building for the rich, the poor will be left with fewer alternatives as the rich scoop up the available supply. I once lived in a tenement in Greenwich Village with laywers, doctors, etc. This would built 100 years ago for the poor and it used to be decried as substandard housing. The poor can't afford to live there now.

Increasing the cost of housing by 20% (and let's drop the subsidies since that's just another way to extract payment from the population as a whole) is a very stiff price to pay for tokenism. The few families that benefit from the negligible number of apartments created in this manner comes at a cost of pushing the cost of housing 20% higher for everyone than what it would have been if regulations were liberalized without the "extortion" from developers (and without subsidies.)

This is an example of Bastiat's law of "seen and unseen" effects in economics. The 19^th century French economist was seminal in explaining how people focus on only the "seen" effect of a law and not the unintended consequences of what would have been otherwise. Henry Hazlet, a former editor of the New York Times and economic columnist for Newsweek, explains this subtly in his book "Economics in One Lesson." Finally, the Manhattan Institute had a study, reported in the New York Sun, that claims that regulations and taxes are responsible for doubling the price of housing including rents.

If you put restraints on housing construction everyone loses. We need supply no matter who it is built for and developers will build for the highest bidder. Let them; as long as they build.

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