Anyone who lives in, or has looked for an apartment in, Manhattan has asked himself or herself the same question: “Why is Manhattan so expensive?”The question has been taken as the title of a report issued yesterday by the Manhattan Institute. Penned by a professor of economics at Harvard University, Edward Glaeser, and a professor of real estate and finance at the Wharton School, Joseph Gyourko, the report concludes that the reasons aren’t what one might think.

While the intuitive assumption many New Yorkers make is that real estate prices are bound to be high on a small island with limited space and a wealthy population, that explanation only takes one so far. The rest of the equation is excessive government regulation. In other words, if you live in Manhattan — and not in a rent-controlled apartment — the government is to blame for your high rent because it has made it too difficult for developers to get permission to build new housing.

The authors show this by applying basic economic principles to the housing market. The most important concept to grasp here is that the price of any product ought to be roughly equal to what it costs to make that product — at least in a competitive, free market. Take the example of a hot dog. If it costs a man with a cart in the street $1 to produce each hot dog he sells (taking into account the cost of the dog, the bun, the condiments, maintaining the cart), he won’t be able to charge customers much more than $1 a dog. If he tries to charge $1.50 for a $1 hot dog, some other vendor with a cart will sell it for $1.25. Someone else might even sell it for $1.10. Eventually, the market price for a hot dog is going to be awfully close to $1.

Why, then, the authors of the study ask, was the average price of a condominium in Manhattan $468 a square foot between 1984 and 2002,when the cost to build a condominium in the same period was about $200 a square foot? The answer is that the housing market is not free. If it were, more people would be building housing, and the price of each square foot would be less than double what it cost to build that square foot. There could be factors other than government interference that would explain the difficulty.

If, for instance, Manhattan were to run out of land, that would make it impossible to build new housing and would make the existing housing extremely valuable. The authors, however, reject this. “Even if vacant land is rare, new units can be supplied by ‘building up,'” they write. It could also be the case that there are not enough companies competing to build housing. But there are more than 1,000 multi-family housing builders in New York state.

What we’re left with is overregulation. The Glaeser-Gyourko study is not comprehensive. There are other factors. Building costs, used as the baseline of the study released yesterday, are inflated by the cost of union labor and excessive building regulations. Furthermore, rent control has given builders less incentive to build since so many apartment dwellers are not in the market for new housing — they don’t want to give up their sweetheart deals.

But the crux of the problem appears to be the maze of zoning regulations. Those looking to build new housing in the city are forced to go through an almost endless series of reviews and applications, including environmental impact statements and something called the Uniform Land Use Review Procedure — the procedure is no shorter than its name. And many projects will be harassed legally and politically by community and activist groups.

Alleviating such problems will require a streamlining of New York’s zoning regulations, but don’t expect any such move soon. Mayor Bloomberg has been too busy pandering to those who think New York City is overdeveloped. But New Yorkers might want to keep in mind a simple equation: more development means more housing, more housing means lower rents. This leads to another question. Couldn’t Manhattanites use the relief?