“In America, housing policy rests on two mutually exclusive goals: we want our principal investment vehicle to be home equity, and for the value of our homes to rise indefinitely and astronomically. But then, we also want the cost of houses to be more affordable. For some reason, nobody seems to consider that we can’t have houses worth more and also cost less. We don’t have a quantum housing market. What we have is supply and demand, and it applies to housing whether we like it or not.
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Starting in the 20th century, politicians decided everyone ought to own a house. A man who owns a house has a stake in his community and is less likely to flush alligators down the toilet or contract communism. That idea kicked into high gear during the Great Depression, when the New Deal created federal subsidies, loans, and tax incentives to help people buy homes.
Today, our tax structure continues to encourage homeownership as a national investment strategy. You can deduct the interest on up to $750,000 of mortgage debt from your federal taxes. And you can deduct much of your local and state property taxes from your federal income taxes. First-time homebuyer credits exist. And because the federal government backs 30-year mortgages as a guarantor, banks are less concerned about risk and charge lower interest.
Add it all up, and Washington subsidizes homeownership to the tune of around $150 billion per year.
On top of all that, when you sell your subsidized home, the first $250,000 of profit—or $500,000 if you’re married—is exempt from capital gains taxes.
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Renters get none of these benefits. No subsidies on the way in, no exemptions on the way out.
So it makes perfect sense to get a mortgage and build equity. But once you have that equity, you will want to protect it. If someone builds an apartment complex across the street, your property value may go down. Cheaper housing near your house means your house is worth less.
That’s why America’s 90,000 local jurisdictions fight to ensure cheap housing never threatens existing home values. “Not in my backyard” (NYMBY) advocates make it illegal to create inexpensive housing through minimum lot sizes, single-family zoning, height restrictions, historic preservation rules, outright bans on apartments, and density limits.
And because of supply and demand, restricting new housing keeps prices high. Build more homes in a city, and prices fall. Even when zoning boards aren’t deliberately conspiring to restrict supply, that is exactly the effect.
So American housing policy literally cannot achieve its stated goals. You cannot have housing serve as the nation’s primary wealth-building tool and also expect affordable housing for everyone.
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Japan has far less regulations and subsidies around housing, and therefore builds more housing and keeps housing affordable.
One reason housing is so expensive is because we don’t have enough houses. One reason we have fewer houses is because local regulations make building more expensive. Until local politicians get serious about limiting regulations, or the federal government withholds funds to localities that do not do so, these politicians are not serious about housing affordability.
“On one of their units, the Lulgjurajs are able to charge monthly market-rate rents of $2,600. For an identical unit that became vacant in 2019 after a long-term tenancy, they can only charge $710 per month.
The costs of legally mandated repairs to that unit—which would include replacing the kitchen and bathroom, performing lead abatement, and leveling the floors—exceed $100,000. Yet the 2019 law permits them to reclaim less than half of these costs, let alone raise rents to something approximating market rates.
Without the ability to recover the costs of legally mandated repairs, the unit currently sits empty.
In addition to alleging a taking, the property owners’ lawsuit also argues that the wildly different rents allowed on units, dependent solely on how old the unit is and when it became vacant, is arbitrary and irrational.”
“The city has the nation’s most regulated housing sector and the largest stock of government-owned and subsidized housing, and yet progressives blame its real estate troubles on the free market.
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These buildings are falling apart, with an estimated $78 billion repair backlog, including “non-functioning smoke detectors, antiquated electrical components, damaged interiors, missing child guards…deteriorated roofs, deteriorated pumps, and leaking pipes,” according to a recent report. The system for making repairs in New York public housing is rife with corruption. Heat and hot water service are routinely interrupted. The elevators, which are crucial in multistory buildings housing elderly residents, are constantly breaking down.
When public housing was created, it was assumed that the residents would be two-income, working families whose rents would cover upkeep. That plan failed as stable families opted for home-ownership. Today, only 2 percent of New York public housing households include two adults with children, and just a third of households report income from wages.
The perverse incentives of public housing help explain why the city is perennially plagued by shortages. According to data from the U.S. Department of Housing and Urban Development (HUD), fully 30 percent of the city’s public housing residents are “overhoused,” meaning single adults are living in 3- or 4-bedroom apartments. About 10 percent of residents have lived in their units for more than 40 years.
This problem also applies to rent-regulated units: Artificially cheap rents mean tenants don’t vacate after their kids grow up and move out, leading to inefficient use of a limited stock.
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The “affordable housing” program championed by Mamdani will likely take the form of new private apartment buildings setting aside units for lower-income families, whose rents are subsidized by the federal government. These programs require developers to navigate extensive red tape, which adds cost and slows housing production. The system allocates units via lottery, so it’s based on luck.
Similarly, rent-regulated units in Manhattan go to tenants lucky enough to get them, or, in some cases, inherit them from their parents or grandparents. Since New York lawmakers have made it so hard to evict tenants for nonpayment of rent, landlords are incentivized to pick high-earners to inhabit this scarce resource.
As mayor, Mamdani would select the members of the Rent Guidelines Board, which sets price increases on nearly 1 million apartments. According to Census data, turnover in rent-regulated units is half that of market-rate units, which is one of the reasons the city’s overall turnover is 46 percent lower than the national average.
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thanks to a 2019 law that made New York’s rent regulation laws far more stringent. Some 200,000 rent-regulated apartments, many in need of ongoing maintenance, don’t generate enough income to cover basic operating expenses, according to Mark Willis of New York University’s Furman Center. He also noted that “such rent shortfalls are likely to continue to grow over time, potentially exponentially, jeopardizing the long-run economic sustainability of these properties.””
“There are indeed many weird rules that drive up the cost of housing that could be safely eliminated. Yet it’s inaccurate to say, as Ossé and Glazer imply in their video, that the elimination of a few weird rules will meaningfully combat the yawning shortage of units they identify as making New York City unaffordable.
Much broader deregulatory reform that goes beyond the elimination of a few “bizarre rules” would be required to eliminate that shortage.”
“it would appear this would be another “emergency” that the president will declare to force through policy changes that in nonemergency times would require going through the federal rule-making process or even, gasp, Congress.”