10 Sep “Rent Control and the quality of Life”| SharkStreet Radio on 970AM TheAnswer
Watch the interview here: https://youtu.be/3ZDoXEtHfMw
Bill Staniford 4:12
Happy summer Saturday afternoon everyone out there. I would like to welcome you to this edition of SharkStreet, and we’ve got a great show for you today. We’re going to be bringing in Michael Hendricks who is the director of local and state policy at the Manhattan Institute and we’re going to be doing a deep dive on some some some pretty interesting topics mostly focusing on rent control. But, you know, I was driving in today and it’s, it’s, it’s absolutely wonderful to be back in the city, and maybe it’s wishful thinking maybe I’m just trying to be hopeful but it did seem like things were coming back together a little bit there was more people on the road people were walking around the streets of Manhattan and that was a positive sign. Got you know i’m just i’m super interested in things getting back to normal and I just, I hope for the best here it’s going to be. It’s going to be a rough fall I have a feeling, and anything that we can do to sort of relax and regroup right now. I hope everyone out there is enjoying the day this is I guess we you know we got some weather coming in here soon with this new hurricane but I think it should be pretty mild. And it’s just a it’s an excellent day today to enjoy the beach and hopefully people can just relax a little forget about coronavirus and everything that’s happening and sort of enjoy themselves. But I was driving in today and I was thinking about the real estate industry which I always think about the real estate industry and I was thinking about how much I love it and when I got into it and why I love it and I was thinking back to the year of 2005 when I started out in Property Shark as the vice president of sales. And we, we decided that we were going to start to do some, some real estate events we were going to call some people out and we’re going to see if we could get some people together that maybe wanted to socialize and we rented out a tiny little bar in Williamsburg. And the next thing we know it was completely packed, I mean there was you could not get in people were busting at the seams. And I said, Wow, I mean this is this is this is my type of thing I love it, I love people. And that’s what I love about the real estate industry that’s that’s one of the main things that I love about it and I talk about this a lot about who the people are that work in this industry, and how they’re the salt of the earth. These are people from all different walks of life we have planning people with their fancy degrees from the fancy institutions and that’s great there’s a place for them in the finance side but then there’s everybody else and you know I’m a former US Marine and, and there are people that that work in the industry incredibly successful that don’t even have high school degrees and you know what we don’t care. And the reason why we don’t care is because this industry is practical. If anything were practical. We want to get things done anything that works is good, we don’t necessarily care about all the frivolous things as long as it actually is, is a good thing then you know we want it. And the last thing that I really like about the real estate industry is there’s no bad time. Now, you may think that’s crazy, but it’s true. And the reason why it’s true is and there may be, there may be bad times in certain industries. Clearly this is a bad time for retail. Clearly this is a bad time for for the restaurant industry. There can also be bad time for certain locations there could be towns that go out of business where nobody wants to live there anymore and…and there could be bad times for certain sectors even right so, but the problem the, the fact is is that there’s always something good going on, and if prices come down that’s great to price it you know if prices come down it’s great time to be a buyer, if prices go up it’s a great time to be a seller. And so there’s it’s, it has everything to do with our life. Again, I mean it always, it has everything to do with our life, everything that we do. Touch feel any time that we participate in the world we’re participating, you know, even if we don’t leave. Obviously our homes, we’re still participating in real estate, the one most important thing at least I think is the most important thing about the industry is the data now and this is. And, you know, maybe that’s self serving because I come from a data background clearly property shark was one of the original real estate data aggregators data providers, and the insights that now, people can see can tell you can dictate what the strategies are so you know really coming from just a position of aggregating the data and then synthesizing that data into intelligence, and then taking that intelligence and turning it into strategies. That is the essence of everything that I think about in the real estate space and, and, you know, one of the, one of the greatest aspects. So, the main topic that we’re going to be talking about today as I stated is going to be rent control right and and rent stabilization and how that affects not just the industry but how that affects our lives and everybody else’s life around it. And, you know, what is rent control when you really think about what is rent control what is rent stabilization and the fact of the matter is laws right. These are our elected politicians that try to craft laws for certain reasons right and then, and we can debate all day long whether those are good reasons or bad reasons and that’s and that’s not really the point. And so one of the things that I’m not going to do today is I’m not gonna sit here and take a position I have a position on rent control, but that’s because I have a hypothesis right I have, I have a thesis, as to what rent control, actually does. And, and I personally believe that it doesn’t do what it’s intended to do but that’s sort of a moot point okay. And it’s not really what I’m trying to get at here and not really what I’d like my audience to understand what I’d really like to talk about is, and this, this actually doesn’t pertain just to just to rent control this pertains to all laws and how laws are created and how we’re governed and, and, quite frankly, why we hate each other and why this is such a polarized society at this point. And my belief as to why this is such a polarized society. and, and how we can actually rectify it because as as a business person as an entrepreneur, I don’t like to just present problems right that that’s sort of irrelevant to me I mean, there’s always going to be not even common problems like challenges okay so if there’s if there’s an issue out there that we’re having trouble with that there’s a challenge. There’s a solution, more than likely there’s a solution, maybe it’s not the greatest solution but it’s a solution and we can get through and but we know we get to the point where everybody’s at each other’s throats this the the polarization in our society is is very stressful and I think unnecessary and so I’m going to use rent control as sort of an example of a law and and the solution that people should think about as to how we can sort of work through these problems. And, again, like, it goes back to data right so let’s say for example, you want to propose a new rent control law, well that’s fine and you should be able to propose what you think and why you think that you should also be able to outline what the actual goals are. If your law is enacted, and whoever is sponsoring the law, they should be forced to say, this is what the goal is of the creation of this law. I mean I think that’s really only fair so that we can determine whether or not we think this is a good initiative. But on top of that, I think we really should attach data, and some type of way of measuring the success of the law that is being proposed and, and it should be put forth by the sponsor of whatever bill is being put forth to say, here’s the bill here’s my intended goals, and oh by the way here are the data sets that I’m going to specifically be looking at to ensure that the law that I’m proposing is doing as intended. And here are the KPIs, or the key performance indicators to ensure that this is happening. Right. And I think, first of all, that would create some good transparency around the laws that are being presented, but it has to have some teeth. To the degree that if the law does not achieve the goal set out and the data, the KPIs set forth by the person that’s being sponsored. Now that law should just be automatically repealed after a certain period of time. Now if you think through that if you think through that process. And what that would do for the society in general, it’s, it’s kind of amazing because it’s what business people do all the time. If you’re especially if you’re an entrepreneur right if you’re an entrepreneur, you need to try different things because it’s never been done before that’s sort of the purpose of being an entrepreneur. And so if you’ve never done something before you have to test a bunch of different things and not every single idea that you have is going to be good and that doesn’t mean that you’re stupid, but what it does, if any, if anybody that works on my team that says, hey, I’d like to try something I say great how are you going to test it, how are you going to measure the success. And that’s, that’s, that’s what I’m proposing here, because if we can actually measure the success of these laws that are being implemented ensure that they’re doing what is expected of them. And if they don’t, they’re being repealed. Then, wouldn’t everybody feel a little bit more comfortable about the laws that are being passed, I know I would right and this this is what drives me crazy what drives me absolutely up the wall is when people present laws they pass laws that don’t do as intended, and for some reason we’re stuck with them. And so, you know, again we’re going to be going into this a little bit later, we’re going to be talking to Michael Hendrix from the Manhattan Institute. I know they’ve come out with, they’re doing a poll right now talking about the quality of life in New York City, which is going to be pretty interesting. But, you know, I really want to put forth this concept and put it out into the universe and see if people, you know, believe it or like it or in just a way to hold our elected officials accountable when they’re creating the laws that govern our existence. It’s, it’s really, it’s important to me. And so, you know, Michael, obviously from the Manhattan Institute he’s going to be arguing against rent control and that’s fine and quite frankly that’s a position that I take but, you know, briefly, I want to let everyone know that I’ve done some research on the benefits of rent control right I don’t want to be seen as completely biased one way or the other. And there’s an article that caught my attention, written by an individual named Tim Breadman out of the San Francisco Bay Guardian. It’s a little bit I mean not too old, it’s 2013, but it was pretty interesting and, and I’m going to be challenging Mike a little bit long, later on with this but you know one of the one of the the components of Tim’s argument is that people that are implementing rent control. Everyone everything’s baked in right so you know there are incremental increases of rents, and if you’re if you’re if you want to purchase that property you should know that well in advance, and your banker should as well know that in advance and you should be able to underwrite your asset effectively. And really what his argument is, is that rent control is protecting against speculative gains. And listen, you know, I think that’s one of the stronger arguments that is that’s out there. But again, I don’t actually think that’s been true and then I really want to make sure that people are looking at the data behind it so that we can actually make sure that the things that we expect to happen are happening, or we’re going to be right back with Michael Hendrix from the Manhattan Insititute right after this break.
Bill Staniford 18:34
And welcome back to SharkStreet. Happy summer Saturday afternoon we are joined today with Michael Hendrix who is the director of state and local policy, Michael, how are you doing today?
Michael Hendrix 18:46
I’m doing well how are you?
Bill Staniford 18:48
I’m doing excellent. And where are you, I know you’re not in the city?
Michael Hendrix 18:52
I’m just taking a week away in Nashville, Tennessee, but can’t wait to be back in New York.
Bill Staniford 18:57
Awesome. All right, so So Mike I want to get right into it. Why don’t you just take a little bit of time and explain a little bit about your background and how you ended up in the Manhattan Institute.
Michael Hendrix 19:09
Sure, so I lead our state local policy team at the Manhattan Institute, that means everything from housing to transportation and public finances, you know, I’m at an institute because I care about cities that have suitable so is we’re born in cities we’ve been there for four decades or so and you know I I grew up in the suburbs of Texas found myself working in DC right around the time of the Great Recession. The Chamber of Commerce US Chamber of Commerce. And, you know, I saw that a lot of small businesses were struggling to recover out of the recession and especially for small mom and pop shops with local regulation that often stood in the way, even saw you know the local taxi Commissioner in DC runs sting operations against new startups like Uber, trying to shut down in favor of incumbents. I thought you know we got to do better for local regulation. We should also be doing more studies on how local regulation maybe inhibit small business growth and that really got me thinking about what makes for flourishing cities, what makes them succeed. And, and also housing, because I paid a lot rent in big cities with a lot of opportunity and that ultimately led me to to to Manhattan Institute market oriented Think Tank, thinking how can we get markets to work better for more people. And here we are.
Bill Staniford 20:28
Well that’s awesome so I don’t know if we discussed this but I am a long horn, I did do my college years after the Marine Corps at the University of Texas so you know I do love that state and it’s great it’s great for everyone to experience things out from the state that they grew up in and gives you a better holistic view of the country. So, why don’t you tell us a little bit about what’s going on the Manhattan is to right now? What do you guys working on?
Michael Hendrix 20:54
Right. Right. Well, you know, one of the biggest concerns in the state of the economy York. We have roughly one in four new yorkers out of work. It’s one in five New Yorkers that are out of workone and four in places like the Bronx. I mean this is great depression levels of unemployment. We also look safety concern shootings are up, murders are up,
Bill Staniford 21:20
So you’re seeing a 25% in Bronx, out of work. Is that what you’re saying?
Michael Hendrix 21:24
25% and by the way that’s an undercount, but also that undercounts people who’ve dropped out of the labor force entirely, but also misses those who maybe are here illegally or informally, that also really just doesn’t address how many people are under worked in New York City, consider, because he worked on Broadway or in restaurants or hotels, you know, kind of, the kind of limited hours that they have. The situation is much worse than that. And so, I think that’s a big focus for us, how can we address the state of the economy. The public safety concerns that are out there also race relations too you know we’re, we just held a series of conversations with folks on everything from the Great Awoke-ing, as we call it this awareness of social justice concerns out there to, you know, to critical theory we’re trying to understand how we can improve and have a more healthy dialogue on race relations in the city but really around the country. And then, you know, I think something that’s near and dear to my heart is the cost of housing. So, I think that, you know, even though we’re seeing rent declines in rent, sometimes to the degree that we haven’t seen in a decade or more in New York City especially Manhattan, rent, and and how the costs are still far more expensive than what many people can afford especially when they’re out of work. I think that’s a big concern of mine, and it’s a really big focus of the Manhattan Institute right now.
Bill Staniford 22:59
Right, so, you know, we’re gonna we’re gonna get into the real estate side of things in the next segment, but for right now, um, you know you would talk to me a little bit about a poll that was you were and I, again this if the poll hasn’t come out yet I don’t want to push you into it. You don’t have to talk about the numbers but just talk a little bit about, you know, I think from what you told me it was going to be testing quality of life issues
Michael Hendrix 23:25
Right, you know i. We’ve not released this yet but look for it coming out very very soon. We did a bit has to, we did a poll of New York City, and I can’t reveal the findings just yet I think they do do really confirm number one that New Yorkers care about quality of life issues, that’s, you know, everything that they see on the streets are a disorder and businesses that are flourishing and not flourishing safety, you know they do care about quality like concerns and they, and they are concerned,
Bill Staniford 23:58
Talk about your perspective…
Michael Hendrix 24:00
I also think that…I think that at best, the judgment of New York City right now is that things are meant. Their average. And when you really break down, who is, is, is saying the things are just on. Often people who are wealthier in their incomes, they’re better educated, when you really look at poor New Yorkers when you, when you look at minority groups in the city I think there’s a lot more concern for the direction that the city is going, and really assess that the city for what they pay in taxes and, you know, the, maybe the lack of opportunities that we’re seeing right now, that New York City maybe is increasingly rotten deal for them.
Bill Staniford 24:47
Right. Why don’t you tell us what you, what you in your mind how do you conceptualize quality of life, what are the what are the main, the key elements of quality of life?
Michael Hendrix 24:57
I think well one of them I just mentioned, is really what you see when you walk when you walk on the streets. Is there, their trash in the streets panhandlers, you know, is there are there literal broken windows, you know, separate out the whole debate of broken windows policing for a second, which we can talk about too but you know just the sense of what you see with your eyes, gives you a certain sense of whether or not the life that you live there could be one of quality and whether or not the people in power or the people empowered to care for the city already caring for it. You know, I think that if you look at it, for instance, the number of 311 fireworks complaints between June and July last year to this year. That gives you one window into quality of life. It’s just a little snapshot, you know, last year we’re talking, 700 or so complaints over those two months, you know, right now we’re talking about the 10s of thousands. I think the number is something like 47,000, you know it’s unbelievable, the jump in. In, disorder that we see. And now you may say, fireworks. What’s the big deal. I’ll say two things one. When we’re now being told. We should address quality of life concerns or complaints between our neighbors ourselves don’t call the cops don’t involve any potential for violence, these debates. One lady. Unfortunately, which was shot and killed when she complained to her neighbor about shooting off fireworks. So there’s a real concern there. And it also. There’s just simply a sense of if we are not addressing quality of life concerns or concerns of disorder when they are small. There is a fear, and there are some studies to confirm once you don’t address issues when they’re small, they become much bigger, and much harder to address.
Bill Staniford 27:09
Yeah, you know, and I’d like to point out and I know you you weren’t around in New York City. In the 80s, the 70s, the 80s, and the early 90s I was and I was, I was a little kid in the 70s. I was a teenager in the 80s and I was in my early 20s in the early 90s and in 1990 and I keep telling this is the craziest number. It’s 2400 murders in, in, in, in 1990. And I mean, what did you do the math on that and it’s crazy and I just fear that we’re slipping back into the battle days. But besides besides what you see when you’re walking around any other elements to quality of life?
Michael Hendrix 27:52
Yeah, I mean, certainly the, the housing stock is one part of the equation. So, you know, is your apartment crumbling are there. Is there upkeep. I think that’s also part of it as well. I think also transportation is part of it too and it’s really where you beginning to see the quality of life encompasses everything within a city. So if you’re riding on the subway and there are smashed windows in the subway which are increasingly prevalent subways right now.
Bill Staniford 28:27
Hold your thought right there. we are going to be right back with some more Michael Hendricks from the Manhattan Institute right after this break.
Bill Staniford 33:14
And welcome back to SharkStreet. We are here today with Michael Hendricks, Director of state local policy with the Manhattan Institute.
Bill Staniford 33:23
And you know, so before we get into sort of the meat of the issue today, Michael, I’d like you to just take a little bit of opportunity to promote the Manhattan Institute. And if there are any members of the audience that would like to get involved in the Manhattan Institute. Maybe there’s a newsletter, whatever you’d like to say.
Michael Hendrix 33:43
Right, Well I say join the Manhattan Insititute. Join the four I mentioned join for the work and research that we do. We have newsletters both for Manhattan, also for New York City itself. Our bigger Apple newsletter comes out every Friday. I author it in our team get other to great insight in
To what can take the Big Apple and grow it economically and in our population to become bigger apple. Also, of course, feel free to contribute also to our mission.
You know, we depend on New Yorkers supporting us to be able to do more work for New York.
Bill Staniford 33:55
No, I think it’s actually really important that people that people listen to this because I think right now more than ever, people need to get involved in the city. Look, we’ve been through this before. New York has been through harder times than this. And I mean, that we have. And, you know, I absolutely think that Manhattan Institute is the premier think tank for New York. And I just I really want to reiterate that people out there should be you know, donating some money and and absolutely signing up for the newsletter for the Manhattan Institute.
Michael Hendrix 34:28
I couldn’t have said it better myself.
Bill Staniford 34:29
So Michael, um, you know, I want to get into rent control and rent stabilization, but before I do, I just want to just talk about this one because I actually looked up I found this one example on
Streeteasy and it just killed me because, you know, when you’re looking at something, it’s an ad, if you will, for a listing for a property. And and basically, you pretty much only say good things about the property you don’t say anything negative about I mean, that’s the whole point of trying to sell something, but you’re reading this this thing and it is 111 Hudson Street. So Tribeca and read great neighborhoods. And it says, right in the first paragraph, “tenant is not interested in buyout at this time, no showings.” So basically what this says to me is the owner no longer owns this property, it is controlled by this tenant that is basically sitting there and for some reason for they have the ability to, I don’t know get some type of payment out of this. And they’re expecting a buyout. It’s just It’s incredible to me. So you know, you can refer to that if you like, but why don’t you just give us a quick history and education on the difference between rent control and rent stabilization.
Michael Hendrix 36:03
Rent regulation is something that is increasingly coming into vogue because America’s housing market is increasingly unaffordable. You know it one of the quotes that I came across on rent control I just thought was astounding. It was that next bombing, rent control scenerios, in many cases to be the most efficient technique so far known for destroying cities. And that, by the way, was a quote from a socialist economist in 1977. In New York City, instituted pretty stringent form of rent control in the late 1940s. After World War Two out of a concern that with returning GIs rent would just spiral out of control. But of course, once you Institute rent control, it’s very hard to make a temporary measure, indeed, temporary, it quickly becomes permanent because you’ve got your you’ve got your peace. of New York, you’ve got your subsidy of housing and you don’t want to give it up in New York City makes it very easy for you to keep a hold on to it. Now, of course, since then there have been many different kinds of rent control. That’s why we talk about rent regulation, broadly, rent stabilization, just try to ensure that you don’t have, you know, rents being jacked up exorbitant amounts and surprise tenants and, indeed leave them to have them leave their apartments when they don’t want to. There’s a lot of support for that in many coastal cities. And then of course, is rent regulation that seeks to you know, in, if defined in the in the most favorable terms, seeks to give tenants the power to have more control over their over where and how they live and what they pay for it. Of course, at the end of the day, the more stringent you make these forms of rent regulation, you’re essentially turning renting into a form of property rights. You’re essentially meaning that you have so much control over that property and what happens to it and how much you pay for it. And the actual owner of that real estate has so little control over what happens there. But you’ve essentially handed control on the keys over to the tenants themselves. And you’re turning it into a regulated, you’re turning housing into a regulated utility. That of course…
Bill Staniford 38:22
And some people believe that, right? So some, some people actually don’t believe that, that it’s a utility. I mean, and this is sort of, this is where I draw the line, right? So this is the philosophy line, where there are there, there are people out there and they’re not stupid, but they act they just believe that a tenant, once they once they rent a property has the right to live in that that location for the rest of their life. How do you how do you argue against that?
Michael Hendrix 38:52
Well, well, first of all, you point out how it’s unfair actually to newcomers into a city. That’s one example. point out that rightly so that this is actually an unfair deal. It could be a fantastic deal for the recipient of that property, right, who has their housing highly regulated. They have some assurance that they can stay in that neighborhood seems like a great deal. And, at least philosophically, ideologically, some supporters are in rent control think that that is exactly the bargain that we want to offer to people. But imagine that you are a poor immigrant from another country. Imagine that you’re maybe a blue collar worker, moving from the Midwest, trying to make it in New York City. All of a sudden that that housing stock that is highly rent regulated, is basically off limits to you. And the more that we extend this rent regulation, the more that we highly regulate our housing stock and set it aside for people the less is available to to two newcomers and they often are overwhelmingly poor They don’t have relationships in the city, maybe they are persons of color. They’re the ones who are less likely to be able to access that housing stock. And the only argument that you can offer is really that you need to set aside get more housing for them, you need to create more waiting lists for them. He didn’t have more public housing stock, the best example of how much of a failure that is actually is perhaps in Stockholm, which has indeed has this model, where housing is a public utility. And the net result of this is an average wait time for new housing of nine years. In some neighborhoods, it’s 20 years. And that is a terrible bargain. It’s incredibly unfair deal for anybody who’s trying to move into Stockholm. And that’s what we want to try to prevent in a place like New York City,
Bill Staniford 40:50
Right. So so one of the things that I was talking about in the first segment before you joined us was this concept that people were creating laws and they have these sort of concepts or ideas So what the the end result would be, and it doesn’t turn out that way. And and then the but the law still stay on the books and I it literally just drives me crazy. So, I mean, when you’re talking about let’s just say the end goal is diversity and your argument that well, that’s not actually happening.
Michael Hendrix 41:20
Right, right, exactly it, you know, basically what ends up happening is you institute a form of rent regulation or regulation on the housing stock. And you have hidden costs that now become clear and emerge, you have effects that you did not anticipate before. And of course, the response by these advocates of regulation is to institute more regulation. They say, you know, this is perhaps housing that is rent regulated, it’s not actually to persons of color. So now we need to create special set asides for them. That There solution. Now, of course, what ends up happening is, at best, you just create new systems of favor, you empower bureaucrats to pick favorites. And so this, of course, is incredibly unfair too..my response is, if we have problems that emerged from legislation, we didn’t understand that maybe the problem is the regulation itself. And, you know, I think one of the one of the terrible things that I found in researching rent control is that communities are contrary to the goal of rent regulation communities are not integrating socio economically or racially due to the introduction of rent control. So, you know, economic segregation in Cambridge, Massachusetts increased tremendously under rent control. higher income households, tended to in New York benefited enormously from from rent control, especially considering winters offspring in New York City, over generations could inherit a reputable department regardless of income. And really, basically what you’re seeing is increasing economic, social, and in some cases, racial segregation. Because of this as a terrible outcome, and we shouldn’t need more regulation to write that wrong, we should have less.
Bill Staniford 43:22
Okay. And so what what about the financial argument? Or when we’re talking about just affordability if you want to make your city more affordable? What’s the solution?
Michael Hendrix 43:40
Right, so this is rent control is, is indeed a tool to bring about lower rents and just slow rent growth for some people over a period of time. And indeed, it is successful in achieving that. So rent control does control rents for some people. The question is what happens to those who are not so lucky to receive that lottery ticket? I think one point that must must be made clear here is that to the degree to which rent control affects a wealth transfer, because it’s really what it is, it’s a subsidy that is taking from newcomers to a city and transferring a form of housing subsidy that grows over time, as actual asking rents in a market in your neighborhood increasingly, go beyond the level that you pay that grows the effect of subsidy to you. That is an immensely inefficient and inequitable wealth transfer. One, one study of San Francisco
Bill Staniford 44:46
Michael, that hold that thought, you know, that that that segment just flew right by we are going to be right back with some more SharkStreet and and Michael Hendrix from the Manhattan Institute. Right after these messages.
Bill Staniford 46:23
And welcome back to SharkStreet. We’re here with Michael Hendrix. And Michael is the director of local and state policy at the Manhattan Institute. So Michael, I apologize for cutting you off at the end. But I want to go go back into you were talking about the wealth transfer.
Bill Staniford 46:48
So…I think we lost Michael there. We’ll try to get him back right now.
Michael Hendrix 46:53
I’m right back. Okay. Hear me? Yeah, I can hear you..
Bill Staniford 46:54
So yeah, go ahead.
Michael Hendrix 46:56
What we found was in One study of San Francisco’s rent controlled apartments from the mid 90s to the mid 2010s. Was it those and rent controlled apartments saved nearly $3 billion, I think 2.9 billion current residents and future renters paid $2.9 billion more for housing because of higher rent and noncontrol units. That’s the effect of the wealth transfer. They’re one group pays more. Another group pays less the end of the day. Among those people who are non-rent control residents, among those who are future renters. Many of those people who are poor, some are wealthier. Some report people in rent controlled apartments, some are poor. Also, many aren’t wealthier. In New York City. We found that among the recipients of rent control, affluent renters received a much bigger discount white renters claimed a 36% discount on rent, while Hispanic renters black renters pay between the state About 17% of 16% what we’re seeing is that this is there’s many other studies that show that that wealth transfers inefficient, unfair, and it doesn’t even go to the groups that we claim to want to receive the best.
Bill Staniford 48:11
So again, I like this this this one example that I found in Streeteasy. I find just amazing this this one 111 Hudson Street and the price on this this is a 3000 square feet apartment loft apartment in tried that it’s it’s selling right now for 1,250,000. And it’s probably like in the fair market. Right and probably worth around 4 million, I would guess. And so, but the thing that’s so shocking to me, right is that this this whole property is…So there’s less and less rent that’s being paid, right? So that’s, that’s less income for the property and that’s less it’s also less value on that property, which means less taxes are being paid. Right? So It flows through. And, and then for some reason this tenant, I just won the lottery we can talk about a lot of because a lot of results is super interesting to me. But this this tenant I have no idea how long they’ve been there for. And I’m super curious. But for some reason, they deserve a patent. Right? Because you they have the rights to say there. And so now the property owners are expected to pay the tenant for them to leave. Is that is that that’s what we’re talking about
Michael Hendrix 49:29
Right. Right. Right. And by the way, I don’t want to miss the point, an excellent point that you just made. When control also costs the city revenue, just looking at property tax revenue itself. One study of New York City in the 80s found that every year it was costing New York City, double the amount that it spent on Parks and Recreation during that during that era, in lost property tax revenues in that inevitably filters out through the rest of the services that our city provides.
Bill Staniford 49:57
Right and how Does that not affect the schools? Of course it does, right? Because the schools are subsist on the funding that comes from their local real estate taxes.
Michael Hendrix 50:05
Right. And and by the way, that also, you know, maybe there is a harm in other forms of essential services. There’s also, by the way, administrative costs that cities face in order to enforce these new forms of rent regulation that cost a lot of money too…
Bill Staniford 50:22
Right now, how have you done any work on the lottery to get into one of these units? Do you know the numbers here? Because I think I was looking at it once. Maybe this was three or four years ago. So it’s not not overly recent. But I remember that there were I don’t know there was something like 60,000 units and there was some incredibly long waitlist, but the numbers were so skewed, there was 80,000 people applying to a small number of units. Do you have any numbers on that?
Michael Hendrix 50:51
No, I don’t I think that actually is a problem in and of itself. The answer is remarkably unclear. Sometimes I wonder if that’s indeed purposeful I’ve done not to sound conspiratorial, but it’s just remarkably unclear. And I wonder why that is, you know, there’s actually to the credit of HPD. And the credit of of this current administration is normally in the business of giving them much credit, but they have actually made it much clearer to apply for, quote unquote affordable apartments middle income in particular affordable apartments in New York City. And they made it easier to apply for specific apartments you know, right now there, there tends to be, you know, it’s kind of scattershot approach you Just apply for everything under the sun and you wait around for years and maybe you win the lottery. Maybe you don’t They’ve made this process a little more transparent, a little more clear to apply for these units, but even Still, it’s very unclear on the back end. Just how many of on the waitlist and how long it lasts.
Bill Staniford 51:58
Do you know which direction we’re going with the number of regulated units that are in New York City? Are we going up with the number of units are we going down? With a number of units, which way is it going?
Michael Hendrix 52:11
Well, I think that what we’re seeing is the number of units going going down over time. But we’re still waiting to see how that shakes out with the 2019 rule. Which made a lot of what we’re going to be temporary measures are ones that had to be measures that had to be renewed on a regular basis, make them permanent and we’re still Seeing just what the shakeout of this is going to be. I think that the initial impact was, you know, property owners taking more units off the market waiting to see if some of these reforms will be rolled out. back. I think that we’re i think that that had a costly in impact on the housing market and I think that what we’ve seen in it Every housing market that has had these forms of rent controls especially The more stringent they are. We’ve seen a lot of condo conversions and again, the responsive Like control advocates. It’s just like lf foreseeing condo conversions, since property The owners can’t make as much revenue off these unit We just need to make it illegal to have condo conversions we just need to regulate this more but I think it again is a telltale sign that Nobody’s property owners just really cannot They just can’t really make ends meet. Oh Go have these Projects pencil out swith rent control. condo conversions also take rental units off the market Place and I think we’re seeing that now.
Bill Staniford 53:38
Okay and so you We only have a couple of minutes left and I love For you to be able to chime in if you’d like to on good cause evictions. Do you have any thoughts on that? That initiative that’s happening up in Albany
Michael Hendrix 53:54
Right I think this is another a provision that will just be tremendously costly to, not just to property owners who of course, are often And ridiculed in New York City by the powers that be, but I also think that it could be a rotten deal for tenants. You know This is something where look if you are If you’re a property owner Let’s say you rent out basement apartment in your house. To a family friend and your Your daughter comes home from college and you want to rent out the apartment o them and it lists Either person in that in that basement apartment just doesn’t want to move. It was a really cool laws to say, hey look, we just don’t don’t renew your lease. We can just stay there forever and again as part of transferring essentially a property right to the tenant What ends up happening though is with good cause eviction. In many other pernicious effects it makes property owners just hesitant to rent to anybody and really makes them has an attempt to make make the rest of the charge affordable. It makes it very hesitant to charged dirt to anybody without stellar credit. And and also it offers a backdoor especially for just the inadvertent discrimination. Now of course, we don’t want Like discrimination. I don’t believe that we see a lot of discrimination in rent.But basically, it makes it more likely that we will try to find other reasons And just say look, we don’t want to rent to you unless you Unless we know you unless You have a stellar job stellar credit And we could be okay with you renting here. in perpetuity, that’s it. This kind of premise This effect I think will ultimately harm renters just as much as property owners
Bill Staniford 55:39
It’s just a strange concept to consider. me it seems like the The legal contract that you’re getting With two adults right and then you’re saying this legal contract is no longer valid if you say like right this is a year long contract. This is your lease after the end of You leave. That’s it and that I just I literally, I don’t get it. Again, a couple of minutes left. Is there any initiatives you’d like everyone to be aware of at the Manhattan Institute Things that you’re super excited about. That’s coming up?
Michael Hendrix 56:11
Well keep an eye out for some of our work to try to restore growth to New York City. I think our big agenda of the next year is to how to have a pragmatic jobs oriented approach in New York. City. We’re going to be rolling out a series of specific policy or forums specific initiative but deleted can take and a specific agenda that may or All candidates heading into the next election coming up Keep an eye out for that. But I really think for us, that’s Because of economic growth and restoring growth Senior city will be huge. We have taken care Both for granted over the past Almost decade in New York City and we’ve been enjoying the fruits of previous reforms for prior for a prior decades and I think that that the those reforms those gains are kind of run out and we’re reading need to have a new agenda. For the next handful of years Otherwise the past three years of population decline in New York City will really turn into a route and we’re going to find that our our tax base is just going to disappear And that will have tremendous cost and pain to every single one of us. As the people who live in New York, rich or poor, as we Seek our quality of life decline. We want to avert that just So now before things get out of hand,
Bill Staniford 57:29
Yeah, I mean it I absolutely think our budget is is It’s a disaster. I am I’m actually terrified about what’s going happen now how can people get in touch with you, Michael?
Michael Hendrix 57:43
Well Follow me on Twitter for one thing. I’m at Michael Under score Hendrix at Hendrix with an X just like Jimmy Also shoot me an email [email protected]institute.org I’m always happy to talk to anyone who wants to reach out.
Bill Staniford 57:58
That’s great and and singles. So again, you can you can follow me on twitter bill Staniford connect with me on LinkedIn Bill Staniford, you can contact me directly through email at [email protected] and parting notes here, Michael, are there any? Are they politicians that you’d like us to be aware of anyone Coming up in the state elections that the Manhattan Institute is particularly interested Are you try to stay away from that
Michael Hendrix 58:27
We try to stay away from From that, look, anyone we don’t care. Your party is you our interest. Making markets work more markets for more people making the work You’re interested in a pragmatic jobs oriented agenda.
Bill Staniford 58:44
Yeah, that’s right. Pro growth. All right. Thank you, Michael. Have a great weekend.