Friday, January 11, 2013

Does the Model reflect Reality?

http://www.nytimes.com/1981/08/01/opinion/on-rent-controls.html

6 comments:

  1. I don't think that rent control is the issue causing an increase in abandonment of NYC apartments. I think the real reason is a decrease in the quality of public services in certain neighborhoods which leads to people abandoning their apartments.

    Tenants do not want to live in crummy neighborhoods and landlords do not want to invest if no one is interested. So, we need to stop using rent control as an excuse and start updating public services. Update the parks, police force, and other public services and more people will be interested in those abandoned apartments.

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  2. Though I agree that updating public services would decrease likelihood of abandonment, I wonder if the tax funds needed for this update would cause another market distortion that could be equally as detrimental to the housing situation. The article stated that the correlation between population loss and abandonment is high. Therefore if raising taxes in order to fund greater public services leads to population loss (as a lot of people do not enjoy tax raises) abandonment issues would not necessarily be solved.

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  3. the above post was made by Crawford Smith (i'm still trying to figure out why it says a rondo string of numbers)

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  4. Although it is tempting to cite rent controls as the promoting force behind the rise in housing abandonment in New York City, Peter Marcuse provides a convincing argument for the improvement of existent rent controls as a means of quelling abandonment. While rent control (classified as a price ceiling) is associated with inefficiently low quality housing as it strips landlords of incentive to provide better conditions, it appears as though the deficit in public services may be the crux of the abandonment problem. The absence of adequate public services in the form of deficiencies in sanitation, law enforcement, education and park maintenance stimulate abandonment of housing in poorer neighborhoods. These same neighborhoods often contain housing that has been intentionally damaged by tenants, perhaps out of anger stemming from the poor upkeep by landlords. This vandalism can leave entire buildings unlivable and induces abandonment as the landlord nor the tenants are able to finance repair costs. Neither of these variables are considered in the typical price ceiling model associated with rent control, indicating that the model is not an accurate reflection of reality and therefore does not hold up. Based on rent control and abandonment statistics for NYC and other cities it appears as though rent controlled housing can facilitate a low abandonment rate, suggesting that modifying rent controls rather than discarding them would be beneficial to lowering abandonment rates.

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  5. I think the author of this article proposes a really good argument by organizing his thoughts well and backing up those thoughts with good real-world evidence. His someone optimistic idea that we can "conceive of a rent-control system that would permit landlords enough rent to cover all operating and maintenance costs, repairs, and a normal return on investment, yet protect tenants by preventing super-profits" is in fact very compelling. Just because things are not perfect now doesn't mean that eliminating the whole process is necessary. I really agree with the fundamental statement that a huge part of housing abandonment and the main cause of problems with the kind of low income housing we are discussing comes from a failing of social policy. Things like a worsening welfare policy, a struggling urban public school system, and social abandonment of these neighborhoods promote fundamental difficulties within these communities. As Marcuse says, "the public abandonment of neighborhoods encourages the private abandonment of buildings". This I think is the most powerful and insightful sentence in the article. The housing abandonment issues we are facing will only improve if the quality of life improves for the tenants.

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  6. After reading the article and the comments before mine, I agree with the assumption that tenants who can choose where they want to live, would prefer a neighborhood in which the area surrounding the living area is adequate to raise a family or just to be safe, especially for what he or she pays in rent every month. I feel that this is the case because the tenant views the apartment, condo, etc. as an integral part of the abandonment of some neighborhoods because there are many alternatives, which would make the elasticity of demand more elastic. However, despite all the problems around the apartments, rent control is still blamed for the abandonment in many prominent cities. Marcuse disproves this argument with the correlation of rent controlled complexes and house abandonment. This is powerful in identifying the true source of problem of abandonment, the living environment for the tenant.

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