The headline: "Rents Are Falling in New York City. Is This a Crash?"
Rents in New York City are leveling off at about 3 times the unencumbered cost of building a new unit. New units are being built at a rate that would almost accommodate internally generated population growth.
Total permits topped 50,000—more than any year since the early 1960s.Population growth of NYC in the decade of the 1960s - a whopping 1.5%.
This is the problem. We need an economic coup. There is a gate locked between Americans and opportunity at the outskirts of a half dozen metropolitan areas. That gate needs to be crashed. There is no winning move here that doesn't involve a "crash". We either manage for stability, or we manage for opportunity and freedom of movement. They are mutually exclusive.
But, as with so many issues, change is what scares us. Progress is change. This is the core problem with many attitudes about international trade - a lack of discernment between unuseful change and change from progress. If you're against change, you may be against progress. In fact, you're probably against progress.
So, Trump gets a popularity boost from negotiating with Carrier to keep a plant in the US. This generated a good dose of bipartisan complaints about how this isn't actually helpful in the broad scheme of things. Sometimes our broad prosperity demands that local producers lose - even when those local producers are workers. Boy, there's an unpopular truth, huh!
Shouldn't it be so much easier to say that sometimes our broad prosperity demands that local real estate moguls lose? I wonder if there will be a vocal bipartisan response to these concerns about crashing real estate? More likely there will be a consensus in agreement that "Whoa Nelly, we need to slow this puppy down. Next thing you know, 2 bedroom apartments in Manhattan will be going for $2,000 a month. There be dragons!"
The asymmetry here is sort of funny. Economists seem to be in pretty wide agreement that we shouldn't generally stand in the way of geographical shifts in manufacturing employment, but there is a healthy debate about how we can support vulnerable workers who endure dislocation because of it.
On the other hand, who is out there demanding that New York City should expand housing until rents decline by at least 50%? (This would actually be the best thing we could do to support those ailing workers, by the way!) I don't see a lot of cheerleading for that dislocation. And, maybe the best way to encourage that would be to throw massive subsidies and transfers at existing Closed Access real estate owners in exchange for opening up those cities to new residents. How's that for a non-starter - let's let Donald Trump build thousands of units in New York City and send him millions of dollars in aid to make up for the losses on his existing buildings. But, Donald doesn't have to worry. Everyone wants stability. We'll demand that NYC slows down their permit approvals enough to keep the rents flowing. We wouldn't want a crash.