A Barrel With No Bottom. Ever.

Decades ago, in an effort to keep housing “affordable”, the city of New York imposed rent control. No existing rental unit could increase its price, absent jumping throught a Byzantine series of bureaucratic hoops.

The “market” responded to the bureaucratic muddling – at first, creatively. The rent control stayed with the the renter. When the renter died or moved, the rental rate could move with the market. But the “ownership” of the rental could be passed down through any semblance of the original renters families – so children, nephews and nieces, stepchildren, further-order descendants, and utterly phony descendants – a fraud that was almost never investigated. Also, renters (and their descendants) could, and did, sublet, and even subdivide, apartments, renting the spaces out at much better than market rates and making a tidy profit on the deal. People are pretty creative when it comes to skirting rules, and New York City government is equally thud-witted and uncreative at creating the rules people skirt. It became almost

The second-order consequences were less salutary. While rents were frozen, utilities and property taxes were not – so landlords got squeezed hard. Landlords with sufficient means sold their properties to “co-ops”, or went condo, or found the few available loopholes – and there were very few, since the powers that be (and are) in New York treated landlords as a populist enemy to be demonized for political gain. The less affluent landlords fell behind on taxes. Squeezed by the city to pay up, repairs sufferend. Eventually these landlords stopped repairing their properties in less desirable areas, which quickly became even less desirable; vast swathes of Brooklyn, the Bronx, Queens and Harlem fell into deep blight, with block after block of apartments abandoned…

…in a city with an “affordable housing crisis” where even in the 1980s, it was impossible to find a place to live for under $2,000 a month in 1985 dollars (which is $4,500 to 5,000 today).

Of course, all that blight begat crime. By the late ’70s, much of New York was a shooting gallery, wit over 2,000 dead per year.

Of course, there is a lot of money in New York, and a lot of people want to be there, so the real estate didn’t sit idle for too long – begetting the third-order consequences: developers moved in, took over the blighted, abandoned real estate, and built it back up. Of course, given New York’s regulatory “zeal” and astronomical taxes, it wasn’t just any developers. It was the ones with enough money to do the building, to navigate the bureaucracy (read “Money”) and pay the taxes (read – “keep the money coming”). The up-front costs were high – and the rest was even higher.

So after decades of “rent control”, one can not live in a decent place on Manhattan with an income of less than $500,000 a year.

I write this to highlight the path that the Minneapolis City Council – known among those in the know as “the dumbest city council between Chicago and Los Angeles” – is drooling to drive Minneapolis down.

Neo-populist progressive economicallly-illiterate stupidity – a barrel that, in Minneapolis, has no bottom.

8 thoughts on “A Barrel With No Bottom. Ever.

  1. The co-op thing is funny, because I tried to explain it to group once and they nearly had a group heart attack.

    “Our landlord is gouging us on the rent. What can we do?”
    “Buy the building from him and transfer ownership to a non-profit corporation.”
    “What then?”
    “The members controlling the non-profit corporation are the current renters, one vote each.”
    “And then?”
    “The non-profit gives a lease to each member. Only members can lease. You won’t be leasing your apartment from the landlord, but from yourselves.”
    “Sounds great. How much is the rent?”
    “Add up PITI on the mortgage, utilities, maintenance, a reserve, then divide it up.”
    “That’s more than we’re paying now! Owning the rental property would be a money-losing proposition. What a stupid idea. Why are you telling us this?”
    “Oh, sorry. Okay, Option B. Move.”

  2. You know what has no bottom? The losses hedge funds are taking.

    The DOW is down 750 today, and no bottom in sight. Pedo Joe’s shit show owns the worst crash since Black Friday. Hahahaahaaaa!

    And the best part is, these scumbags were taken down by a bunch of retards on Reddit, who are now millionaires, and who have vowed to hold their majority stakes until the funds burn to the ground.

    Elizabeth Warren is calling for the SEC to sanction Reddit!

    When it was clear that the reprobates steal was going to stick, I took all of my 401K’s and rolled them into an annuity that caps losses. Meanwhile, silver has gained more in the past 3 days than it has in the past 6 months. My broker is sold out of 1oz bars.

    HAHAHAHAAHAAAAA…I am rolling, Wyatt!

  3. The equity delusion hard at work in Mill City. U of M study cited showing median income black family can’t afford median priced apartment. So I just looked at the “study”, a report on “gentrification “ which turns out to be the converse of block busting. Higher income people, generally white, move into apartments in run down areas that have been flipped. Demand is high, rents increase and the poor usually black residents are priced out of the market. I don’t see rent control turning that around. Developers won’t improve existing rental units and they will continue to be rat and crime infested crap holes. Here’s an idea: stop paying people to be single parent baby mamas. Reward good behavior with tax credits they can use to afford rent in good neighborhoods.

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  5. Minneapolis and Saint Paul are lost causes.
    Don’t fall for the “sunk costs” fallacy.
    Minneapolis and Saint Paul, together, have a population of just 660k.
    The suburbs are not lost. They could be/should be the center of MN conservatism.

  6. Don’t worry MO, they will jack up property taxes in the ‘burbs while providing tax breaks in the city, jack up gasoline tax while offering free rides on the LR, the sheeople will have no way but to move to the cities. Poof goes the conservativism!

    Oh and where would all the people be herded in the DT core? Into the now-empty office building which will be converted to affordable housing, of course!

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  8. I remember reading about an affordable housing project in Oakland CA that was getting the “bargain” price of $350k/unit–I think for about 1000 square feet. My thought at the time was that you could pay the poor person’s moving costs to Iowa, buying them their own home and giving them a large fund to help them get on their feet, and save a cool quarter million bucks.

    Along the same lines, it strikes me that if you wanted to reduce housing costs in places like Oakland and Gotham, you’ve got to remove the barriers to producing modernized, safer versions of the original affordable housing: tenements. It doesn’t play well on TV, but if there are people who need something they can afford for a price builders can afford to build, that’s the kind of thing you’ve got to do.

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