I could be wrong about this but I believe there already is a trading style system for new construction in NY, where developers who are required to build x% affordable units will sometimes not build those units in their fancy new development but instead give the money to some non-profit developer to build the units somewhere else. There's also famously a sort of cap-and-trade with air rights in NYC. Between the two feels like the city government ought to already have some familiarity and expertise in this zone
The idea that the tenants can negate the increases with their own RICS is deeply destabilizing. How are you supposed to be able to finance a building if you don't know what your increases are going to be?
Ultimately, the free market is a good thing. Price increases serve to efficiently allocate apartment product to the right end user. Allocating to the right user allows productive labor to be close to productive office nodes. It allows nice restaurants to open up next to people who can actually afford them. It allows nice schools to open up next to affluent families that can afford the taxes necessary to hire nice teachers and staff.
Getting in the way of that is bad.
RGB is bad but at least that system provides some level of predictably so you can underwrite these investments. This is more volatile and similarly inefficient.
Totally fair points - I’m with you that the rent stabilization system creates major economic distortions across the city. I think the point about tenant RICs adding uncertainty is valid, but I still think this is a step in the right direction:
1. Changes to the system only affect the existing rent stabilized stock; new builds are already exempt from stabilization today, so financing for new construction is unchanged. This just reallocates friction within the existing regulated units.
2. The current system is already unpredictable; rent increases have ranged from 0% to 7.5% over the last decade, including multiple years of 0% under De Blasio. RICs add more variability WITHIN the price cap, but also give a flexible mechanism to respond to the RGBs decision.
3. This adds a market mechanism where none exists today. Right now rent increases are set administratively with no price signal. RICs allow allocations based on market signals - most likely buildings with higher costs or required maintenance investments.
Put differently: the policy baseline today is 0% rent increases, assuming Mamdani wins. The stabilization system isn’t going away, but even a tenant-friendly version of RICs brings more market feedback in a system with very little of it
Instead of doing all that, why not just subsidize the people you want to subsidize, instead of making their landlords, who had no hand in their situation, do it? You avoid all the deleterious effects of rent control, while achieving the goal much more effectively than the current system. Cap and trade works when the socially optimal level of an activity is different from the market equilibrium level -- and that condition isn't met for rent increases.
I should note that, given supply constraints, you could implement a price ceiling without additional harm -- but the solution in that situation is not to say, "so let's do that then", but to get rid of the supply constraints. NYC doesn't need more rent control, it needs to build more, and at market rate, if it actually wants to reduce housing costs.
I enjoyed reading the piece; it made me think, and that's always fun. But I don't think I've seen a mayoral candidate who could read so many words, not to mention comprehend these abstract and creative concepts.
This was a fascinating read, as someone in a rent stabilized apartment
I could be wrong about this but I believe there already is a trading style system for new construction in NY, where developers who are required to build x% affordable units will sometimes not build those units in their fancy new development but instead give the money to some non-profit developer to build the units somewhere else. There's also famously a sort of cap-and-trade with air rights in NYC. Between the two feels like the city government ought to already have some familiarity and expertise in this zone
The idea that the tenants can negate the increases with their own RICS is deeply destabilizing. How are you supposed to be able to finance a building if you don't know what your increases are going to be?
Ultimately, the free market is a good thing. Price increases serve to efficiently allocate apartment product to the right end user. Allocating to the right user allows productive labor to be close to productive office nodes. It allows nice restaurants to open up next to people who can actually afford them. It allows nice schools to open up next to affluent families that can afford the taxes necessary to hire nice teachers and staff.
Getting in the way of that is bad.
RGB is bad but at least that system provides some level of predictably so you can underwrite these investments. This is more volatile and similarly inefficient.
Totally fair points - I’m with you that the rent stabilization system creates major economic distortions across the city. I think the point about tenant RICs adding uncertainty is valid, but I still think this is a step in the right direction:
1. Changes to the system only affect the existing rent stabilized stock; new builds are already exempt from stabilization today, so financing for new construction is unchanged. This just reallocates friction within the existing regulated units.
2. The current system is already unpredictable; rent increases have ranged from 0% to 7.5% over the last decade, including multiple years of 0% under De Blasio. RICs add more variability WITHIN the price cap, but also give a flexible mechanism to respond to the RGBs decision.
3. This adds a market mechanism where none exists today. Right now rent increases are set administratively with no price signal. RICs allow allocations based on market signals - most likely buildings with higher costs or required maintenance investments.
Put differently: the policy baseline today is 0% rent increases, assuming Mamdani wins. The stabilization system isn’t going away, but even a tenant-friendly version of RICs brings more market feedback in a system with very little of it
Instead of doing all that, why not just subsidize the people you want to subsidize, instead of making their landlords, who had no hand in their situation, do it? You avoid all the deleterious effects of rent control, while achieving the goal much more effectively than the current system. Cap and trade works when the socially optimal level of an activity is different from the market equilibrium level -- and that condition isn't met for rent increases.
I should note that, given supply constraints, you could implement a price ceiling without additional harm -- but the solution in that situation is not to say, "so let's do that then", but to get rid of the supply constraints. NYC doesn't need more rent control, it needs to build more, and at market rate, if it actually wants to reduce housing costs.
I'm surprised a mayoral candidate hasn't proposed this
I enjoyed reading the piece; it made me think, and that's always fun. But I don't think I've seen a mayoral candidate who could read so many words, not to mention comprehend these abstract and creative concepts.