The Latest In New York's Rent Regulation Follies

In the never-ceasing quest of the New York progressive to achieve perfect economic fairness between and among all people, one of the prime policy tools is the so-called "affordable housing"  program.  The required article of faith is that the government can make housing plentiful and "affordable" to all by decreeing that it be so.   Eighty or so years into the game and with the most expensive housing prices in the country to show for it, the faith remains unshaken.  In fact, Mayor de Blasio if anything is leading a revival.

But of course, as usual with these things, nobody thought about the unintended consequences.  Lately, this has been getting humorous.

Because of the way the "affordable housing" programs have been set up, it turns out that over time there are more and more instances of people living in the same building, and in very comparable apartments, yet paying wildly different rents, sometimes one a multiple of another.   A rent regulation system that initially applied to entire buildings has become subject since the 90s to gradual deregulations that proceed one apartment at a time; and new "affordable housing" requirements put about 20% "affordable" apartments into many new buildings that otherwise are priced at the top of the market.

Add to this mix that today in Manhattan we have rather a super-heated apartment rental market, in substantial part the result of the shortage caused by rent regulation, affordability requirements, and restrictions on development.  Ordinary one-bedroom apartments in most neighborhoods rent for at least $3500 per month, two-bedrooms for $5000 per month, and apartments with anything special can go for substantial premiums above that.  The landlords and developers have noticed that they can get the premiums by installing so-called "amenities," often using space that previously went empty, like the basement and the roof.  Popular amenities include gyms, children's party areas, and roof gardens.

And now -- I know you'll be shocked -- it has started to be noticed that many landlords and condo associations who install the amenities make them available to the market rate tenants, but not to the rent-regulated and "affordable" tenants in the same building.   Grumblings about this have been around for several months, but got a big play this past Sunday on the front page of the Real Estate Section of the New York Times, in an article titled "What's Next, a Bouncer?", subtitle: "Rent-Regulated Tenants Excluded From Amenities." 

The article is mainly a series of quotes from rent regulated tenants complaining of being treated like "second class citizens."  It won't surprise you to learn that the tenants and buildings in question are not scattered around the city, but rather all but one are on the Upper West Side of Manhattan.  This is ground zero of political correctness and gentry progressivism, and also squarely within the New York 10 Congressional District, justly famous for combining the most efforts in the country to combat income inequality with the highest income inequality of all districts.   The buildings at issue include the Windermere at West End Avenue and 92nd, Stonehenge Village at Central Park West and 96th, 230 Riverside Drive, 40 Riverside Boulevard, and so forth.  In a neighborhood where you will be very hard pressed to find any apartment with a bedroom renting for under $3000 per month, the rents of two of these people are given as $1250 and $1107; a third is described as "rent-controlled," a special program with different rules where the rent (not given) is likely to be under $1000 per month.  

You might look at these people and say, they have really lucked out in life.  Each is getting several thousand dollars a month in free housing value, courtesy of some combination of the taxpayers, their landlord and their neighbors.  They are entitled to stay and keep that deal until they die.  Shouldn't they be counting their blessings?  Well, you don't understand the exquisite sense of entitlement of the Upper West Sider.  Here is the rent-controlled Ms. Sarah Denby:

"It’s ridiculous to have a gym here that I can’t use,” said Sarah Denby, who lives in a rent-controlled one-bedroom with her husband, Walter Brotman, a building resident for 60 years. “At one point I got so mad: I can store the bike in the bike room but I can’t have a key. I have to return it right away or the doormen freak out. They absolutely flip out. They just besiege me."

Oh, did we forget to mention that her building (230 Riverside Drive, which is a condominium) has 24-hour doormen, an amenity that costs her neighbors at least about $250,000 per year, none of which could possibly be covered by her rent?  Market one-bedroom rentals are currently available in the building at $3100 and $3300. 

You'll be glad to know that the local politicians have sprung into action to correct these terrible injustices.  Bills have been proposed in both the City Council and State Legislature to penalize landlords who provide less than equal access to amenities to the rent-regulated and "affordable" tenants.  Sponsors include Council members Mark Levine and Corey Johnson, and Assemblywoman Linda Rosenthal.  But here's my question to you esteemed lawmakers:  If access to these gyms and gardens and storage areas is to be opened up to the "second class citizens" of New York, why only to the likes of Ms. Denby, who already is getting a $2000+ per month gift of discount housing courtesy of the taxpayers and her neighbors?  Why not also to all the less fortunate hardworking citizens who have no access to the rent-controlled apartments and live in relatively cheap but remote market rate units in deep Brooklyn and the Bronx?  In any kind of "fair" world, aren't those people equally or even more entitled than Ms. Denby to access to the gym at 230 Riverside Drive?

And while we're on the subject of the rent regulation follies, here is a report from yesterday's New York Law Journal on a decision handed down Monday from the Manhattan Housing Court by Judge Sabrina Kraus in a case called RSP 86 Property v. Sylvester.    It seems that the landlord decided to try to evict Mr. Sylvester from his rent-regulated apartment on 86th Street using one of the difficult-to-implement grounds, namely a claim that the apartment was not Mr. Sylvester's "primary residence."  The court denied the application, finding that the 89-year-old Mr. Sylvester had lived in his 900-square-foot, $1090 per month apartment (market rent would be $3500 - $4000) for some 45 years, had been registered to vote there all that time, received mail there, and "has deep roots in Manhattan."  Are you sympathetic?  Other facts mentioned are that he "spends most of his time" "wintering" at a condo in Florida and "summering" in East Hampton.  Also, that his "cars" are registered in Manhattan.  Now, I know that Jerry Seinfeld has multiple cars in Manhattan, but not a lot of other people, including many quite wealthy people, can afford that kind of luxury.

We keep thinking that we can achieve perfect fairness by government decree, but somehow the harder we try the farther we seem to be from the goal. 

Government Motors' Killing Of 13 Is A Small Part Of The Problem

A few days ago General Motors agreed to pay a $35 million fine to the U.S. Department of Transportation as a result of alleged "ignition switch defects" that are claimed to have caused 13 deaths and 42 crashes.  Expect numerous other regulators and prosecutors to pile on in coming weeks and months.

Well, US DOT, who owned GM when all these deaths were occurring?  In substantial part, that would of course be the U.S. government.  Agents of the same U.S. government then waited a barely respectable 5 months or so after the government sold its final stake in December 2013 to announce this settlement.  But didn't the problem occur on the watch of the U.S. government itself?

A long article by Bill Vlasic in the New York Times on May 17 traces the timeline of the story, and essentially accuses GM's in-house legal department of a long-running cover-up.  It's the usual Times narrative of the greedy corporation hiding safety problems to avoid having to pay settlements all while the innocent die.  According to Mr. Vlasic, GM had a "wall of secrecy on the switches," ultimately cracked by a combination of lawyers for injured plaintiffs and brave government investigators.  Somehow Vlasic manages to write the whole long article without once mentioning that the government was the largest owner of GM during most of the time in question, and even the majority owner of GM during some of the time in question.

Here's the timeline:  In approximately 2006 GM made some major changes to the ignition switches in its Chevy Cobalts -- changes that may have caused the problem.  It then conducted a series of investigations of the switches from that time through and including 2013, but according to Vlasic maintained its "wall of secrecy" during the whole stretch.  Meanwhile, in July 2009, as a result of the GM bankruptcy, the government came to own some 61% of it.  That stake was reduced to about 26% in 2010, 19% in 2012, and ultimately to zero in December 2013. 

So the government was the largest beneficiary of the cover-up, and sold out just before the problem came to light.  How exactly does it get to maintain its status as some kind of innocent bystander, let alone have its investigators claim to be brave sleuths bringing wrongdoers to justice? 

The real news, of course, is that these 13 deaths are a very, very small part of the government killing large numbers of people and getting a free pass from all concerned.  And no, I'm not talking about military campaigns.  Consider, for example:

• Corporate Average Fuel Economy standards, or CAFE.  Since 1975 the government has set ever-increasing levels of mpg fuel economy that car manufacturers must achieve.  The current standard for cars is an average of around 30 mpg.  The way to achieve that standard is to make your cars somewhat smaller and somewhat lighter -- in other words, more dangerous when someone gets in an accident.  J.R. Dunn at the American Thinker in 2011 summarized studies from the likes of the Harvard School of Public Health, the Brookings Institution, USA Today, and the National Highway Transportation and Safety Administration, which showed a range of estimates from about 41,600 to 124,800 excess deaths over a thirty-five year period (1975-2010) resulting from the CAFE standards.  Suddenly the 13 ignition-switch deaths at Government Motors pale into insignificance.  So what's our next move?  Why, of course, to increase the CAFE standards to an average of 54 mpg.  This increase was announced by President Obama in August 2012 and is already in place and scheduled to take effect by 2025.  Hundreds of thousands will die, but don't worry, this will help us to "address global climate change."
• The FDA.  The mission of the FDA is supposedly to make sure that our drugs are "safe and effective."  In practice, they are obsessed with the idea that even one person might die from taking an approved drug, and don't care one whit how many hundreds of thousands of people die while waiting year after year for an approval to come.  According to this report from the Independence Institute, prior to 1962 statutory revisions giving the FDA increased authority, the average time from filing to approval of a new drug was 7 months; more recently it has been around eight years.  Various studies estimate the number of deaths due to this "drug lag" in the hundreds of thousands -- a huge multiple of the number that may have been saved by keeping unsafe drugs off the market.  As just one example, tens of thousands of deaths have been attributed to the FDA's multi-year delay in the 1970s and 80s in the approval of "beta blockers" to prevent second heart attacks.  And then there is the FDA jihad against "off label" marketing -- that is, selling a drug that has been approved as both safe and effective for treatment of a condition that was not the condition for which the FDA approved it.  There is no legitimate health reason to restrict off-label marketing; this is about putting a higher priority on preserving the privileges of the regulators than on the lives and health of the people. 

To come up with other examples of the government killing large numbers of people, you only have to think about it for a few minutes.  How about the current VA scandal, where vets were put on waiting lists and kept there without treatment until they expired?  Or the government's promotion of the "low fat" diet over several decades, now starting to be recognized as a major cause of obesity.  Or the collateral damage of the drug war.  The government's current campaign to take cheap energy and electricity away from the poor hasn't gotten too far yet, but has the potential to kill many hundreds of thousands, if not millions.  So overall, while I'm a little upset that the government is getting a free pass on the 13 GM deaths, that's really the smallest part of this problem.

New York: Will We Get A More Real Budget?

In an article several days ago, "Not A Good Week For New York -- But It Could Have Been Worse," I looked at de Blasio's newly released budget and the new teachers contract, and noted that the two didn't seem to add up.  Where were the retroactive raises being hidden?

[U]nder any honest accounting, if you committed to that today, wouldn't you have to accrue the whole liability today even though you won't be paying for years? . . .  So where are you hiding these pay increases, including the retroactive ones?

Turns out that new Comptroller Scott Stringer had the same questions.  The New York Times reports the story today, "High-Power Tug of War Over Teachers' Deal," buried rather deeply at page A23. 

 [C]ity [C]omptroller, Scott M. Stringer['s] . . . team . . . discovered basic accounting problems with the deal.  In a series of extraordinary weekend meetings that started with an evening summit at Gracie Mansion, Mr. de Blasio and his senior aides pushed back at Mr. Stringer’s critique, . . . arguing that their deal was in compliance with standard accounting principles.  But Mr. Stringer insisted the administration had violated those principles, which have governed city finances since the 1970s, by spreading out the liabilities for certain back wages over several years, rather than booking the costs up front.

Result:  there will be a $725 million "adjustment" to the accounting for the deal, to bring the costs of the retroactive raises into the current fiscal year instead of spreading them over the years in which they are expected to be paid.  Here is the press release issued jointly by de Blasio and Stringer reflecting the agreement.  Key quote:

In order to ensure that the city’s financial accounting reflects a preferred approach, the Mayor and Comptroller have agreed that certain expenses now shown over the four-year plan will be presented as Fiscal Year 2014 costs.

That leaves two issues unaddressed by both the press release and the Times article:  (1) Is the current year budget going to be adjusted to put in this new expense?  and (2) What about all the other retroactive raises that de Blasio is about to agree to and thought he could put in out years where nobody would notice them?

The whole incident is extremely discouraging in showing de Blasio as totally willing to hide known expenditures in out years so that spending on political paybacks can be maximized in the current year.  I'll give the same advice to de Blasio today as I gave to new Newark mayor Baraka yesterday:

If you view the role of government as to spend as little as possible to accomplish its core functions, then Newark [New York} can resume a path to growth and success.  But if you regard the government's role as to spend as much as it can get away with to please and pay off the people who put you in power, then Newark's [or New York's] decline will continue and accelerate.

And meanwhile, among what may well be many other problems that I don't know about, it is clear that the pension projections in de Blasio's budget are wildly optimistic.  That has the effect of both deferring the problem and hiding it from public view.  Sadly, it is hard to see how we are not setting ourselves up for a period of decline. 

Newark Elects A Mayor

While New York enjoys the services of its new Mayor Bill de Blasio, just across the river in New Jersey, the largest city, Newark, elected a mayor yesterday.   It appears that Ras Baraka has prevailed over his opponent Shavar Jeffries.

I put Newark firmly in the category of the "basket case" cities.  Sitting right near the middle of one of the largest and most prosperous metropolitan areas in the world, Newark still has managed to find itself in a state of decline and financial crisis for decades.  The population, which peaked at 442,337 in 1930, was down to 277,140 in the most recent (2010) census.  Needless to say, if you are a basket case city, then somehow you are required to double down on the policies that have brought you decades of failure.  Newark is not an exception.

Some suggest there has been a modest recent renaissance in Newark under just-departed Mayor (now Senator) Cory Booker.  Steve Malanga of the Manhattan Institute analyzes that claim in a May 9 WSJ op-ed here.   He points out that the seeming progress of Booker's early years as mayor has largely been lost back in the more recent few years.  Murders declined from  over 100 down to 67 by 2008; but then they were back to 111 in 2013.  Unemployment fell from 9.4% when Booker became mayor to 7.4%, but now is back to 11.9%.  Newark's regression has occurred while New York has continued to prosper -- notably including areas heavily populated by African Americans that had previously suffered economically.  In Newark there are a few new office buildings downtown -- but even Detroit has that, and in the case of Newark it is hard to attribute new business arrivals to anything other than massive state giveaways to buy a few corporate relocations.  For example, according to nj.com here, Panasonic moved its North American headquarters to Newark in 2013 after New Jersey agreed to a $102 million "Urban Transit Hub" tax credit for the company.  For the $102 million, Panasonic pledged to create some 200 jobs over the next ten years -- that's almost $500,000 per job!

This race was nominally non-partisan, but no Republican would waste time trying to compete.  Jeffries was the moderate.  Baraka is most commonly described as a radical progressive.   Charles Upton Sahm in the Daily Beast on May 5 called him "a firebrand whose politics of racial resentment seem out of date many places in 21st-century America, but still resonates in Newark."  Sahm quotes an unnamed "prominent business owner" as saying "This guy is as radical as they come . . . .  He makes de Blasio look like Ronald Reagan."  Baraka's web site is rather short on specific policy proposals, but an idea of where he's coming from can be obtained from his past actions on the City Council.  For example, on his attitude toward charter schools, Sahm reports:

Thousands of children are on wait lists to get in charters and Baraka insists that he supports them as part of the overall system. But he introduced legislation in the city council in 2013 to place a moratorium on the opening of any new charters and voted against nine of 10 charter school lease agreements.

Needless to say, support of city unions, and particularly the Newark Teachers Union, was an important factor in the Baraka victory.

Well, I still wish Newark luck with this new guy.  But here's my advice to him.  If you view the role of government as to spend as little as possible to accomplish its core functions, then Newark can resume a path to growth and success.  But if you regard the government's role as to spend as much as it can get away with to please and pay off the people who put you in power, then Newark's decline will continue and accelerate. 

In Case You Thought That Our Government Was Other Than Completely Fraudulent

I have frequently pointed out here how most government statistics are designed and/or manipulated fraudulently to induce the public to support further government growth.  In case you are a bit skeptical about that, you need to take a look at the new "National Climate Assessment" Report just out from NOAA  This thing is really a new low in government fraud.  It has little or nothing to do with a fair assessment of the climate, and everything to do with an effort to scare the people into accepting additional government control over their lives.  

An honest climate assessment would, for example, need to feature and deal with the fact that global temperatures have failed to rise now for some 17 years, even as atmospheric CO2 levels have continued to increase.  An honest assessment would need to set forth the predictions from the alarmist government models from 10 and 20 years ago and compare those predictions to the real world data, which have failed to match the alarming temperature rises predicted.  This Report doesn't show the slightest interest in these subjects.  Instead, the Report treats one after another topic in the way to maximize the scare factor, in the process ignoring and/or cherry-picking data in a way that is insulting to the intelligence of anyone who follows this subject.

Out of a Report of some 800 pages, I'll just pick a few examples.  The very first chapter purports to summarize "Observed Change."  Anybody who follows the data knows that current temperatures are higher than those at the beginning of the twentieth century, but that the rise has two anomalies that are difficult for the climate alarmists to explain -- a period from about 1940 to 1970, when temperatures cooled despite increasing CO2; and another period from about 1997 to present, when temperatures have been flat despite increasing CO2.  After the thirty-year cooling starting around 1940, temperatures hit a recent low around 1970.  With that in mind, consider these key quotes from the Report:

Temperatures at the surface, in the troposphere (the active weather layer extending up to about 5 to 10 miles above the ground), and in the oceans have all increased over recent decades . . . .  The majority of the warming at the global scale over the past 50 years can only be explained by the effects of human influences.

"Recent decades" and "the past 50 years."  Could they really be cherry-picking the period of the late 1960s to present to maximize the apparent warming and avoid having to explain 1940 - 1970 and 1997 to present?  Yes, that is exactly what they are doing.

Or turn to the chapter on "Melting Ice."  They actually begin with a discussion of ice on the Great Lakes, including a big chart purporting to show that ice there has been decreasing for decades.  The chart ends with the winter of 2012-2013.  Yes, they are leaving out that Great Lakes ice is just coming off a record-setting 2013-2014 season, having been at record high levels from mid-winter through the spring, including up to right now.  It's almost impossible to believe that they would present this data truncated in a way that anyone who knows anything about the subject will immediately recognize as intentionally misleading.  They then move to a discussion of sea ice, with emphasis on declining ice in the Arctic.  But hasn't Antarctic ice been increasing, leading to a combined total that has recently been at record highs?  Here's how they try to slip the Antarctic ice increase past us:

While the Arctic is an ocean surrounded by continents, Antarctica is a continent surrounded by ocean. Nearly all of the sea ice in the Antarctic melts each summer, and changes there are more complicated than in the Arctic.

Got that?  The Antarctic is "more complicated," so it doesn't count.  Could they please mention that global sea ice actually hit record highs at various points during the past (Northern Hemisphere) winter?

Then there's my favorite topic, "ocean acidification."  "Acidification" -- there's a rather scary word!  They actually feel a need to define the term:  "lowering ocean pH levels ("acidification")."  A big chart shows the pH of the ocean at Hawaii declining since measurements began in 1988 from about 8.10 to about 8.07 today.  So let's whip up some fear!:

Such large changes in ocean pH have probably not been experienced on the planet for the past 100 million years, and it is unclear whether and how quickly ocean life could adapt to such rapid acidification.

But hang on a second.  I thought that pH over 7 means it's not acid at all; it's "alkaline."  Well, now we know why they defined the term.  Nobody using normal English would call pH going from 8.10 to 8.07 "acidification"; the normal term would be "decreasing alkalinity."  Unfortunately, nobody is going to get too scared about "decreasing alkalinity"; but "acidification" has just the right ring.  There is literally nothing honest about this exercise.  Guys, how scared should we really be if the ocean gradually came to have a pH, like pure rainwater, of right around 7?  By the way, at the rate it's going, it will take many centuries to get there.

Somewhat encouraging is that the abandonment of science for scare tactics increasingly induces honest scientists to break ranks, and even to express their disgust at what is going on.  For example, Judith Curry, Chair of the School of Earth and Atmospheric Sciences at Georgia Institute of Technology, who until several years ago continued to attempt to defend climate alarmism, has really had enough.

Some of the basic underlying climate science and impacts reported is contradictory to the recent IPCC AR5 reports…the phrase ‘climate change’ is now officially meaningless.  The report effectively implies that there is no climate change other than what is caused by humans, and that extreme weather events are equivalent to climate change.

Marc Morano at Climate Depot has a round-up of other negative reviews of the Report, ranging from "designed to scare people," to "simply made up," to "science fiction."  But I continue to be amazed at how many so-called "scientists" let their names be associated with this kind of transparent scam.  As to the government, scamming the people to increase their size and power is just what they do.  

UPDATE May 13, 2014:  As if part of a coordinated campaign to keep the climate alarmism going, the New York Times gives its lead slot at the top right of the front page this morning to a story by global warming propagandist Justin Gillis titled "Scientists Warn of Rising Oceans From Polar Melt"  Seems that NASA held a press conference yesterday, where the takeaway quote was "Today we present observational evidence that a large sector of the West Antarctic ice sheet has gone into irreversible retreat."  Supposedly the mechanism causing the problem is that warming waters are eating away at the edges of the sheet.  Somehow they manage to write the whole story without mentioning that the Antarctic sea ice "anomaly" (variance from normal for this date) as of this week is just slightly below the all time record high set in 2008 -- it's more than 1.6 million square kilometers above normal.  They also never mention the actual water temperatures, or variance from normal.  So somehow the "warming" waters are melting the land ice but not the sea ice?  In a post relating to a previous (2012) scare story from Antarctic ice researchers on this same issue, Steven Goddard of the Real Science web site had this to say:

Sea ice is expanding around Antarctica because the water is getting warmer. Makes sense if you have the IQ of a turnip.

To think that I once thought of the New York Times as a trusted news source!

There Is At Least One Dissenter To The Monetary Policy Folly

In December 2012 I asked the question, "Do Our Monetary Authorities Know What They Are Doing?"  My conclusion was, "All indications are that they don’t have a clue."  But then, is it just me?  Unfortunately, the question is rather important.  But very few people pay much attention to what's going on in monetary policy, and the ones who do are almost all specialist economists caught up in a big dissent-free groupthink.

The official Federal Reserve word is that they operate monetary policy with two goals, one an interest rate target and the other an unemployment rate target.  Does monetary policy have any direct short-term effect on the unemployment rate?  The idea seems preposterous to me.  Yet from presentations I have attended of the Shadow Open Market Committee, I'm given to understand that there is no dissent on the FOMC from having an unemployment rate target for monetary policy.  The result has been QE I, II, and III, and the Fed balance sheet growing from about $800 billion in 2008 to about $4 trillion at the last report in March.  This is a monetary "stimulus" wildly larger than anything previously undertaken in the history of the world.  We have had a sluggish, gradual decline in the unemployment rate, more of it coming from a declining labor force than from more jobs.  So far, no meaningful inflation.  On the other hand, the monetary base created by the asset purchases turns up as excess reserves on bank balance sheets.  Is that any kind of a problem?  I would say that it's a huge problem -- a gigantic inflation pre-baked and ready to explode upon us at any time without notice, and probably nothing that can be done about it when it happens.

I had thought nobody was concerned about this but me, but then on Thursday the Wall Street Journal carried an op-ed by economist Allan Meltzer that says all the things I've been saying for a couple of years.  Here are a few key quotes:

Fed Chairwoman Janet Yellen recently admitted that the central bank doesn't have a good model of inflation. . . .

The Fed's forecasts of inflation ignore Milton Friedman's dictum that "inflation is always and everywhere" a result of excessive money growth relative to the growth of real output. . . .

But long before idle reserves reached $2.5 trillion, the Fed didn't ask itself: What can we do by adding more reserves that banks cannot do by using their massive idle reserves? The fact that the reserves sat idle to earn one-quarter of a percent a year should have been a clear signal that banks didn't see demand to borrow by prudent borrowers. . . .

We are now left with the overhang. Inflation is in our future. Food prices are leading off, as they did in the mid-1960s before the "stagflation" of the 1970s. Other prices will follow.

That all sounds right to me.  Nobody seems to be paying much attention.  Meanwhile, back in Europe, what's the plan?  More "monetary stimulus" of course!  Here's Bloomberg reporting today on a speech by ECB President Mario Draghi yesterday:

Analysts from Goldman Sachs Group Inc. to UBS AG revised their forecasts to expect an interest-rate cut in June after ECB President Mario Draghi said officials would be “comfortable” adding stimulus if needed.

And then there's the Bloomberg editorial from Thursday advocating more of same:

In recent months, Europe's economies have begun a tepid revival. . . .  ECB President Mario Draghi has room to maneuver and should use it.

And these people think that our big worry should be climate change!  I guess it all depends on your perspective.