Nationalize Manhattan

Recently – and this says a lot about my life – a friend texted to see if I’d weigh in on the issue of rent stabilization for commercial leases. She and her husband had been arguing since they read about a small independent bookstore that was closing in Manhattan because of rising rents; she felt that protecting local businesses was worth price controls, and he did not.

I said that I hadn’t thought about it very much, but in the case of Manhattan, I was sympathetic to that sort of thing.

But having thought about it a bit more, I think I didn’t go far enough. We shouldn’t just have price controls on commercial real estate in Manhattan; we should really just nationalize the whole island.

The Empire State Building turns red in more than one way.

For one, the conflicting realities of the social and physical worlds – nearly unending desire for real estate in Manhattan, along with relatively limited capacity to actually create that real estate – mean that there’s no way supply will ever catch up with demand and make prices anywhere close to reasonable. (Note that this isn’t true for the vast majority of the rest of metropolitan New York, where there really is room to meaningfully improve the supply of housing.)

Moreover, there are lots and lots of really iconic historic neighborhoods in Manhattan, and I think it’s perfectly understandable to strongly oppose the redevelopment of, say, Greenwich Village, or parts of Harlem, or Soho, or whatever. But of course if you take those off the table, you’re restricting supply even more.

So, faced with the prospect of turning market-rate Manhattan into the world’s largest ghetto of the rich in perpetuity, I propose transferring the whole thing to the public sector. This isn’t a painless tradeoff, of course. If housing units are no longer distributed according to who can pay the most, they’ll have to be distributed according to some other principle: probably, in an ideal world, just a wait list. In which case we’ll have a Scandanavian-type situation where people have to wait five or ten years to move to the Upper West Side. Locals and older folks would have serious advantages over domestic and international migrants and younger people. And of course that sort of thing would open itself to corruption, and so on. But I think that’s probably still preferable to allowing such massive segregation of privilege.

See? It’s fine.

And, I should point out, taking all of Manhattan off the open market isn’t nearly as radical an idea as it sounds. There are pleasant northern European cities that do that, more or less, for one. But also Manhattan’s housing is already close to half non-market-rate, if you roll together public housing plus rent-controlled and rent-stabilized apartments. Those units have already demonstrated both the pluses and minuses of non-market housing, maintaining a bulwark of diversity in some neighborhoods while making things more difficult for anyone who doesn’t already have a unit.

Nationalizing Manhattan wouldn’t have to mean an end to new construction, either. Allowing more people to live on the island and reducing wait times on the housing list would still be in the public interest, so the government could contract to build out as many new units as possible. They could pay for it, maybe, by allowing developers to keep the buildings private for five or ten years, or however long it took to recoup their investment and make a little profit.

And then, happily, the units would return to the public sector, ready for whoever had signed up for them several years before.

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10 thoughts on “Nationalize Manhattan

  1. “There are *pleasant* Northern European cities…”

    Exactly, pleasant. Not dynamic, certainly not foremost leaders in innovation and responsible for a huge amount of international wealth creation.

    If you can’t house your workforce, business would decamp for elsewhere. Even if demand for the city remained the same, that housing money would then just head to the boroughs, making them completely unaffordable while people waited for someone in Manhattan to die and open up a space.

  2. Stockholm is very income-segregated. Poor people, especially poor immigrants, need housing more urgently then 5-10 years, so they just go to the public housing projects in the suburbs. My neighborhood looks very white – I see very few nonwhites on the streets; this contrasts with the more diverse environment I see when I go to the train station, which as a CBD hub presumably mirrors the ethnic mix of the metro area better. Vancouver’s public housing model is to build everywhere, even in rich neighborhoods and in desirable environments (such as with waterfront views, providing a major source of right-wing middle-class resentment); Stockholm’s is to build projects in the suburbs.

    1. That’s interesting. Have you read Carl Nightingale’s “Segregation”? I haven’t, but it’s appealing in being one of the only international surveys of urban segregation I’ve seen. Other ideas?

  3. Allow me a counter proposal. There is nothing inherently special about the geography of Manhattan. What makes Manhattan special is the built environment. The dense skyscrapers, the extensive subway system, the huge park in the middle; without these things Manhattan is just another Atlantic coast island. So instead of making Manhattan some sort of super exclusive park for well connected people who can rig the government housing lottery why not just build more Manhattans? I mean the government has no incentive to either build up Manhattan more or maintain Manhattan’s buildings since they wouldn’t be recouping market rate rents. So if the problem is that Manhattan isn’t building up housing stock fast enough to meet demand then why not just build more Manhattan? Have the government buy up 22 square miles somewhere and build roads, sewer lines, subways, and buildings. Then auction the whole thing off. Seems like it would do a better job of increasing the urban housing stock, and probably cheaper too.

    1. The problem is that it’s not just the built environment: it’s the social networks that exist there and not elsewhere, and you couldn’t recreate those by rebuilding Midtown.

      That said, building more Manhattans sounds fun.

      1. The trouble with the “build more Manhattans” idea is that land speculation can cause development to grind to a halt. Some of those in the new urbanist community have found that land gets hoarded when the zoning allows significantly more dense buildings, while the speculators wait to cash out on the biggest project possible. This can possibly be mitigated by a property tax structure that is more land-value focused than improvement-value focused, but I suspect there’s still going to be issues “priming the pump” so to speak. Manhattan itself is the product of centuries of incremental development. Even in SimCity it’s difficult to go straight from vacant land to skyscrapers without anything in between.

  4. ^^^ he means that property taxes should be paid more by the square foot of land and less by the value of improvements. The low cost of taxes on vacant property lowers the cost of hoarding land significantly. Now, property taxes of 2.5% on the total value of a $100k lot are only $2,500. While if a modest mansion ( of 6 flat ) is built on it, it might be $1million with $25,000 in taxes. If you skewed the taxes to tax land higher and buildings lower, say 10% on the land and only 1.5% on the building – it would create an incentive to build more – which would create more affordable housing.

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