Study: Regulations Raise Housing Costs

Reduced regulation of the Big Apple’s housing market will help curb skyrocketing real estate prices, according to a recent report published by a Harvard professor.

The report, co-authored by Professor of Economics Edward L. Glaeser, says that despite stimulating economic conditions, Manhattan’s housing market has experienced little growth over the past 20 years due to increased regulatory control.

While taxes may be necessary to counteract the social costs of new housing—such as overcrowding and increased traffic—the current “zoning taxes” of Manhattan are too high, the report says.

Costs of building new apartment buildings in Manhattan fall somewhere between $150 and $200 per square foot, according to the report, while the median sales price for condominiums was $606 per square foot last year. The report attributes the difference between cost and price to the bureaucratic costs stemming from New York City building regulations.

“The guts of the report is that current housing prices in Manhattan are three times more than the cost of providing it,” said Glaeser.

The Manhattan Institute, a public policy organization that favors free market solutions to social problems, published the report, which Glaeser co-authored with Joseph Gyourko, a professor of finance and real estate at the University of Pennsylvania.

Glaeser rejected criticism of the study that suggested the study only dealt with selected facets of the housing market in Manhattan, while not taking into account certain aspects like demographics.

“There are some genuine issues with this report, but that isn’t one of them,” said Glaeser.

Glaeser said that only if, for example, a hypothetical real estate market with monopolistic builders arose would the critics objections be legitimate.

He said that Manhattan is nearly alone in its real estate crisis due to its specific housing policies.

“Many areas of the country such as Las Vegas have high demand, but real housing prices there have barely budged,” he said. “The idea that New York has better demographics than Las Vegas is ridiculous to me.”

Glaeser said that although Harvard students may not be affected directly by New York’s market right now, many may want to move to Manhattan later and the rising costs of housing will make it difficult for students to find residences.

“Students will have to buy in,” he said.

Glaeser also said that combatting the shortages in the New York housing market can provide an outlet for students concerned with social justice.

He said that remedying the housing crisis “is obviously the most effective means of facing the homelessness problem.”