Last week, the New York State Legislature arranged a series of regulations designed to protect tenants and control rents. This action was quickly repeated by the California Assembly, which passed a rent-cap bill, both following in the footsteps of Oregon’s statewide rent control law enacted this past February.
Landlords in New York City were quick to argue that the new legislation would cost local construction jobs and prevent owners from making needed repairs, leading to buildings in disrepair. Nevertheless, these arguments were insufficient in the face of passionate grassroots activism. The leading image for a New York Times article captured their perspective, picturing enthusiastic crowds and signs, one of which reads, “People Over Profit.”
The attempt by a few prominent real estate developers to contact Governor Cuomo directly and convince him not to sign the new measures failed. Trying to thwart the new rent-control regulations behind closed doors probably didn’t help the popular opinion of the landlords’ public arguments either.
Of course, such attempts by businessmen are nothing new. Adam Smith is sometimes mistaken for a “pro-business” thinker because of his critical work laying the foundation for the free market. Nevertheless, Smith famously said,
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
Is the pictured protester correct, then, that this is a simple case of “People Over Profit”? Definitely not. The deeper reality is revealed in another recent case of New York City regulations. Also last week, the building housing the popular Strand Bookstore was designated a historical landmark, over the opposition of owner Nancy Bass Wyden.
The new rules facing the Strand will make maintenance and upkeep more difficult, endangering the family business that has thrived since 1927. In this case, the bookstore’s threatened profits support a workforce of over 200, providing that small group of people the resources they need to serve the many people of New York City creatively and well while living a life of dignity. People and profits are clearly on the same side.
It can be easy to lose sight of this truth in the high-powered world of New York real estate development, especially when a conflict seems to be between influential businessmen and lobbyists who can call up New York’s governor, and active, engaged, passionate community members.
Unfortunately, New York City’s new legislation simultaneously damages economic liberty, making housing less accessible and less well-kept, and erodes the importance of social institutions. Grassroots activists relying on top-down action from the state government have undercut their own achievement. By putting greater control in the hands of bureaucracy, more power has been given to the small group of cronies who can call Governor Cuomo on the phone. He may not have answered this time, but the haze of activists’ victory give him the opportunity to trade special favors to the biggest developers behind the scenes in exchange for political support. Large companies succeed while citizens and small businessmen suffer in this crony capitalist game.
Lost in the shuffle of recent rent regulation battles is the natural harmony between individual creativity, human action through social institutions, and the free market. Powerful landlords pull strings, while everyday people spend thought, time, and imagination on rigid regulations that empower the lobbyists they hope to fight.
If these resources and creative energy were released through free enterprise, new solutions might be found to reshape New York City’s housing market to benefit ordinary citizens instead. Until then, the illusion of people against profits will continue to lead back to government, where expensive and bitter battles keep politicians permanently in the winner’s circle.
(Photo credit: Daniel Schwen. CC BY-SA 2.5.)