Thursday, February 12, 2009

A "Monument" to Altruism

A recent report by the Center for Urban Future (HT: Houston Strategies) finds that New York City is losing middle-class residents in droves. The cost of living in the city is simply so high that a middle-class family cannot afford to live there.

The ACCRA Cost of Living Index, an analysis by the Council for Community and Economic Research, finds that Manhattan is by far the most expensive urban area in the United States, with an aggregate cost of living (224.2) more than twice the national average (100) and considerably higher than the second most expensive city (San Francisco, at 173.6).
In contrast, Houston comes in at 88. While housing costs are a large part of the reason for the exorbitant cost of living in New York, other costs are also the most expensive in the nation.

City residents pay among the highest prices in the nation for electricity. Telephone service, auto insurance, home heating oil, parking and milk are also higher in New York than virtually anywhere in the continental U.S. The combined state and local tax bill is also tops among major cities.

An individual in Houston who earns $50,000 would have to make $123,322 in Manhattan and$85,918 in Queens to live at the same level of comfort, according to ACCRA’s Cost of LivingCalculator. Someone moving from Houston to Manhattan would pay 68 percent more for groceries, 447 percent more for housing, 54 percent more for utilities, 22 percent more for transportation and 38 percent more for health care.

While all of these statistics paint a pretty grim picture of life in New York City, they fail to explain why costs are so much higher. These statistic tell us what is occurring, but not why it is occurring. The report does give a hint as to the cause:

One reason for such high costs of course is high land values; another is the city’s building code, which, for example, outlaws in new buildings the once ubiquitous external fire escape, requiring more expensive internal arrangements.

Another big cause, says Randy Lee, chairman of the Building Association of New York City, is the bureaucratic red tape. “You can file a project with [the Department of] City Planning and wait a year before you get the building passed,” Lee says. “A sewage change will take you two years. The bureaucratic environment is really hostile in New York.”
Such delays force developers to incur costs on land they cannot use, on top of the fees associated with the permitting process and the expenses associated with meeting the city's building mandates. All of these costs are ultimately passed on to consumers in the form of higher housing costs. These costs are a primary factor in driving up the cost of housing to a level that is unaffordable.

But these damning economic statistics do little to sway advocates of land-use regulations and draconian building codes. Indeed, New York Mayor Michael Bloomberg wants to make the city's building "greener", which will undoubtedly add to the cost of housing. Those who advocate such regulations and controls do so in spite of the overwhelming economic evidence of the harm caused. They advocate such controls because, according to their moral code, it is the proper thing to do.

Such controls are invariably defended on the grounds of the "public welfare" or the "common good" or protecting the public. Underlying all of these arguments is the premise that the individual must place the welfare of others before his own welfare. The individual must sacrifice his values for the alleged benefit of society or the poor or the environment. And if he can no longer afford to pay for housing, so be it. When the altruist must choose between the moral and the practical, his moral code will win every time.

The ultimate cause of New York's high housing costs is altruism--the belief that individuals must serve others rather than themselves. The report states that there is no money to be made in housing for the middle-class. Yet the low-end market and the high-end market have boomed in recent years. The low-end market is subsidized--the needs of the poor must be satisfied with altruistic government policies. The high-end market provides attractive profit margins.

Another factor that contributes to New York's housing costs is rent control, which largely impacts housing for the middle-class. Developers have a disincentive to build rental housing when their profits will be arbitrarily capped by rent control laws. Not surprisingly, the city's vacancy rate is the lowest in the nation--rent control discourages an expansion of supply.

Rent control laws, like building codes and land-use regulations--are ultimately driven by altruism. The need for affordable housing takes precedence over the property rights of landlords and developers and the actual results are irrelevant. That laws intended to create affordable housing have actually had the opposite effect is of no concern to the altruists.

Altruism can only lead to misery. Despite the pronouncements of its advocates, altruism is neither benevolent nor concerned with human welfare. A morality that demands self sacrifice is not a morality concerned with the well-being of individuals. A morality that demands the renunciation of one's values is not intended to lead to happiness. Altruism presents individuals with the false alternative between morality and practicality, between virtue and happiness. If New York is to ever be a great city again, it must reject altruism. It must embrace the moral code that is also practical--egoism.

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