TCS Daily


You'll Never Condo in This Town Again

By Benjamin Zycher - May 4, 2005 12:00 AM

As Saul Steinberg taught us many years ago, from the perspective of New Yorkers, Hollywood might as well be Japan. Well, let us now observe, from our perspective out here in the land of Arnold, that New York might as well be the Soviet Union.

The Soviet Union lives no more, you say? True enough; but The Big Apple lives and breathes, and within it beats the heart and soul of the New York City Politburo, oops, City Council, which in honor of Purim just past donned its finest Siberian greatcoats and fur hats as it slid, vodka at the ready, ever further into the gulag-like depths of that sausage-making art known as New York City lawmaking.

And what an art it is. Never content to allow individual choices freely made -- in a phrase, the market -- to balance competing economic needs and investment alternatives, the Council is about to proscribe the conversion of hotel rooms into condominiums and apartments. That these conversions represent a looming crisis is not obvious to those naïve souls unmoved by the prospect that Saudi princes on a weekender might not be able to stay at The Plaza.

Of course, not all visitors to New York come in pursuit of an alternative to Harrod's; ordinary Californians, among other species, also are known to migrate eastward in search of various forms of fun. And while New Yorkers are known for their generosity during times of trial, this is ridiculous: The City Council is striving to reduce the supply of housing for the natives in order to increase it for the visiting nomads.

Now, the dear departed may vote in Chicago, early and often, but I doubt that Californians and other foreigners vote in New York. So what gives? Amid the numerous highminded blatherings in the proposed law about the employment and tax revenues yielded by the tourism goddess -- assertions ranging between dubious and disingenuous -- one searches in vain for the phrase "hotel employees unions." And that is where the art comes in, to wit, the high art of wealth redistribution.

I betray no secret by pointing out that the owners of the respective properties will lose, in that they will be prevented from making investments yielding the uses for their buildings valued most highly by the market, that is, actual people spending their own hard-earned dollars. Hotel patrons will both win and lose, in that the effect will be to preserve the supply of hotel rooms for awhile; but an ancillary effect will be to politicize the hotel and housing markets even more than is the case now, increasing the risks inherent in investment. For the hotel sector, that investment will fall and the long run price of hotel services will rise. In terms of the housing market, New Yorkers writ large will lose, in that prices will be higher than otherwise would have been the case.

The only clear winners, at least in the short run, are the hotel employees and their unions; nowhere can there be found a coherent argument as to precisely why public policy ought to favor them at the expense of everyone else. Just as the Soviet system rewarded the politically loyal with extra rations and the less-bad apartments in Moscow, it is obvious that this City Council compassion for the winners is driven by the quid pro quo of political support. As American as a corned beef sandwich, you say? Fine; why not be candid about it?

The City Council has neglected to mention as well that among the losers would be the construction workers and their unions, as the law will reduce construction demand in New York. This obvious reality essentially is acknowledged in the proposed law in its assertion that the conversion of hotel rooms to residential property diverts construction resources away from the "development of affordable housing in diverse parts of the City..." And so why do we not hear opposition from the construction unions? It cannot be because they are dumb; instead, their silence must be part of an implicit logrolling exercise in which the City Council compensates these losers with some other legislation imposing losses upon New York City as a whole, the specifics of which have not yet reached the Far West.

There is, of course, another group of major losers: the principles of property rights, free enterprise, and economic liberty, steadily being destroyed in New York even as America attempts to promote them overseas. Alas, like Californians, they do not vote in the Big Apple.

Benjamin Zycher is a senior fellow at the Pacific Research Institute for Public Policy. Email: benzycher@bzecon.com.

 

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