Net Neutrality Debate Reveals Folly of Rent Control

What does internet freedom have to do with rent? Much more than you’d think.

Net neutrality is the idea that regulation must prevent internet service providers from favoring one kind of content over another. When this debate raged more than a decade ago, some feared that with limited bandwidth to go around, ISPs would discriminate against some content, such as video. Streaming would die an early death.

That fear is a distant memory now because the industry made lots of bandwidth available, observed Bloomberg opinion writer Tyler Cohen.

“One lesson of the net neutrality debate comes from economics: Supply is elastic, at least when regulation allows it to be,” he wrote.

Are you beginning to see the parallel to real estate? Here’s more from Cohen:

“Some thinkers on the left favor what they call ‘the abundance agenda’ as a way of resolving disputes over allocation and distribution. Legal rationing, or the fixing of equal prices, is not needed if private suppliers can create enough for everyone.

“The fact that the net neutrality debate has turned into a nothingburger should raise the status of the abundance agenda.”

This is what supply-siders have been saying forever about housing: Let builders build, and they will provide enough for everyone. Owners of those homes will have to compete with each other on price, rather than exploit their control of a scarce resource by jacking up rents.

New York, unfortunately, opted for rent control when returning soldiers from World War II caused a sudden spike in demand that pushed rents up. Rent control was intended to lapse when the housing emergency ended, just like after World War I.

But in 1940, the city began creating low-density districts where only single-family and two-family housing could be built. In 1961, New York strangled supply citywide by passing infamously restrictive zoning.

Before the 1961 zoning resolution kicked in, developers took advantage of a grace period by stockpiling building permits, then went on a construction spree for the first half of the 1960s. But when those permits were exhausted, housing production nosedived.

In 1969, New York passed even more sweeping price controls, calling it rent stabilization.

That’s how the temporary housing crisis of the late 1940s became permanent.

Below, a chart from 1996 shows the early 1960s spike in units and the low production in the 30 years after that, except for a brief surge in the early 1970s:

That chart, by the way, was put together by the Rent Guidelines Board staff (not board members). It’s a reminder that thinking people have been paying attention to this issue for a while.

But in the knife fight that is New York City politics, thinking people lose to outraged homeowners — Nimbyists — and rent-control zealots. Those two otherwise disparate constituencies have formed an accidental, powerful alliance to distort the city’s housing market for their own purposes.

However, as they did on net neutrality, some folks on the left have begun to accept — and even promote — the Real World argument that more supply would alleviate the rise in housing prices. Check out Brooklyn Council member Chi Ossé’s savvy video about rezoning an Atlantic Avenue corridor, for example.

“New York City is the greatest city in the world,” he said. “So what happens? More demand for the same supply of housing makes prices go up.”

Other left-leaning elected officials have come around to that view. One, socialist state Sen. Jabari Brisport, even courageously acknowledged — after reading a paper by doctoral fellow Xiaodi Li — that construction of market-rate housing does not raise rents nearby.

Progressives’ voice in this debate has become especially crucial since Mayor Eric Adams, who had been a champion of building more housing, squandered his political capital in a scandal involving alleged straw donations and discounted travel.

Stubborn advocates, such as the ultimate broken record Cea Weaver, just keep repeating that the answer is rent control for everyone. Perhaps she should apply for an apartment in Stockholm now, because it could take 20 years for one to become available.

But people like Weaver are increasingly the exception, and the real estate industry has noticed.

“I think the tide has turned a little bit in terms of how housing [development] is viewed,” one land-use attorney said in an interview last week. “It’s seen more as a need.”