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E-Book:  The Rent Is Too Damn High by Matt Yglesias

At the suggestion of one of my anonymous commenters, I read this book.  It was fine.  The basic argument is that in overly expensive urban areas, ie LA, NY, SF, DC, cities should relax zoning restrictions (ie deregulate) and build more apartment-style housing to lower the overall rent prices.

Yglesias is a proud liberal and I found it somewhat ironic his policy prescription for the topic he choose could have been written by Ronald Reagan.  My sister is also a very opinionated liberal, except when it comes to her field of expertise: education, where she is a big proponent of charter schools and introducing competition into the public school system.  Something to think about.

So...deregulation.  More apartments.  Okay, I'm in.  I live in Santa Monica one the most overpriced little sections of land in the entire country.  Luckily for me, I got into a weird rent control situation and am paying under market value for my apartment.  This is precisely the type of scenario Yglesias has a problem with  - the combination of zoning rules and rent controls help present residents at the expense of "would-be" residents by making the available housing and rental units prohibitively expensive and to de-incentivize moving for the folks who are already in the rent-control places.

Now I'm trying to imagine the real world application of Yglesias policies.  In Santa Monica and Venice area, I've noticed a lot of big apartments being built recently.  In Santa Monica, there are all these yuppie developments over around the 3rd Street Promenade with names like "The Victorian" and "The Galaxy Apartments" and other Vegas-type naming knock offs.  (I am making up those names).  Over on Rose Ave, they just build a huge complex called "The Frank Apartments," which is pitching itself as some sort of eco-friendly living arrangement (how exactly, I am unsure).

I looked up the Frank Apartments.   This is Yglesias dream world.  Yoga and pilates studios in the first floor.  Fancy coffee shop.  Shared communal spaces.  Easy proximity to the beach and a nice little shopping district.  A one bedroom costs $3000 a month.  A townhome costs $5000.  Other examples of Yglesias style developments are littered along the beach - huge apartment/condo complexes.  I imagine they cost a lot more.

Who the hell would pay $3000 a month for a one bedroom apartment?  Just doing some quick math -- that is $36,000 a year in rent, which should be about what?  25% of take home income...a mere $144,000 a year of TAKE HOME income.  To bring that much in, you need to be making a salary of around $250,000 per year.  Unless you are in entertainment, in which case, you need to be making $300,000 because of your agent, lawyer, manager fees.

Who makes this much money to live in a one-bedroom place?  Maybe a lawyer who graduates in the top 5% of his/her law school class.  Maybe a doctor who worked 12 years to become a specialist.  Maybe a pretty successful television writer or actor.  Maybe an entrepreneur.  Who else in Los Angeles would make this much money at an age when they would want to like in a one bedroom?  Not many people.  We're talking top 2% here.  Hardly a solution for "the people."

So what am I doing here?  Making Yglesias point for him?  Should we build 2-3 other apartment complexes just like this in the area to drive prices down?  Would anyone do that, given there is no way the first one is filling up?  And then there is the aesthetic question.  Do people want to live in glorified college dorms?  I don't.  I look at these places and the sign might as well read: yuppies douches in here. They have no personality.  They are Ikea Furniture made a bit nicer.

I don't have an answer.  I suppose the de-regulation might work.  I think it might be more interesting if the cities encouraged more condos or individual units for sale to be built to eventually lower prices - so people can get some equity into their rental situations.  But again, maybe that is just a prescription for a bubble.

As a general note, in books like these, I'm more of a fan of how Michael Lewis approaches subjects where he takes specific individuals and situations and those anecdotal stories illuminate a larger trend in American society rather than these folks who make wide-ranging policy claims with very little actual evidence or specifics.  I'd separate Tyler Cowen's book only because it makes more of a historical claim and attempts to read data in a different way.