Pure Geoism

Sometimes it’s said that our “economic reform advocacy” lacks passion, doesn’t get down to real cases. Well, here’s one: here’s the story of “a bold, bare and enormous wrong” (as Henry George put it) perpetrated against someone who is very dear to me — although we must realize that she is just one of many millions. I’m not going to reveal too many of her personal details, because she wouldn’t want to be a public example, but many people involved with the Georgist movement will know who I’m talking about.

shelterThe real estate situation in New York City (as in many others) has long been cut-throat, and never more so than right now. Because of this, New York City has long had a rent-stabilization law. As long as a rent-stabilized tenant honors the terms of her lease, she can stay in her apartment at a rent that rises at about the rate of inflation. The problem with this, of course, is that the value of the land under one’s apartment tends to rise at a rate that is much, much higher than inflation. My friend’s building is in the Lower East Side, an area that is in the full upswing of gentrification. Her building has recently been sold, and she is about to get kicked out of the apartment where she has lived for thirty-five years.

I mentioned to her that what’s happening to her is “pure Geoism” (I meant, in terms of the problem, not the solution), and she just nodded. She’s not an economist, but she trusts my judgment that we’ve been working for a righteous cause all these years. You should understand that we’re talking about a highly responsible citizen here (and the Salt of the Earth). Though she lives with chronic, painful sciatica, she has held down jobs and paid her rent, all her life — in fact, knowing how nasty landlords can be, she has most often stayed a month ahead on her rent. She has long remitted help to various struggling family members, and is well known for helping out many stray animals and persons in her neighborhood (she tends to like the animals better, but I think she really can’t be faulted for that).

The rent stabilization law, long denounced by libertarians, was enacted to provide just aid to people like my friend. She had no control over the forces that vastly hiked land values on her street.

Now, there are a few things we need to understand about the NYC rental market in the 21st century. (Make no mistake, though: other cities have the same problems; only the details are different.) First, although over two-thirds of New Yorkers live in rented housing, and more than half of those apartments are rent stabilized, their number declines every year. New leases are almost exclusively market-rate, and apartments are converted to condos or coops as soon as they can get the old renters out. The consequences for “affordable housing” are dire.

Counters of theoretical beans will point out that because the rent stabilization law prevents landlords from collecting the appreciation of land value over time, those leases acquire a market value for the tenant — and older ones can be worth quite a lot. But, it’s a seller’s market, and this value quite often stays with the landlord. One fool in my friend’s building was offered two months’ rent in cash to leave, and happily took it. My friend, who is not completely without intelligence or resources, was offered a sum that seemed sizable, but wouldn’t be nearly enough, after taxes, to allow her to rent a comparable apartment. And the offer was conditioned on her vacating the place in a month’s time (if she leaves it clean, she could even get her security deposit back). Since she needs the asset of the buyout money to qualify for renting a new place, it would be a decent bet that she’d be unable to get it together in time, the landlord wouldn’t have to pay, and she’d be on the street. (The sum offered is a pittance anyway, in terms of the multi-million dollar renovation that’s undoubtedly planned.) Of course, she has a legal right to refuse the buyout and keep the rent-stabilized lease. But, she’s a woman in her late 60s, with health problems, and the tales of harassment of such holdouts are appalling, and many.

But that’s the price of progress, right? Just the way it goes?

Don’t you believe it. Our current system causes significant land values to accrue to rental tenants, who never asked for them, and who are often powerless to collect them. Is that not a sign of perverse dysfunction? All of these problems arise when we let unearned land rents, which are created by the entire community, into private hands. My friend, and millions like her, lose their apartments and have their lives turned upside down for the benefit of sleazy investors. “I knew something was up,” she said, “one morning when three young suits showed up, talking very quietly to each other.” They suck up the land rent that belongs to every person in the city, while my friend paid city wage taxes on every paycheck she ever got, and will even have to pay federal “capital gains” tax on her buyout — if she ever sees it. The collective loss of this backwards tax system is stupendous. It harms real working people, every single day. There is a viable alternative and we need it NOW.

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5 Responses to Pure Geoism

  1. This is a heart-breaking tale that we in NYC working on this problem are hearing more and more often. Statistically, we have a record number of homeless people – over 50,000/night, though this doesn’t count the couch-surfers who rotate from one impatient relative or friend to another until, hopefully, they can scrape up enough cash to make a (last) month’s rent plus security, plus first month’s rent. This can be a very high bar for someone on a fixed or inadequate income, especially if they are facing all the other inefficiencies of being poor (higher food per meal costs from not being able to buy in bulk, and of course, the notorious “payday lenders,” a form of legalized loan-sharking without the pleasures of knee-capping). Hidden in all this is the virtual half-slavery of our low-income benefits policies, which require people to work SOMEWHERE in order to qualify for benefits that can amount to half of what ought to be their income. This means that employers can pay less than a living wage while the government picks up the slack, while perhaps offering courses (like Walmart did until it was outed) in how to collect benefits form the government to make up for their Always Low Wages. McDonald’s, unhelpfully, offered a “budget” online – despite their employees not having reliable access to a computer – that didn’t include money for heating an apartment.
    Of course, all of this “surplus” is gobbled up by the Land Owner.
    On the other end are new ultra-highrises on what has been dubbed Billionaire’s Row (mid-57 street), including One57 where two penthouses recently sold for over $90 million….each.
    We need to get to the root of the problem by taking back the private collection of rent for the public good!
    Those who are interested in learning more about the dysfunctional NYC housing (read: land) problem, can view the seminar I recently gave for the Henry George School here:
    http://www.opednews.com/articles/Fairness-Sustainability–by-Scott-Baker-Community_Fairness_GROWTH-DEVELOPMENT_Georgism-140210-926.html
    and even download the slideshow I used.
    – Scott Baker, president of Common Ground-NYC

  2. Lisa Cooley says:

    Great post, but I don’t understand the following sentence: “Our current system causes significant land values to accrue to rental tenants, who never asked for them, and who are often powerless to collect them.”

    Explication, plz?

    • Lindy says:

      Thanks! The thing that makes the value accrue to the tenant is the law that allows them to keep their leases indefinitely. The landlords then aren’t allowed to collect the increased value of that location, so they are willing to buy out the leases.

  3. Lindy,
    Please explain the ‘viable alternative’, in clear, succinct language.
    In Denmark we have a Land Value Tax – increasing – making people (as they say) unable to stay in their very expensive houses. So we have a public requirement for abolishing/reducing the LVT.
    I am saying, if they don’t want to – of if they can’t – pay the LVT they should move to an area with a low LVT – of which we have many (but not close to the metro, etc.).
    No other georgist want to say that!
    What is the alternative?

    • Lindy says:

      The alternative is the Single Tax. Denmark also has rather high income taxes, does it not? Are the LVT rates there high enough to deter a speculative land market? If not, then I’d say that is what is making places unaffordable — not the fact that *some* of the rent is being taken by the government.

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