This Is Why Housing Will Remain Unaffordable In NYC

The City will buy unsold condos and coops to be resold as affordable housing.

The city is starting a program to buy vacant apartments to bolster its affordable-housing stock, City Council Speaker Christine Quinn announced in her annual State of the City speech yesterday.

The plan, which Mayor Bloomberg supports, would empower the city to buy unsold condos and co-ops and ensure they are resold as affordable units.

"Where developers have units they cannot sell, the city will negotiate the lowest possible price and make these homes affordable for middle-class families to rent or buy," Quinn said at City Council chambers.

Details will be rolled out in the coming months, according to Quinn and Deputy Mayor for Economic Development Robert Lieber.

Quinn vowed that the city would not end up being a landlord for homes in foreclosure, as it did in the 1970s.

Yes, you read that right. This goes against supply and demand - basic economics.

Allowing those units to remain on the market pushes the prices units down, making them more affordable. By purchasing these units and holding on to them, it provides a price support that distorts the market and ensures that prices remain higher than they should be had the market been allowed to adjust to the current economic conditions.

Affordable housing is not affordable when the government steps in and takes actions like this because it makes homeownership more expensive for everyone else. There are better ways to make sure that units get sold at affordable prices, and they all involve the private sector being allowed to build more units without price controls - rent stabilization or other government interference which has hampered the construction of residential real estate in the City for years.

The longer that units remain on the market, the more pressure there is on developers to lower the prices - and we already see that the price pressures are resulting in lower prices for units across the market (high end on down).

It also ignores the costs to the City to buy and hold on to these units; costs that the City can ill afford when it is cash strapped as it is.

This is a bad idea all the way around.