Law of Supply and Demand not yet a law at Bloomberg.com

Hey, I hate to make fun of a fellow Dutchman, but over at Bloomberg News Simon van Zuylen-Wood really put his foot in it when he wrote the following: “Rent-stabilization laws have their critics, but they account for some of the last sensibly priced apartments in New York City, the second-most-expensive rental market in the country after San Francisco.”

Yes, rent-stabilization laws do have their critics, those wackos who think that laws discouraging the development of new or refurbished housing—thus decreasing the supply of housing and increasing its cost for everyone except for the privileged and undeserving few who occupy rent-stabilized apartments—are a bad idea. But poor Simon, who clearly can’t see past the end of his own sensible nose, just doesn’t get it.

Like most people, Simon simply doesn’t understand—or rather unconsciously rejects—the whole notion of market pricing. It’s “natural”—or certainly seems to be so—for us human folk to think that all goods and services have an intrinsic value that should not vary appreciably regardless of time or place. Whenever real estate is discussed, people make the same joke—“the three most important things about real estate is location, location, and location!”—but nobody gets the joke, or at least no one understands it, no one understands that virtually the entire cost of housing can be determined, not by “what you get” but where you get it. What Simon means by a “sensibly priced apartment” is one that a sensible person (i.e., himself) would want to live in at a rent he could afford, regardless of location, be it the Upper East Side or Woodville, Mississippi.¹

Virtually of us sensible folk have had the experience of seeing a house or apartment and thinking “That would be a perfect place for someone like me!” and then discovering that the cost is about triple what we thought we might be able to swing, particularly if Mom and Dad would cash in, or cash out, sometime early next year. It’s like a hard slap in the psyche instead of the face, and a sting to the psyche don’t fade in a hurry. We thought we were cool—at least we hoped we were—and instead we find out we don’t count for much in the “real world”.