I've long suspected Fair Trade goods were an economic impossibility. I would be curious to hear about any systems the article maligns as "do-gooder" that have been successful in beating market realities.
The rental market in New York City fails similarly. A certain percentage of each building must be set aside for rent stabilized apartments. A select few housing lottery winners receive housing at well below market rates. Many of the lottery winners don't deserve the housing in the first place (e.g., voluntarily "low-income" children of wealthy parents).
There is fierce aftermarket competition for these artificially cheap apartments. Everybody wants these apartments, not only the poor, because setting the rate below market value hands any resident a clear profit. Well-off people are better equipped to compete for them, and they very often win them.
Rent stabilized apartments are often in the hands of people who don't deserve them, by any standards. They are illegally sublet at a profit. They are traded as favors to friends, or traded in exchange for off-the-book proceeds. A lot of effort is expended by landlords, usually of the nasty kind, in getting rent-stabilized tenants to move out when the time comes to reallocate the building.
Landlords don't like setting aside apartments for low income tenants. Naturally they raise the price on all the other apartments in the building. The net effect? The other tenants subsidize the rent stabilized apartments...to the tune of hundreds of dollars a month.
You can imagine the effect fully subsidized public housing has on the real estate market. You can view this as a side channel that collects taxes and pays for housing, but that's not exactly how it works. Some of the poor benefit greatly, the rest of the poor deal with the same inflated market as everyone else. And, let's face it, the middle class in NYC already has a terrible time paying for housing.
In the end, the goal of the rent control laws is thwarted (the low rents are enjoyed by well-paid tenured faculty rather than the needy), the income tax laws are thwarted (a sizable part of compensation is untaxed), and all this is done by a nonprofit institution (the university) whose ostensible purpose is to serve the public interest.
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[ 16.0 ms ] story [ 195 ms ] threadI'd link to the study, but it is behind a paywall.
The rental market in New York City fails similarly. A certain percentage of each building must be set aside for rent stabilized apartments. A select few housing lottery winners receive housing at well below market rates. Many of the lottery winners don't deserve the housing in the first place (e.g., voluntarily "low-income" children of wealthy parents).
There is fierce aftermarket competition for these artificially cheap apartments. Everybody wants these apartments, not only the poor, because setting the rate below market value hands any resident a clear profit. Well-off people are better equipped to compete for them, and they very often win them.
Rent stabilized apartments are often in the hands of people who don't deserve them, by any standards. They are illegally sublet at a profit. They are traded as favors to friends, or traded in exchange for off-the-book proceeds. A lot of effort is expended by landlords, usually of the nasty kind, in getting rent-stabilized tenants to move out when the time comes to reallocate the building.
Landlords don't like setting aside apartments for low income tenants. Naturally they raise the price on all the other apartments in the building. The net effect? The other tenants subsidize the rent stabilized apartments...to the tune of hundreds of dollars a month.
You can imagine the effect fully subsidized public housing has on the real estate market. You can view this as a side channel that collects taxes and pays for housing, but that's not exactly how it works. Some of the poor benefit greatly, the rest of the poor deal with the same inflated market as everyone else. And, let's face it, the middle class in NYC already has a terrible time paying for housing.
In the end, the goal of the rent control laws is thwarted (the low rents are enjoyed by well-paid tenured faculty rather than the needy), the income tax laws are thwarted (a sizable part of compensation is untaxed), and all this is done by a nonprofit institution (the university) whose ostensible purpose is to serve the public interest.