Readers of FREE WHITEWATER know that I have been opposed to a restrictive, anti-market approach to student housing. Whitewater’s leading critic of student-rental housing is dentist-politician Dr. Roy Nosek. Nosek has mentioned, more than once, that student housing is a ‘death-knell’ for a neighborhood.
Recently, I offered three posts critiquing Nosek’s understanding of basic market forces, his apparent cultural bias against student housing, and the weak story that reporter Carla McCann of the GazetteXtra wrote about student housing in Whitewater. (One of the reasons that I described Nosek as having a cultural bias is because as an economic prescription, Nosek’s positions are incoherent; he doesn’t seem to understand the probable economic consequences of his own proposals.)
Since my three posts, a reader pointed me to a follow-up story that McCann wrote about student housing in Whitewater. McCann’s second story on the topic is dated December 15th, and is entitled, “Do Renters Get a Bad Rap?” The second story lists the views of City Council member Max Taylor and Whitewater Developer Russ Walton. They do a good job explaining that (1) the vast majority of students cause no social problems, and (2) new housing units lead to reduced housing costs. Both points are unquestionably true.
I have no idea why McCann did not write a balanced story initially. As I pointed out after her first story, she omitted any points of view from students or landlords. That left the first story as laughably one-sided. These second interviews should have been part of a single story. I’ll note, by the way, that McCann’s first story’s conclusory headline (“Neighborhoods Oppose Housing for UW-W Students”) was biased in favor of Nosek’s position; the second headline’s equivocal nature (Do Renters Get a Bad Rap?) is not similarly supportive of the pro-market position.
Recently, a reader wrote and asked me what might be done about a near-monopoly on student housing by a single landlord. He asked if a subsidy might be necessary to break that monopoly. I promised him an answer, and here it is.
Let’s assume that there is a near-monopoly in favor of a single landlord. There are times when a market does not form, or when conditions prevent a market from functioning. I would favor reductions to entry barriers (zoning restrictions) as the solution to this problem, over subsidies. I know, of course, that subsidies are meant to address entry barriers of a different sort, so under an effectual monopoly, I would not dismiss the idea easily; the practical return to a normal market is a worthy goal. Subsidies would be my last resort, but we could consider them if that need came to pass.
The problem, of course, is that zoning restrictions and an overly-aggressive enforcement culture work to favor an incumbent landlord over new entrants, and make the use of a subsidy by new entrants difficult, if not impossible.
There’s irony in all this. Nosek’s support for harsh zoning restrictions leads to a few ill-consequences: (1) it favors incumbent landlords over new entrants, thus perpetuating an assumed near-monopoly, (2) it makes use of a subsidy difficult to impossible, as new entrants could not use it, (3) it favors incumbents and allows them to raise rental rates, (4) because it inhibits new construction in zoning-restricted areas, it forces incumbents to use profits in less-optimal ways than their area of greatest skill (as landlords), (5) drives demand for student housing to a black market, (6) leads to a need for increasingly intrusive methods of code enforcement to prevent homeowners from choices that satisfy demand for student housing, (7) ultimately prevents homeowners from selling to the highest bidders, who might satisfy that student housing demand. Rentals would cost more, and homeowners would not get the best prices at sale, under Nosek’s approach.
That’s why a subsidy is not feasible, now. Nosek’s opposition to student housing is ill-considered, and will lead this city down an economically irrational path, made worse by mean-spirited, intrusive municipal enforcement.