The risk of suit and the cost of running the gauntlet of agencies–20 or more city and state agencies are involved in various aspects of housing–undoubtedly inhibit rehabilitation and construction in both the public and the private sector. They add significantly to the expense, and perhaps most important, they discourage innovative attempts by the private sector to meet the needs of low-income renters.
Just how significant the cost may be is underlined by a recent study conducted in New Jersey. The Newark StarLedger found that “it is not the value of labor and building materials that are pushing the average price of homes beyond many, but the uncontrolled growth of a massive and costly system of regulation and bureaucracy, much of which has been found to be wasteful.” As much as 35 percent of the cost of a new house in New Jersey, it estimated, was due to regulation. Since New York’s code is arguably even more Byzantine, its effect on costs is undoubtedly greater.
Single-room-occupancy hotels, one of the cheapest forms of housing, have been particularly hard hit by the restrictions. The number of such units in New York fell 89 percent between 1970 and 1983, from 127,000 to 14,000. Although gentrification and the increasingly high cost of land in the inner city contributed to their demise, rigid zoning and equally rigid specifications (mandated square footage per room and requirements for individual kitchens and bathrooms of certain sizes and levels of amenity) played a major role. Bringing back SRO hotels will require flexibility in the code but could produce great benefits. San Diego, for example, opened its first new SRO hotel in 70 years, the Baltic Inn, in 1987. That project benefited not only from generous financing but from a decision to exempt SRO hotels from parking space requirements. The occupants, after all, are unlikely to have cars.
Cato Policy Analysis
April 4, 1990