New York City mayor Bill de Blasio has long been an admirer of the Sandinistas, the revolutionary political movement that overthrew the government of Nicaragua and brought to that unhappy country its Marxist ideal of justice, which turned out to be rather heavy on mass executions. But Mayor de Blasio’s roving eye seems to have settled for the moment on Venezuela.
Mayor de Blasio proposes to expropriate the property of New York City’s commercial landlords. Of course, he wouldn’t put it quite like that, just as Senator Warren wouldn’t use the same blunt honest language to describe her daft proposal to put corporate boards under political discipline. (To be fair, Senator Warren is only 1/1024th a Leninist.) But that’s what his proposal amounts to: Commercial landlords would no longer have the power to set their own rents, to evict undesirable tenants, to determine deposit amounts, etc. The property would remain formally titled to them, but they would in effect lose control of it.
This is an example of what Robert Higgs calls “regime uncertainty,” which does not describe the rise and fall of governments but rather the security of property rights. Mayor de Blasio and other Democrats would argue that they are not depriving landlords of their property rights, only subjecting them to regulation in the public interest. But the changes proposed represent a fundamental shift in the nature of those property rights, away from property owners and toward political actors — the prior regime of property rights ceases to exist. A landlord who cannot set his own rent may still own his property on paper, as does a corporation that cannot determine for itself the composition of its board, but ownership no longer means what it did.
Regime uncertainty means that investors are unable to make long-term plans for their property, because the nature of rights to that property is not securely established. Often, this has the perverse effect of raising prices that regulation had been meant to lower or to stabilize: If an investment involves a higher degree of risk, then investors will demand higher returns to put their money behind it.
New York City, of all places, should understand this, given the catastrophic and categorical failure of its residential rent-control regime, which ended up subsidizing the housing of celebrities and politically connected multimillionaires. As a Vanity Fair contributor by the name of Donald Trump put it in a 1987 essay:
Consider one building on Central Park West at Seventy-third Street — magnificently designed, with huge apartments, wonderful detailing, a beautiful double-height marble lobby, and, of course, gorgeous views. Mia Farrow has ten rooms overlooking the park, paying about $2,000 a month for an apartment that could rent for upwards of $10,000 a month on the open market. Carly Simon lives in the same building and pays about $2,200 a month for her ten rooms with the same view. Across town, Alistair Cooke pays roughly $1,100 for his eight-room apartment on Fifth Avenue, and William Shawn, former editor of The New Yorker, lives in an eight-room apartment in the same building and pays about $1,000 a month. William vanden Heuvel, a very prominent attorney who served as ambassador to the United Nations under Jimmy Carter, pays less than $650 a month for his six-room apartment in a terrific building on East Seventy-second Street.
(Ambassador vanden Heuvel is the father of Nation editor Katrina vanden Heuvel, who seethes with revolutionary zeal in the Hamptons.)
Many of those celebrities eventually were shamed into giving up their subsidies — or they just moved on, as people do — but the underlying dynamic never changes. Oddly enough, neither does the progressive response: Every few years, some far-thinking politician will propose tax credits or some other form of subsidy to encourage manufacturing jobs, or alternative energy, or whatever it is the politicians think needs encouraging, and, then, a few years later, they will complain that these subsidies are going to actual businesses — businesses they hate — instead of the magical nice rainbow businesses of their mentally diminished imaginations. Manufacturing credits go to Starbucks and oil companies, green-energy incentives redound to the benefit of Tesla or General Electric, credit subsidies sold as guarantors of good blue-collar jobs go to Koch Industries. Think of Elon Musk as the Carly Simon of green-weenie schmundo.