The Fountainhead: Rent Control

The Fountainhead: Rent Control January 25, 2019

The Fountainhead, part 4, chapter 8

Peter Keating has asked Howard Roark to do something that Peter himself isn’t capable of – to design a cheap, economical housing project for the poor, and let Peter take the credit to salvage his failing career. Inexplicably, Roark agrees:

“Now listen to me. I’ve been working on the problem of low-rent housing for years. I never thought of the poor people in slums. I thought of the potentialities of our modern world. The new materials, the means, the chances to take and use. There are so many products of man’s genius around us today. There are such great possibilities to exploit… You wish to know how to build a unit to rent for fifteen dollars a month? I’ll show you how to build it for ten.”

Lest you think that Roark’s decision was motivated by compassion for poor people who’d benefit from affordable housing, he hastens to disabuse us of that notion:

“So whatever we do, don’t let’s talk about the poor people in the slums. They have nothing to do with it, though I wouldn’t envy anyone the job of trying to explain that to fools. You see, I’m never concerned with my clients, only with their architectural requirements… Peter, before you can do things for people, you must be the kind of man who can get things done. But to get things done, you must love the doing, not the secondary consequences. The work, not the people. Your own action, not any possible object of your charity. I’ll be glad if people who need it find a better manner of living in a house I designed. But that’s not the motive of my work. Nor my reason. Nor my reward.”

Roark’s absolutist worldview echoes the assertion in Atlas Shrugged that the only permissible value is loving work for the sake of work. If you like your job because it gives you the opportunity to help others or improve their lives, that means you’re an evil socialist. But this begs the question: What is work for if not to benefit other human beings, to make their lives safer or easier or more pleasant?

Rand’s ontology would insist that if you become a doctor because you want to heal sick people, that makes you a bad doctor. In her worldview, the only good surgeon is a surgeon who thinks cutting into human bodies is an end in and of itself. If an Objectivist surgeon’s patients get better, he would regard that as, at best, an acceptable side effect. (You can multiply the absurdities: a firefighter who really loves jumping into burning buildings? A teacher whose favorite part of the job is administering standardized tests?)

Certainly, you could imagine an arrogant doctor who only cares about the challenge of cracking a tough diagnosis or performing a difficult procedure correctly. But to say this is the only possible motive to go into medicine, that a good doctor can never be motivated by compassion?

The fallacy in this is that, if you care about other people’s welfare, you should want to do the best job you can for them. If you only care about ticking the boxes on a job description and have no concern for the people you’re serving, more often than not, you’ll end up disregarding their needs and giving them something they don’t want or can’t use. Rand tries to sidestep this paradox with her impossible insistence that Roark can build houses that are magically perfect for his clients, even though he doesn’t know or care what his clients want.

But even if you accept this worldview at face value, there’s a further problem. The terrific irony of it is that Howard Roark, the diehard libertarian, is agreeing to build a government housing project intended to help the poor! Even if he’s doing it because he enjoys the challenge, this contradicts everything Objectivism is supposed to stand for.

Remember, in Atlas Shrugged, heroic robber barons like Hank Rearden refuse to do business with the government at any price, and Dagny Taggart’s swashbuckling ancestor threw a government bureaucrat down the stairs just for offering him a loan. If Roark were a character in that book, John Galt would have kicked him out of Galt’s Gulch and left him to perish with the rest of the looters.

Rand tries to paper over the contradiction by having Roark monologue about why he hates the idea of housing projects. But that doesn’t solve the inconsistency, it just deepens it. After all, the book strongly implies that Roark is the only architect smart enough to meet the requirements for Cortlandt. If he doesn’t build it, it won’t be built at all.

He walked to a window and stood looking out at the lights of the city trembling in the dark river.

“You said yesterday: What architect isn’t interested in housing? I hate the whole blasted idea of it. I think it’s a worthy undertaking — to provide a decent apartment for a man who earns fifteen dollars a week. But not at the expense of other men. Not if it raises the taxes, raises all the other rents and makes the man who earns forty live in a rat hole. That’s what’s happening in New York. Nobody can afford a modern apartment — except the very rich and the paupers…. I’d have no desire to penalize a man because he’s worth only fifteen dollars a week. But I’ll be damned if I can see why a man worth forty must be penalized — and penalized in favor of the one who’s less competent.”

Having delivered this long diatribe on why government housing projects are bad, Roark then agrees to design a government housing project:

“Then here’s what I’m offering you: I’ll design Cortlandt. You’ll put your name on it. You’ll keep all the fees. But you’ll guarantee that it will be built exactly as I design it.”

Keating looked at him and held the glance deliberately, quietly, for a moment.

“All right, Howard.” He added: “I waited, to show you that I know exactly what you’re asking and what I’m promising.”

Since Roark brought it up: the classic argument against rent-controlled housing, made even by liberal economists like Paul Krugman, is that it benefits tenants who are able to get rent-stabilized apartments, but makes rents higher for everyone else by reducing the supply of market-rate real estate. Because it doesn’t incentivize new housing to be built, it does nothing to ease housing shortages.

And there may be something to this. But consider the other side of the coin: What happens when the free market is left to run wild with no regulation or oversight? Does it deliver a smoothly functioning utopia of efficient prices and thriving neighborhoods?

We can see the answer in New York, the city that Rand loved so much. In recent years, some of the richest and most desirable streets in Manhattan are turning into blighted eyesores, pockmarked with vacant stores, graffitied shutters and “For Rent” signs. But the problem isn’t too little capitalism – it’s too much.

The source of the problem is called “high-rent blight”. Commercial landlords are raising rent to eye-watering levels, doubling or tripling or even more. In the process, they’re driving out the small businesses and restaurants that gave the neighborhood its character and made it a desirable place to begin with. The landlords are doing this because they’re all hoping to capture corporate chains, like banks and luxury retailers, that won’t blink at the price tag. And if they can’t find a tenant willing to pay, they just leave the property vacant – sometimes for years. Even pricey hipster meccas like the West Village aren’t immune:

In the heart of the former shoppers’ paradise — the five-block stretch running from Christopher Street to Bank Street — more than a dozen retail spaces sit empty. Where textured-leather totes and cashmere scarves once beckoned to passers-by, the windows are now covered with brown construction paper, with “For Lease” signs and directives to “Please visit us at our other locations.” (source)

This seems like a problem that the law of supply and demand would solve on its own, but that’s not happening. Instead, the plague is spreading, emptying out whole blocks. Blogs like Vacant New York chronicle the extent of the problem. It’s gotten so bad that even Starbucks is closing stores.

Part of the problem, as this article suggests, is that many landlords own a portfolio of properties, and lowering rent at one location would spur other tenants to demand price cuts. The corporate and luxury tenants, for their part, often open stores as loss leaders, not because they plan to make money from that location, but just for the prestige of getting to say they have a store there.

This is a tough problem with no simple fix. I’ve previously mentioned Mayor Bill de Blasio’s proposal of a vacancy tax to fight high-rent blight by incentivizing landlords to lower their prices, which would be a good start. More pessimistically, this may be unfixable as long as there’s so much inequality in the world: it will always be more profitable for business owners to chase the highest and tiniest slice of the income distribution, rather than trying to appeal to the rest of us.

Image credit: Public domain, via Wikimedia Commons

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