The free market breaks down, in some sense, in very small areas where living is highly desirable. Housing quickly gets priced out of the reach of all but the wealthy.
The only two actual cities in US where this applies, AFAIK, are the island of Manhattan and San Fran. Many more people would like to live there than can. This results in an auction bidding up rental and housing prices beyond all measure.
In fact, I suspect all of Manhattan would eventually become an enclave inhabited only by the truly wealthy were it not for “rent control,” which greatly slows the sorting action of the free market.
Read an article recently about some of the “housing” on Manhattan. One guy lives in an “apartment” about 150 SF. Doesn’t even have its own bathroom. But it was cheap. From his POV all he does is sleep there, so what more does he need? Wouldn’t work for a family, of course, but for a single person, why not?
There are other places where all but the rich have been utterly priced out. Aspen and Nantucket spring to mind, but of course these aren’t really cities.
On looking back at the first sentence of this post, I can see I was wrong. Such sorting is exactly what the free market is supposed to do, and if not for government intervention it would be much farther along. The question of whether it constitutes “market failure” boils down to whether one thinks a NYC and SF inhabited only by the truly wealthy is or is not desirable.
It comes down to the belief in free association. If one believes that we have that right, then people exercising that right is a good thing. If one does not believe in free association, they won’t.
Personally I’m fine with enclaves of uber wealthy because I believe that is how it should work. If I want to live there, I should become able to afford it and not force others to accommodate my economic situation.
At certain times in my life I traveled through those circles. I vastly prefer being around mountain hick rednecks with beer and chewing tobacco. Not because I don’t appreciate fine things. I do. But I find those of lesser means and material goods to be a better class of people overall.
NYC is where SF is headed, guided by the same globalist elites.
It’s the same people.
NYC real estate has extremely high property tax rates:
http://www.nyc.gov/html/dof/html/property/property_rates_rates.shtml
from about 10% to 19%.
This makes owners look for alternatives.
Ergo, they have the low income housing tax credit program.
http://www.nyshcr.org/Topics/Developers/LowIncome/
Which leads owners to HFA financing for construction.
http://www.nyshcr.org/Topics/Developers/MultifamilyDevelopment/
It all means you do everything their way if you want to make money.
The financial elites, having their stooges in public office, have firmly set in place
A) the elites at the top, making money hand over fist
B) the middle class earning say around $150k per year and up, living in a cubby hole and paying taxes through the nose
C) the off the books service employees, who earn $50k per year and up, off the books, and live in low-rent cubby holes
All that “need to verify income”... hogwash ! :) Once you get into a low income apartment, you never leave, no one ever checks your income level again. Lots of people get into one when they’re young and first get to the city, later on they make gobs more, and keep the cheap apartment.
Well, its a question of say, $600 per month jumping to $3,000 per month, for the same cubby hole.