The Value of a Liquor License

Via Lydia DePillis, a glimpse into the exciting world of rent:

It's yours for $18,000 a month… Damn! What do you think, realistically, can go into that space and afford an $18,000 a month lease? Interesting that it already has a liquor license. I'm still thinking legit country bar. But that's a lot of Budweisers to sell…

The space may not end up leasing for quite that much. But the fact that the owner sees it as realistic is a fascinating window into the economic value created by the Adams-Morgan liquor license moratorium. Residents of the neighborhood decided that they didn't want any more bars in this bar-heavy area, so they imposed a moratorium. Using that particular means of restricting the supply of bars ends up creating a giant economic rent for the owners of existing licenses. It's much better policy to restrict alcohol supply through taxes, in which case the revenue ends up in the city's coffers. That would allow for a lower level of taxation on non-booze retail.

An even more radical alternative would be to just welcome the idea of more bars opening in Adams-Morgan. You can think of that area as possessing a valuable natural resource known as "unpleasant people want to go drinking there." Allowing for more development of that valuable resource would increase the city's tax revenue and increase the opportunities for employment and entrepreneurship enjoyed by the city's residents. It might also decrease the value of property in what's currently a very expensive neighborhood (cheapest home up for sale is a 343 square foot basement for $169,900) which would be an effective means of increasing the supply of affordable housing in a city whose politicians claim to be interesting in increasing the supply of affordable housing.