Rent Control Is Destroying New York City

Nando Times ^ | May 19, 2003 | Robert L. Bartley

[bruinbirdman]

"[R]ent control appears to be the most efficient technique presently known to destroy a city -- except for bombing," Swedish economist Assar Lindbeck observed in a 1972 book. It has been particularly destructive in New York City.

{} New York has maintained price controls on rent since World War II, and as it took over buildings abandoned by landlords at one point owned 70 percent of Harlem.

{} Prior to rent control, builders regularly completed 30,000 units a year, or 90,000 at the peak in 1927.

{} However, household formation exceeded housing increases in every year of the 1990s, peaking at 44,700 new in 2000; during the boom, in 1998, developers completed only 11,432 units and rehabilitated 6,967.

{} Only 30 percent of rental units are exempt, so their rents naturally soar, and high prices are then used to justify price controls.

William Tucker estimates the direct costs of rent control at $2 billion a year, exclusive of the effect of shrinking the property tax base.

A Manhattan Institute study by Henry O. Pollakowski, a housing expert at the Massachusetts Institute of Technology, concluded, "tenants in low- and moderate-income areas receive little or no benefit from rent stabilization, while tenants in more affluent locations are effectively subsidized for a substantial portion of their rent."

By contrast, a new Pollakowski on the effects of a statewide referendum terminating rent controls in Cambridge, Mass. in place from 1971 to 1994. Pollakowski found that Cambridge deregulation was followed by a boom in housing investment.

Source: Robert L. Bartley, "Rent Control: New York's Self-Destruction," Thinking Things Over, Wall Street Journal, May 19, 2003.

For WSJ text (requires subscription)

For Manhattan Institute Study

For more on Rent Control

[denydenydeny]

From Friday's New York Post:

May 16, 2003 -- GUITAR legend Johnny Winter was singing the blues after he lost a sweet rent-stabilized penthouse at 501 E. 87 St. A Manhattan Supreme Court judge ordered him to pay more than $30,000 in back rent last month. Winter had been living in the double-balconied pad on the Upper East Side with his wife since 1974, and paying cut-rate rent the whole time. But when he renewed his lease three years ago under the corporate name "Ole Pa" rather than under his own name, the landlord argued that the spread was no longer protected by rent stabilization laws. The judge agreed and Winter is now strumming his guitar in Connecticut.

One of the primary characteristics of socialism is that it always results in the poor directly subsidizing the wealthy.

[ricpic]

Don't confuse the issue with facts. It's all about power. Rent control and even rent stabilization are ways for bureaucrats to control the housing market. That the market is ruined in the process is beside the point.

[yankeedame]

This is news??

Over and over again, it can clearly be seen that everywhere rent control is tried, either here or abroad, it has been the kiss of death.

[RLK]

New York City is destroying New York City. The infrastructure and the housing problems associated with that many people are prohibitive, especially when such costs are added to the price of goods and services.

[umgud]

Why do they enforce rent controls, but not the number of people per unit under occupancy regulations?

[laurav]

You know, I've been trying to figure out where these mysterious rent-controlled apartments are. My roommate and I pay as much for our two bedroom one bathroom place on the upper east side as my parents pay for a five bedroom house in Indiana. I don't know anyone who's ever had a rent-controlled apartment. How does one land one of those things anyway?

[Sonny M]

My family is in real estate. We have several building with rent control apartments. To be honest with you, its next to impossible to get one. Even worse, here's the most bizarre irony of all. Rent Control is good for landlords, but not the individual landlord who has it, rent control is bas for tenants in general, but not for the individual tenant who has it. If somone has a rent control apartment, they have taken an apt off the market,they they might not normally want or have, but they have also driven up the rents in other apartments. A family will have to settle for a smaller place, while a single person will keep a bigger place. Its alot more complicated then this, but this is a small basic of it.

[Focault's Pendulum]

Perhaps they might consider raising the taxes on cigarettes.

[ambrose]

Rent control is typically "grandfathered" in to existing tenants... but once someone moves out, the landlord can raise the rent back to market rates.

[Texas Eagle]

Rent Control Is Destroying New York City

Good!

[supercat]

Rent Control is good for landlords, but not the individual landlord who has it, rent control is bas for tenants in general, but not for the individual tenant who has it.

To put it another way, the best thing for a landlord is to have everyone else have rent controls, just as the best thing for a restaurant is for every other restaurant to prohibit smoking.

[Sonny M]

You said it a hell of a lot better then me, but basically yes. Though in this case, also, indiviudal tenants benefit also at the expense of other tenants. The easiest solution for housing in NYC, and the most obvious, is the one that will never come to be, because some liberal groups are more powerfull then others, and everyone bends over for the wrong cause at the wrong time.

See the stupid open air acts.

[proxy_user]

Rent control and rent stabilization are gradually being phased out in NYC, although no one is admitting it.

In order to eligible for rent control, you have to be in continuous occupation of your apartment since 1970. The number of such apartments is steadily falling.

With rent stabliization, apartments are eligible for decontrol when the rent exceeds$2000 per month, and the income of the tenants is over $175,0000. Since these numbers are not adjusted for inflation, it is only a matter of time.

Many landlords in the outer boroughs are renting at less than the maximum legal rent because the stabliized rent is higher than they can get on the open market. These apartments are rent-stabliized in name only.

[secretagent]

Trying to understand this: All NY landlords benefit from the government created scarcity, because of the law of supply and demand - their nominally rent controlled receipts exceed what they'd get in a real market competing against new units and landlords.

But that begs the question: what keeps new landlords coming in now?

[Nick_123]

I knew a women who grew up in NYC. Her parents lived in a rent controlled apartment (West 113th St.) when she was young. Many years later, her parents divorced and her mother got a apartment downtown (Chelsa). Since she stayed with both parents, her name was on both leases. Her mother died a number of years ago and she moved in permanently, paying about 500$/month. Its a 2 bedroom so she rents out the spare room for about 500$/month. A few years later her father got very ill and was moved to a nursing home. Since her name is on the lease there as well, she can stay there if she wants at a cost of about 400$month. She rents it out to a couple of Columbia students for about 500$/month.

I think it was Thomas Sowell in his book "Basic Economics" who made the claim that due to rent control in NYC, there are more abandoned apartment units than homeless people.

[Teacher317]

You mean price controls inevitably lead to failure? Whodathunkit?

(Doesn't anyone in New York have a friend from Russia?)

[nutmeg]

read later bump