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Dispelling Disinformation About Rent Controls

by Timothy Collins (Biographical info)


This memorandum was drafted to assist those involved in the current debate over the extension of New York's rent laws. The analysis is based upon a personal review of hundreds of studies, reports and surveys generated by government, industry, tenant and academic experts over the past thirty years.

Updated May 5, 1997

Introduction

New York landlords and their advocates have spent millions of dollars over the past two decades on lobbyists, campaign contributions and advertising - all aimed at ending or discrediting rent regulations. Industry advocates, including the Real Estate Board PAC, the Rent Stabilization Association PAC and the Neighborhood Preservation Political Action Fund contributed a total of $401,605 to legislative incumbents and campaign committees just before the last round of rent law renewals in 1993. Nearly 90% of those contributions went to Republicans. In the 1994 and 1996 election cycles, Senate Republicans received $883,925 from real estate industry PACs. Most of those funds went to legislators who do not have a single rent regulated constituent in their districts.

In my seven years with the New York City Rent Guidelines Board landlord organizations such as the Rent Stabilization Association and the Community Housing Improvement Program spent hundreds of thousands of dollars on studies which invariably concluded that rent and eviction protections are bad public policies. Notably, research funded by non-profit organizations, academic institutions or government agencies produced findings that were starkly at odds with the conclusions of the landlords groups. Unfortunately, due to limited funding and marketing efforts the results of these non-partisan efforts rarely received public notice. As a result, the hard facts about the experience of New York and other cities with rent regulations have been overwhelmed by a well engineered public relations effort by the landlords. Today, the myths and rhetoric generated by the landlords' effort to persuade the public of the evils of rent regulation are routinely and uncritically echoed in the local media. The purpose of this brief memorandum is to identify and correct some of the unfounded assumptions about rent regulations.

History

Contrary to a common perception that rent controls are a vestige of New Deal liberalism government correction of market imbalances is a practice that is over 500 years old. Medieval theologians developed the concept of a "just price" for the necessities of life and persuaded the English Parliament to regulate the price of bread, meat, lodgings and other staples of life for centuries. In the American colonies similar laws followed the English tradition. Many of those laws continued long after the American Revolution. In fact, New Jersey enacted a statute regulating the amounts Innkeepers could charge for food and lodging in February of 1791 - just fifteen months after it ratified the U.S. Bill of Rights. Throughout the 19th and 20th centuries various price regulations were challenged and upheld as constitutional exercises of government's power to protect public health and welfare.

Even if rent and price controls are within our historical experience and national traditions, hasn't the "free market" addressed our housing needs throughout most of that history?

The sad fact is that free markets in New York City have rarely produced an adequate supply of decent and affordable housing. The horrors of open market housing were well documented by Jacob Riis in the nineteenth century. Rising rents and evictions led to extreme public unrest, rent strikes and mass protests at the turn of the twentieth century and into the 1920's when the City first experimented with rent controls. The Rent Laws of 1920 lapsed in 1929 because a growing economy led to a building boom which reduced the need for controls. During the Depression of the 1930's poverty forced many families to double up. Overcrowding, along with a deflationary economy kept rents in check. When state officials met to revise the State's Multiple Dwelling Law in 1946, they noted that a housing shortage began to appear as early as 1936 but that the Depression had forced many families to double up which concealed the shortage.

The Emergence and Demise of Rent Control

During World War II rent and eviction protections were reactivated as part of a national price control program. While demand for apartments was strong, building construction was stalled due to the diversion of resources to the war effort. After the war housing construction rose dramatically. The fact that over two million rental units remained under strict rent controls had no measurable impact on the development of new housing. The Rent Control system initiated during the war now governs only 71,000 housing units. Since 1971, rent controlled apartments in three to five unit buildings have been deregulated upon vacancy. Rent controlled apartments in buildings with six or more units which are vacated now fall under rent stabilization. Consequently, over 700,000 pre-war apartments which were formerly subject to rent control are now under rent stabilization.

Rent Stabilization

By the end of the 1960's rising construction costs and zoning changes slowed the production of new housing. Strong demand for rental units and a low vacancy rate caused a sharp rise in rents throughout the uncontrolled housing stock. Complaints flooded the City's Housing and Development Administration - mostly from middle class residents of newer and higher priced post-war apartments. In 1969 rent stabilization was established to protect about 400,000 households living in these uncontrolled apartments. The stabilized stock has since grown to over one million units with the influx of vacated rent controlled apartments.

In 1971 the state adopted vacancy decontrol for both rent controlled and rent stabilized apartments. Rising rents and complaints that owners were harassing tenants out of regulated apartments to take advantage of vacancy decontrol led to a re-establishment of rent stabilization coverage for vacant units in 1974.

In 1971 the state adopted a law which prevents the City from adopting rent controls that are stricter than those already in effect. Since then, the City has been deprived of home rule over rent regulations.

The rent stabilization system was adopted to ensure reasonable rents for everyone. That is, it was designed to restore fair bargaining relations between owners and tenants - whether those tenants are rich or poor. Although it clearly benefits low income tenants, it was never intended to serve as a social welfare system. The much repeated criticism that rent regulations were primarily intended to protect poor people raises a convenient straw man for the critics of rent controls to knock down. While concern was expressed for those on fixed incomes and for the displacement of long term city residents, the main objective contained in the legislative declaration was to relieve tenants of the burden of "abnormal" rents which had been driven up by the housing shortage.

The notion that rent regulations force owners to "subsidize" tenants was rarely heard until the late 1980's. Until that time the standard critique of rent and eviction protections proffered by the real estate industry was that such regulations hurt the housing stock and the local economy. Having failed to make a convincing case, they came up with the new argument that rent regulations "subsidize" affluent tenants. Ignoring the traditional "fair rent" objective of the system, they argued that rent protections were primarily intended to protect poor people and therefore should not benefit anyone else. This argument fails to account for the anti-profiteering purpose of the law. The rent laws were enacted to eliminate unfair bargaining advantages that landlords have over all consumers who are forced to shop for apartments in an overheated market. In other words, the law was designed to ensure that a landlord could not charge $1,200 for an apartment that - in a normal market - would rent for only $800. Until the lobbyists for the landlords embarked on reconstructing public perceptions, the relative wealth of tenants was not a concern. Notably, the landlords' public relations effort has never attempted to explain how an increase in rent from an affluent tenant given to an even more affluent landlord serves the public interest. Usually poor landlords do not own luxury housing.

In 1993 with the passage of the so called Rent Reform Act, the state imposed a means test on a very small group of exceptionally affluent tenants. Tenants who earn over $250,000 for two consecutive years and who pay more than $2,000 in monthly rent are subject to decontrol. The state also imposed vacancy decontrol on apartments with rents that exceed $2,000 per month. Although these changes were supposed to effect less than one percent of the housing stock, they have disrupted the lives of thousands of tenants who must now file income verification forms every year. Many tenants who earn far less than $250,000 have been deregulated because forms are returned a few days late or are lost in the mail or by the DHCR. Many owners have illegally increased rents beyond $2,000 just to escape coverage under the rent laws. Administratively, the luxury decontrol provisions have been a costly nightmare. At best they benefit a few wealthy owners of upscale buildings who have no particular need for such increases.

Notably, tenants who earn more that $250,000 and reside in apartments renting for less than $2,000 per month remain protected by rent regulations. Why is this so? When the rent laws were revisited in 1993 there was a widespread recognition that the housing shortage did not effect the luxury market. That is, those who shop for high rent apartments (above $2,000) have plenty of options. By continuing protections for all tenants in lower rent units where housing remains scarce, the legislature reaffirmed the anti-profiteering goals of the system.

In the rental market for apartments below $2,000 housing is scarce. According to the City's triennial Housing and Vacancy Survey the vacancy rate for apartments with monthly rentals above $1,250 declined from 4.47% in 1993 to only 2.5% in 1996. Therefore, a lowering of the threshold for "luxury" apartments which are decontrolled upon vacancy (to say $1,500) would erode protections for many middle income families who now face a tight rental market.

How would Deregulation Work?

There are three ways to terminate existing the rent laws.

Vacancy Rates Exceed 5%

Both rent control and rent stabilization exist because of a housing shortage which is measured through periodic vacancy surveys (usually in three year intervals). If the vacancy rate rises above 5% rent stabilization will automatically terminate after a public hearing. In most cases, that would mean that rents would go to market once existing leases expire. Landlords would have no obligation to offer renewal leases. If they did offer leases, they could increase rents as much as they want and they would be free to rewrite any terms in the new leases. If the vacancy rate rises above 5% rent control does not automatically terminate but local authorities are required to implement a plan for "orderly decontrol".

Currently only 4% of housing units are vacant and available for rent. Very few of these vacant units are affordable to middle income households.

The Laws "Sunset" by Legislative Inaction

The state Emergency Tenant Protection Act expires periodically and must be renewed prior to each expiration. The ETPA is now scheduled to expire on June 15, 1997. About one million apartments are covered by this law. If the law sunsets, landlords will have total control over rent levels and lease terms as existing leases expire.

The State Affirmatively Ends Renewal of Local Laws

About 30,000 rent stabilized apartments are governed solely by the local Rent Stabilization Law. Also, some 71,000 apartments are protected under the local rent control law. These laws were just renewed by the City for three more years. If, however, the state decides to amend the 1962 enabling legislation which permits local regulation of these apartments, those protections could also fall.

Varying interpretations of these laws by government lawyers and state courts could result in an earlier or later termination. Complex issues such as the funding and function of the State Division of Housing and Community Renewal's Office of Rent Administration which enforces the rent laws would have to be worked out.

How Does Rent Regulation Help Tenants?

Fair Bargaining between Tenants and Owners

The City's housing shortage places tenants at a bargaining disadvantage when it comes to rent levels and lease renewals. Under rent regulations landlords cannot evict tenants unless they prove in court that a tenant has violated a condition of the tenancy. In the absence of rent regulations landlords could simply refuse to renew a lease without any explanation at all. Eviction protections would not work if landlords could force tenants out through large rent hikes. Similarly, rent protections would offer little protection if landlords were free to evict tenants at will.

Reasonable Rents

There is ample evidence that New York's rent regulations provide critically needed protection against unreasonable rent increases. According to the City's 1996 Housing and Vacancy Survey, the average income of rent stabilized households is only $21,600 per year. The average income of rent controlled households is only $12,408 per year. Among the ranks of protected tenants are a relative handful of the City's rich and famous. By the last available count only about 5% of rent stabilized households earned $100,000 or more per year. Less than 1% of rent controlled households earned $100,000 or more per year.

Compared to other high rent cities (Los Angeles, Boston, San Francisco and Washington D.C.) middle and low income tenants in New York benefit substantially from rent regulations. According to a 1991 study by the Citizens Budget Commission, a typical rent regulated tenant who earned less than $100,000 per year paid a little less for rent as a proportion of income than did similar tenants living in another high rent cities. For example, rent regulated New Yorkers earning between $10,000 and $15,000 per year devoted about 38.9% of their incomes to rent payments. Tenants in the same income group in other high rent cities spent 48.5% of their incomes on rent. Notably, a typical New York tenant who earned more than $100,000 per year faced virtually the same rent burden experienced by their counterparts in other high rent cities. In New York those earning over $100,000 per year spent 9.5% of their incomes on rent. In other high rent cities those earning over $100,000 spent 9.4% of their incomes on rent. Thus, in terms of relative rent burdens rent regulations do an effective job of protecting low and middle income tenants.

That is not to say that rent regulations have afforded middle and low income tenants overly generous protections. The city wide average rent burden for all income groups has grown dramatically over the years. In 1970 the average New York tenant devoted only 20% of their income to rent. According to the 1996 Housing and Vacancy Survey, over 32% of tenant earnings now go to housing costs. Evictions for non-payment of rent are nearly twice as high as they were twenty eight years ago - rising from about 13,000 in 1969 to over 24,000 in 1996.

Overcrowding is another indicator of the bargaining leverage exerted by landlords. In 1984 only 7.7% of rental units were considered overcrowded (having more than one person per room). By 1996 overcrowding had risen to 10.3%. If economic growth were to stimulate a rise in new household formation - and a corresponding decrease in overcrowding - the City's overall vacancy rate of 4% could fall precipitously leaving starkly few housing options for new households.

In a nation where the richest 2% of the population has more wealth than the bottom 90%, no responsible citizen or legislator can ignore the income effects of dramatic changes in public policies such as rent regulation. Approximately 25,000 individuals, corporations and partnerships own rent regulated apartment buildings in the City. If deregulation were to cause only a 15% increase in rents, the total transfer of wealth from tenants to owners would be approximately 6 billion dollars in the first five years of deregulation. About 12% or some 3,000 of these owners own fully 77% of the City's residential rental units and would reap the bulk of this transfer. In short, ending rent regulation would result in a massive transfer of wealth from largely poor and middle income households to some of the richest people on the planet.

Protection against Arbitrary Evictions

Nearly 300,000 non-payment petitions for evictions are filed in New York City's courts every year. Of these over 100,000 remain unresolved before a hearing is scheduled. In a typical year about 25,000 end up in actual evictions. Often tenants withhold rents to get owners to make repairs. There are over three million housing code violations of record outstanding in the City so the need to withhold rents to secure repairs is widespread.

Most owners find that they can increase profits by cutting back on maintenance. Free market rents will not resolve this problem because buildings with high maintenance deficiencies usually house tenants who cannot afford rent increases. It is well established that income limits have a greater influence over rent collections in low income neighborhoods than do rent regulations. That is why the tenure protections secured by rent regulations are so important to low income tenants. Without such protections low and middle income tenants who assert their right to safe and habitable housing will encounter owners who simply discontinue their tenancies by refusing to renew their leases. To be sure, the statutory defense of "retaliatory eviction" will survive deregulation. Nonetheless, that defense is very difficult to prove and most owners know how to defeat it. In the final analysis, deregulation will have a dramatic chilling effect on tenants who would otherwise have the strength to stand up to landlords who try to squeeze every dime from their buildings.

Does Rent Regulation Hurt Owners?

According to data analyzed by the New York City Rent Guidelines Board in 1993, rent increases have kept pace with the cost of operation for over three decades. About seven in ten regulated apartments are located in pre-war buildings. In 1967 it cost a typical landlord approximately 65 to 70 cents of each rent dollar to run a rent regulated pre-war building, leaving 30 to 35 cents of each dollar for mortgage payments, improvements and profit. By 1991 that operating cost figure remained largely the same at 64 to 70 cents. The changing composition of the post-war stock (with over one in three post war units having been converted to co-ops) makes a similar comparison difficult. Nonetheless, there is no evidence that these newer units lost any income as a result of rent regulation. In the years since that 1993 study was undertaken landlords have seen their net operating incomes rise substantially. In short, the rental increases afforded by rent regulation have been sufficient to preserve landlord profits and landlords are better off today than when rent stabilization first began.

Notwithstanding the availability of rent increases, many buildings in low income areas have experienced very significant problems meeting operating costs. The root cause of this housing distress is well documented: rising property taxes along with rent collection losses resulting from steadily declining tenant incomes and inadequate shelter allowances. If tenants cannot afford existing rents - even at controlled levels - owners cannot pay their bills. The decline in the value of shelter allowances given to public assistance recipients has greatly compounded this problem. Today a family of four is entitled to only $312 for monthly rent. If low income tenants could afford the rents landlords are already allowed to charge, housing distress in New York City would virtually disappear. Landlords are well aware of this.

The results of a survey of over 300 landlords conducted by the Rent Guidelines Board in 1994 is highly instructive. When asked "what single city initiative would most improve building profitability" 40% favored lower property taxes and lower water and sewer charges; 30% favored establishing a more efficient housing court; and only 25% favored higher rents.

Do Rent Regulations Pit Tenants Against One Another and Against Co-op Shareholders?

A common criticism of rent regulation is that it increases rent inequities among tenants leading to a sense of unfairness. In fact, such inequities exist in both rent regulated and unregulated buildings. Several studies show that rent "skewing" occurs wherever long term tenancies exist. Naturally landlords often give preferable treatment to long term stable rent payers over more transient tenants. There is strong evidence that rent regulation promotes long term tenancies and this explains most of the rent skewing that occurs in rent regulated buildings. One study by the Rent Guidelines Board in 1994 found that the annual "discount" given for long term tenants is virtually identical in both rent regulated and unregulated buildings. Only the fact that rent protected households typically occupy units about three to four years longer than unregulated households accounts for the deeper overall discount they receive. In short, except for promoting long term tenancies, New York's rent regulation system mimics open market patterns of longevity discounts quite effectively.

Deregulation will not cure these inequities in a way that satisfies those who now feel that they pay more than their neighbors. If rent regulation ends rents are likely to go up for nearly everyone. The fact that your neighbor's rent goes up 25% while your rent goes up only 10% is not likely to provide much comfort.

Critics of rent regulation have referred to the lengthy tenure of rent regulated tenants as "housing gridlock". Tenant advocates see long term tenancies as providing neighborhood stability. In a City where more than 2 in 3 households are renters and families have fewer home ownership options, the presence of long term tenancies is not surprising nor particularly undesirable.

Shareholders in co-ops often resent the fact that some - though hardly a majority - of rent regulated tenants in their buildings pay less rent than they pay in maintenance charges. The comparison between rents and maintenance can be misleading. First, most co-ops have sizable underlying mortgages which reflects the ownership interest of the shareholders. Those mortgages are paid off by rents and maintenance charges. While the co-op corporation gains a larger equity interest in the property as such mortgages are retired - adding to the value of each share held by co-op owners - tenants do not benefit from this. Second, shareholders are permitted to take income tax deductions for that part of their maintenance charges which go to mortgage interest and property taxes. This means that co-op shareholders see a good portion (often 10-20%) of their maintenance returned at tax time. Tenants get no such discount.

Rent increases for tenants - especially rent controlled and low rent stabilized tenants - generally exceed increases in annual co- op maintenance charges. Also, as tenants vacate their apartments those units may be sold or rented at market. In sum, upon serious reflection most co-op shareholders realize that they are not treated unfairly by their rent regulated neighbors. As with all things, there are some exceptional cases. Those cases can be addressed through modest adjustments within the present system.

Have Rent Regulations Hurt the City's Housing Stock?

New Construction

The presence of rent regulations has never affected new housing starts in the City because new housing was always exempted from controls. In fact, New York's biggest housing booms occurred during the 1920's, and during the period from 1947 through 1966 - a time when stringent rent controls covered most of the existing apartments.

In an owner sponsored study examining, in part, the effects of moderate rent regulations on new housing construction, economist Anthony Downs found that "repeated studies of temperate rent controls in the United States provide no persuasive evidence that such controls significantly reduce new construction here." Opponents of rent regulation often blame rent regulations for all negative events in housing markets. This can be highly misleading. For example, among the several New Jersey cities that adopted rent controls in the early 1970's by 1977 new apartment construction fell by 52%. In New Jersey cities without rent controls, new apartment construction fell by 88% over the same period.

Some analysts have suggested that deregulation will increase the demand for new housing as middle income families are deprived of "bargain" apartments. These arguments fail to consider two critical facts: First, their is no guarantee that such families will shop for new housing in the five boroughs and a loss of middle income families would be a disaster for New York. Second, rent increases will cause a decline in tenant savings making it very difficult for many middle class families to save up a down payment for a new home or co-op and thereby depressing demand for new housing.

Abandonment

The factors which cause housing abandonment have been the subject of multiple studies and reports focusing on local and national markets. The most thorough investigation of the relationship between rent control and housing abandonment was undertaken by Professor Peter Marcuse of Columbia University in 1981. Professor Marcuse concluded that "[t]he substantial evidence available from national as well as local studies suggests that there is no correlation between rent control and abandonment. Rent control is neither a necessary nor a sufficient explanation of abandonment. Abandonment takes place, and as severely, in cities without rent control as in cities with it." Very few economists who have studied the actual workings of New York's housing markets have concluded that rent regulations reduce new construction or cause abandonment. Anyone familiar with the sources of housing distress readily understands this. Poverty, joblessness, redlining by lending institutions and excessive property taxation in low income areas are primary factors which cause abandonment.

The Views of Economists

The views of professional economists on this subject are often grossly mischaracterized by the press. The common misconception that economists universally oppose rent controls appears to find its source in a survey reported in 1984 where economists were asked, among other things, if they agreed with the proposition that "a ceiling on rents reduces the quantity and quality of housing available" [Frey, Pommerehne, Schnieder and Gilbert, Consensus and Dissension Among Economists: An Empirical Inquiry, 74 Am. Econ. Rev. 986 (1984)] Of the American economists responding 77% "generally agreed" and 19% "agreed with provisions". One has to wonder how anyone could reasonably disagree with such a statement; A rent "ceiling" would be a drastic measure which would certainly have dramatic market consequences.

Nonetheless, the consensus on the effects of a rent ceiling hardly proves that economists are united in opposition to moderate rent regulations which allow adjustments in rents to compensate for increases in operating costs and which exempt new construction from coverage. This is the case with New York's rent laws.


Economists who have directly studied the impact of New York's moderate rent laws have thoroughly questioned and criticized the conclusions of those who have considered only abstract models or only the effects of strict rent control laws.

See Michael J. Mandel, Does Rent Control Hurt Tenants?: A Reply to Epstein, Brooklyn Law Review, vol. 54, pages 1267-1274. Professor Mandel observed that:

[E]conomics textbooks, like introductory books in other fields, often engage in oversimplification to make a pedagogical point. In this case, the textbook authors needed a way of illustrating the effects of imposing a price ceiling on a market, and rent control provided a vivid example to liven up the usual dry supply and demand diagram.

But good examples make bad economics. A price ceiling, as defined by economists, is a uniform ban on selling a product above a certain price... It is clear that such a policy inevitably leads to shortages.

However, rent control laws in the United States are not price ceilings in this sense. Under all existing laws, rent control regulates the rent on most apartments built before a particular date, but new construction is exempted from any rent regulation. In New York City, for example, the rent laws do not cover apartment buildings constructed after 1974.

This apparently small difference makes a tremendous difference in the effects of rent control. We teach in first-year economics courses that the supply of a good is determined by the price at which it can be sold. In the case of housing supply, the construction of new apartments is determined by their rent, which under existing rent laws is unregulated. This suggests that these laws will not suppress the supply of new apartments (and ... may even increase supply).

See also Phillip Weitzman, Economics and Rent Regulation: A Call for a New Perspective, New York University Review of Law and Social Change, vol. 13, pages 975-988 (1985). Professor Weitzman concluded that:

The existing empirical literature does not take into account the rise of second generation [moderate] rent controls, nor does it attempt to respond to the concerns expressed by tenants and neighborhood leaders for preservation of their homes and communities. It is also not clear that enlightened public intervention necessarily has all the adverse effects so confidently predicted by economists.

See also John Cirace, Housing Market Instability and Rent Stabilization, Brooklyn Law Review, vol. 54 pages 1275 - 1280. Professor Cirace concluded:

[T]he case against all forms of rent control is based upon a static efficiency analysis; but static analysis conceals the time it takes for equilibrium adjustments to occur, the relative magnitude of the adjustments, and the importance of market stability. The case for rent stabilization is based upon an analysis of the housing market that is concerned with the dynamic considerations ignored by the static analysis.

Housing Quality

Most analysts who criticize rent regulations as causing a decline in housing quality fail to examine the fact that most regulatory systems allow generous rent adjustments for building wide capital improvements and improvements to individual apartments. New York's rent laws allow 1/40th of the cost of improvements made to individual apartments (usually done after a vacancy occurs) to be passed on in monthly rent increases. That increase stays with the apartment forever. Consequently, an owner who invests $400 in a refrigerator is entitled to a $10 per month rent increase forever. By the eighth year the refrigerator is in use the tenant will have paid the owner $960 for it. Owners are allowed to charge 1/84th the cost of capital improvements. Thus, an investment of $10,000 in a new boiler will yield twice that much over a 14 year period. These incentives have supported the massive upgrading in heating systems and weather proofing (such as double pane windows) which occurred during the 1980's.

Buildings that suffer from chronic neglect are typically located in poorer communities where the income base of tenants simply cannot support rent increases for major improvements. In these buildings, the struggle is for day to day minimal maintenance and the rent laws have little impact.

See Edgar Olsen, What do Economists Know About the Effect of Rent Control on Housing Maintenance? Journal of Real Estate and Finance Economics, vol. 1, No. 3 Article 5: Below is an abstract of Professor Olsen's article written by Beth Kittle:

Economists' views concerning the effect of rent control on the maintenance of controlled apartments are based on extremely simple models of housing markets and rent control ordinances and on casual empiricism. This paper shows that the models are seriously deficient in that they ignore essential features of actual rent control ordinances and important responses to them. When these features and responses are taken into account, the effect of rent control on housing maintenance of the controlled stock is theoretically ambiguous. The paper also shows that the few systemic empirical studies have serious flaws. Therefore, there is no basis for economists' strongly-held belief that rent control leads to worse maintenance.

One of the most powerful tools for housing improvement has been the linking of rent increases to the removal of housing code violations. Unfortunately, the 1971 law which requires the removal of 100% of serious violations and 80% of all others in the rent controlled stock has been undermined by cutbacks in housing code inspectors and administrative inaction.

Do Rent Regulations Hurt the City's Economy?

To be sure, increased rents would cause a flood of billions of dollars into the hands of landlords and a portion of that increase would go to City property tax collectors. But every dollar that goes to a landlord is a dollar that a tenant will not have to spend in the local economy or to place into a savings account. Thus, while landlords may reap the gains of rent increases, local merchants and service providers would experience a corresponding loss of income as consumer spending by tenants declines. Sales taxes and other local tax revenues would suffer, local jobs may be lost and the character of New York's neighborhoods would change. There is a good deal of evidence indicating that new businesses already shy away from New York because the City's high rents produce high wage demands. On balance, there is no credible evidence that a dollar in a landlord's pocket produces a greater economic benefit for the community than a dollar in a tenant's pocket.

It is simply myopic to assume that a transfer of wealth from tenants to owners will increase the overall wealth of the City. All of the studies sponsored by landlord organizations fail to credibly analyze the impact of rent increases on the disposable incomes of tenants and the implications this has for the economy at large.

Conclusion

Without practical arguments to support ending rent regulations, we are left with a stark ideological dispute: Does the ownership of property give landlords a moral claim to take advantage of a housing shortage by unrestricted rent increases and evictions? The answer lies in centuries old customs, well established constitutional norms and democratic ethics. It is a resounding "No!". Rent and price controls rest on a time honored principle that public authorities may intervene in markets driven by scarcity to ensure fairness in bargaining relations. This anti- profiteering purpose is well documented in the legislative history of New York's rent laws. Whether you are rich or poor you should be allowed to rent an apartment that is worth $1,000 for $1,000. Unless we are prepared to abdicate our democratic birthright to a handful of conservative ideologues who believe that property rights should override all other public values, there is no practical or ethical reason to depart from the goal of fair rents for everyone.


Timothy L. Collins

  • Partner in the law firm of Collins and Dobkin
  • Assistant Attorney General, Real Estate Financing Bureau, 1994-95
  • Executive Director and Counsel, New York City Rent Guidelines Board, 1987-1994
  • Assistant Counsel, New York City Department of Housing Preservation and Development, Office of Rent and Housing Maintenance, 1985-1987

 


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