NY's Rent Laws: Boon To The Rich
March 13, 2003
By Henry Pollakowski
YESTERDAY, the New York City Council, led by Speaker Gifford Miller, took a big step in the wrong direction when it approved a bill to extend rent-regulation laws.
Its decision, apparently, is based on a huge misconception: that rent-stabilization offers benefits to most New Yorkers.
When you do the research, as I've done, it's clear that that belief is unjustified.
Indeed, the majority of New Yorkers, especially low- and moderate-income families, receive virtually no benefit from rent stabilization, once dwelling size, quality and location are accounted for.
On the other hand, the minority who are helped are mainly residents of the city's most affluent Manhattan neighborhoods.
But misunderstanding of the facts persists.
"It's critical that we maintain our city and make it affordable for those of us that need to live in the city and work in the city and cannot afford to commute," Councilman Leroy Comrie said.
But he's from Queens - which actually derives no benefit from rent stabilization.
How did we get to this point where legislators representing the outer boroughs and Upper Manhattan oppose deregulation in a misguided attempt to represent the best interests of their constituents?
One answer is: inadequate information.
While many believe that poor- and middle-income families substantially benefit from the rent laws, my recent research, sponsored by the Manhattan Institute and using data from the New York City Housing and Vacancy Survey, demonstrates that this is not the case.
According to my findings, it is in just those neighborhoods, where these non-affluent renters are concentrated - Brooklyn, Queens, Staten Island, Upper Manhattan, the Lower East Side and parts of The Bronx - where rent stabilization is providing little or no benefit.
In these areas, tenants are typically not paying rents that are below market, once dwelling quality is factored in.
Thus, repeal of rent stabilization would not lead to rent increases for the majority of New Yorkers.
Who, then, receives most of the benefits?
The answer is residents of the affluent areas of Manhattan, especially longer-term tenants. Residents of stabilized units in Midtown, the Upper East Side and the Upper West Side pay more than $400 per month less than their counterparts in the unregulated market, even after taking apartment size, condition and location into account.
Again, it is crucial to emphasize that it is only in the affluent neighborhoods of Manhattan where stabilized renters received significant protection in the 1990s.
The less fortunate New York renters, however, are concentrated in the rest of the city and in special programs such as public housing.
What does all this mean for the debate over rent stabilization?
First, and most important, the fears of widespread rent increases in the event of deregulation are unfounded.
For the majority of New Yorkers, including the vast majority of outer borough residents, rents would not rise.
While average neighborhood rents of stabilized units in affluent Lower- and Mid-Manhattan would increase anywhere from 16 percent to 28 percent, these increases would be far less than the current rent benefits.
And as the stabilized dwellings in these neighborhoods - about 75 percent of the stock - became deregulated, there would be considerable downward pressure on rents.
Given the longstanding history of rent regulation, reform legislation should include "phasing-out" timing provisions for those accustomed to substantial rent discounts.
Of these households, those least able to afford rental housing will need further assistance.
This might be modeled on the current policy of reimbursing landlords in the cases of low-income elderly tenants paying old-style controlled rents.
But however structured, direct governmental subsidies for those households least able to bear the city's housing costs would provide more help for struggling families than maintaining the costly-to-administer current system.
Henry Pollakowski, an economist at the M.I.T. Center for Real Estate, is editor of the Journal of Housing Economics and author of Civic Reort 34: Who Really Benefits from New York City’s Rent Regulation System?
©2003 New York Post