Affordable apartments' heavy cost
In the mid-'90s, Albany passed two laws that would gradually free New York City from its tortured history of rent regulation. But Mayor Bloomberg has been undoing that triumph —further distorting the city's warped housing market and harming its middle-class residents.
Under the current rent-stabilization laws, the city and state governments regulate the rents of 1.1 million apartments, insulating half the city's rental stock from healthy market forces. (The city sets yearly increases for renewal leases, allowing larger hikes for vacated apartments.)
The '90s reforms began rent regulation's slow demise by allowing landlords to take a vacant apartment off the regulated rolls once the rent hits a $2,000-a-month ceiling, or an occupied apartment once it hits that rate if its tenant makes $175,000 or more a year. Full deregulation would take decades, as rents slowly rise to $2,000 under the regulated annual hikes — but that's real progress in New York.
Yet the mayor just won't let rent control die. Instead, he's putting as many as 115,000 new apartments on the regulated rolls under his "New Housing Marketplace" plan to build or "preserve" 165,000 subsidized apartments.
Under this plan, Bloomberg offers special tax breaks and other goodies (including, in some cases, free land) to developers who agree to build "mixed income" housing that mingles "market-rate" residents with subsidized moderate- and low-income ones.
Most low- and middle-income rental apartments built under the mayor's program will fall under rent-stabilization laws — which Rafael Cestero, the Department of Housing Preservation and Development's deputy commissioner for development, told me is still "the primary mechanism for ensuring long-term affordability."
Result: While the number of older rent-stabilized units fell by 28,000 between 2002 and 2005, new rent-stabilized units rose by 29,000.
Worse, under one Bloomberg plan for the West Side, Gotham will actually lease land to developers rather than sell it — so the city could dictate rental terms forever, not just until newly regulated apartments reach the $2,000 ceiling.
Of course, many New Yorkers won't see this as bad news. They think regulation protects them from rent hikes that would end in eviction. But that's only true for an elite few. On the Upper West Side, a "free-market" renter might pay as much as $3,400 a month, because the sup¬ply of apartments is artificially constricted, while a regulated tenant pays as little as $600, according to Census Data recently analyzed by Quantitative Analytics. So, out of the millions of people who'd love to live cheaply on the Upper West Side, a lucky and/or well-connected few get their wish.
But regulation doesn't protect most tenants from the street: Instead, they get the worst of two worlds. Their regulated rent isn't low enough to provide the massive benefit that residents of rich neighborhoods enjoy — but is low enough to prevent their landlords from providing first-rate maintenance.
In many outer-borough neighborhoods, the difference between regulated and unregulated apartments is less than $200 a month: In Astoria, for example, a regulated tenant might pay $850, while the "free-market" tenant pays $1,050. It's the same all over The Bronx, Queens and much of Brooklyn.
But the landlord often needs that extra$200 to keep his building in prime shape (especially if some tenants aren't paying rent at all — under New York's laws, it's not easy to kick them out).
A landlord who owns a decent building in a decent neighborhood can easily pay $700 a month per apartment in operating and mortgage costs. When he can't in¬crease his rent enough each year to keep up with rising costs, he cuts corners —and buildings slowly and (at first) imper¬ceptibly fall into disrepair. That's why the city Finance Department deems nearly 12 percent of apartment buildings "distressed" — double the 1999 figure, mostly thanks to high fuel costs that the rent laws have obliged landlords to eat.
The '90s reforms promised the slow return of a normal housing market. True, some tenants in rich neighborhoods like Greenwich Village wouldn't be able to afford their apartments without regulation — but that would just add demand for decent apartments in the city's resurgent outer-borough and upper-Manhattan neighborhoods.
And New Yorkers finally would have landlords with the means and incentive to keep their buildings in good condition. (Yes, thousands of single mothers wouldn't be able to afford unsubsidized apartments "on their own," but that's not a housing problem; it's a problem of the dysfunctional underclass.)
But Bloomberg's moves will prolong this peculiar institution — and perpetuate New York's same old problems: forcing "market-rate" residents of new mixed-income buildings to fork over higher prices to subsidize their neighbors. A working family in a "market rate" apartment in Harlem might pay $2,400 a month for a two-bedroom to subsidize an identical apartment in the same building going for an artificially low $600.
These disparities aren't just unfair. They also create the risk of a wholesale re-regulation of the city's unregulated apartments. If inflation skyrockets, "market-rate" renters might face double-digit rent hikes one year — while they see that their regulated neighbors are protected. The "market rate" tenants would clamor for a full-scale re-regulation of all apartments — and the advocates would lobby on their behalf, or risk losing political support for rent control for anyone.
Outlandish? It happened in the '70s, when the city abandoned an earlier "decontrol" attempt because of an outcry over rent-hike disparities.
The sheer number of New Yorkers who theoretically qualify for "affordable" housing demolishes Bloomberg's rationale for building it. According to Census Bureau data on family incomes, nearly 1.7 million families, or 5.7 million people — a full 92 percent of New Yorkers who identify themselves as families — would qualify for city-subsidized housing under Bloomberg's formula.
Unless Bloomberg takes over the city's entire private housing stock to ensure that everyone who he believes deserves "affordable" housing gets it, all he's done is create a lottery in which 10 percent of the people who qualify win.
But this lottery isn't voluntary. Millions of working-class and middle-class New Yorkers pay for it through poorly maintained apartments and higher "market-rate" rents.