Few would argue that New York City is in the midst of a housing crisis defined by high prices and low availability. There is ample evidence for that conclusion. latest federal government New York City housing and vacancy research reported a vacancy rate of just 1.4%, “in stark contrast to the 2021 vacancy rate of 4.54.” During the same period, the median monthly rent rose from $1,500 to $1,641. This includes everything from luxury high-rise buildings to public housing.
Numbers like these are driving the continued search for solutions to the problem, including most recently Mayor Adams' Dec. 12 announcement of a new city. Charter Revision Committee In his words, we need to look at ways to “make housing as affordable as possible for working-class New Yorkers and their families.”
A thorough examination of New York City's housing policy at both the city and state level includes a series of changes to rent regulations that affect 960,000 “rent-stabilized” apartments, where prices are determined by the mayor rather than the market. economic research may be included. Appointee. Rent stabilization may offer better conditions for those lucky enough to benefit from it. But economists from across the political spectrum increasingly agree that it will ultimately have a negative impact on the city's housing market for many.
Research on the effects of rent control has a long history. Back in 1997, Harvard University economists Edward Glaser and Elzo Lutner described the “housing misallocation” that rent control creates. This term referred to the mismatch between what renters need and what they choose because of the lower price. For example, people who may only need a small apartment but live in a larger apartment because they can afford it.
Most recently, in 2018, liberals brookings institute He cited the same issue, saying, “Once a tenant secures a rent-controlled apartment, they may choose not to move in the future and abandon rent control, even if their housing needs change.” . Brookings added that this “misallocation” could have significant consequences, most notably “empty-nest households living in family apartments and young families crammed into small studio apartments.”
last year census An analysis of New York housing data suggests that's exactly what's happening here — as young people crammed with multiple roommates into subdivided studio apartments know all too well. The difference between rent-regulated and market-rate housing in the Big Apple is clear. Only 94,000 (24%) rent-stabilized tenants moved (either by moving in or moving out) in the past year, compared to 221,000 (57%) in the market. -Assess tenants. Rent-stabilized tenants are more likely to stay, creating a kind of housing blockade for newcomers and households with children who need more bedrooms. According to the census, long-term rent-stabilized tenants were not necessarily low-income. 30% reported income of more than $100,000 per year. This is consistent with a notorious study. story Actress Mia Farrow and Congressman Charles Rangel enjoy rent-stabilized housing. (As far as the law allows, Farrow inherited hers through her family.)
Rent management, notes Journal of Housing Economicsleads to income redistribution —This could include tenants who become wealthier at the expense of their landlords. Kenny Burgos, a former Bronx borough councilman and current president of the New York Apartment Association (NYAA), which represents owners of about 400,000 regulated properties, said the current system is “a natural part of the normal housing market.'' “It obstructs the flow and movement of people,” he said.
Economists say it could have a negative impact on rent-stabilized tenants themselves, and could also have a negative impact on housing quality. In February 2024, Federal Reserve Bank of St. Louis We investigated the physical effects of rent control. They argue that “while rent control policies limit rents at more affordable rates, they can also lead to reduced rental inventory and maintenance, thereby further exacerbating the affordable housing shortage.” concluded. Similarly, Journal of Housing Economics From March 2024, even tenants in managed housing may suffer from rent suppression as maintenance on such housing is reduced, which could lead to a decline in housing quality. ” concludes.
Again, the latest findings from New York reveal these very same market conditions. An investigation into “reported housing issues” found that rent-stabilized units had more tenant complaints about rodents, leaks, cracks and heating than unregulated units. The numbers are staggering, with 376,000 rodent reports in regulated units (39% of the total) compared to 240,000 in market-rate units (22% of the total).
Maggie Brann, president of A&E Real Estate in Brooklyn, said older, rent-regulated buildings are in need of repairs, and owners may even simply abandon them. said. “If you live in an apartment for 20 or 30 years, you'll reach a limit.” [on rent increases] That doesn't even come close to the actual cost of rewiring, plumbing, and basic improvements needed to rent an apartment your family will be proud to call home. That means much-needed low-rent apartments are becoming increasingly vacant. ”The problem worsened by 2019 new york state law This greatly limits rent increases even if the cost of major repairs increases.
NYAA's Burgos estimates that at least 10,000 such “ghost apartments” remain vacant — because their owners “have no intention of recouping their costs.” Because it's not allowed.” Inflation, property taxes, insurance. As a result, “banks won't make loans,” he said. That's exactly what Brookings discovered. “Rent control could also lead to a decline in rental housing stock; landlords would be unable to invest. Maintenance is necessary because these investments cannot be recovered by raising rents. ”
“The system is not working for owners and tenants,” Burgos said. But how can we actually adjust this deeply entrenched system that has existed in one form or another for over 50 years?
The experience of another major world city, Buenos Aires, Argentina, suggests that doing so may not cause the disruption or price gouging that proponents of tenant price gouging suggest. At the end of last year, libertarian-leaning Argentine President Javier Millay was easily “dropped.'' Rent control, as reported by the Wall Street Journal. The effect is that “Argentina's capital is experiencing a boom in the rental market,” the report said. Rental supply in Buenos Aires has increased by more than 170%, and landlords are rushing to get properties back on the market. Although rents are still rising in nominal terms, the real price of rental property, adjusted for inflation, has fallen by 40%, and many renters are getting better (or at least fairer) deals. ”
Of course, it would be much more difficult to simply abolish rent controls as in Buenos Aires in New York, where there are many regulations. But as Burgos points out, even allowing for deregulation of vacant units could lead to significant improvements without impacting current tenants. What he calls “vacancy control” prevents rent increases that owners need to invest in just to comply with building codes and lead the tax abatement law, rather than leaving rooms vacant. is. The city charter commission could help by lowering property taxes and water rates in regulated areas.
But even rapid deregulation may not have much of an impact in large parts of the city. Census reports indicate that a typical market rate rent ($2,000) is not much higher than a typical regulated rent ($1,500). In the Bronx, the standard rent for all units (including non-stabilized rents) is just $1,200. In other words, market rents may be closer to regulated rents in low-cost areas. Combined with a wave of vacant properties returning to the market and new investment, New York may follow in (or at least tiptoe) in the footsteps of Buenos Aires.
Such a move would not only benefit renters, but it would also save the city money associated with the Rent Stabilization Guidelines Board, an agency that most large cities do not have. The commission's staff sets rent increase recommendations and monitors compliance. Additionally, property owners (including single-family landlords with just a few buildings) no longer have to go through the tedious red tape of registering their buildings each year and mailing or handing over the necessary documents and fees. Masu. Each unit is paid to both the state ($13) and city ($20). Otherwise, $500 fine per apartment.
Led by the Rent Stabilization Association, an ownership association (now part of the New York Housing Association), attempts to overturn the price control system through the courts were unsuccessful. Most recently, The U.S. Supreme Court rejected the challenge.It is based, in part, on the argument that rent control is, in effect, a legal “grafting of property from owners.”
The fact that property owners have tried to overturn rent control through the courts reveals how difficult it is to legally change the system. But city and state officials should take note of the change in leadership in Washington. In the first Trump administration, White House Executive Council He singled out rent controls as a target of criticism, writing that they could lead to “restrictions on supply.” [which] It will hurt some of the low-income renters it was intended to help. ”
New York City's budget relies on Washington for $100 billion in revenue, including from the Department of Housing and Urban Development, but the aid could come with conditions, such as requiring changes to rent regulations or repeal of them. be. If Donald Trump returns to office, as he often does, he could act as a wild card and deregulate New York City's housing market.
Howard Husock is a senior fellow in domestic policy at the American Enterprise Institute.
