Albany's Rent Racket
Time to end pols’ scare tactics
New York City’s rent laws expire later this spring -- giving state politicians a chance to make life worse for the 5.5 million city folk who don’t own their homes.
The city hasn’t had anything close to a free housing market in nearly a century. The details have shifted since the first regulations back in 1920, but the central-planning philosophy holds.
Today, the state regulates rents on nearly 1.1 million apartments, or half the city’s rental housing. Each spring, bureaucrats decide how much the landlords can raise the rent on more than a million apartments -- last year, for example, they allowed 2.25 percent hikes for one-year renewals.
The last major change came in the mid-1990s, when reformers got the Legislature to make a change: Allow vacant apartments to escape regulation when the rent exceeded $2,000 month.
Today, Democrats realize that change was much bigger than it seemed -- and a big mistake for them, politically.
Back then, the Dems thought this “vacancy decontrol” would apply only to “the rich” -- people who could afford $2,000. But now they see that, over time, as inflation pushes up regulated rents -- and as landlords refurbish apartments, allowing them extra rent hikes -- all units will eventually hit that line.
This will take a few decades -- but it had already freed 100,000 apartments from rent-regulated rolls by 2009.
But without rent regulation, politicians would lose a huge scare tactic with voters. They wouldn’t be able to tell the public: Vote for me, or some investment-banking billionaire will come steal your walkup rental in Flushing.
Because rent rules aren’t permanent law, but “emergency” provisions, the pols have a chance to revise (or even scrap) them every few years. The current “emergency” expires in June.
So last week, a near-unanimous crew of Democratic lawmakers sent a letter to Gov. Cuomo insisting that a new rent deal -- one that repeals vacancy decontrol -- be part of the current budget negotiations.
And don’t be surprised if city Dems refuse to vote for Cuomo’s suburban property-tax cap unless he similarly caps regulated-rent hikes, likely to 2 percent a year.
In defense of this, the Dems in their letter trotted out the tired old claim that “millions of working and middle class New Yorkers will be at immediate risk of losing their homes.” Writing separately, Assembly Speaker Sheldon Silver insisted that extending current laws isn’t enough to “save New York’s middle class.”
In reality, the best thing for the vast majority of tenants would be an accelerated end to all price controls.
Obviously, in a freer market, a newly renovated apartment in an elevator building near midtown Manhattan would still go for far more than a shabbier walk-up an hour away by subway. That’s life.
But a Facebook founder or Goldman Sachs partner isn’t going to suddenly covet that two-bedroom apartment in an aging building off the Belt Parkway, demolishing New York’s middle class.
In 2008, only 32 percent of vacant non-regulated apartments fetched more than $2,000 monthly, with a far larger share clustered around $1,000 to $1,600. In fact, the median rent for all non-regulated apartments was $1,200, against the median stabilized rent of $925.
And the end of the rent laws would increase supply, pulling down prices on today’s non-regulated units. Developers have already expanded supply in the non-regulated market -- and tenants have benefited: Between 2005 and 2008, Gotham built 52,289 new rental units, adding 2.5 percent to the city’s supply.
Oh, and the vacancy rate for non-regulated apartments is more than twice what it is for regulated-apartments, giving tenants more choice.
That’s why many market-rate tenants have seen their rent go down in recent years, especially since the 2008 financial crisis.
If the pols won’t speed up the death of rent control, they can at least let what’s working continue to work: Renew existing laws and make no changes to vacancy decontrol.
But the worst change is the idea of holding regulated rent increases to 2 percent a year. That change would gradually devastate the city’s housing stock.
Already, nearly 13 percent of regulated apartment buildings lose money because rents don’t cover costs -- a figure that’s doubled since 1999. Further constraining rents would force landlords to cut back on maintenance -- so working-class tenants would see their buildings decay more. (And blight from the 2 percent cap would spread even faster if inflation, pushed by soaring fuel costs, rises.)
What’s the best way to create a healthy market? Make it a real market -- one governed by free information, not by politics.
If Cuomo and the rest of the Dems want to help New Yorkers, they could change the current laws to mandate that landlords report rental prices on all apartments, rather than just regulated units. And report it on a public Web site, not through documents filed away in Albany.
Then all tenants, working-class or rich, could quickly know what their neighbors are paying. They could figure out whether they’re getting a good deal, a raw deal or something in between.
But real tenant power isn’t what anyone with political power wants. That’s why we can count ourselves lucky if Albany just leaves things be -- and even that may be too much.
This piece originally appeared in New York Post
This piece originally appeared in New York Post