Don't Blame Rangel for His Rent

It is tempting to view the fact that Rep. Charles Rangel is renting no fewer than four rent-stabilized apartments in a Harlem building chiefly as a reflection of political corruption—perhaps using his position, and its implied influence, to obtain residences and an office at below-market rates. This may, indeed, be what was going on—but such a storyline, nonetheless, misses the point.

Mr. Rangel's good fortune in getting inexpensive apartments is less important as a personal story than as a reflection of the fundamental flaws of the system which provides for such cheap square footage in the first place: the city's rent-control and rent stabilization regime.

Simply put, it's a system which provides strong incentives for landlords to rent for reasons which distort the city's real estate market and ultimately mitigate against the interests of those of modest means, such as Mr. Rangel's Harlem neighbors.

Consider the world as it appears to owners of the city's million-plus apartments governed by rent regulation. By definition, they are asked to take a price which is different than that which the market might dictate—in most instances (especially in Manhattan neighborhoods), likely a lower price. This essential fact is what leads to situations such as that of Mr. Rangel—and other distortions.

If one cannot get the best possible price for one's premises, it is inevitable for owners to seek other, non-monetary forms of compensation. Having access to the chairman of the House Ways and Means Committee—a person with the presumed capacity to influence matters at the city level, as well—could be one such form of compensation. (I'm speaking hypothetically here. There's no evidence, it's important to note, that the owner of Mr. Rangel's building had any special reason to rent to him.)

There are other, much more common—and pernicious—forms of non-monetary compensation which owners in a rent-regulated world will find tempting. Far more likely, however, would be security. If one is going to be forced to sell a product at a discounted price, one has a strong motivation to at least make sure of being paid.

So it is that rent regulation—which forces landlords to sell at such a discount—provides an incentive to rent not to those of modest means but, rather, to the well-heeled: Congressmen, movie stars, and others whose income would lead one to conclude they'll pay the rent on time. Or to yuppie couples who have no children—and are thus more likely to paint and decorate than cause any damage to the floors and fixtures. They are the nomenklatura of this quasi-socialist system.

Those who are far less likely to benefit are those of low-income and modest occupations in whose name rent controls of various sorts have been continued for two-plus generations. They, implicitly, pose more risk for landlords—and rent regulations insures they will not be compensated for taking such risk. Why bother with the poor if you can rent to a congressman, after all.

The Rangel story is a good reason for a through-going investigation of the demography of current rent control tenants. How does their income compare to the city's median? How many are "over-housed"—i.e., they have more bedrooms than residents?

Absent rent control, it is certainly true that apartments in some districts would become more expensive. But, as the current housing bust demonstrates, some would become cheaper, while others simply stabilized.

One can be sure, however, that apartments would be distributed on a new and fairer basis, the same one which dictates who gets to buy ground beef in the grocery store: what you can pay, not who you are.

This piece originally appeared in The New York Sun

This piece originally appeared in The New York Sun