The Life and Death of Rent Control 

Can a Quintessential New York Tradition Survive?

Life in a box.

In talking to a coworker recently about that most universal of New Yorker concerns, real estate, I mentioned, as I am wont to do when the topic arises, that I live in a rickety hovel above a major thoroughfare in one of North Brooklyn’s least scenic nabes. Knowing, as I did, that we both enjoy roughly the same just-above-poverty-level wage, I expected her to counter with a similar tale, and for the two of us to then share a bit of self-congratulatory outrage regarding the travails of life in the big city.

Instead, she copped to spacious West Village digs just off Washington Square, which, I have to say, rather ruined my plan. I apparently showed it, too, my slack jaw, no doubt, giving my astonishment away as I pondered just how she might be pulling this off.

“I get a really great deal,” she said, her voice carrying with it a vague hint of conspiracy.
“My place is rent controlled.”

In 1943, responding to the inflationary pressures of a fully-employed wartime economy, the federal government’s World War II Office of Price Administration froze rents in a number of cities around the country, including New York. Four years later, New York state took over the program, establishing rent controls on all residential developments built before 1947. Some 20 years later, facing falling vacancy rates and rising rents, the city passed the Rent Stabilization Law of 1969, covering apartments of six or more units constructed after 1947. And so, more or less, New York City’s two-tiered rent regulation scheme was born. Today, roughly 60,000 buildings fall under the strict 1947 controls, while over one million apartments are affected by the somewhat less stringent stabilization rules of 1969. For people like my coworker, it’s a pretty great deal. To listen to your average economist talk, though, it’s a pretty lousy one for everyone else.

In fact, rent control would seem to be one of the few issues about which economists can muster something resembling unanimity. A 1992 poll found 93 percent of the American Economic Association’s membership agreeing that “a ceiling on rents reduces the quality and quantity of housing.” As no less than Paul Krugman noted in a June, 2000 New York Times column citing this survey, that’s the sort of solidarity that would put even four out of five dentists to shame. (Ok, so that’s not exactly what he said, but he did mention that rent control was a fairly crap idea.)

Among the woes that New York’s rent regulations are traditionally blamed for: Unnaturally high prices for unregulated rental stock, as a little under half of the city’s 2.5 million apartments have been effectively taken out of the market. An inflated percentage of either abandoned or rundown apartments, as landlords essentially decide it’s not worth it to keep up their properties. The depression of the city’s property tax revenue, regulated apartments being assigned lower property values than they otherwise would be. A slowed rate of construction — particularly in the case of lower- and middle-income developments — due to builders’ fears that the city’s current rent regulations may in the future expand to cover new apartments as well.

Now, just how well you think these accusations stick tends to depend on where exactly, ideologically and politically speaking, you’re coming from. For the crowd at the Cato Institute, they probably don’t go far enough. Certain tenant organizers, on the other hand, would probably deny every one of them to their dying breath. And, as is often the case where economic models are concerned, the various factors involved are complex and intertwined enough to support, however thinly, most any sort of outrage or denial you’d like. The bulk of informed opinion, though, suggests that rent controls, like price controls in general, are usually a bad idea, and that we’d all probably be better off with, say, a gradual phase-out of rent restrictions and – for those silly bleeding hearts still worrying about where grandma will live once her landlord jacks up the rates — perhaps a means-tested program of subsidized vouchers.

Interestingly, as MIT housing economist Henry O. Pollakowski observed in a 2003 study, if one takes into account the differences in age, size and location between regulated and unregulated dwellings, rent regulation as it currently stands is really only a factor in your more affluent stretches of Manhattan. In these areas the median monthly subsidy from rent stabilization was (using 1999 numbers, the most recent available) about $400. In the Bronx the median subsidy came to roughly $60 per month. In the LES, Upper Manhattan, Chinatown and Brooklyn, meanwhile, the median monthly subsidy was less than $10. In Queens and Staten Island it was effectively $0.
And yet, despite the comparatively small band of renters benefiting from regulation, and the fairly strong case against it, the program remains wildly popular among city residents. Polls place support for rent control/stabilization in the 70 to 80 percent range.

Now, to an extent this is probably simple humanitarianism. New York’s housing market is, in the popular imagination, a wildly volatile beast, and even those already paying the decontrolled rate are understandably hesitant to let it off its leash. But beyond this there’s something else — in addition to providing some small measure of stability to the city’s renting public, the system as it’s currently rigged serves to glorify that most New York of virtues — savvy.

Anyone willing to toss down two grand a month can find a suitable West Village studio. To snag one for 400 a month, though — well, now, there’s a true urban operator. And this is the Dream of New York — to, by dint of connections, a bit of savoir faire, and the occasional shady deal, grab a little bit bigger slice of the city than you really ought to be entitled to. Not everyone can make it happen — Lord knows I haven’t exactly pulled it off (rickety hovel above a major thoroughfare, remember?) — but those who do are an inspiration to us all.
It’s something like a version of the Protestant Work Ethic adapted for a city of heathens. Instead of wealth and productivity, free stuff and insider schemes are the marks of God’s favor. Complimentary Yankee tickets, drinks at clubs given gratis, a spacious abode at half the market price — these are the things that money can’t buy. They are simply bestowed upon those with the good fortune to be in the know. And this, after all, is what life lived well in New York is all about. Given enough quid you can get your hands on just about anything. But if you really know what you’re doing, you can get it for free.

And as such, rent control is more than just a social program. It’s an artifact of the city’s spirit. There has long been a tale floating around — possibly apocryphal — that when Ed Koch moved into Gracie Mansion after taking over as mayor in the late 1970s, he still held on to his six-room rent-controlled Greenwich Village pad. For some, the tale speaks to the absurdities of regulation. For others, it’s an anecdote about government corruption. To me, though, it’s just another story of a guy who knew how to play the angles. Ed was paying 400 bucks a month on a $1,200-a-month place. What was he supposed to do? Just hand it over? Really now? Would you? After all, this is New York City, where there’s no higher mark of your worth as a human being than an ability to work the system, no surer sign of your seat amongst the Elect than knowing a guy who knows a guy who knows a guy.

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