New York's Rent Regulation Fight

http://www.bbc.com/news/business-32891544

by giles • 11 years ago

28 49 11 years ago

exelius4• 11 years ago

This is the problem with housing subsidies: they very often go to those who don't need them. In New York, your choice of apartment is primarily based on location -- anything that's not in the >$1 million range is pretty similar. So if you're looking at two apartments near your work and the rent stabilized one is $1200/mo and the other is $3000/mo, you try to get the $1200/mo one even if you could afford the $3000/mo one. I guarantee you it's not $1800/mo nicer.

You see this effect anywhere that supply of rental housing is a problem. If you implement price controls, people with high incomes will seek out lower rents. They'll still often end up driving out the lower-income folks, because if you're a landlord with two applications for a vacant apartment, you're going to favor the one with better credit. Rent controls also deter landlords from investing, both in existing properties and in new ones.

IMO the right answer (and this is not a popular sentiment) is to let rents float and have certain desirable areas of certain cities end up effectively "off limits" to lower income renters. Is it fair? Not particularly, but the side effects of this situation are that the people who can afford to shoulder the costs associated with their way of life are the ones actually doing so. They are going to crowd low-income renters out of the neighborhood eventually anyway, and hopefully a housing / worker shortage would prompt the city to actually develop a low income housing solution rather than forcing landlords to just deal with rents too low for even basic maintenance.

jellicle2• 11 years ago

The type of "price controls" that you are railing against do not exist in New York City and to the best of my knowledge have never existed there. Maybe during World War II.

dantheman• 11 years ago

Here you go: http://www.nycrgb.org/html/resources/faq/rentstab.html

URSpider94• 11 years ago

I'm not sure what you are referring to, but New York definitely has two levels of rent pricing controls: rent control and rent stabilization.

With rent control, the rent never increases, it is fixed for the duration of tenancy, and can even be handed down (once) to a family member. Once that tenant or their heir vacates the apartment, then the rent goes to market rate with no further regulation.

With rent stabilization, the city sets an annual percentage increase for the rent, which is typically not as high as the market-rate appreciation rate. When a tenant moves out, the landlord can raise the rent by a vacancy allowance, as well as an adder of 1/40th of any improvements made to the unit. Once the annual rent exceeds $2,500 per month, the unit is considered market-rate, and becomes unregulated (however, regulation continues until the current tenant moves out).

SOURCE: I was a landlord in NYC. In my building, I had one rent-controlled unit occupied by a senior citizen who never paid rent (she needed the $100/mo more than I did), and 80% of the other units were rent-stabilized.

colinbartlett• 11 years ago

Not necessarily disagreeing with you. But the practical meaning of that is that, in the case of New York, this means the entire island of Manhattan becomes a playground for the wealthy and the people who keep that playground humming are relegated to the outer boroughs.

nine_k• 11 years ago

Entire Manhattan, including 200th streets?

I can imagine that areas like this already exist, e.g. in most lower Manhattan and upper west side. Did it result in anything particularly bad, or at least measurably bad?

(Disclaimer: I live in Brooklyn and work on Manhattan; my commute is still better than in most other places I lived.)

exelius4• 11 years ago

That's kind of the entire point. The wealthy who use Manhattan as their playground today are just getting the public to subsidize housing for the people who keep their playground humming.

Manhattan is already far too expensive; I have a friend who commutes daily to Manhattan from Philadelphia because rents are 25% of what they are in Manhattan. It's only 90 minutes to Penn Station on the train, which is about the same time it would take from the affordable parts of Brooklyn or Queens.

endtime• 11 years ago

Living in Manhattan is not a right. I don't see anything wrong with a shorter commute being more expensive.

I would very happily pay more for services that get more expensive because workers demand higher wages for their longer commutes (etc.), in exchange for the drop in market-rate rent (which I pay) that would come from throwing out rent regulation.

czinck2• 11 years ago

I mean, it practically is. I live in Manhattan, and with the exception of a very few places (basically UES right on the river and then the projects) any studio apartment south of 100th (~115th on the west side) street is going to be $2000/month or more. If you find any place cheaper it is going to be borderline uninhabitable or a 6th floor walkup. Rents in Harlem are going up now, too.

krschultz2• 11 years ago

That has already happened.

Most of the people that currently live in rent controlled or price stabilized apartments got them decades ago. The waiting list for any units that become available is extremely long.

That effectively means most rent control is helping the elderly. I present that without comment or judgement, it's just a fact. The elderly are generally not the people manning the counter at your local bodega. They are not your local construction workers, doormen, or bartenders.

All of those people, the ones that are the backbone of the service economy within Manhattan, already live in the outer boroughs.

So the question effectively becomes does it make sense to subsidize the rent of retired people in Manhattan? On one side you can be the assholes kicking elderly people out of the homes and neighborhoods they have lived in for 30 years. On the other side you can be the assholes forcing the working class to commute 90 minutes a day. Take your pick of the bad options.

nuschk• 11 years ago

Well, economists often suggest a better way than just let the rich take over: directly subsidize people, not flats. So, if you want a neighborhood to not just attract bankers but also families with kids, pay the families for living there! The idea is to pay them only while they live there - independently of which accommodation they choose - and stop the payments when they move away. This way, the market isn't distorted, people don't get "sticky" in their ability to move to other apartments, and the whole setup is much more fair, as it's pretty easy to control who gets which benefits.

The downside, of course, is that the cost of such payments is far more transparent to the public. Many economists would argue that it's in fact much cheaper, as you it's more efficient. Still, today's subsidies are well hidden and almost never show up in household budgets. And thus it's hard to get to a system of direct payment.

exelius4• 11 years ago

Yeah, such a solution is difficult -- and costly -- to implement. For the reasons you mentioned, government tends to choose subsidization options where money isn't explicitly exchanged: i.e. rather than paying the landlord the difference between controlled and uncontrolled, they just tell him certain units are controlled and he has to deal with it.

A solution such as the one you described also makes it difficult to distinguish between who to subsidize and who not to subsidize. How do you make sure you're not giving big payments to people who don't really need the money and just want the house? What's the difference between a family making $90k/yr and wanting to live in a $5k/mo apartment and a family making $500k/yr and wanting to live in a $25k/mo apartment off central park west? Neither can afford the rent in the area, but where do you draw the line?

mseebach2• 11 years ago

people don't get "sticky"

People would get VERY sticky against moving away from a subsidised area, even if it might actually suit them better, and they could afford it - leading to sub-par allocation of resources.

Also, there's the question of how/when/if to pull back the subsidy. If you do it according to income, you create a very high marginal tax rate at the beginning of the pay scale - that's toxic to work and traps people in poverty. If you do it when the children are grown, you're suddenly kicking people of of family houses they've lived in for decades (see "Bedroom tax" in the UK). If you don't, then what started as a family neighbourhood becomes a neighbourhood of middle-agers living in large apartments - while their kids struggle to find a decent place to live.

Incentives are HARD.

mathattack• 11 years ago

There are many many problems with the current system:

- It locks people into poor locations. Someone that is unemployed lives in a massively subsidized apartment in the Bronx. A job opens up in South Brooklyn. Would they move and take it? Not when their rent will go up 4X.

- It helps long term residents at the expense of shorter term residents, and companies who hire them.

- It only helps the small subset of the needy who can get in, and leaves the others out in the lurch.

- It discourages investment in the housing infrastructure.

I can keep going, but it would take me an hour to finish venting.

kazinator2• 11 years ago

Is it fair?

Absolutely. You can't dictate to the owner of private property how much it should sell or rent for. (Unless maybe your surname is Lenin or Zedong.)

What's next? Why not have the government step in if someone dares ask $300 on Craiglist for a bicycle that's only worth $50 and make him or her sell it for $30? If someone forks up $300 let that be. If nobody buys it, let the message slowly dawn upon the seller.

desirable areas of certain cities end up effectively "off limits" to lower income renters.

Speaking of desirable: It is an undeniable fact, also that a lack of lower income renters is part of what makes those areas desirable. It's not just the views, quality of the suites or city convenience. It's also the fact that poor people aren't there. Same as country clubs, private schools, and all that.

bsimpson2• 11 years ago

Wow - a regulated rental market that makes San Francisco look comparatively sane.

iolothebard• 11 years ago

Lmao, not really. They're both fucked up. At least in NYC you can build up, in SF you've only got SoMa you can build in.

bsimpson2• 11 years ago

I mean less about the building and more about the rental regulation. In SF, you are either regulated or you aren't, and the rules are pretty simple (if your unit is older than 1996 and is not the only unit your landlord owns, you have rent control).

xname• 11 years ago

"For renters like Soni Fink, 91, the rules have meant she can keep living in the apartment she moved into in 1961. A move to market rate would easily eat up her retirement income, she tells the BBC outside her two-bedroom home towards the south of Manhattan."

Why Soni Fink, 91, is entitled to live in a two-bedroom home?

kazinator2• 11 years ago

I can construe an entitlement story on behalf of Soni Fink like this: since 1961, she probably put in enough money into rent that if it had one into a mortgage, she would own the place, with enough left over for all the upkeep.

The fact that she has been a tenant for more than half a century and paid into the building should count for something. It can be argued.

nextw33k2• 11 years ago

You need to learn about old age and how it effects the brain.

You take an alzheimer's patient out of their home and place them in a hospital or new home and you are effectively transporting them to another planet, it freaks them out.

Your home is your kingdom, she's been there too long to feel comfortable anywhere else. Its not idea, its not economically the best utilisation of a resource, but it is human.

nextw33k2• 11 years ago

The correct solution to this problem is to tax the rental income and hand that money to low income households. It would create a balance of correct market prices and allowing low income people to stay.

Just letting the price float and pushing low income people out creates an unbalanced society where a class divide builds up over time. Modern housing policy in the UK is to mix social housing with regular housing developments, having social housing all grouped into one location was a catastrophically bad idea from the post war era.

yason• 11 years ago

Subsidies and regulation doesn't work.

If you subside families, the subsidies will simply go into rents and then those who don't get subsidies still have to pay that same rate. Basically, the lowest rent turns into exactly the same level where you're entitled for full subsidies. In effect, you'll just give tax payer's money to landlords.

If you regulate rents (or subsidize apartments), the apartments aren't taken cared of. The landlord is squeezed between the regulated rent and rising costs, and this doesn't lend to a very good and successful renting business.

If the city builds public housing (council housing) and rents directly to poorer families, you'll get two things. First, a lot of poor people get flocked into the same building or neighbourhood, including problematic people (most poor people aren't problematic but most problematic people are poor), and this lowers the reputation of the area. Second, those who were poor but are now in the middle class still want to hold on to their cheap apartment because they would face a direct hit in their standard of living if they moved out to an apartment rented at market price. This is a huge disincentive to move because of a better job or to move because more (or less) space is needed.

So far I've only seen one scheme that does work: public housing, initially at at-cost prices (no profit for the city) but with rents discounted based on the tenant's annual income. The subsidy isn't money that could go to anyone else but the tenant as the city "pays" for the subsidy by simply getting less money from that tenant. If the tenant begins to earn more money, the rent will go up in proportion to the extra income so that there's no big jump or disincentive to not get a better job. The rent always goes up less than the income, so that it's always worth taking a better job, until at some point the rent will equal market prices. This allows people to stay (if they like the place) or move away (because they already pay the market rent). The city could also sell individual apartments to long-term tenants if they wish to buy: this is to gradually balance the demography of the area and keep the houses from being populated by poor people forever.

New York's Rent Regulation Fight

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