NYC Rent Control

This is what is still rent-controlled in NYC:

Rent control applies to rental units in buildings constructed before 1947 that have been continuously occupied by the same tenant or a legal successor tenant since before July 1, 1971. Rent stabilization generally applies to apartments in buildings with six or more units built between 1947 and 1974, to some loft buildings, and to some buildings whose landlords participate in tax-abatement or other government programs.

Then we get an executive denying that the building owner is a member of homo economicus:
"We don't look at this process as a mechanism to move out of rent stabilization," said Neil L. Rubler, an executive vice president at the Olnick Organization. "We spend exactly as much on an apartment renovation as we need to deliver a first-class product in keeping with the property's tradition. If we do get the legal rent over $2,000 we, of course, will deregulate the apartment."
Uh, huh. Might it not be worth it to get the legal rent to $2001, permitting unlimited future rent increases? Just asking.

The new market-beating strategy is to offer subsidies and tax abatements for agreeing that 20% of new apartments will be rent stabilized for 20 years. That this necessarily increases short-term market rents and taxes is not ususually recognized. But most proponents would probably argue that the costs to some are worth the benefits to others.

Of course, one can debate about who are really getting the benefits. In March, the NYTimes pointed out that under the old system, the rich were getting richer!:

It is far more difficult, however, to get a good deal in the affordable rental buildings of Manhattan, where vacancies tend to come in just a trickle. Part of the scarcity problem, Dr. McCarthy at the Ford Foundation points out, is that "many lower-priced units are occupied by more affluent people."

"I'm not against rent control," he said, "but there's a tendency of people to sit on desirable affordable properties. And it's not unusual to see some people paying less than 10 percent of their income for rent while some others pay more than 50 percent."

I guess it's time for a new crop of people to win the rent control lottery.

I bring this up again and again because it comes up again and again. For me, the most potent anecdote about the political motives behind rent control came from Stiglitz' Principles book. It was about former NYC mayor Ed Koch's rent controlled 6-room apartment in Greenwich Village going for $441 a month, when valued at $1200 a month.

I think later editions of Stiglitz dropped the reference to Koch. I cannot find a major news source for the Koch accusation, which is one of those anecdotes that seems to have spread without authentication.

UPDATE: Another excellent example of the type of person who actually benefits from rent control - people who own investment properties:

Josephine Hemsing is a lifelong renter who bought her first piece of real estate last August.

Along with her husband, Dan Cameron, she runs Hemsing Associates, a public relations firm that works with classical musicians. They live in a rent-stabilized apartment on the Upper East Side and also rent another apartment for an office.

Content for the time to live and work as renters, they still felt the time might be right to buy a condo that they could rent to someone else. They reasoned that would allow them to build up equity in a property that, in the future, they might want to occupy themselves.

The couple looked at several apartments before finding a one-bedroom condo at the Concorde, a luxury building at 220 East 65th Street, which they bought for $590,000 last August. Their broker, Lynne Roberts of Bellmarc, helped them find a tenant who pays $3,000 a month. Regularly scheduled mortgage payments, taxes and common charges total about $3,500 a month, Ms. Hemsing said, and the couple have also decided to make additional payments on the loan principal.

"I realize there's a frenzy going on but that's not why I was involved," Ms. Hemsing said. "I felt that I had come to a point in my life where I had to take some money and invest it."


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This page contains a single entry by Kevin published on April 13, 2005 12:47 PM.

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