RENT CONTROL: THE REAL NEW YORK SCANDAL
September 17, 2008
Rent control laws in New York were first established to help the poor and middle class, but instead, they benefit the well-to-do, says Eileen Norcross, a senior fellow at the Mercatus Center at George Mason University.
Since 1947, New York City has had rent control laws; in 1969, they were expanded creating a rent stabilization program and loosened in 1971 because the system was benefiting wealthy renters. Under today's rules, landlords can move apartments renting for more than $2,000 a month with occupants making more than $175,000 a year onto the free market, says Norcross:
- Today, there are 43,317 apartments where tenants (or their heirs) pay rents first frozen in 1947; there are another 1,043,677 units covered by rent stabilization.
- About 70 percent of the city's rental apartments are either rent controlled or rent stabilized,
- Because the system has been in place for more than six decades, many residents see their below-market rents as an entitlement.
This is precisely the problem, says Norcross -- rent control and rent stabilization have increasingly become a tool of the well-heeled and the well-connected.
According to the New York city Rent Guidelines Board:
- Across the city there are 87,358 households reporting income of more than $100,000 a year that pay below-market rent.
- A full 35 percent of all the city's apartments covered by the rent control regimes are rented by tenants who make more than $50,000 a year.
- New York has a city-wide vacancy rate of just 3 percent - and when good rent-stabilized apartments come on the market, you have to either know someone or pay someone to get it.
Furthermore, this system is destructive to the city's housing stock, because landlords who own rent-controlled apartments have fewer incentives to pay for repairs and upkeep. It warps the housing market, and forces many new arrivals to occupy the least desirable apartments, says Norcross.
Source: Eileen Norcross, "Rent Control Is the Real New York Scandal," Wall Street Journal, September 13-14, 2008.
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