New York City by Rent Control
May 19, 2003
"[R]ent control appears to be the most efficient technique presently known to destroy a city -- except for bombing," Swedish economist Assar Lindbeck observed in a 1972 book. It has been particularly destructive in New York City.
- New York has maintained price controls on rent since World War II, and as it took over buildings abandoned by landlords at one point owned 70 percent of Harlem.
- Prior to rent control, builders regularly completed 30,000 units a year, or 90,000 at the peak in 1927.
- However, household formation exceeded housing increases in every year of the 1990s, peaking at 44,700 new in 2000; during the boom, in 1998, developers completed only 11,432 units and rehabilitated 6,967.
- Only 30 percent of rental units are exempt, so their rents naturally soar, and high prices are then used to justify price controls.
William Tucker estimates the direct costs of rent control at $2 billion a year, exclusive of the effect of shrinking the property tax base.
A Manhattan Institute study by Henry O. Pollakowski, a housing expert at the Massachusetts Institute of Technology, concluded, "tenants in low- and moderate-income areas receive little or no benefit from rent stabilization, while tenants in more affluent locations are effectively subsidized for a substantial portion of their rent."
By contrast, a new Pollakowski on the effects of a statewide referendum terminating rent controls in Cambridge, Mass. in place from 1971 to 1994. Pollakowski found that Cambridge deregulation was followed by a boom in housing investment.
Source: Robert L. Bartley, "Rent Control: New York's Self-Destruction," Thinking Things Over, Wall Street Journal, May 19, 2003.
For WSJ text (requires subscription) http://online.wsj.com/article/0,,SB105330345754178400,00.html
For Manhattan Institute Study http://www.manhattan-institute.org/html/cr_3.htm
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