Time to put an end to rent control – By George J. Marlin
The following appears in the April 8-14, 2011 issue of the Long Island Business News:
Assembly Speaker Sheldon Silver is revving up his minions to battle for yet another renewal of that World War II relic – rent control.
In September 1943, the federal government’s Office of Price Administration brought New York under wartime rent controls. This interference in the real estate market, Washington promised, was to be only a temporary measure.
In 1950 federal controls were lifted, but New York – unlike all other major cities – kept the controls in place. “As a result,” housing expert William Tucker reported, “[New York] City essentially missed the postwar boom in housing construction. [By 1990] more than 60 percent of New York’s housing [was] more than 60 years old.”
Not only did rent control discourage entrepreneurs from investing in new multifamily housing projects, it also encouraged landlords to defer maintenance and led many to just walk away from unprofitable properties. In the 1970s, for instance, over 250,000 apartments were abandoned in New York City. Tucker observed that “in no other city except New York has housing been lost during a housing shortage.” By 1993, the largest owner of rundown apartment buildings was the City of New York.
This system also discouraged people from moving because they were reluctant to give up their below-market rents. In March 1990, The Washington Times reported that the poor suffer under this program, while wealthy people take advantage of these “anti-housing regulations.”
In 1997 when there was an opportunity to abolish the control law or to significantly modify it, Gov. George Pataki – who had pledged not to give in to political pressure – disappointed Conservatives when he surrendered to leftist foes.
Commenting on the Pataki capitulation, the Daily News concluded, “the tenant side, championed by Assembly Speaker Sheldon Silver, beat back all but a few of the landlords’ demands for change. The legislation left largely intact the protections New Yorkers have relied on since 1943.”
Since that time, the state Legislature has routinely extended rent control laws without a fuss and as a result, the government still regulates more than 1.1 million apartments in New York City and thousands of units in Nassau County including Great Neck, Long Beach and Glen Cove.
With the present law set to expire on June 15, there is talk of eliminating the vacancy decontrol mechanism which kicks in when rent exceeds $2,000 a month.
Back in 1993, liberals signed on to the $2,000 decontrol clause – which has liberated over 100,000 city apartments during the past 18 years – because they figured it would only affect rich people. However, with that monthly nut now common to tenants across the economic spectrum, they have changed their tune.
Eliminating or increasing the ceiling will harm both tenants and the real estate industry. At the present time, rent control regulations cause approximately 13 percent of regulated apartment buildings to incur annual financial losses. More stringent guidelines would only exacerbate this situation and force additional cutbacks in tenant services and building maintenance.
It’s time to liberate New York housing. “In reality,” the Manhattan Institute’s Nicole Gelinas has observed, “the best thing for the vast majority of tenants would be an accelerated end to all price controls. … The end of rent laws would increase supply, pulling down prices on today’s nonregulated units.” The end of rent control would also lead to a surge in investment in housing at a time when construction labor unemployment rates are high.
Senate Majority Leader Dean Skelos has been telling Conservatives that he and his GOP conference have “found their way” and will no longer pursue Democratic-lite policies.
If Republican senators wish to be true to their word, they now have an incredible opportunity to strike a blow for freedom and to promote new investments in rental housing by either letting the rent control laws sunset or insisting on genuine free market reforms.