Rent laws are welfare for the rich
Even the landlords behind a recently-filed federal lawsuit challenging the constitutionality of New York City’s rent stabilization laws don’t expect the whole system to be thrown out. But the litigation is an opportunity for all New Yorkers — not just the courts — to take a long, hard look at the problems and perversities of the current system.
“We believe it’s time for the city of New York, and the nation as a whole, to have a fundamental conversation about how we supply affordable housing in the city,” says Jay Martin, executive director of Community Housing Improvement Program, a pro-landlord advocacy organization that is lead plaintiff. “This lawsuit will do that. It will be a rigorous conversation about that in the court of law. We also plan on having it in the court of public opinion.”
An adult conversation is long overdue. Thanks to a new round of laws passed in Albany this year, New York is tougher than ever on landlords, especially those who take advantage of tenants.
But it feels like the city is running
on a treadmill, huffing and puffing but going nowhere fast. The current system is set to chug along for another generation, with most landlords claiming decent profits and a few reaping windfalls, while families everywhere fret about the high price of housing.
Meanwhile, there’s compelling evidence that rent stabilization, despite its good intentions and undeniable benefits, actually makes affordable housing more scarce, more expensive and more run-down.
“The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial,” future Nobel laureate Paul Krugman wrote in a well-known New York Times column back in 2000. “In 1992 a poll of the American Economic Association found 93% of its members agreeing that ‘a ceiling on rents reduces the quality and quantity of housing.’ Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.”
Krugman explained how rent-control laws in San Francisco had already led to sky-high rents, a severe shortage of affordable units, and a loud political arms race pitting cynical tenant-screening and eviction tactics against ever-harsher legal restrictions. He called the ugly scenario “exactly what supply-and-demand analysis predicts. But people literally don’t want to know.”
Which brings us back to New York City, where politicians and advocates gush about the benefits of rent stabilization, but allow this important benefit to be distributed mostly as a matter of luck: you either have the good fortune to snag a stabilized unit, or are related to somebody who did.
Only about 38% of families in stabilized units make less than $35,000 a year, according to the lawsuit, while plenty of non-needy New Yorkers — we all know folks like this — hang onto stabilized units long after they’ve made it financially.
“A former Philip Morris executive lived in a rent-stabilized apartment for nearly 20 years, while he and his wife bought a weekend home in the Berkshires,” says the lawsuit. “A former magazine editor and her husband who owned a photo agency lived in a rent-stabilized unit in the Upper West Side for 27 years, while at the same time owning a cottage on a 7-acre property in upstate New York.”
What’s the answer? “We think there should be some sort of a means testing,” Martin told me. “At least 20% of rent stabilized units are [rented by] people that make $200,000 [a year] or more. Every person that’s in there is essentially taking a unit away from a senior citizen, or a low income individual who could be in that housing.”
If the idea is to help cure New York’s housing crisis, we need to stop treating stabilized units like randomly-distributed lottery tickets. Regular means testing would be a good way to start the process.
Louis is political anchor of NY1 News.