Rent Control at 50, Still Stirs Controversy: The Defense
New York Times, March 21, 1993
By Peter Marcuse
FIFTY YEARS OF RENT CONTROL -- and New York City is still standing! The extreme critics of rent control would never have expected such a thing. The predictions have been dire: New construction will come to a halt, abandonment will become pervasive. Yet neither of these results have occurred, and thoughtful people have come to recognize that rent regulation is neither ultimate disaster nor the ultimate solution.
The old arguments, quietly, have been largely settled. Three studies presented solid evidence: One by the Federal General Accounting Office (Housing Abandonment: A National Problem Needing New Approaches); one by The Women’s City Club of New York (With Love and Affection -- A Study of Building Abandonment), and one of my own (Housing Abandonment -- Does Rent Control Make a Difference?).
Regulation does not cause abandonment. Cities without regulation have abandonment, cities with regulation don't. Abandonment often has subsided when regulations were strengthened, and continued when they were weakened. Areas where regulation is most prevalent are not those where abandonment is greatest. The rents landlords of most abandoned buildings were collecting were below the permitted rents in the period before abandonment. To put it together, Buildings are abandoned because tenant incomes are not sufficient to cover expenses and yield a profit, not because of rent regulation.
Nor does rent regulation stop new construction. Rent regulation does not cover new construction in New York City to begin with, unless a developer voluntarily accepts coverage in return for city subsidies. or tax benefits. New construction has waxed and waned, in New York as elsewhere, as interest rates have risen or fallen as effective demand has increased or dwindled.
New York’s patterns of new construction follow regional and national trends. Rent regulation does not change the pattern. Even where, in other communities, regulations cover new construction, the evidence is that initial rents are slightly higher than in neighboring communities without regulation, but longer-term tents show slower increases.
Regulation is not an injustice to landlords. In economic analysis, it ultimately reduces the cost of land as speculative profits from the limited locations available for housing are held under some control. In fact, landlords with decent buildings at affordable rents are making out decently. Returns on non- speculative investments have kept pace with returns in other areas of the economy.
The argument that regulation create a subsidy from landlord to tenant is a non-sequitur. Nowhere is it written that a landlord is entitled to squeeze every possible dollar of profit out of a tenant if limited housing opportunities make tenants desperate. Nor is there any reason why unexpected changes in market conditions should fall to the exclusive benefit of landlords.
Rent regulation is not income-related -- on either the tenant or the landlord side, although no one seems to argue that landlords’ incomes should be taken into account in setting rents, unless they are too low. On the one side, most of the rich are not protected, nor do they need it -- although why a rich tenant should pay an excessive rent to a rich landlord on an uneven playing field, a situation of shortage, is not clear.
On the other side, many poor tenants cannot pay even what reasonable regulation permits. There is now wide agreement that public subsidies, whether in the form of expanded public housing or housing allowances, are needed to provide adequate help for the poor. But regulation does benefit the poor, especially the working poor, and dollar for dollar, a savings in rent means more to them than to those earning more.
Middle-income people, particularly the elderly, are benefited as well. Regulation helps many of them stay in the city and it helps the elderly stay in their homes, results desirable for urban policy and social justice.
The New York system is hardly perfect. Begun in a time of wartime shortage, extended to protect returning veterans, continuing through periods of rapid growth and of economic hardship, adjusted year after year, sometimes radically, sometimes marginally, it is a hodgepodge of regulations that only a historian with the patience of Job could ever explain.
Its administrative machinery is cumbersome. Paperwork is burdensome, appeals procedures lengthy, some rules arbitrary, others hard to comply with. And, even in an ideal system, deciding fairness between individual tenants and individual landlords can be a task to challenge a Solomon.
But on balance rent regulation works; It prevents potential price abuses, and keeps some housing affordable to some tenants while letting landlords make a normal profit. It does not solve the housing problem for everyone. Perhaps one day a comprehensive policy, national and local, will work toward that goal. Meanwhile, regulation provides some protection for some people, most of whom need it. That’s not too bad a result.
Peter Marcuse is professor of urban planning at Columbia University.