Strange Bedfellow
Slate Magazine, May 17, 1997
Such a Deal
By Jacob Weisberg
The romance of rent control.If you want to understand the bitter debate over rent control that now dominates social interaction in New York, you have to begin by ignoring arguments about social justice, market economics, and all appeals to principle. Instead, apply crude Marxist dogma: It's a battle of naked class interest. The catch is that the "classes" glowering at each other across the barricades aren't rich and poor. They're the New Yorkers with scandalously sweet deals vs. all those who get screwed as a result.
Recent experience has done much to reinforce my own class consciousness as a member of the latter group. My wife and I were minding our own business in an unregulated apartment in the rapidly gentrifying East Village when we returned from work one day to a letter informing us that our already (to non-New Yorkers) alarming rent of $1,950 was going up $700. That's for a largish one-bedroom in a marginal neighborhood. This catapulted us into Manhattan-real-estate hell, a place where rapacious brokers extract usurious commissions on glorified broom closets renting for $2,300 a month. We lucked out, relatively speaking. Thanks to a connection, we fell into a nice, $2,000 one-bedroom in Chelsea, without paying a finder's fee. Absent the artificial shortage created by rent regulation, we would either have a bigger place or pay much less for the one we've got.
The moral and economic arguments against rent control are pretty much unassailable. Under the present system, government intervenes in the market to protect a class of people defined to some extent by long-term residency, but to an even larger extent by luck. This massive intrusion in the real-estate market, which might be hard to justify even if it had purely beneficial consequences, has a number of obviously disastrous ones. It deters young people and new immigrants from moving to New York City; it encourages landlords to neglect their buildings; it makes them hate their tenants. But even as a victim of this misbegotten system, I hope Joseph Bruno, the Republican state Senate leader who has been threatening to let all the rules expire on June 15, cuts a deal to let rent control continue a little longer. New York City is a highly complex, weirdly evolved organism--kind of like a pickled old codger living on gin and cigarettes: He should have started behaving more sensibly a long time ago, but forcing him to suddenly do it now would be an act of cruelty, more likely to kill him than to make him healthier.
What would happen if rent regulations were really abolished? It's a pretty safe bet that in most parts of Manhattan, market rents would settle in somewhere between the $2,000 a month I pay and the $600 that others pay for nearly identical apartments in the same building. Using the estimates promoted by the Rent Stabilization Association (the newspeak name for the group representing landlords who actually wish to end rent stabilization), the typical one-bedroom in the Village or on the Upper West Side might go for $1,300 to $1,400 after the shakeout. A rent like that calls for a pretax income of at least $50,000. Once you figure in New York City and state taxes, a more realistic figure would be $60,000. A two-bedroom apartment suitable for raising a child in might cost only a bit over $2,000, which would demand an income of at least $90,000. These are conservative estimates; I find it hard to imagine bargains like that being freely available, even in a totally deregulated market.
The poor, who are subsidized directly, and are likely to be exempted even in the case of radical decontrol, would stay put. What Manhattan would lose is what remains of its middle class, those earning between $25,000 and, say, $75,000. This would mean a tremendous blow to the city's social variety and cultural vitality. Gone would be the used-bookstore owner, the public-school teacher, the family that's been in the same Upper West Side building for 100 years, the office manager (a guy I actually know) who attends every performance of the Metropolitan Opera. Without protection for those marginal, cosmopolitan souls who cling to it tenuously, Manhattan would become much more the way people who don't live here imagine it, a soulless playground for yuppies, with an alienated underclass underfoot. The city would become more rational and less charming--more like Tokyo, less like Rome. The irony is that the yuppies who would benefit financially from the end of the rent-control system would probably like living here much less without it.
Decontrol would also make New York uglier. One of the big points made by opponents of rent control is that the present system prevents the construction of new buildings. Because rent regulations say you can't evict people when their leases are up (if they even have leases), one obstinate tenement dweller can block the creation of a 50-story high-rise. But who wants new buildings in Manhattan? What an apartment building looks like--on the outside--affects everybody, not just the landlord and the tenant. New York's old buildings are gracious and charming, even those that are run-down. Its new ones--at least those of the residential variety--are generally horrible. It is rent control that has preserved the aesthetic as well as the social fabric of the kind of variegated, low-rise neighborhoods Jane Jacobs celebrated in The Life and Death of the Great American Cities, which in many other places were knocked down to make way for high-rise development. Manhattan, again like Rome, should be regarded as largely finished.
In all likelihood, there will be a compromise on rent control. Let's hope it's not like the "luxury decontrol" compromise in 1993, when everyone agreed to end controls for those with incomes over $250,000, whose apartments rented for over $2,000. Both conditions apply, which means that if you earn $8 million, and your eight-room apartment on Central Park West only costs $847, you get away unmolested. Rent-control defenders stick up for the worst excesses of the system on Realpolitik grounds; they want the rich on their side in the fight to keep the whole shebang. But given the outrage such excesses generate, advocates would be better off cutting the rich loose and gaining a modicum of redistributive equity for their side of the argument. Any sane person has to be against rent control after hearing about Bernard-Alexis Poisson de Menars, a French marquis who a few years ago was reported by Newsday to be paying $103.50 a month for a duplex on the Upper East Side that he didn't even live in. When his landlord tried to lure him into a smaller apartment in the same neighborhood, he insisted that it would not befit a man of his "class and social station." This time, the "luxury" threshold will probably be scaled back, while exempting anyone over 62, regardless of income. Surely there should be an exemption for middle- and lower-income elderly. But why should Alistair Cooke get to keep hogging those eight rooms on Fifth Avenue for $2,078? If he wants all that space, let him pay for it.
The goal of a rent-regulation compromise should be to diminish unfairness and mitigate perverse side effects without giving a shock to the city's social system. This argues for a fairly straightforward means test for rent control, say $100,000 a year. There will be people, some of them elderly, who make more than $100,000 but still can't afford the rents their apartments could command on the free market. They will have to move. How big a tragedy is that?
The other essential reform is "vacancy decontrol," which would allow landlords to charge market rent when apartments empty. (Tenant groups argue that this gives landlords an incentive to harass tenants. But landlords have plenty of incentive to harass tenants now, since they're already allowed to raise the rent somewhat when an apartment changes hands.) The intergenerational handing down of rent-controlled apartments, which Gov. George Pataki favors, perhaps on the Republican principle that no form of inherited wealth is bad, should also disappear. These reforms would mean that rent control would evanesce over the next 30 or 40 years. It would be Nicorette for New York's neighborhoods, instead of cold turkey.
The New York City Rent Guidelines Board, the agency that establishes annual increases for rent-stabilized units, serves up numerous studies and statistics, including the full text of the newly released study, "The Effect of Deregulation on Rents and Economic Activity in New York City," commissioned by the Rent Stabilization Association. TenantNet (http://tenant.net) is a pro-renter mecca, offering a guide to the 1997 NYC Rent Wars (http://tenant.net/Alerts/Guide/index.html). As for neighborhoods whose identities might be transformed if the rent laws change, here are sites providing tours of just a few: East Harlem Online (http://east-harlem.com/), Bay Ridge.com (http://bayridge.com/), the Morningside Heights Residents Association (http://idt.net/~mornside/), Harlem.NYC (http://www.harlem.nyc.ny.us/), and NY Site-the Guide to the Upper West Side (http://www.nysite.com/). The liveliest neighborhood site may be Hell's Kitchen Online(tm) (http://hellskitchen.net/), which asserts, "our neighborhood is not Midtown West, an unwelcome moniker slapped on by the real estate interests," and includes the straight-faced section, "Houses of Worship in Hell's Kitchen."