Albany's rent compromise solves a political problem but not NYC's housing shortage
Newsday, June 18, 1997It's a classic New York compromise.
In the end, Albany's leaders chose not to phase out the state's baroque and forbidding system of rent regulations. That idea entailed too much political risk. Instead, they acted to preserve market controls by letting unhappy landlords in on a heftier chunk of the swag.
If the politicians can placate landlords and tenants, then the crisis is over, right?
That's what Albany's ruling troika - Gov. George Pataki, Assembly Speaker Sheldon Silver (D-Manhattan) and Senate Majority Leader Joseph Bruno (R-Brunswick) - hopes most New York voters will think.
Their plan - hammered out late Sunday night as the clock ticked down on the old rent-regulation laws - gives landlords a 20-percent rent increase on a two-year lease each time an apartment becomes vacant. On top of that, when previous tenants had held an apartment for eight years or more, landlords will get an additional 0.6 percent increase for each year the renter lived there.
Pataki claims this scheme - along with provisions to rein in succession rights - will bring as many as 75 percent of all regulated apartments up to free-market rates with just one turnover. Who knows? Maybe he's right.
This plan still won't end the housing crisis.
Oh, sure, in an acknowledgment the city needs housing, the deal vows to examine new ways to encourage apartment construction. But there's no huge mystery about this: If the state simply phased out regulations, demand would increase the supply - especially if other governmental obstacles were lifted.
But wait, it gets worse. The plan seeks to encourage wary developers with a statutory guarantee that no new apartments will be subject to state rent regulations.
The problem is, new apartment housing isn't subject to rent regulations now. Most developers are skittish about building in New York because they don't want to compete in an artificially depressed market. Albany's compromise may make the market a little less depressed. But so what? After all the smoke has cleared, New York will still be left with a housing market controlled more by politics than economics. That won't impress investors - or end the housing shortage.