The sorry legacy of New York's absurd rent regulations

New York Post, June 11, 1997

THE spring planting is under way in Manhattan and elsewhere in New York -- on land that, in a city with saner rent laws, would be dedicated to the construction of much-needed housing.

Such is the legacy of five-plus decades of rent regulation: Vegetable gardens grow on vacant lots in a city where the rental vacancy rate rarely approaches 4 percent; where in recent years, three housing units have been lost for each new one built -- and where an estimated $4 billion worth of deferred apartment rehab and repair work is begging to be undertaken.

New York City's "The-Bronx-is-burning" arson epidemic of the early '70s was, of course, sparked by the fact that owners of otherwise marginal buildings couldn't earn enough from rentals to cover their operating expenses.

One would think that the lesson had sunk in. Wrong.

Because they are not permitted to charge tenants the

actual costs of maintaining their buildings, New York's landlords now face a comparable crisis in supplying water to their tenants. The landlords' inability to pass along assessments associated with badly needed upgrades to the city's water-distribution system has presented officials responsible for ensuring safe water for New Yorkers with a substantial dilemma: To saddle property owners with the full bill for upgrading the water system and perhaps precipitating a new wave of building abandonment a la The Bronx; Or not to to proceed, thus permitting an already overstressed system to deteriorate even further -- possibly to the point of no return.

To be sure, adoption of Gov. Pataki's proposed rent-regulation compromise -- limited vacancy decontrol, with ironclad protections for the elderly and the disabled -- will not undo overnight 50 years of damage. But it would be a start.

Such reforms can be expected to draw the private sector back into the void that now exists between luxury development at one very narrow end of the scale and taxpayer-funded "affordable" housing at the other.

In the 1920s, more than 100,000 units of private housing were built annually in New York. In the '60s, 30,000 units a year was common. Last year, only 8,000 were built -- barely up from 6,000 in 1995.

City Hall felt obligated to get into the housing game in a big way in the late '80s, undertaking a $4-billion reconstruction and rehabilitation program -- revolving, ironically, around city-owned property acquired from landlords who couldn't earn enough from rentals even to pay their property taxes.

That program, by the way, was no bargain for taxpayers: The city paid an average of $100,000 for each of the 40,000 housing units it rebuilt on its own -- roughly 50 percent more than for the small number of units it reclaimed by contracting the work to private builders.

Obviously, that's no answer. What the city needs is to recreate conditions conducive to private investment in rental housing -- by changing the laws to encourage entrepreneurial engagement in the market.

The latter is the essence of Pataki's compromise -- now under active consideration in the state Senate, but anathema to the Assembly.

The lower house seems determined to let the current laws expire at midnight Sunday, apparently in the belief that Pataki will thus be damaged.

Perhaps. The real damage, however, is being done to New York City, where soon the corn will be as high as an elephant's eye -- and where a rental apartment in a desirable neighborhood will remain nearly impossible to find.