Editorial: For the Pataki plan
New York Post, June 15, 1997
At midnight tonight, barring a bolt from the heavens, the laws underpinning New York's intricate -- and thoroughly antiquated -- rent-regulation system will expire.
Albany seems incapable any more of functioning without artificial crises of the sort created by impending deadlines. Negotiations, formal or otherwise, likely will be under way well into the wee hours tomorrow.
But if anything can be said with reasonable certainty, it's that a rent-regulation compromise will indeed be struck -- eventually.
It is in the best interests of all New Yorkers that such a settlement come as close as possible to the proposal put forward weeks ago by Gov. Pataki -- and for all intents and purposes endorsed by state Senate Majority Leader Joseph Bruno (R-Rensselaer) at midweek.
Pataki's plan points to a gradual phase-out of controls as apartments become vacant -- but incorporates ironclad protections for virtually all tenants who now enjoy the benefits of rent regulation.
This approach is sound both as a matter of equity and of long-term public policy.
There is something intrinsically unfair about a system that -- originally set up in response to a wartime emergency -- denies property owners a fair return on current investment fully five decades later.
It is, of course, understandable that those tenants who enjoy the benefits of below-market rents want to preserve into perpetuity the system that makes their subsidy possible. But what about all those who aren't so lucky -- who don't have a subsidized-lease apartment, but who instead, directly or otherwise, pay the price of the subsidy? Where should they go to live?
Beyond simple fairness, however, any system that discourages construction of new housing in a market with one of the lowest apartment vacancy rates in the nation is fundamentally unhealthy.
And it's probably no accident that nothing like it exists anywhere else in the United States (Massachusetts having finally disposed of rent controls via referendum).
New York's political culture has long been informed by a fully developed sense of entitlement. As a result, social-services spending in New York is, by every measure, far and away the highest in America.
That's also the reason state and local taxes here are the nation's most burdensome.
Once upon a time, of course, New York could afford a system of governance based on the notion that it's OK to live off the sweat of someone else's brow. Unhappily, there are no longer enough sweaty brows in New York.
The city's unemployment rate is hovering around 10 percent -- a shocking figure at a time when the national rate, 4.8 percent, is lower than it has been at any time since 1973.
New York has benefited to some extent from America's mid-'90s boom; that's what generated those surpluses in the state and city budgets.
But in terms of solid, sustainable growth, the economic good times are bypassing New York -- the city in particular -- for understandable reasons.
Despite the best efforts and considerable accomplishments of Mayor Giuliani and Gov. Pataki, it is still difficult to justify doing business in New York.
Income taxes in New Jersey, for example, are substantially lower than New York's -- 4 percent vs. 7.4 percent at the top of the scale. But the maximum rate in the Garden State applies only to adjusted incomes above $150,000 -- compared with $40,000 here.
WHY THEY SHUN N.Y.
The list of reasons not to invest in New York is long. But at or near the top (right after iffy public schools) resides the city's legendary housing shortage. Why should a CEO move his company to New York when doing so effectively sentences his employees to, among other things, excessive taxes and oppressive commuting regimes?
Pataki engineered income-tax relief for New Yorkers when he took office three years ago, and he's working hard at improving the state's economic climate in other ways as well.
Certainly his support for rent-regulation reform fits into the pattern.
When Massachusetts began a phase-out of rent control in 1994, a construction boom quickly ensued. Rental stock in Boston alone grew by almost 2 percent in the first 18 months. In the New York City market such a rise would mean 27,000 new rental units virtually overnight.
The best the city could do last year was 8,000 units (6,000 in 1995), a pace that runs well behind the city's loss of 20,000 apartments a year through attrition.
Perfect parallels, of course, can never be drawn between New York and other cities. But Boston's turnaround seems instructive; moreover, the housing shortages that are squeezing off New York's economic growth simply don't exist in cities where there are no rent controls.
Which is to say, everywhere in America outside of the Big Apple.
There are other reasons to wind down rent regulation here. Permitting landlords to pass along rehabilitation and repair costs in a realistic manner would go a long way toward improving the condition of existing housing stock.
Similarly, allowing landlords to apportion water and sewerage charges fairly could mean that necessary water-system infrastructure improvements would be undertaken without encouraging the owners of marginal buildings simply to abandon them.
EQUITABLE TO ALL
Not proceeding along the lines proposed by Pataki makes no sense at all. His plan protects virtually all present tenants; it encompasses special considerations for the elderly and the disabled; it provides reasonable succession rights; it ensures that the transition out of the rent-control straitjacket will be gradual.
What happens after tonight is anybody's guess: Whenever darkness falls in Albany, there's good reason to tremble.
But it is in the best interests of all 18 million New Yorkers -- including, odd as it may seem, the 2.5 million now residing in rent-regulated apartments -- that Gov. Pataki's plan carry the day.
Or night, as the case may be.