Rent Control is Your Issue

by William Tucker
NY Press April 30, 1997

WHEN PEOPLE MOVE TO NEW YORK, IT usually takes them a couple
years before they run into rent control. Take for example
this young woman who wrote the following letter to the Daily

"I recently moved to New York and I pay almost $1200 a month
for a nice little apartment on the Lower East Side. The
landlords have been reasonable and the building is clean.
Still, when I found out at a tenants' meeting that 30 of the
building's 34 apartments rent for below $300 and that most of
the tenants in those cheap apartments make more money than I
do, I was a bit outraged. I understand protecting the old
people, but protecting fellow yuppies with bargains?"

In Texas, $450 will pay rent on a two-bedroom apartment with
air conditioning, washer/dryer, swimming pool, fireplace and
garage. The vacancy rate is over 10 percent. There are no
rent controls and the tenants hold all the cards. And
landlords are not a hated breed. If New Yorkers are so smart,
why can't they see that what exists now is more than unfair?
It's stupid.

New York has had rent control for 50 years, and rent
stabilization for 25 years. (You're becoming a real New
Yorker when you start to learn the difference.) Rent controls
were originally imposed on the whole country during World War
II as an emergency wartime measure. The idea was to cut
domestic consumption. All the bricks, mortar and labor were
being diverted into war production, so you impose price
controls to create shortages. Those shortages are then evenly
distributed by wartime rationing. After the war price
controls are lifted and things go back to normal.

It didn't happen in New York. There was a big Marxist
contingent in the city and everybody figured this was our
chance to emulate the Soviet Union. Besides, there's always
the illusion that people can live cheap from rent control and
not suffer any consequences. (There are people in New York
who argue this even today.) So New York City made wartime
rent controls permanent in 1947. Ever since, New York has
been experiencing a "housing crisis."

You have to realize that once upon a time people loved New
York City precisely because it was such an easy place to find
an apartment. In the 1920s and 30s, New York was often called
the "City of Nomads" because people moved so frequently. You
could be kicked out of your apartment for getting drunk on
Saturday night and have another apartment Sunday morning. One
big incentive was a law that required a landlord to give
every new tenant a fresh paint job. I had a great aunt in
Brooklyn who used to move every six months just because she
loved the smell of fresh paint. People used to put their
furniture in summer storage and then rent another apartment
when they returned from summer vacation. In August, the
papers always carried stories of landlords sprucing up their
buildings for the "Fall renting season."

All this created a paradise for adventurous young people
pursuing their careers in the city. I remember Diane Di
Prima, in Memoirs of a Beatnik, talking about her "love
affair with New York City" in the early 1950s. She crashed
with friends, even slept in doorways a few times, but there
was always a cold-water flat somewhere where you could put up
for a few months. It was the one place in the country, she
said, where you could pursue a life of poetry while living on
next to nothing.

Today, anyone moving to New York has to be prepared to pay
$1000 for a studio apartment, $1500 for a one-bedroom (or
$2000 for a three-way share). For the first year or two,
your whole life may be consumed with finding a place to live.
People become devious. A number of years ago, in an article
entitled "How to Find an Apartment (Seriously)," New York
recommended "joining a church or synagogue" as a good
strategy for meeting people who might be able to provide
leads on a good deal somewhere. I often tell people you can
fly to Chicago -- a city without rent control -- and find a
decent apartment at a price you can afford within 24 hours.
They never see any relevance. "That's Chicago, this is New
York," they say -- as if the laws of supply and demand
stopped at the Hudson River.

Now State Senate Republican Majority Leader Joe Bruno has set
about to change all this. Since December, Bruno has been
warning that he intends to "end rent regulations as we know
it" A businessman and a free marketeer, Bruno has one simple
perspective on New York City's perpetual housing problems.
Rent controls are the cause of the crisis, not the solution.
Bruno has said he'll settle for a two-to-four-year phase-out,
but as far as he's concerned the game's over.

Bruno's words have set off a firestorm among New York's two
million regulated tenants, who are predicting thousands will
be thrown into the streets. Democratic Assembly leader
Sheldon Silver has vowed rent regulations will remain in
place and wants to make them permanent. Governor George
Pataki is straddling the fence, philosophically opposed to
rent controls but cautious about tackling the issue before
his re-election. Mayor Giuliani, facing voters this year, is
running to the head of every parade of tenants.

The editorial pages of the four major dailies all oppose rent
controls, but reporters -- particularly at the Daily News --
have been running a scorched-earth campaign against Bruno.
With seven weeks to go in the debate -- and no rational
discussion yet in sight -- it might be worth stepping back
for a minute to review the situation.

About half the city's two million apartments are now
regulated. The old "rent control" applied only to apartments
built before 1947. There are only about 70,000 of them left
Everything built after 1947 was supposed to remain
deregulated. In 1969, however, tenants in new buildings hit a
critical mass and demanded their apartments be regulated as
well. Mayor John Lindsay invented "rent stabilization," which
was supposed to be more lenient, allowing annual rent
increases. New construction was again exempted, but it only
took until 1974 to renege on that promise again. Since then
developers have assumed that anything built in New York will
eventually be regulated. Consequently, they put up only about
4000 5000 new apartments a year -- whereas in unregulated
cities such as Phoenix, Dallas and Houston, developers build
20,000 units a year. As a result, vacancy rates in these
cities often exceed 10 percent -- whereas vacancies haven't
been over five percent in New York since World War II.

True rent-controlled apartments as you may have noticed --
are as rare as Old Masters. Most of them are in the hands of
people who have been in continuous residence since 1969. (The
Lindsay law said that when rent controlled apartments were
vacated, they would bounce up into rent stabilization.) The
average income of a rent-controlled tenant is $12,408 -- but
that's more an indication of longevity than poverty. The
median age of a rent controlled tenant is 70. This sometimes
creates the impression that rent control was designed to
protect the elderly, but in fact only means that most tenants
have grown old in their apartments. My cousin was a census
taker on the Upper West Side in 1990 and said he encountered
whole buildings of elderly tenants living in huge, old
apartments -- sometimes closing off several of the rooms for
lack of use. All of them paid minuscule rents. Other rent-
controlled apartments have simply been handed down as family
heirlooms. Until recently, New York's most famous rent-
controlled resident was Mia Farrow, who rented an 11-room
apartment overlooking Central Park for under $2500. Most
people believe Farrow got the apartment by being a famous
movie star. In fact, she inherited it from her parents, who
were Old New Yorkers.

Rent-stabilized tenants as a group are much more typical.
According to the city's 1996 Housing and Vacancy Survey, the
median tenant had an income of $20,000, while the median
stabilized tenant had an income of $21,600. Tenants in pre-
1947 stabilized apartments (once rent controlled) had a
median income of $20,000, but tenants in postwar buildings
had a median of $30,000 -- the highest of any tenant group.
Renters in the private, non-regulated sector (about half the
market) had a median income of $28,000. Tenants in public
housing have the lowest income -- $12,600.

One thing that has become embarrassingly clear since Bruno
kicked off the discussion is that rent regulations do
virtually nothing for the poor. In March, the Rent
Stabilization Association (the landlords' group) issued a
study by the American Economics Group predicting the results
of deregulation. The study projected a 13.2 percent citywide
increase over the next five years, mainly the result of
upgrades by landlords who have long neglected their
buildings. (An earlier study by MIT, released in February,
predicted an immediate increase of only four percent -- about
$17 per apartment.) The increases would be distributed very
unevenly. Most severely affected would be the affluent areas
of Manhattan -- the Upper West Side, the Upper East Side,
Greenwich Village and the Financial District. In the most
heavily regulated area -- the Upper West Side rent would rise
50.9 percent.

Taking this figure and waving it in people's faces, the Daily
News ran a screaming frontpage headline, "Landlord study
shows that if controls are scrapped, rents will go SKY HIGH!"
Reporters interviewed tenants on the street, telling them
their rent was about to rise 50 percent. Naturally, most of
them said they'd soon be headed for New Jersey. What the News
forgot to ask was whether the interviewees were regulated.
Since their average rent was $1100, it appeared they were

Lost in the hysteria were the anticipated rent increases in a
few other city neighborhoods: Central Harlem, East Harlem,
Morningside Heights: 5.3 percent; Bedford-Stuyvesant,
Bushwick, East New York, Starrett City, Ocean
Hill/Brownsville, 1.8 percent; Crown Heights, East Flatbush,
Prospect Heights, 0.0 percent; Morrisania, Hunts Point,
Parkchester, Highbridge, South Concourse: 5.3 percent. The
Times put the whole matter a little more discreetly: "Studies
Suggest Tenants Would Be Hit the Hardest In Upscale

So nobody is really talking poor anymore. Instead, the focus
has shifted to the middle class. Deregulation, as Assembly
Speaker Silver puts it, will cause a "middle class exodus" to
the suburbs.

"Another potential consequence of decontrol is financial loss
to the city and state caused by families like mine who will
move to New Jersey or Connecticut in the event of a 50
percent or greater increase in our rents," proclaimed one
correspondent to the Times. "We raised two children in New
York and contribute to many charitable, social and community
organizations. Rent control made it possible to do this."
Another writer commented the same day: "[M]any desirable
people live here because they are protected by rent control
and rent stabilization."

Basically the argument has come down to this. There is an old-
time middle class in New York -- people who have been here at
least a decade that has become very adjusted to their cheap
rents. As one bank executive told Crain's New York Business:
I expected to live in rent stabilized apartments forever.
I've built my whole life around it. I bought a home in the
country, the whole bit." End rent regulations and this middle
class will depart for the suburbs, leaving the city much

Is this argument valid? Let's take a look. The premise is
that if rents are deregulated, landlords will raise their
rents so high that middle-class people will be forced out.
Having evicted these people, landlords will then rent these
same apartments to -- the poor?

Of course not. The real antagonist of New York's protected
middle class is not landlords or the poor but other middle-
class people who are willing to pay more in rents. If you're
renting a two-bedroom rent-stabilized apartment on the Upper
West Side for $584.17, your rival is not your landlord or
someone from East Harlem. It's another middle-class person
who is willing to pay $1000 for the same apartment but is
prevented from bidding by rent control.

Because their interest is less focused, these people often
have more difficulty in identifying themselves. However, they
are beginning to realize their predicament. In last week's
Times, one woman finally wrote:

"Where are the voices of all those who do not share the
benefits of rent control but who actually suffer from it? For
the past seven years my husband and I have been killing
ourselves to pay our exorbitant market rent for a small one-
bedroom apartment in order to stay in this city... By all
means, let's protect the truly deserving -- the poor and
elderly. But I know too many people who live in rent-
controlled apartments who also own country homes. One person
(whose apartment we tried to rent at the legal rate) moved to
Florida and now rents out his apartment, illegally, at the
market price, subsidizing his new life style. If ending rent
control would mean a fairer, less insane market, then it is a
just cause. If the housing situation does not improve, it
will be the new generation of middleclass New Yorkers who
will be forced to leave the city we love."

A couple weeks ago, I decided to take a look at the market
these people are facing. I bought some out-of-town papers and
compared apartment listings in different cities. Keep in mind
now, the median rent in New York, according to 1996 U.S.
Census figures, is $630, just about the same as it is in most
other cities. In Chicago, it's $590, in Los Angeles $690, in
San Francisco $650, in Dallas, Houston, and Atlanta between
$520 to $550.

The apartments advertised in other cities reflect this. In
the Chicago Tribune, the median rent advertised was $650. In
The Los Angeles Times, it was $720 (this included a healthy
market for rented single-family homes). In Philadelphia, it
was only $525, in Atlanta, Dallas and Houston, around $575.
Moreover, in city after city, the advertised rents followed a
distinctive pattern. They were all clustered right around the
median, with a long tail stretching toward the more expensive

So how about New York?

Are you ready for this? The median rent of the 2200
apartments advertised in The New York Times on April 13 was
$1700 -- almost three times the median. The most commonly
quoted rent was $2000 -- more than triple the citywide

What's going on? It's fairly simple. The one million
apartments that are now regulated never come on the market.
They are hoarded like family jewels, passed on to relatives
or friends, even left empty by people who have left town but
want to keep a pied-a-terre. (I knew one free-market
economist who moved to Las Vegas but kept his rent-controlled
West Side apartment because, as he said, he liked to attend
the opera.)

As a result, anyone looking for an apartment today gets
funneled into the unregulated sector -- newer buildings,
buildings with fewer than five units, the rented condos
where they will pay prices that are two and three times above
their real market value. In the end, even people with
regulated apartments end up prisoners of rent control. As
Tama Janowitz put it, they become slaves of New York because,
once they finally get their great deal, they know they can
never move again.

The ultimate victim, though, is the city itself. In 1965, 250
of the Fortune 500 had their national headquarters in New
York. Today the figure is 45 and still falling. Outside Wall
Street and Silicon Alley, the city's economy is dead in the
water. One major reason businesses flee New York is that they
can never find housing for new employees. Anyone moving to
New York has to start at the $2000 end of the market and work
their way back.

What the city needs is a four-year phase-out of rent
regulations with special provisions to subsidize the poor and
elderly who would be displaced by the transition. The city
could dismantle its half-billion-a-year housing bureaucracy
and concentrate on a few well-placed subsidies instead. The
city would once again become a vital, energizing place where
people could concentrate on their careers instead of worrying
about a place to live.

Would a few Old New Yorkers have to leave in the process?
Undoubtedly, yes. When Mia Farrow got caught in luxury
decontrol a few years ago, she decamped for her second home
in Connecticut, rather than pay the additional $6000-a-month
rent. But is her apartment vacant today? Is it occupied by
some one less "desirable?" If they're paying their own way,
they're certainly a lot more desirable by me. Was it New York
that betrayed Mia Farrow? Or was it Mia Farrow who betrayed
New York?