Rent Decontrol: Study Finds Varied Impact

New York Times, May 14, 1997

NEW YORK -- A study commissioned by New York City has found that allowing rent increases once an apartment falls vacant, a policy recommended by Gov. George Pataki, would have a limited impact on the rent of most apartments during the next two years. But a few areas, including Manhattan's Upper West Side, would see rent increases as high as 30 percent, the study found.

The study, co-sponsored by the city's Rent Guidelines Board and by the Center for Real Estate and Urban Policy at the New York University School of Law, addresses the potential effect of vacancy decontrol, as the policy is known, over two years, and does not consider a longer term. The results are based on data from the city's official 1996 Housing and Vacancy Survey.

It predicts the tenants who would be most likely to leave their apartments in the next two years: those who are younger, single, or couples without children who live in apartments where the difference between the regulated and market-rate rents is smallest.

As expected, the study suggests that vacancy decontrol would have the greatest effect on rents in Manhattan, where market rates are highest. It predicted significant increases above 96th Street in Manhattan, averaging 24 percent, since market rents are much higher than regulated rents in those neighborhoods.

It also found that rents in Stuyvesant Town and Turtle Bay would rise an average of 14 percent. In Chelsea, Clinton and midtown, rents would rise an average of 23 percent upon becoming vacant.

"The results are limited to the short term," said Michael Schill, director of the NYU law school's real estate institute. "Over the long run, as people who currently enjoy the biggest rent discounts move out of their apartments, we can expect substantially larger increases."

Monday, Pataki proposed eliminating rent protections on apartments as they become vacant, a plan that would eventually end a half-century-old system that limits increases on 1.1 million apartments in the state, most of them in New York City.

Tenant advocates, including Democrats in Albany, oppose any plan that would lift rent regulations, arguing that vacancy decontrol would encourage landlords to harass tenants to make them move out. Landlords, backed by Republicans who have supported efforts to eliminate regulation quickly, criticized Pataki's proposal as too weak. Without some form of agreement, rent regulation is scheduled to expire June 16.

The study was conducted by Dr. Edgar O. Olsen, a professor of economics at the University of Virginia. It compared the rents of regulated apartments with the rents on similar market-rate units in the same neighborhoods.

"We commissioned this study in January, anticipating that the debate might come down to vacancy decontrol," said Douglas P. Hillstrom, executive director of the Rent Guidelines Board, the city agency that sets annual increases for rent-stabilized apartments. "We didn't have any idea that the report would be as timely as it's proven to be." It was completed Monday.

Across the city, the study said, the median increase would be $32 a month, or an average of 4 percent. The change would vary; many neighborhoods would see small increases or none at all, and some neighborhoods would see sizable increases in rents, the study said.

The study breaks down its figures by sections of boroughs taken from the Housing and Vacancy Survey. In Manhattan, the calculations show, rents would rise in Greenwich Village and the financial district by a monthly average of $131, or 12 percent, but would not change on the Lower East Side and in Chinatown. On the Upper West Side, the increases would average $293, or 30 percent, and on the Upper East Side, $108, or 11 percent.

Perhaps surprisingly, the increase in Manhattan above 96th Street would average $147, or 24 percent, a month.

Asked why the northern part of Manhattan would experience relatively high increases, Olsen said that in general the estimates for the smaller areas "are less reliable than for the city as a whole."

He added: "And this problem was especially severe in a few cases, such as Manhattan above 96th Street, because of the small number of unregulated units available to estimate market rents. In central Harlem, for example, there were only four unregulated buildings that were surveyed."

In greatly simplified terms, the study used data from previous Housing and Vacancy Surveys to predict which types of tenants would most likely vacate their apartments in the next two years. Data from the 1996 survey were then used to estimate what the market rate rent for those newly vacated apartments would become if they were decontrolled.

The tendency of younger tenants who have lived briefly in their apartments to be more likely to move skews the effect on rents downward, Olsen said. "The regulated units that come onto the market in the next two years will tend to be the units with the lowest difference between the controlled rent and the market rent," he said.

In Brooklyn, the projected increases per month ranged from $59, or 10 percent, in southern Crown Heights, and $38, or 7 percent, in Sheepshead Bay, Gravesend, Flatlands and Canarsie, to no increase for sections like East New York, Brownsville, Williamsburg and Greenpoint. Flatbush would experience an average increase of $13, or 2 percent, the study said, while, surprisingly, apartments in Brooklyn Heights, Fort Greene, Park Slope, and Carroll Gardens would see no increases on average.

Asked to explain that finding, Schill said Brooklyn has a large number of areas in which the average stabilized rent is close to market rates.

"The average stabilized rent in Brooklyn Heights is 90 percent of the unregulated market rent, which is fairly close," he said. "And in Park Slope, it's even closer, 96 percent of the unregulated rent."

As expected, landlord and tenant advocates took widely divergent views on the study.

"The independent study by the Rent Guidelines Board and NYU answers the first big lie that has always been trotted out by tenant leaders, that rents will skyrocket in every part of the city," said Joseph Strasburg, president of the Rent Stabilization Association, the city's largest landlord organization. "What this study confirms is that most of the benefits of rent regulation are primarily in Manhattan."

Michael McKee, the rent law campaign manager for the New York State Tenants and Neighbors Coalition, referred to the only previous period of vacancy decontrol in New York, from 1971 to 1974, and said: "It was really devastating. There was an enormous amount of evictions and eviction attempts."

"This study is predicated on the assumption that no one will move, except voluntarily," McKee continued. "There will be a replay of history and landlords will go wild."

Copyright 1997 The New York Times Company