End of Rent Control Could Freeze the Market

New York Times, June 13, 1997
NEW YORK -- Living with her aunt in a rent-stabilized apartment in Crown Heights, Brooklyn, has become just about untenable for Sheria McFadden, 29. She has a new baby and a job at City College in Harlem, more than an hour's commute away by subway. She needs to move.

Under the Republican proposal to remove rent regulations from apartments when they become vacant, it would be impossible for Ms. McFadden to find a rent-stabilized home if she moved. So she is unpersuaded when she hears Gov. George Pataki and other advocates of the plan known as vacancy decontrol say repeatedly that it would protect 99 percent of tenants.

"How is he protecting me?" she asked. "By forcing me to live here for the rest of my life?"

The Republican plan would let renters remain under rent stabilization or rent control as long as they stay in their apartments. But the rents would rise to any level the market would bear when tenants move, die or are evicted. The Republicans would also remove rent ceilings for households earning $175,000 a year or more under a plan called luxury decontrol.

It is true that under that plan, 99 percent of people living under rent regulation would continue to do so, but with one important condition: To keep their rent ceilings, they could not move. No one would ever again find a vacant rent-stabilized apartment, and that, renters say, is why the Pataki plan has evoked such ire.

New Yorkers, who have taken rent regulation for granted for generations, are a fairly transient lot. In a recent New York Times poll of New York City residents, half of all renters said they had moved in the last five years, and most likely a few hundred thousand of them are in the market for a new home right now.

And it has dawned on many people that under vacancy decontrol, they would have to choose between staying put and taking their chances in an unregulated market.

Young adults would think twice before leaving their family homes. Two people living alone could be dissuaded from looking for a larger place to live together. Couples would have to consider the difficulty of moving when making family planning decisions.

Similar effects might also be seen from luxury decontrol: A woman might not be so eager to have her boyfriend move into her rent-stabilized unit if their combined income pushed them over the $175,000 limit and sent her rent soaring.

Critics of the current system of rent regulation argue that it ossifies the market by giving people incentives to stay where they are, leading to poor uses of space and exacerbating the housing shortage.

For instance, an elderly person whose spouse has died and whose children have grown and moved away may be unwilling to give up a three-bedroom apartment if the rent is so low that it is not worthwhile to move to a smaller unit.

Paradoxically, many housing experts, including some who support deregulation, say that vacancy decontrol could make the market rigidity much worse.

"Vacancy decontrol would give people fewer options, so they would stay in their units longer," said Elizabeth Roistacher, an economist at Queens College and the City University Graduate Center who has studied the city's housing market. "The turnover rate would fall. The number of vacancies at any one time would actually drop. And, ironically, that would make the shortage worse, and drive up rents."

In the long run, experts say, as more of the market became deregulated, such symptoms would ease, but the first several years could be difficult. Real-estate experts also point out that there are dozens of neighborhoods, most outside Manhattan, in which demand is so low that landlords will probably not be able to raise rents even if they are allowed to.

The essence of the governor's plan, indeed the sole reason for changing the current law, is to gradually deregulate the state's 1.2 million rent-stabilized or rent-controlled units, nearly all of them in New York City and its suburbs. Yet Pataki avoids saying so, and will not say the words "vacancy decontrol."

When asked this week if his plan might pose a problem for anyone who needed to move, the governor said, "I'm not going to talk about everybody, the possible thoughts of every individual," and quickly turned to another question.

Advocates of decontrol say it would encourage new housing construction, easing the shortage and, in the long run, driving down rents, and that it would encourage renovations. Skeptics counter that builders cite a number of other factors, including a labyrinthine city approval process, that hinder new construction.

They also note that developers have been free to build unregulated housing for more than two decades, but that this freedom has not resulted in a building boom. In fact, most builders have voluntarily submitted to rent regulation in return for tax breaks.

Critics of the governor's plan also note that owners of unregulated apartments are not required to give their tenants leases, that they can raise rents at any time, and that they can evict renters at will. Supporters counter that about one third of the city's rental market is already unregulated, but that there has not been an epidemic of such abuses.

For Ms. McFadden, as for many others, the sum of the changes Pataki would make is a feeling of being trapped.

"I can't afford more than $500 a month, and there's hardly any one-bedrooms that cheap in Harlem," she said. "Even if I did find something, without a lease, without any protections, it would be like walking on the edge. You're not secure, not stable. How can you live like that and raise a child?"