Briefing Book:
Purposes, Accomplishments & Limits of Rent Regulation

A Briefing Book


Chapter One


Rent regulation helps to make housing more affordable and New
York City more livable. The system is not an artifact of the
city's past but a key policy for our collective future. It is
aimed at minimizing distortional market effects -- such as
profiteering, lack of affordability, and the erosion of tenant
rights -- that are created by a housing shortage. Rent regulation
is, in fact, an essential municipal service that continues to
promote the public good despite problems of implementation and a
generally negative public image. To this end, rent regulation
seeks to fulfill three objectives:

(1)  moderating rents to promote tenant affordability while
     ensuring a fair return for owners;

(2)  providing eviction controls; and

(3)  setting guidelines for maintenance of services that affect
     housing conditions.

Listed below are brief analyses of these purposes and the extent
to which they are currently being achieved.

Moderation of Rents

The primary goal of rent regulation is to keep rent levels
"reasonable." But reasonableness is subject to interpretation;
thus the large controversy surrounding the rent-setting aspect of
the system.

Rent regulation takes a system-wide or market approach to
achieving affordability. Unlike programs such as public or
Section 8 housing, which target needy households, rent regulation
creates ground rules for all players -- not exclusively for the
most needy. It protects all persons (renters) who must rely on
other persons (owners) to fulfill their basic human need for
shelter. It attempts to minimize market failure so that more
households do not fall into a need for subsidy. Efforts by the
real estate lobby to describe rent regulation as a "subsidy"
(with attendant debate about who should get that subsidy) are
therefore misplaced.

The rent regulation system serves to stabilize rental prices in a
market plagued by shortage. It is not the sole solution to the
housing crisis, but it is a vital strategy designed to keep
housing, a basic human need, within renters' financial reach.

Since moderating rent levels involves balancing the interests of
tenants and owners, regulation has promoted affordability only to
a limited extent. However, the system has made New York City's
rental housing more affordable than it would be in the absence of
regulation. Though somewhat dated, information prepared by the
Rent Stabilization Association illustrates that New York's
tenants, when compared to tenants in other cities, are being
protected by regulation [Table 1].

The data also indicate that the rent-to-income ratio for low-
income renters is high - and that tenants with the lowest incomes
have the highest rent burden. But the ratio is somewhat lower for
New Yorkers living in rent-regulated units. This comparison
indicates that regulation makes rents more affordable.

                             Table 1
                 Percent of Income Paid for Rent

              Renters in Other    Unregulated       Regulated
Income           High-Cost            NYC              NYC
Level              Cities           Renters          Renters

$ 5,000- 9,999       78%              64%               57%
$10,000-14,999       49%              44%               39%
$15,000-19,999       38%              35%               29%
$20,000-24,999       31%              28%               26%
$25,000-29,999       26%              25%               22%
$30,000-34,999       25%              20%               18%
$35,000-39,999       23%              19%               17%
$40,000-44,999       19%              18%               16%
$45,000-49,999       18%              17%               16%
$50,000-59,999       18%              15%               14%
$60,000-74,999       15%              13%               12%
$75,000-99,999       11%              12%               10%
$100,000 and up      09%              12%               10%

Source: Rent Stabilization Association. May 1992. Viability of
the Rental Industry and the Future of New York: With
Recommendations for Action. A submission to the NYC Rent
Guidelines Board relative to Order No. 24., pg. 24. This table
was based on the 1987 NYC HVS and the 1987 American Housing

Despite this measure of protection, a contrary trend with regard
to housing affordability has taken place. The actual median
income of renters has dropped when compared to the income needed
to pay median rents. Thus, the purchase power of tenants has
eroded dramatically, falling by 31.6 percent over the past 13
years [Table 2].

As incomes decline, New York City's tenants need the protection
of regulations more than ever to promote affordability. Though
rarely considered in the debate, eviction protection and
maintenance guarantees are also crucial.

Eviction Controls

Another aspect of seeking equilibrium between landlords and
tenants in a market plagued by shortage is to provide a level of
security for renters. Under rent regulation, tenants can only be
evicted for "good cause" such as failure to pay rent or creating
a nuisance. Without protection against eviction, rent regulation
would be rendered useless.

In the absence of eviction controls, the affordability objectives
of rent regulation may be undermined by property owners who use
evictions as a means to raise rents. Such controls are also
important on their own merits, in that tenants have a right to a
modicum of security. Eviction controls protect tenants who assert
the rights afforded them by the rent regulation laws and other

In simple terms, if housing is affordable but a tenant may be
evicted upon a landlord's whim, then the effectiveness of the
rent regulation system is diminished to the point of uselessness.
Thus, rent regulation should be more accurately described as rent
and eviction regulation.

                             Table 2
                  Index of Renter Affordability
                    New York City, 1978-1991
                         Current Dollars

                        1978     1981     1984     1987     1991

Median Asking Rent
for Vacant
Available Apts.        $ 185    $ 240    $ 315    $ 450    $ 600

Household Income
Needed to Afford
Median Vacant Apt.
at 30% of income       7,400    9,600   12,600   18,000   24,000

Median Renter
Household Income       8,500   10,500   12,600   16,000   20,000

Index of Renter
Affordability         114.9%   109.4%   100.0%    88.9%    83.3%

Source: Worlds Apart: Housing Race/Ethnicity and Income in New
York City 1978-1987, pg. 54., and NYC HVS 1991, Series IA, Table
9 and Series IIA. Table 31

Maintenance of Services

An integral part of rent regulation is a guarantee of services:
insurance against maintenance reductions aimed at recouping
profits "lost" through regulation. These provisions attempt to
insure that the level of housing quality does not decline after
regulation is adopted. Kenneth Barr explains:

     In addition to regulating rents, another important
     purpose of rent control is to require adequate
     maintenance. As one New Jersey court noted: "Rent
     control would be self-defeating were landlords
     permitted to reduce maintenance expenditures and
     allow buildings to deteriorate because their
     profits have been regulated downward."(1) If
     reductions in services and maintenance are not
     accompanied by rent decreases, an increase in the
     price of remaining services has been

Rent regulated tenants are entitled to a particular service if
that service was provided on the legal "base date" - the date the
apartment first became subject to regulation. Any repair needed
to correct a violation of a local housing code is also considered
a service.(3) In New York City and the suburban counties, a
landlord's failure to provide services can result in a rent
reduction and a rent freeze until the service is restored.(4)
These service provisions within the rent regulation statutes help
to provide a reasonable quality of housing for tenants.

The purposes of rent and eviction regulation laws are to moderate
rent levels, insure housing quality through maintenance
standards, and protect tenants from arbitrary or retaliatory
eviction. Chapter 3 analyzes the effectiveness of rent regulation
in New York City in meeting these goals.

The Limits of Rent Regulation

While the purposes described above are worthy and vital, there
are limits to what rent regulation can achieve. These include the

o    Rent Regulation Does Not Increase the Housing Supply.

Rent regulation cannot address a key housing supply issue:
production. Regulation does not produce a single unit of much-
needed housing. Rather, it sets ground rules for the landlord-
tenant relationship in existing housing. It can work in concert
with housing production programs but should not be a substitute
for the rehabilitation or new construction of rental units.

o    Rent Regulation Does Not Assure Affordability.

Because rent regulation allows regular rent increases, it does
not assure affordability. In the words of Peter Marcuse, rent
regulation "can hold the price of housing down to some extent,
and prevent some of the grossest distortions: it can smooth out
the housing market."(5) But it does not ensure that the rent
burden of any given household is within its means. Rent
regulation generally does nothing to hold rents down to
affordable levels, nor to increase tenant incomes to meet the
burden of increasing rents.

o    Rent Regulations Are Not a Complete Housing Strategy.

Rent regulation may compliment other policy initiatives but is
not a substitute for other housing strategies. For example,
tenants with Section 8 rent subsidies may locate housing within
their price limits more easily in a regulated market than in an
unregulated one. Regulation should not replace such initiatives
but instead should work in concert with them. As Peter Marcuse
has put it: "[Rent regulation] functions best as part of an
overall and coordinated attack on the housing problem, not as a
substitute for such an attack."(6)

In summary, rent regulation can promote market-wide
affordability, protect tenants against unfair eviction, and
assure the provision of necessary housing services. However, rent
regulation cannot create more housing, cannot address the income
and affordability needs of individual households, and cannot
substitute for a comprehensive housing strategy -- although it is
a crucial component of such a strategy.

Notes to Chapter 1

1.   Orange Taxpayers Council, Inc. v. City of Orange, 169 N.J.
     Super. 288,303,404 A.2d 1186, 1193 (App. Div. 1979, aff'd,
     83 N.J. 246, 416 A. 2d 353 (1980). From Baar.

2.   Baar, Kenneth K, "Guidelines for Drafting Rent Control Laws:
     Lessons of a Decade," Rutgers Law Review, Vol. 35, No. 4,
     Summer 1983, pg. 830.

3.   In 1975, a landmark New York State law, Section 235-b of the
     Real Property Law, established a nexus between the quality
     of housing provided by the landlord and the tenant's
     obligation to pay rent. Under the "warranty of
     habitability," all residential rental agreements, whether
     written or oral (not only rent regulated ones) guarantee
     that the landlord is responsible for maintaining apartments
     and public areas of apartment buildings in a habitable state
     and for maintaining agreed-upon services. Now, regardless of
     rent regulation status, tenants are eligible to seek repairs
     and rent abatements for violation of this warranty. However,
     rent regulated tenants are given a greater ability to
     enforce habitability requirements through the rent
     regulation system.

4.   Community Training and Resource Center Fact Sheet, "Rent
     Reduction for Lack of Services," 1991.

5.   Marcuse, Peter, 1986. The Uses and Limits of Rent Regulation,
     pg. 153. Commissioned by the New York State Division of
     Housing and Community Renewal, which suppressed the report.
     Community Training and Resource Center obtained a copy from
     the author and published it.

6.   Ibid, pg. 153.