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How does rent regulation provide landlords a guaranteed return?

Posted by Mike Wolffs on March 25, 1997 at 00:19:41:

To Tenant Net

In your replies to several postings, you have stated that rent regulation, as
it currently exists, provides landlords with a guaranteed return. I would appreciate
it if you could explain the mechanism for this.

It is my observation that rent regulation is a lose/lose proposition for landlords.
In strong markets, it limits landlords upside return. In weak markets, it provides
no protection against falling rents (admittedly a fairly rare occurrence). I have
experienced both of these situation in my dealings with the NYC rental market. I rented
my current apartment at the height (depth?) of the recession. The apartment was sitting
empty, and the landlord had to cut the rent by over $100/month from the previous tenant in
order to rent it. Currently, based on my knowledge of rents of similar apartments in my
building, my apartment is at least $300/month below the current market rent.

The only mechanism I can see as providing a guaranteed return to landlords would be that the
regulations discourages vacancies, preventing large numbers existing apartments from
coming onto the market simultaneously and driving down market rents. In addition, it
prevents older, smaller building from being emptied, demolished, and replaced with larger buildings,
having more units. This also prevents apartments from coming onto the market. This helps tenants
who already have apartments that they want to keep. But it presents a huge barrier to people
looking to rent apartments, by keeping supply tight and market rents high.

I feel it is import to understand these issues for the following reasons:

- You seem to imply that there is an undercurrent of support from the rent regulation
from the real estate lobby. I consider this highly unlikely, and expect a complete,
unrelenting push to entirely eliminate all rent regulation. Any hints at cooperation
from the landlords are likely to be just part of a PR campaign to provide both
political cover and confusion as the clock ticks down to expiration.

- I also feel that the need of people looking to change apartments are not being addressed
at all by the current regulatory scheme. At some point in the near future, I would like to
find a new apartment, and current market situation is a major problem in that regard.

Your thought would be appreciated

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