Asymmetrical Information

I think that should be "absurban."

More like "adsuburban," if you want to go for the Latin pun, then.

Or just adsuburb, though the participial phrase seems like the wrong part of speech.

I'm an agnostic on the rent control issue, as on many things. I know well the theory that explains why not having it will cause much housing. Very sound.

I also spent a year living in Boston, post-rent control, and the only way I could afford it was, in essence, charity. The rents exploded, and I've not noticed a recovery due to the subsequent predicted building of housing.

I can't begin to analyze all the factors, of course. I simply know that NYC apartments are expensive, at present, and Boston apartments are impossible, last I looked.

I do no pretend to be scientific in my research; I've just lived in each place.

As usual, I think it's not nearly as simple as being "for or against" rent control.

i also care a lot more about where I might find a place I can afford to live than I do the adverb, much as I love precision of language.

Fair enough, you're entitled to your experience. There is, however, a massive body of research done on the subject. Krugman had a classic article a couple of years ago on the subject. The evidence really is overwhelming.

Note that if you lived in Boston shortly after rent control was ended (it's a bit unclear to me, but it seems that you lived there for a year) you would be at the worst possible time-- the combination of the Internet boom plus being too early for enough new housing to have entered the market. (Rent control was lifted in Boston in 1997, IIRC.)

In any case, rent control is not just about the price of an apartment-- it also affect whether one can find an apartment, and how well the landlord will act. Also, an absence of rent control, but the presence of really nasty zoning laws that prevent new housing construction don't help, and can keep rents high and supply low.

Here's the Krugman column. One of his best works for the NYT, written before his hectic schedule and partisan instincts got to him.

To paraphrase SURFIN' BIRD
(Frazier - White - Harris - Wilson)
THE TRASHMEN (GARRETT 4002, 1963)

A-birb birb birb, the birb is the worb.

The best rent control is a 10% vacancy rate.

Okay really. At the bottom of that article, it mentioned Boston lifted its rent control policies. And is Boston a cheaper place to live because of it? No. Would releasing rent controls in New York do anything but force out the poor and give the landlords a much unneeded revenue spike? Of course not.

Supply and demand. Unless you actually think New York can or should become even denser, you have to come to terms with the fact that demand will continue to outstrip supply. Even if New York's housing capacity doubled, worsening its crime, air pollution problems, and utilities problems, supply will still be a tiny fraction of demand. People want to live in New York. As long as more people desire to live in New York than New York has housing, prices will naturally go up and up and up.

When prices go up, inflation goes up with it. And New York's cost of living will be even more rediculous. This isn't rocket science.

One of the problems with rent control is that whenever it is present, landlords/owners refuse to improve the property. The reason is because of the fear that once those improvements are made, then the cost of maintaining improvements will exceed the amount of rent that can be charged. Why? Because once a property containing rent control units has been improved, the improvements cannot decline or the person on rent control must receive a proportionate reduction in rent.

As a result, you have elevator men sitting in elevators that don't need elevator men. You have tenants that would love to improve common areas but won't.

Furthermore, rent control doesn't benefit the people it is supposed to benefit. The overwhelming majority of New Yorkers don't have rent control -- therefore they have salaries that reflect higher rent. But do you think the guys on rent control are telling their employers, "oh I don't need this big paycheck, I'm on rent control." Of course not, they're taking the money and buying a weekend house upstate.

And don't even get me started on the "brokers" who specialize in placing buyers in rent control apartments.

As far as I'm concerned no one has a right to live in a place they can't afford simply because they want to be a snob by refusing to live in a "lesser" (and cheaper) city.

Wow, I didn't know anyone would actually try to seriously defend rent control anymore.

New York at least taught most of the rest of the country the folly of rent control.

They also serve as an abject lesson in how nearly impossible it is to get rid of a lousy policy like this once it's in place.

Toward the end of the article, W. Tucker makes a mistake that irritates me. He refers to the situation in a rent-controlled city as having _negative_ feedback. This is wrong. The situation is one where the output of the system reinforces the input, thereby driving the output more toward the extreme. This is _positive_ feedback. Of course you could say it's negative in the sense that it's bad, but if that's what you mean then that's what you should say.

Den Beste makes the same mistake all the time.

fpt

New York and Boston have other issues -- particularly, New York's other regulatory schemes mean there's a roughly 20-year lag between market signal and response, because that's how long it takes to get a real estate development approved, on average, in Manhattan. I imagine Boston's scheme is similarly sclerotic.

Nonetheless, it will eventually help, by changing the composition of new construction as well as the amount. Since 1970, the only buildings that have been constructed are luxury-class. The only ones. Why? Landlords are justifiably afraid that if they build middle- or low-income housing, the city will take their property away. That's why the supply of "affordable housing" continues to dwindle, and will as long as rent control is in place.

Ken, you seem to be under the impression that there's some sort of civil right to live in Manhattan. There's perfectly affordable housing in Brooklyn or Queens -- why should we force landlords to provide Manhattan apartments below cost? Personally, I wouldn't pay the rents required to live in Manhattan, but that doesn't mean I think someone else should pay them for me.

Would it be possible to phase out rent controls without the accompanying price spike but simply repealing the laws on new construction? Then, if there's a shortage of housing driving prices up, builders are free to step into the breach and provide new units without being saddled with the rent control regulations that you argue discourage new building.

But existing apartments are left under the old rules, so their rents don't suddenly spike and kick out the peoiple who currently rely on the rent control? And then, in the future when enough new apartments have some online, the exisitng rent control regualtions can be completely abolished.

I know little about the issue, but it seems like this is a possible compromise solution to getting rid of the laws by removing their major negative impact (no new building), while continuing any current value provided (low rent apartments.) Why wouldn't this work?

New construction is immune now. It doesn't matter; landlords perceive, correctly, that there is a risk their property will be 'nationalized' (new construction was uncontrolled after WWII, so the City Council slapped a control order on it all in 1970), so they only build luxury apartments, which don't risk getting controlled.

as with pretty much everything, if you just got rid of bureaucrats and democrats, the problem would fix itself...

for the disbelievers up above: regardless of planning approval and such: it takes a long time to finance and build apartments, period

in toronto, a condo building will go on sale with delivery in about 3 years, due to marketing and construction time (you need to sell enough of the building before you build it). so even if you could get instantaneous approval and you already had the land (complete bs, as you should know) it'll take 3 years before things come on the market, and some appreciable time for that to filter out (6 months to a year minimum)

now add in planning time and acquisition time... talking about 10 years even in a relatively low regulation area (need plans, and funding, and neighbourhood approval...)

so mr. farber, you'd obviously not have seen the benefitsfrom rent decontrol.. but you will in a few years... (in new york's case, the market would likely free up much faster, as the inhibitions to moving would be eliminated as people were being charged markets rents they couldn't afford... things would change with decent speed.. 3-5 years, with real benefits after new construction)

as for phased in... the point is that people in controlled apartments SHOULD be kicked out! they've been screwing over everyone else through immoral use of government power... don't let the door hit you on the way out

personally think that people should have to reimburse the gov't for their rent subsidy over the control period, the welfare bastards... but taht's just cause i HATE welfare queens, especially ones that live in the 50s and 60s (west or east)

Regarding Megan's point about the reasonable expectation of retroactive controls, the NYT recently described a great example. The piece is about landlords' struggles to exit the Mitchell-Lama program for affordable housing, despite the fact that the option for such exits were a big part of the program in the first place and the procedures for such exits are bing followed scrupulously.

Regarding Megan's point about the reasonable expectation of retroactive controls, the NYT recently described a great example. The piece is about landlords' struggles to exit the Mitchell-Lama program for affordable housing, despite the fact that the option for such exits were a big part of the program in the first place and the procedures for such exits are bing followed scrupulously.

Decontrolling only new construction is a problem for another reason. Lots of people who might move into the new buildings won't do so because they're paying below-market rates for their current apartments. Some people who pay $2000/mo, the market rate, for an apartment will be willing to pay $2500, say, for a nicer place. Bu if they're now paying a controlled rent of $1500 they are much less likely to be willing to go to $2500. So the existence of rent control hurts the market for uncontrolled apartments as well.

Regarding Megan's point about the reasonable expectation of retroactive controls, the NYT recently described a great example. The piece is about landlords' struggles to exit the Mitchell-Lama program for affordable housing, despite the fact that the option for such exits were a big part of the program in the first place and the procedures for such exits are bing followed scrupulously.

I have no idea why my comment was posted twice. Obviously the hobgoblins of the Internet deemed it worthy of repetition.

I seem to recall that one provision in NYC's byzantine rent control system is that apartments renting for more than $2500/month are not covered. In Manhattan, I think that's now the rental for a decent 1 bedroom (or an undecent 2 bedroom) apartment.

So it may be that we've inflated our way out of the worst of the rent control problem.

I did think of one way out of the rent control maze, which I'm sure Mayor Bloomberg would be in favor of. Since rent control proponents are always talking about the poor, we should require all NYC renters to list their monthly rent on their income tax forms. If they make more than a certain amount, then the city would charge them the difference between their actual rent and what a realistic rent would be. This wouldn't result in new construction, but might encourage some people to move out of 3 bedroom Park Avenue apartments they have no need of.

I agree, PJ. If they can require a taxpayer to report income from a scholarship, unemployment compensation or meals he gets free at work, why can't the enormous difference between rent-controlled rent and a market rent be imputed to the taxpayer?

Perhaps Congress could lend a hand by including the difference between FMV rent and rent controlled rent in taxable income. (Since NYC has its own income tax, the city would get some add'l tax revenue, too.)

Of course, there would still be some net benefit to those in rent controlled appartments (since the combined federal, state, and city income tax rates would not equal 100%). Still, about 50% of the benefit would be taxed away and, my experiance is people sometimes respond to taxes in a manner that is out of proportion to the cost of the tax.

I am surprised no one pointed out how few people who are actually, well, poor, benefit from rent control. Finding a rent controlled apartment in Manhattan requires skillful negotiation of an essentially underground market composed of shady brokers, in-the-know friends and relatives, off-the-books sublets, etc. Keeping one requires stable income and an ability to manipulate the City rent control regulations and bureaucracy quite correctly described as byzantine in a previous post. Few truly poor people, the kind who were ill educated at the City's public schools and work minimum wage jobs, possess these sorts of skills. So rent control benefits not them but a moderately well educated middle class of paper pushers, schoolteachers, social workers, civil servants, and the like who could very well afford to live in the dull outer boroughs but instead get to live in fashionable Manhattan at below market rents.

I noticed that there seems to be some confusion between rent-control and rest-stabilization. Most of what's being discussed is rent stabilization, and yet the original article which sparked the debate was all about rent-control. There are not that many people with rent controlled appartments in NYC anymore. Most of us are in stabilized housing.

What's the difference? Rent control applied to everyone. Rent control is grandfathered. Rent control only raises the rent approximately two percentage points a year regardless of economic factors. Most people who obtained their rent-controlled apartments in early 1970s or before are paying pre-Carter rates and will never reach $2,000 of rent per month.

Rent-Stabilization was only established in the 1970s after rent-control was abollished. Rent stabilization allows for market rent, allows for a percentage increased based on market factors (Last time it was 7% for a two year lease). It confirms that housing will be maintained and gives both landloards and tenants rights.

I got my rent-stabalized apartment in Manhattan seven years ago. At the time, they had to DROP the rent as an incentive to move in. At the height of the market in New York I was paying probably $1,000 below market value. At this point, I'm paying $400 below market value. As soon as I move out, they can raise the rent on the apartment back up to market value.

Since I have a decent relationship with my landload I know they'd rather have the stability of someone like me than constantly having to worry about a new tenant every year or so. There was a period of time when I was thinking of moving to Brooklyn and they offered me incentives, even with my below market rent, just so I would stay.

So do I mind having a little protection against my landlord kicking me out because a dot-com millionaire has $5,000 per month to pay for an apartment and no time to haggle? Not really. The apartment wouldn't be rent stabilized if the landlord hadn't taken government subsidies for the renovations to make the building attractive to people like me in the first place. Obviously my landloard doesn't mind, or he would have made a deal with me a while ago to move out and gotten himself someone richer to pay the market rent. Within four years my husband and I will hit the $2,000 mark in rent and the apartment will be destablized anyway, so I can't say my heart bleeds for him. I don't think his heart bleeds for him either.

So while everyone can rally against rent-control, and you won't get an argument from me, I think of stabilization differently.

By the way, whenever someone starts to talk about getting rid of rent controls in New York, they mean stabilization, not actual rent control. Getting rid of rent control would actually take an act by the state legislature, which won't happen.

Since there is supposed to be a public benefit from rent control, the imposing authority should pay the landlord the difference between the controlled rent and the free market rent. The public should pay for pubic benefits.

I have a friend in NYC who "inherited" a rent-controlled apartment from her cousin. This is a two bedroom apartment on the Upper West Side for $1450. So she rented out one of the bedrooms at market price, for $1200, and he pays $250 for his share. Oh, and he has to pay the doormen $400 at Christmas to keep the situation hush hush. So the doormen are making $400/year, and my friend is making ($1200-$250)x12 -$400 or $11000 from rent-control. Of course someone is going to make money when supply is greater than demand, but in the best case, it would be the landlords, which would give incentive to increase the housing supply.

Kate: Other than what it is called, I don't see how "rent control" differs from "rent stabilization". You say you are currently paying $400 less than market value for your apartment (and at one time were paying $1,000 less than market). I assume these are monthly numbers -- so you are saving $4,800 a year. Not bad. I can see why you'd like the arrangement. And, I can see why a landlord might not be too upset with the arrangement.

On the other hand, can you see how the same landlord might be unwilling to invest in a NEW building at these artificially low rates? (Even if the new building were rented out at the current market rate, the landlord would know that, over time, the average rent would be well bellow market.) Bottom line, laws that interfere with the market's ability to set rental rates will distort the amount of available apartments. Absent rent stabilization, the amount you are paying now might equal the "real" market -- and no one would expect your rent to climb to $2,000 a month in the next few years.

as with pretty much everything, if you just got rid of bureaucrats and democrats, the problem would fix itself...

I beg to differ: the GOP went along for the ride at the creation.

If you'd like a modern-day version of what "moving day" is like, go to Montreal on July 1.

I have added a link on Rent Controls in Canada that paints a very different picture than that article.

The big question is, what do you define as Rent Controls? There are so many variations of the laws that it is hard to make judgements.

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