Throughout this essay, I will expound on the background of Rent Control in New York City; the debate/controversy over it in New York City, including historical and present opposition to as well as historical and present support for it. In addition, I will discuss opposition and support for it in other U.S. cities; my opinion of the opposition as well as support for Rent Control.
What is Rent Control? It is a program administered by the New York City Office of Rent Administration, which is responsible for regulating rents in about 1.2 million privately owned rental units statewide under four laws: the Emergency Housing Rent Control Law, the Local Emergency Tenant Control Act, the Rent Stabilization Law, and the Emergency Tenants Protection Act (ETPA). The preceding four laws are the foundation of the rent regulation systems commonly known as “Rent Control” and rent stabilization (New York State Division of Housing and Community Renewal, 2006). However, the focus of this essay will be centered on New York City because of the limited scope of this paper luxury homes in miami beach.
Rent Control usually applies to residential buildings constructed before February 1947 in 55 municipalities (including New York City, Albany, Buffalo and various cities, towns, and villages in Albany, Erie, Nassau, Rensselaer, Schenectady and Westchester counties), that have not declared an end to the postwar rental housing emergency (New York State Division of Housing and Community Renewal, 2006). The rules are as follows: for an apartment to be rent controlled, the tenant (or his/her parents) must have been living in that apartment continuously since before July 1, 1971. If a rent controlled apartment should become vacant, it will either become rent stabilized, or, if it is in a building with fewer than six units, it is generally removed from regulation. In addition, an apartment in a one- or two-family house without commercial units must have a tenant in continuous occupancy since March 31, 1953 in order for it to be legally rent controlled. Once it is vacated after March 31, 1953, it is no longer subject to regulation. Previously controlled apartments are usually decontrolled on various other grounds (New York State Division of Housing and Community Renewal, 2006).
Rent Control restricts the right of an owner to evict tenants and limits the rent an owner may charge for an apartment. It also requires the owner to provide essential services and equipment. For example, the owner must provide and maintain all services furnished or required to be furnished on the base date of May 1, 1950 for rent controlled apartments outside of NYC, and March 1, 1943 for those within NYC. Moreover, modifications required and essential services may have been ordered thereafter, with an appropriate adjustment in rent. The essential services may include, but are not limited to: repairs; maintenance; the furnishing of light; heat; hot and cold water; elevator service; kitchen ; bath and laundry facilities and privileges; janitor service, and removal of refuse (New York State Division of Housing and Community Renewal, 2006).
The New York State Division of Housing and Community Renewal (DHCR), outside NYC, determines maximum allowable rates of rent increases under the aforementioned regulation. Periodically, owners may apply for these increases. On the other hand, the said regulation operates under the Maximum Base Rent (MBR) system in NYC. MBR allows a maximum base rent to be established for each apartment which is adjusted every two years to reflect changes in operating costs. Furthermore, owners who certify that they are providing essential services and have removed violations may raise rents by up to 7.5% each year until the MBR limit is reached (New York State Division of Housing and Community Renewal, 2006). In turn, tenants may challenge the increase on the grounds that the building has violations or the owner’s expenses do not warrant an increase. They may do so by filing Challenge Re: Maximum Base Rent Order (DHCR Form RA-94 MBR). Owners may challenge Maximum Base Rent Orders by filing DHCR Form RA-94 MBR, also (New York State Division of Housing and Community Renewal, 2006).
“Rents may be increased in other ways: (1) if the owner increases services or substantially rehabilitates a building or installs a major capital improvement; (2) hardship; (3) increased labor costs; (4) in NYC, increased fuel costs (passalongs)” (New York State Division of Housing and Community Renewal, 2006). In turn, DHCR may decrease rents in certain cases: substantial, uncorrected code violations and reductions in services including facilities, space or equipment, or ancillary services (New York State Division of Housing and Community Renewal, 2006).
The preceding paragraphs depict the background and the law of rent controlled housing which contribute to the debate/controversy of it. The main argument of the opposition to the regulation is that it prevents developers from building new housing as illustrated in the following quote,
“It is hard to find any economist who supports rent restraints. Price controls, even if laboriously tweaked, inevitably produce inefficiencies, reduce supply and cause bad side-effects. Black markets and bribery thrive. Building maintenance is often ignored. Landlords and tenants find themselves in poisonous relationships, since they are linked by law rather than by voluntarily renewable contracts. Unscrupulous property owners go to dangerous lengths to evict tenants in order to get higher-paying replacements; as a result, tenant-protection laws have been enacted that make it almost impossible to evict even a scoundrel” (Economist.com, 2003, para 10).
In turn, the main argument of the support for the law is that it creates stability as illustrated by the following quote,
“Now, in principle I think rent control is great– people shouldn’t be driven out of their homes because the neighborhood gets richer and they don’t. Landlords getting the profits from increased real estate values is a bit of a scam to begin with since they are benefitting [sic] from social progress in a neighborhood, not their own efforts” (Newman, 2003, para 1).
If we describe supporters of price control on the renting of residential housing as good and opponents of it as bad…. Do we call greedy, opportunistic and hypocritical flip floppers (“do as I say but don’t do as I do” on Rent Control) – ugly? So is the case of Robert Nozick, author of the 1974 National Book Award winner: “Anarchy, State and Utopia” which solidified the Harvard philosophy professor’s reputation as the intellectual hero of libertarians. Dr. Nozick preaches the supremacy of free markets being the key to a successful society and capitalism should be given a free hand to operate without external interference such as the economic interventionism of contemporary liberals (Tucker, 2003). However, like his conservative cousins (T.V. evangelists) – Jim Baker and Jimmy Swaggart: preachers of the ugliness of sin – Dr. Nozick doesn’t always practice what he preaches…. Then, again, he is a living testament to the adage: “there’s no atheist in a foxhole because everyone prays to God when their life (self-interest) is on the line.”
Case in point: Professor Nozick – an eminent anti-price control advocate successfully used price control laws on the renting of residential housing in Cambridge, Massachusetts against his landlord, the renowned classical scholar and author of “Love Story” – Eric Segal. Eric Segal was forced to settle the lawsuit, in order, to get Professor Nozick to move out of his condominium apartment (Tucker, 2003).
The above paragraphs illustrate the make-up of the debate/controversy of rent-control. Let’s continue with the opposition to such control in New York City by starting with its historical roots. According to Economist.com (2003,) – an anti-price control advocate, the law on the renting of residential housing was one of many price controls brought in during the grim, panicky period between the attack on Pearl Harbour in 1941 and America’s move to a full wartime economy in 1943. Like rubber, petroleum, coffee and shoes, housing was looked upon as a vital commodity that needed to be regulated for ‘the good of the citizens’ during a time of war. The Economist.com article (2003) mentioned above continued to lament that by 1947 all the price controls were phased out, except property-price regulations. Specifically, the website pointed out that most cities eventually scrapped the preceding market distortions except the capital of capitalism – New York City (Economist.com, 2003).