Rent Control: Impossible to Get, Impossible to Keep

It comes as no surprise that in today’s economy rent-controlled apartments are the most highly fought over properties in New York City. Who wouldn’t love the stability and promise of rent not increasing in a market where inventory is low and prices are constantly rising. Renters have somewhere stable to live (secure supply), and owners have a full building of tenants (constant demand) who want to stay for many years, so what is the controversy about?

The issue is: renters cling to these apartments, they are basically impossible to get rid of; a woman went as far as to pretend her dead aunt was alive to keep an apartment in Brooklyn. While the renters and rent stay the same, the rest of the market, and more specifically market rate of said apartment, are increasing at a faster rate. Take for example, this NY Times article, in which the tenants of rent-controlled 31 Desbrosses risk losing their homes because the market value of the building, post damages of Hurricane Sandy, is more expensive to fix than the profit it brings in. The owner of building has no economic incentive to make the repairs; somehow the concept of rent-control is no longer beneficial to both parties, and thus fails. 

Rent control has had its history of problems since the concept was found shortly after World War I. The Supreme Court rejected appeals of rent control being unconstitutional, or an “illegal taking of property,” in both Pannell v. San Jose in 1988 and Yee v. City of Escondido 1992. Property owners view restrictions such as “rent control” and “zoning restrictions” as the government preventing them from their rightful fortunes.

Many tenants of rent-controlled apartments add value to neighborhoods. They become invested not only in the property but the small businesses around it, due to the number of years they have been a resident the area has become home. So how do we fix the problem of rent control being practical but not economical in New York City?