In yesterday's New York Times, Gretchen Morgenson wrote that the soured deal to buy Peter Cooper Village and Stuyvesant Town in Manhattan -- two rent-regulated apartment buildings bought at the top of the market by developers who intended to turn them into higher-rate rentals -- was just the most high-profile failure. Little deals like that all over the city sucked up about 100,000 affordable apartments, or about 10 percent of the rent-regulated stock, she writes.
Those stats just highlight how left out renters were during the boom. Plenty of homeowners with adjustable rate mortgages are now seeing the value of their dream homes falling below what they owe or are even facing foreclosure. But before that, renters, especially those at the bottom of the income scale, were allegedly being harassed out of their apartments on specious accusations by new landlords who wanted to capitalize on the boom. And it was harder for those people to find a new apartment because landlords were trying to make similar deals on buildings throughout the city.
Plenty of economists love to hate rent regulation, arguing that it creates market distortions that ultimately make rent more expensive by limiting supply. Whether or not regulation's good for the poor in the long term, New York certainly seems happy to keep it. But arguing for an entirely free rental market conveniently ignores a nasty history, one that the landlords in Morgenson's story hint at. Andrew Cuomo, the New York attorney general, is preparing to sue one of the firms that bought regulated apartment buildings because he said they resorted to harassment to try to get tenants out. Before rent regulation, the New York City rental market provided apartments for low-income families, but those tenants were subject to abuse. Apartments were on the outskirts, far from jobs and grocery stores and schools, and were kept in substandard conditions renters had little power to challenge.
Regulated rents are artificially cheap, but they keep people in their homes and, to some degree, help keep income ranges in communities balanced. So while it may do damage to the market, it preserves something else. If New York ever stopped regulating rents, it would need to keep that goal in mind.
-- Monica Potts