Policies meant to alleviate housing crisis might actually cause it.
A group of New York property owners are taking the city and state to court, claiming that new rent stabilization laws violate the United States Constitution.
The lawsuit, brought by a group calling itself the Community Housing Improvement Program, highlights the often-damaging unintended consequences of rent regulations in the most expensive city in the United States.
Since 1969, New York City has had some form of rent stabilization. The city rent stabilization board meets every yearto set limits on how much rent is allowed to increase. In June, the Democrat-controlled New York state legislature passed a sweeping set of changes to statewide rent stabilization laws, expanding them outside of New York City and overhauling many of the associated rules. The landowner group is fighting this set of changes.
“There are 1.2 million rent-stabilized units in New York. That’s almost a third of all of the housing units in the five boroughs,” said Howard Husock, vice president for research and publications at the NYC-based Manhattan Institute.
The new regulations actually expand the number of stabilized units. Under the prior regime, a previously stabilized apartment that cost $2,700 or more per month would lose its rent-stabilization status when it went on the market, a process that Husock said removed stabilization from several hundred thousand units. But that cap is gone under the new law, just one of dozens of “loopholes” Albany Democrats have closed.
The goal of the old cap was to make rent stabilization benefit less-well-off New Yorkers. But removal simply highlights something that was already true, in Husock’s view: “the whole rent regulation regime does not inherently protect people of low and moderate income. All it does is keep prices low.”
Rather than helping low-income renters, Husock argues, rent stabilization just makes it cheaper for high-income renters to hoard more of the housing stock. Unable to discriminate on price, landowners looking to ensure rental income discriminate on credit-worthiness, making it even harder for low-income individuals to enter the market. The consequence is that much of the benefit of the system ends up accruing to wealthy renters, whose rent is kept artificially well below what they might otherwise pay.