Rent Regulation: Our Defense

Last week, The Atlantic Cities published this article, which advocates against rent regulations based on the widespread disdain on the part of economists.  The article argues that a better approach may be “adopting policies that encourage the production of more diverse types of housing, implementing strong regulations and practices to ensure housing quality and to protect tenants from abuses; and providing targeted, direct subsidies to people who need help paying rents.”

We happen to think that rent regulation is exactly such a policy: a strong piece of regulation that protects tenants’ rights and makes the city a more livable and affordable place for low income renters.  Last spring, the United States Supreme Court agreed to hear Harmon v. Kimmel, a case challenging New York City’s rent stabilization law. It was upheld, and New York renters breathed a collective sigh of relief. Rent stabilization in New York is good policy, and here’s why:

New York City faces an incredibly tight housing market due to a “highly desirable location, exceptional population density, high construction costs, and limited space due to natural geographic boundaries.” (Quote from Attorney General Schneiderman’s spirited defense of rent regulations.) These characteristics lend themselves to rent profiteering – allowing landlords to charge exorbitant rents due to both extreme need and extreme shortage. Those with less money would inevitably be pushed out. Even economist Edward Glaeser, who describes himself as “a staunch and steadfast enemy of rent stabilization,” told the New York Times:

“Certain types of stabilization can create more integrated communities,” and “New York is a more diverse place because of rent stabilization.”

Can’t argue against diversity.

Enemies of rent regulation generally make the same couple arguments: housing conditions suffer because landlords have no incentive to fix units and high income people end up living in low rent apartments. They also tend to believe that rent regulations provide a disincentive to create new housing, which would alleviate NYC’s housing shortage and bring prices back down. These are all preposterous arguments.

First, development: But housing units are not built overnight. In the short run, the current supply of housing is basically what we’re going to have. (Current events tell us that supply can in fact decrease, thanks Sandy!) Incentivizing development would do very little for New Yorkers who need help now. But there is a long run, and anyone who thinks that there aren’t developers frothing at the mouth to build housing in New York City should take a look out the window at the Williamsburg waterfront, or try Googling “Bruce Ratner.” Under-development is not an issue. (Whether or not we actually want new development, what we could do to better utilize existing housing stock, is a different conversation. Stay tuned!)

Second, as the Furman Center proved last spring, the vast majority of tenants living in rent regulated apartments are not high earners – they have a median income of $34,000. (Their policy brief is chock full of other socio-economic and demographic facts about NYC’s rent regulations – read more here.)

Third: NYC housing conditions are a problem, but the reason is negligence and greed, not regulations. And thankfully, the housing maintenance code is getting stronger every day.

Peter Tatian, journalist for The Atlantic Cities, suggests that more direct subsidies would be better than rent regulation. While I’m in favor of a stronger and wider safety net, I think we should acknowledge its limitations:

The Section 8 voucher is the most common direct rent subsidy, but unlike food stamps, it is not considered an “entitlement program.” This means there are a finite number of vouchers and not everyone who qualifies will be able to receive one. In New York State, the program has been frozen for several years.  As recent federal budget discussions have shown us, direct subsidy spending is very politically vulnerable and isalways at risk of termination.We can look to the Work and Child Advantage experience for an example.

Even entitlement programs do not reach all who qualify. According to the Food Action and Research Center, about 1 in 4 people who qualify for food stamps don’t even bother to apply due to a variety of reasons ranging from stigma, to misinformation, to hassle. By regulating rents rather than providing direct subsidy, we can ensure that the benefit is received by a major swath of the population who need it, free from stigma and bureaucratic obstacles.

Finally, we stand in defense of rent regulation because there isn’t much else out there for renters. Our national housing policy overwhelming supports homeowners (to a fault, I happen to think.) Public housing has largely been demolished and Section 8 is frozen. So, we stand in favor of rent regulation as one of the last bastions of supportive policy for a growing population of renters who deserve the protection.

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