Rent Control is a cancer that kills cities:
From a real Communist:
Vietnam’s Foreign Minister Nguyen Co Thach said
“The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and that we must change policy,” he said.
From two Socialist Economists:
Gunnar] Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”
His fellow Swedish economist (and socialist) Assar Lindbeck asserted,
In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.
It’s natural and human to want to do something to help people who are struggling. But it’s important to offer solutions that are constructive, not destructive.
A constructive solution to a housing shortage is simple: more supply. Building more housing will increase the supply of units, lowering costs. It’s the most obvious solution in the world and constructive in a literal sense. You’re building something.
Rent control is a destructive policy. In his book Basic Economics, economist Thomas Sowell spends entire chapters documenting the failures of rent control policies around the world, from Australia and Sweden to New York and San Francisco.
We have decades of research showing rent control makes housing shortages worse, which explains why there’s near-universal opposition to rent control policies among economists.
Why wasn’t a single housing unit built in Melbourne in the nine years after World War II? Because rent control laws had made the buildings unprofitable.
Why did Washington, DC, see its available rental housing stock decline from 199,000 to less than 176,000 in the 1970s? Because fewer people were willing to rent their homes because of price controls.
Why did building permits decline by 90 percent in Santa Monica, California, in 1979 from just a few years earlier? Again, because rent control laws had made the building of new units unprofitable.
The lesson? Rent control has effects on housing supply, and those effects are not good. And that’s only half the equation.
Rent control also has adverse effects on the demand for housing. Because properties are priced below market rates, people tend to consume more than they otherwise would. In some cases, Sowell points out, this has resulted in housing shortages in the absence of actual scarcity, such as Sweden in the 1950s, which saw the average wait time for a place to live reach 40 months even though Sweden was building more housing per person than any nation in the world.
“As of 1948, there were about 2,400 people on waiting lists for housing in Sweden, but a dozen years later, the waiting list had grown to ten times as many people despite a frantic building of more housing,” Sowell writes. “When eventually rent control laws were repealed in Sweden, a housing surplus suddenly developed, as rents rose and people curtailed their use of housing as a result.”
The evidence is overwhelming. Rent control laws are destructive. We have decades and decades of research that shows that it makes housing shortages worse, which explains why there’s near-universal opposition to rent control policies among economists.
Nevertheless, the perils of rent control seems to be a lesson we may have to relearn. Bad ideas, like old habits, die hard.
VIDEO: WHY RENT CONTROL HURTS RENTERS: https://youtu.be/oJvTTGOHFkU
In 2019 The New York state Legislature amended the 1974 Emergency Tenant Protection Act “ETPA” allowing any municipality in the State to adopt “Rent Stabilization” as well as other measures that put strict and unrealistic caps on reimbursements for capital improvements.
A link to the act is here: https://www.nysenate.gov/legislation/bills/2019/S6458
A Link to NYS Office Of Rent Administration Fact Sheet on the law: https://hcr.ny.gov/system/files/documents/2020/11/fact-sheet-08-09-2019.pdf#:~:text=With%20the%20enactment%20of%20the,Act%20(ETPA)%20of%201974.
● Makes permanent the state’s rent regulation laws, including the Emergency Tenant Protection Act of 1974 (ETPA), which provide the process by which local governments declare a housing emergency and administer their rent regulation program.
● Repeals statutes that currently allow units to be deregulated on vacancy if the rent reaches $2,744 in New York City, or a corresponding amount in counties outside of the city, as well as if the rent reaches that threshold and the tenants earn more than $200,000 per year for more than two years.
● Repeals the statutory vacancy bonus, which allows landlords of rent regulated units to collect an automatic increase in rent of up to 20 percent on vacancy.
● Repeals the vacancy longevity bonus, which allows landlords of rent regulated units that have not claimed a vacancy increase for eight or more years to collect an automatic rent increase of 0.6 percent multiplied by the number of years since the last vacancy.
● Prohibits local Rent Guideline Boards (RGBs) from setting their own vacancy and longevity bonuses, and from adjusting rent increases for reasons not in the statute.
● Prohibits owners who offer tenants a “preferential rent,” or rent below the legal regulated rent, from discontinuing the use of preferential rent or raising the rent to the full legal amount upon lease
● Landlords may charge any rent up to the full legal regulated rent once the tenant vacates the unit, as long as the tenant did not vacate due to the owners failure to maintain the unit.
● What this means for tenants: Tenants can keep their preferential rent for the life of the tenancy.
● Eliminates the statute of limitations for tenants who claim their landlords have overcharged them, and extends the “look-back” period from four years to six years.
● Removes the ability for owners to avoid treble damages if they voluntarily return the amount of the rent overcharge prior to a decision being made by a court or the Department of Housing and Community Renewal (DHCR).
● Expands eligibility for coverage under the ETPA to every county in New York State by removing geographic limitations, allowing any municipality to opt-in to rent stabilization if there is a housing emergency in which the rental vacancy rate is five percent or less.
● Limits rent-controlled rent increases to the lesser of 7.5 percent or a level equal to the average of the previous five RGB increases for one-year stabilized renewal leases.
● Prohibits fuel adjustments or pass-along increases for rent-controlled tenants.
● Limits the “owner use” provision to the use of a single unit of rent regulated housing stock by the owner or their immediate family as their primary residence.
● Provides tenants with cause of action if they are evicted because the landlord makes a fraudulent claim about the intended use of the unit.
● Requires units to remain rent-stabilized if they are provided by nonprofits to individuals who are, were or are at risk of becoming homeless
● Caps the annual MCI rent increase at two percent statewide, down from the current six percent in New York City and 15 percent in other counties currently covered by ETPA.
● Caps any MCI rent increases approved within the last seven years at the lower percentage beginning in September 2019.
● Removes MCI increases and RGB increases based on an MCI after 30 years, instead of allowing them to remain in effect permanently.
● Tightens the rules governing the spending that qualifies for an MCI increase.
● Strengthens enforcement by requiring that 25 percent of MCIs be inspected and audited by DHCR annually.
● Lowers rent increases by lengthening the MCI formula’s amortization period.
● Caps the amount of reimbursable IAI spending at $15,000 over a 15 year period, for up to three separate
● Removes IAI increases and RGB increases based on the IAI after 30 years, instead of allowing them to remain permanent.
● Lowers increases by lengthening the IAI formula’s amortization period.
● Strengthens enforcement by requiring DHCR to randomly audit and inspect at least 10 percent of IAIs
● The new provisions limits the costs able to be passed along to tenants such that, depending on building size, increases for IAI’s will go up no more than $83 or $89 every fifteen years moving forward. This means more affordable apartments to move into. The law now provides many safeguards against abuse of the IAI system by”
● Requiring IAI costs to be “reasonable and verifiable” and for the work to be done by unaffiliated licensed contractors
● Requiring apartments be clear of serious violations
● Requiring tenants’ consent for an IAI during tenancy on a form provided in the tenants’ primary language