Rosen: Government picks winners and losers with rent control

Here’s a real-life story of rent control.  I grew up in New York City.  My mother and father married when he was in the Army during World War II.  After the war, my dad took a clerical white collar job at a corporation where he diligently worked for the rest of his career.  He hadn’t gone to college and never made a lot of money, so his lower-middle class income qualified our family for a rent-controlled apartment in Brooklyn.

Rent control started in NYC in the 1920s.  In the 1970s, it was renamed “rent stabilization,” with a Rent Guidelines Board determining “fair” rents and increases. Today, one million rent- stabilized apartments account for 44% of the city’s rentals and 28% of its 3.6 million homes.  It’s extremely popular with New Yorkers whose monthly rent is well below the going rate in the rental market.  But wasn’t so for landlords whose rental income over the years didn’t keep pace with the cost of administration, maintenance, and taxes for their buildings.  Consequently, conditions in rent-controlled apartments deteriorated as landlords scrimped on expenses.  Not surprisingly, landlords who owned those buildings could only sell their property at fire sale prices.

Tenants complained about conditions in those buildings to sympathetic politicians who understood the political calculus of rent control: the number of renting voters greatly exceeds the number of landlords.  In the 1980s with landlords pleading for financial relief, NYC government allowed landlords to convert their apartment houses to individual condominium ownership but only with the approval of two-thirds of the tenants who had agreed to accept the landlord’s conversion price. Desperate to unload these near-worthless rent-controlled properties, landlords were in a very weak bargaining position, and the tenants knew it.

Click here to read more