Real Estate in New York City: Without rent control, would anyone outside of the top 1% be left in Manhattan?
Trey Clark
Trey Clark, Founder, http://www.RealtyShares.com
Rent Control actually increases market rents by removing at-market rental stock from a given city/area.
I live in San Francisco, where roughly 80% of the rental units are subject to rent control. Rents here have spiked approximately 15% in the last 18 months.
Here’s the dynamic: people with below market rents stay in those apartments, because they don’t want to pay market rates. Thus those units tend to stay out off the market. When demand increases, as has happened here in the last 18 months due to increased start-up hiring, there is a reduced inventory of units to absorb that demand. Market rents spike.
The same holds for Manhattan, though I’m not sure as large a share of the apartment stock is rent controlled/regulated. If rent control was removed, market rents would drop, though average rent paid would likely go up (no more renters paying below rents far below market).
# – # – # – # – #
Like most Gooferment actions, it has intended and Unintended Consequences!
The use of force or fraud is always immoral, as well as ineffective and inefficient.
It enriches the politicians and bureaucrats who can extract “tribute” and must be “kowtowed” to. Graft, kickbacks, corruption, bribery, and extortion are all the direct observable effects of “rent control”!
It’s ineffective because it actually raises the rents that poor people must pay.
It’s inefficient because it incentivizes the wrong behavior. Old pensioners “lock up” large apartments that they don’t “need” and have to heat ’n’ cool the larger space
Anytime the Gooferment institutes “price controls”, the Free Market is distorted.
The Free Market’s “invisible hand” allows the maximum happiness and minimum unhappiness without the use of force or fraud.
The Free Market allows peaceful exchanges that benefit everyone.
Argh!
Seems so simple.
# – # – # – # – #
Reinke Faces Life 
The counter to the argument against rent control, which has some validity is why should rental tenants pay to help a landlord recover on a very bad investment? In NYC over the past fifteen years there has been a bidding war on rental housing. Buildings once selling for 4 to 6 times annual rent (a valid economic number) routinely sell for 10 to 15 times rent (speculation). Despite the fact that there is absolutely no bottom line for these buildings in even the far future (barring double digit inflation), the banks push the money and the speculators keep buying with the hope of selling to an even bigger fool. When the bust comes, as it did in ’89 to ’92, prices drop, buildings get foreclosed but rents do not ever return to pre- speculation levels. Having been in the business for 40 years, I have seen the true evils of rent control and what it did to the entire Borough of the Bronx. Current rent regulation though is much more flexible but it does require owners and managers to keep current with the law and exercise a modicum of intelligence. The only answer to sky-high rents is a surplus of housing stock which we still do not have. The old timers who taught me were in the business during the depression when there was a huge surplus and it was not unusual for a renter to make his own deal, even in Manhattan!
LikeLike