Streams

Supreme Court Refuses to Hear Rent Control Case

Monday, April 23, 2012

buildings on East 116th Street between Lexingon and Park where the first floor is rented commerically but the several former residential apartment floors are boarded up. (Bob Hennelly/WNYC)

The Supreme Court announced this morning that they will not hear the case of Harmon vs. Kimmel, which sought to question the constitutionality of New York City's rent control laws. Andrew Scherer, professor of Planning Law at Columbia University, discusses what this means for the future of New York City housing.

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Comments [13]

I am always confused about why the "rent control" fans have hesitated to implement the missing piece of the grand scheme needed to keep housing costs within the grasp of the lower-middle-upper-class of the City. I'm talking about residential unit price control whereby the the owners of all residential real estate units, e.g., houses, co-ops and condos, are subject to the same yearly increases in the sale price of their units as landlords are allowed under rent stabilization and rent control.

Apr. 24 2012 05:56 AM

What a dizzying trip down the rabbit hole with Panero!

Just as one practical demurral, in the 60s-70s, we could and did move all the time, everywhere, from the UWS to the Village to the LES, to Hell's Kitchen to, more expensively, the UES, and hardly gave it a second thought, figured it would be this way forever. But this sort of thing is an option only the semi-rich can afford today.

To claim "turnover plummeted" due to rent control is nuts to me.

Apr. 23 2012 12:20 PM
James Panero from Upper West Side

Great segment, but I must disagree with the professor's romance of rent regulation, especially for neighborhoods like the Upper West Side, where I have been a lifelong resident.

Rent control was an 'emergency' measure put in after WWII that stayed on the books for political convenience, even as it nearly bankrupted the aging housing stock in areas like the Upper West Side. These laws, which came out of a fear of the dangers of the free market, in fact demonstrated how government-manipulated pricing could be far more destructive than market forces.

With rents, services, and evictions all regulated by the legislature and the courts, the city and state effectively became the absentee landlords of the Upper West Side. Power flowed from a politician’s apparent ability to depress rental rates for existing tenants while “taking on” the buildings’ now captive owners for diminishing services.

The city's price controls, among the most stringent in the country, meant that the rate of apartment turnover plummeted. This created an artificial apartment shortage that raised the rental rates of new construction. Since lower rent also meant that existing owners had less revenue for upkeep, their aging buildings decayed for lack of funds, meaning that politicians could exert even greater rhetorical leverage over their “slumlord” conditions.

Historically, rent control has exacted its heaviest toll on the very tenants it purported to serve. The wealthy could maintain multiple residences while keeping their sprawling and under-used rent controlled apartments off the market. Corrupt tenants learned to manipulate their rents even further by calling in phony complaints to the Department of Buildings and suing for bogus “diminution of services” in order to tie up rate increases in litigation (the practice remains commonplace today). Meanwhile average, honest renters became hostage to the artificially depressed rents of their apartments as rent control diminished surplus and drove up the prices of alternative rental apartments. Even as their building and their neighborhood collapsed around them, they were unable to afford to relocate and became increasingly captive to the whims of a political class that purported to have a say in rental rates.

The Upper West Side was only saved because of the cooperative revolution. Stocked with rent-controlled and rent-regulated tenants, the Upper West Side’s aging buildings, despite their grandeur, became next to worthless to their owners. Yet the non-eviction plan coop conversations of the 1970s and 1980s allowed owners to sell shares of their buildings to their own rent-controlled and rent-stabilized tenants, who could then invest their capital and sweat equity into the restoration of the neighborhood.

Apr. 23 2012 11:47 AM
Sheldon from Brooklyn

Rob, I disagree, affordable housing is, NOT rent regulation.

Apr. 23 2012 11:23 AM
Rob Hollander from LES Manhattan

Deregulated tenants don't usually leave the city -- they work here and have families -- so deregulation doesn't increase the availability of housing or lower market rates. The market remains just as tight.

New construction isn't regulated, so rent regulation doesn't limit new construction. Rent regulation is actually an *incentive* to build new units.

In every way rent regulation is actually sound economic policy.

Apr. 23 2012 11:20 AM

I'm about as liberal as anybody who posts on this site, but I have to disagree with the guest that there is no loss of economic activity under rent regulation. A government restriction on rents is going to lead to some loss of activity.

Whether that means fewer units being built is a very specific question. The lost economic activity may take some other form (for example, depressed turn-over in rental units).

The big question is: Why is there such a housing shortage in the city? Is it rent regulation or something else, like NYC government's efforts to keep housing prices inflated?

Apr. 23 2012 11:18 AM
Lee from Manhattan

How do the Mitchell Lama laws fit into the rent control question?

Apr. 23 2012 11:16 AM
Sheldon from Brooklyn

Rent-Stabilization actually keeps rents up, by taking many apts "of the market"

The rents in stabilized apts always go up, as LL's almost always take their increases. How does that benefit tenants on a fixed income?

Apr. 23 2012 11:15 AM
Nick Lento from nj

The SCOTUS is not overturning this now because they know the political fallout of overturning rent controls nationally would motiver MILLIONS of people to get out and vote n an election year. They are not politically stupid. The want to keep and to expand the 5/4 dominance.

If Romney wins and the get more votes in the Senate I GUARANTEE you that ths next SCOTUS session will be confronted with a similar case and that at that point you can kiss all rent control goodbye along with lots of other law that we believed was settled.

The SCOTUS is a creature of politics...the legal reasoning they use is just intellectual skullduggery ti rationalize the imposition of one set of values over another. The right understands this and goes for the jugular in every case. We on the left are "nice people" and want to believe that laws and courts are about objectivity and justice...and that it should be "blind". That's ideal is inconsistent with existing human nature.

Apr. 23 2012 11:14 AM
Scott from Lower Manhattan

Could you ask Mr. Scherer: If keeping rents affordable is such a valuable public purpose, which it certainly is, what is wrong with clearing the way for the supply of housing to increase to the what the demand is for housing at what is considered affordable? If that means adding 1 million units to the city, then every council district should have to somehow accommodate another 20,000 units whether by uniformly upzoning or creating districts that cumulatively would have the required number.

Apr. 23 2012 11:14 AM
Sheldon from Brooklyn

It's sound public policy for a municipality to have/provide affordable housing, not to dictate rent prices to private landlords without compensation.

Apr. 23 2012 11:09 AM
Renter from East Village

The Supreme Court declining to rule on the NY rent regulation laws was partly the result of the exposure of ALEC and its influence on the political process. Attempt by landlords like Hammond to eliminate all tenant rent and lease protections has been an on going for decades. The free market/ deregulation philosophy of Charles Koch and the Cato institute on this issue is blind to the consequences on middle class and low income housing. The Cato take on elimination of rent regulations have been wrong. The real issue here is the Supreme Court Citizens United decision made from the same free market position. It allowed legal unlimited financing of political campaigns by real estate money to the NY Senate. The result was the blocking of the elimination of the vacancy decontrol/deregulation section of the rent regulation laws that were renewed last year. These vacancy decontrol laws are responsible for high rents and the increase of homelessness because it eliminates affordable housing. Campaign financing reform is needed to stop politicians like Pedro Espada who was bought by real estate money to defeat rent regulation reform.

Apr. 23 2012 11:09 AM
Scott from Lower Manhattan

The Supreme Court did the right thing. Rent regulation is a bad policy, but the courts are not the place to remedy bad policy. It is bad policy because it props up the fantasy that you can restrict development sharply below what the demand is for any affordable price without consequence. If you want to make rents affordable, allow the supply to expand to what the demand would be at a rent you consider affordable and the market will provide all the restraint you want on landlords.

Apr. 23 2012 11:07 AM

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