Sunday, March 20, 2011

Rent regulations good for New Yorkers?

Market-rate renters in New York complain that they pay exorbitant rents because their regulated neighbors underpay. In their justifiable anger, they imagine that if regulated neighbors paid more, market rates would ease down.

Unfortunately, markets depend not on cost, but on demand. When an entire neighborhood destabilizes and goes market rate, demand actually increases. Market rates increase. All rents go up.

Rent deregulation doesn't lower market rates with a housing flood, it just displaces a whole lot of long-time community residents, upscaling the neighborhood and spreading present and future transiency. Renters also lose their legal protections against landlords and landlord harassment, which also adds transiency. Deregulation is the landlord's wet dream. Landlords get all the cards, renters none.

It's been studied by no less a deregulation advocate than the conservative Manhattan Institute, summarized here. The study itself here.

More regulation means less investment, not higher market rents. Real estate disinvestment in NY? Not likely. Not a worry. Increased investment raising rents? That's a true worry for anyone who isn't in real estate.

Want to save communities and affordability for all New Yorkers? Tell the governor to include stronger rent regulations in the state budget. You can call his office at 212-681-4580

When a city deregulates, the aggregate money available for rent actually increases. Those who were underpaying now will pay more they were paying with few exceptions. If they squeeze into lower-income neighborhoods, they raise rents there. Meanwhile, those who now see an opportunity to live in tonier neighborhoods, pay up the exorbitant market rates, which keeps the market rate rents up. The aggregate demand increases all over the city, unless people stop liking the city and leave. When the aggregate money for rent increases, rents increase, as long as people stay in the city. Why do you think landlords so much want to deregulate the market? To ease your market rate rents? Wake up!

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