Major changes to New York City's rent regulations passed in Albany last week have drawn attention to a nationwide resurgence of rent control laws considered by cities and states across the nation. ( Wall Street Journal , June 14).
By keeping more New York City apartments permanently in the regulated system, the new law will diminish the number of available market-rate units, drive-up market-rate rents, and perpetuate an imbalance in affordable housing supply and demand.
- The law signed by Governor Andrew Cuomo on June 14 directly impacts about 40 percent of New York City's apartment stock and expands rent stabilization to counties across the state. The law generally freezes "stabilized" NYC apartments from ever moving to market rental rates. (New York Times ,June 12 and June 17).
- By keeping more apartments permanently in the regulated system, the new law will diminish the number of available market-rate units, drive-up market-rate rents, and perpetuate an imbalance in affordable housing supply and demand. Affluent Manhattan residents in stabilized apartments who enjoy a rental windfall will stay in place, while lower-income residents in outer boroughs will likely bear higher rent burdens. (Wall Street Journal, June 12)
- The New York law also dis-incentivizes owners from modernizing aging housing with new roofs, boilers, security systems, and other improvements. By capping annual rent increases that an owner can charge for major building-wide capital investments, one critic has warned that the law could lead to a "shabbification of rental housing." (Citylab, June 13).
- Real Estate Board of New York (REBNY) President John Banks stated, "The harmful impact of this legislation will be profound for New York City's economic future … This legislation will keep rent lower for some, but also significantly diminish housing quality and lead to less tax revenue to pay for vital government services." (REBNY statement, June 18)
Affordable Housing: A National Issue
New York's action is part of a growing trend of jurisdictions purporting to address skyrocketing housing costs though rent regulations. Meanwhile, candidates on the 2020 campaign trail are offering plans to address the nation's "affordable housing crisis." ( NPR, June 18)
An interactive national map provided by the National Multifamily Housing Council (NMHC) details the movement of state capitals eying rent control measures.
- An interactive national map provided by the National Multifamily Housing Council (NMHC) details the movement of state capitals eying rent control measures.
- A real estate industry coalition recently opposed a rent control measure under consideration in California. In a letter to Sacramento lawmakers, the coalition explained that increasing housing supplies with new construction built by public-private partnerships will "help bring the price point down," and that it is "more effective to tie assistance to a renter rather than a rental unit." (NMHC, June 17)
- Proposals in Congress that aim to expand and incentivize the construction of affordable housing would be more effective in addressing the nation's housing challenges (compared to government-mandated rental price-fixing). Recently proposed measures would expand the low-income housing tax credit program (e.g., S. 1703, H.R. 3077), and create a similar tax credit geared to moderate-income, workforce housing (S. 3365, 115th Cong.).
- Housing and Urban Development Secretary Ben Carson has offered a strategy to boost affordable housing by encouraging localities to ease their own building restrictions. Carson's proposal has gained support of House Financial Services Committee Chair Maxine Waters (D-CA). It would provide federal monetary incentives for local governments to ease land-use and zoning regulatory barriers that can feed into "NIMBY-opposition" against affordable housing and drive-up development and construction costs. (Politico, June 14)
"Although they are well-intended, we know from decades of experience that rent control regulations distort markets, create shortages, and depress business investments. They often harm the communities they seek to help," said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. "Policy makers should avoid rent control measures and rather seek solutions that grow America's residential stock, to enable our communities to provide safe and decent housing for low-income families and the teachers and first-responders in our workforce."