The Movement To Bring Back Universal Rent Control In New York Gains Steam

If you follow at all the ongoing disaster in Venezuela, let alone the horrors that continue in places like Cuba and North Korea, you must be completely scratching your head at the stunning revival of the movement for socialism on college campuses and among young people.  And how about the horrors of the Soviet Union, the Stalin purges and intentional famines, the Great Leap Forward of Maoist China, the Cambodian Killing Fields?  Could they really teach so little of anything important in schools these days?

It's a small thing by comparison to the great horrors above, but here in New York City we have our own notable example of the return of delusionism as everything important goes down the memory hole.  I'm talking about the trendy campaign for something called "universal rent control."    Leading the charge are Democratic Party gubernatorial primary challenger Cynthia Nixon and Lieutenant Governor candidate Jumaane Williams.  Over in the legislature, plenty of assemblymen and senators are more than ready to vote for such a thing.  After all, it would be "fair" and would "help struggling families."

Here's the forgotten history, supplemented by my own personal experience.  For more details on the legal side, you can read this "History of Rent Control" from  New York City instituted controls on apartment rents during World War II, allegedly as a response to war-time shortages.  When the war ended, controls were not lifted, but continued.  However, beginning in 1947, new construction was exempted from the controls.  Result:  older housing deteriorated, but new construction continued at a reasonable pace.  In mid-1971, the state legislature finally moved toward a gradual phase-out of the long-obsolete war-time restrictions, passing "vacancy decontrol" for all units that became voluntarily vacated.  During the period 1971 - 1974, rental units rapidly began to leave the control system.  According to the history, nearly 400,000 units (out of a total of about 1.2 million) left the regulation system and became "free market" in just that brief period.  But then, in 1974, the legislature totally reversed course, and passed something called the Emergency Tenant Protection Act.  The ETPA completely did away with the vacancy decontrol, and also imposed a new and highly restrictive regulatory regime on all the post-1947 apartments that had supposedly been built outside the restrictions.  You might call it a total betrayal of all the investors who had put up money to build new housing in New York City for 27 years.  

What happened next was exactly what you would expect would happen.  New apartment construction fell off a cliff.  Such construction had been running in the range of 30,000 +/- units per year through the 1950s and 60s, but then dropped to under 5000 per year in the mid-70s.  Five thousand per year is not nearly enough to keep up with deterioration and obsolescence in a stock of some 2 million or so units.  

And then you come to my own experience.  I moved to the City in 1975, and began to look for an apartment.  The 1970s were the decade when New York City lost about 10% of its population, going from some 7.89 million in 1970 to 7.07 million in 1980.  Buildings were burning down and being abandoned all around the city.  And yet, it was nearly impossible to find an available apartment!  You could go to as many brokers as you wanted, and knock on as many doors as you wanted, and you would not learn of the availability of a single unit in the regulation/control system.  Instead, you would be told that nothing was available, or alternatively you would be offered one wildly overpriced and often badly deteriorated unit, and told that you must make the decision today or it would be rented to someone else.  (Only later did I learn that, to be given access to the scarce rent-controlled inventory, you needed either to have personal connections in the real estate industry, or to offer a bribe of several months rent to an insider such as a building superintendent.  It's just as well that I wasn't let in on this secret at the time.)

I would not blame the City's loss of 10% of its population exclusively on the insane rent policies of the 70s.  Clearly other factors were involved as well, not the least being crazily high taxes and soaring crime rates.  But the rent regulation policies were definitely a factor.  And, on the subject of people wanting to move in not being able to find an apartment even as thousands of apartments got abandoned, the rent regulation policies were undoubtedly the principal factor.

The situation of pervasive controls and impossible-to-find apartments persisted throughout the 1980s and into the 90s.  Here is a letter from a guy named Charles Urstadt, New York City Housing Commissioner from 1969-73, to the New York Times in 1992, begging for the restoration of vacancy decontrol as a way to get housing construction going again:

In 1971, when New York City's Vacancy Decontrol Law was passed, it was the first ray of hope for apartment buildings since rent control began in 1943. Sadly, this law was repealed in 1974. . . .  The time is at hand, more than 20 years later, for the state to take another step and follow the actions taken in San Francisco and even in Moscow to lighten the severity of rent control by having the state adopt a luxury vacancy decontrol bill.          

Remarkably, the state legislature did finally pass a partial vacancy-decontrol law in 1994.  The new law was much more restrictive than the earlier one from 1971 (too complicated to go into the details here) but did begin a very gradual process under which a few hundred thousand units have been removed from the control regime over the past two and a half decades.  And new construction began a gradual comeback.  This 2018 Housing Supply Report from the New York City Rent Guidelines Board contains construction data from 1993 to 2017 (at page 5).  In the first three years of that record (before the new vacancy decontrol law took effect) new construction continued to stagnate at the impossibly low level of about 5000 units per year.  But then it began to increase, reaching 10,000 per year by 1998, 15,000 per year by 2000, 20,000 per year by 2003, 25,000 per year by 2004, and then going above 30,000, until a sudden drop-off with the recession in 2009.  The last five years have been volatile, but the average has been over 25,000 per year.  New York City's population finally exceeded the 1970 peak by 2000, and by today has surged to over 8.6 million.  It is highly doubtful that this increase could have been achieved without the housing construction boom unleashed by loosening of rent regulation restrictions in the early 1990s.

Into this mix, enter Cynthia Nixon and her acolytes.  From Ms. Nixon's website:

Rent stabilization laws currently apply to more than one million households in New York City, Nassau, Rockland, and Westchester Counties.  These laws give families peace of mind by ensuring the right to stay in their homes with modest annual rent increases. . . .  Cynthia’s rent platform — Rent Justice for All — is the most progressive and expansive tenant protection program in the country. It will provide affordable homes to more than three million households, help to curb our state’s homelessness crisis, and prevent thousands of evictions.  

Perfect justice and fairness for all!  Does Ms. Nixon have any comment on any of the problems that emerged under the prior version of the same idea?  Not that you can find.  It's highly doubtful that she even knows anything about the adverse consequences of such price controls.  That stuff is all forgotten.