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Landlord Finally Free to Live in His Own Home

After battling in court since 2003, this family is finally able to turn their 60 room apartment building into one gigantic home for themselves. Of course, the beneficiaries of the rent-controlled apartments don’t believe the owner’s family should have the right to live in their own building. New York Post – VILLAGE TENANTS ‘HOUSE BROKEN’ The Court of Appeals found that Alistair and Catherine Economakis can go ahead with eviction proceedings against their low-income tenants at 47 E. 3rd St., as long as they plan to use their apartments for themselves. “We’re all working people, your typical, moderate-income working people. For them to want to kick us out so they can have a luxury mansion – it’s ethically and morally unconscionable. I don’t know what other word to use,” said David Pultz, 56, who’s lived in the building for the past 30 years. Pultz said he pays $625 a month for his one-bedroom apartment, and is concerned that if he gets booted, he’ll have to leave the city. (that’s about 1/4 -1/3 the market rate for that neighborhood) “At a time of a really grave housing shortage, it’s a matter of serious concern that an owner can be permitted to obtain 15 apartments for his own use,” he said, adding that in the rest of the state, owners can’t claim more than two apartments for themselves. As I described in Rent Control Part 3, rent control creates this type of class tensions between the property owners and the “entitled” class tenants. It seems completely silly that the landlord has to go to such extremes to get out of the burdens of rent control, but can you blame him? Compared to buying a new home, it probably cost him next to nothing in lost revenue to evict the tenants. Here is […]

Over 200 Illegal Hotel Buildings in NYC

From AMNY: Report: 200 illegal hotels exist in the city There are more than 200 apartment buildings in the city that have been illegally converted to hotels, according to a report released Sunday, significantly reducing the number of rent-stabilized units available. … Illegal hotel operators frequently take advantage of tax loopholes designed to encourage the construction of residential units, according to Raskin. … Advocates are calling for increased penalties and changes in the zoning laws to clarify where hotels can and cannot operate. And today’s Sun: Crackdown Sought on Illegal Hotels in the City What does this tell us about the housing/hotel markets? It seems to me that tax structures (and probably zoning) favor housing, while there is significant unmet demand for hotel rooms. Nonetheless, there is definitely a shortage of built space in NYC, which could be better accommodated by loosening zoning restrictions on new development. Any other thoughts?

Rent Control Part 3: Mobility, Regional Growth, Development and Class Conflict

Part One of this series was a refresher on the Microeconomics of Rent Control and touched on how it encourages hoarding Part Two discussed rent controls influence on the black market for apartments, rental property deterioration and housing discrimination. Here in Part Three, we will discuss how rent control hampers mobility, regional growth, tax revenue, apartment development, and becomes a catalyst for class conflict. Mobility As mentioned in Rent Control Part One, duration of residence in a rent-controlled apartment has been observed to be three times as long as duration at market-rate apartments. One can see that the incentive to hoard rent-controlled apartments is also disincentive to relocate. The mobility of both the tenants and newcomers are drastically hampered by rent control. Unless the tenant has the money to rent a second apartment (or Governor’s mansion), it will be difficult for him to relocate closer to better employment. The tenant may rather endure a very long commute in order to maintain the rent-controlled apartment. As Walter Block put it, "They are, in a sense, trapped by the gentle and visible hand that keeps them where they are rather than where they might do better." Difficulties are multiplied if the local economy takes a turn for the worse. A downturn in local employment would not be relieved by people relocating for jobs, thus making the unemployment and poverty situation worse. Employees looking to relocate in the city with rent control are hurt the worst as they will have a difficult time finding available apartments. The drawbacks to the local economy are discussed in the section on regional growth and adaptation. The reduction in mobility is especially burdensome on families with children, since public schools tend to be local. If the local school is under performing, a family under rent-control will lose […]

Rent Control Part 2: Black Market, Deterioration and Discrimination

With New York’s new Governor’s rent subsidized by his landlord and California debating the best ways to end rent control through Proposition 98, I thought it was a good opportunity to discuss the negative aspects of rent control. This post is the second in a four part series on the rent control. Read all four posts: Rent Control Part One: Microeconomics Lesson and Hording Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Rent Control Part 4: Conclusion and Solutions Black Market and Deceptive Acts As current renters hoard their rent-controlled apartments, it is rare that new apartments become available. Sometimes, tenants would illegally sublet their units at higher rents. Landlords do under-the table deals or rent to friends and family. New York had to crack down on landlords charging “key fees” as high as several thousand dollars to new renters. Landlords will often find loopholes that will let them de-regulate a building, just to be released of the financial burdens. For example, in NY landlords will take their rent-controlled building and deregulate it by using the entire building as a residence for a certain number of years. This is space that could otherwise have been rented at a market rate. Deterioration of Existing Housing Stock Because of the disincentive to improve and maintain the property, landlords will often become slumlords and allow unhealthy conditions or activities to take place in the apartments. This lack of improvement not only is unpleasant to the current renter, but accelerates the end of the usable life of the aparment building. The Rand Corporation studied Los Angeles’ rent control law and found that 63 percent of the benefit of lowered rents was offset by a loss in available housing related to deterioration and […]

Lower East Side Now “Endangered”?

photo by flickr user paytonc The National Trust for Historic Preservation announced that New York City’s Lower East Side, famous for it’s history of tenements and slums, is one of 11 architectural, cultural, and natural heritage sites that are most at risk “for destruction or irreparable damage.” By “damage”, they mean new luxury towers filled with wealthy people, replacing aged tenements filled with yuppies and hipsters. From the NY Sun: ‘Endangered’ Is Designation as Lower East Side Waxes Professor of Urban Policy and Planning at New York University, Mitchell Moss: “The overall neighborhood is witnessing a transformation. And just as young people move into that area, I certainly hope they are not planning to bring back historically dangerous conditions like cholera, typhoid, and open sewers,” Of course, this comes with downzoning, which will limit supply, drive up rent and land prices, and increase the incentive to tear down more buildings. Thus, quickening demolitions and gentrification. I can understand protecting a few particular locations or buildings, but to downzone the entire area will put a huge burden on the City’s housing supply. Also, Curbed: The Lower East Side is an Endangered Species

Rent Control Part 1: Microeconomics Lesson & Hoarding

This post has been released as the first in a four part series: Rent Control Part One: Microeconomics Lesson and Hoarding Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Rent Control Part Four: Conclusion and Solutions Opposition to rent control among economists spans the political spectrum, including over 90% of American and Canadian economists.  In fact, Swedish socialist Economist Assar Lindbeck famously said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing it.” (Assar Lindbeck, The Political Economy of the New Left, New York, Harper and Row, 1972, p. 39) Without getting into the morality of restrictions on property rights, I will discuss the more subtle consequences of rent control over a series of posts. Quick Microeconomics Lesson: As stated by the National Multi Housing Council: Rents serve two functions essential to the efficient operation of housing markets: they compensate providers of existing housing units and developers of new units for the cost of providing shelter to consumers; and they provide the economic incentives needed to attract new investment in rental housing, as well as to maintain existing housing stock. In this respect, housing is no different from other commodities, such as food and clothing — the amount producers supply is directly related to the prevailing market price. Those of us who have studied microeconomics understand the near-universally accepted supply/demand consequence of rent-control: a decrease in the quality and supply of rental housing over time. But, for those who need a refresher or quick intro lesson, Professor Alex Tabarrok of George Mason University and the popular Marginal Revolution blog explains the microeconomics of rent control in this video: When you have some spare time, watch this more […]

NY Gov. Patterson’s Rent-Stabilized Apartment in Harlem

NY Sun: Paterson Pays A Stabilized Rate of Rent The governor of New York pays about $1,250 a month for a two-bedroom, rent-stabilized apartment in central Harlem, even while owning a home upstate in Guilderland and having unfettered access to the 40-room Governor’s Mansion in Albany. Governor Paterson and his wife, Michelle, made about $270,000 last year, according to their tax returns. This is a classic example of hoarding. He should be ashamed of his Lenox Terrace apartment that someone would gladly pay market rate to rent, but seems to think it’s ok. Can’t we at least deregulate apartments when the inhabitant can afford to live in a market-rate apartment? I hope the media pays attention to this, and properly scrutinizes the dark-side of rent regulation.

Private Streets in Brooklyn?

This isn’t some crazy proposal, they have been private since the 20’s and 30’s. It seems there are advantages and disadvantages. You don’t have to worry about street parking when you own the street, but you have to hire your own contractor to make repairs. My main concern is that those homeowners are still paying taxes, but not benefiting from public services. From the Brooklyn Daily Eagle – Community Board 10 Meeting Sparks New Effort to Solve Cul-de-sac Problems: The 19 private unmapped streets in Bay Ridge are now a public matter as nearly a hundred residents of these cul-de-sac havens came together at a Community Board 10 meeting to learn how they can get city services that they pay for in taxes but don’t get. It would be interesting to see what would happen with more private streets.

Release Us From Rent Regulation

Curbed: Rent-Stabilzation War: Tenants Strike Back New York Times: Questions of Rent Tactics by Private Equity Rent-regulated apartments account for 57 percent of the total in the Bronx, 42 percent of the apartments in Brooklyn, 59 percent in Manhattan, 43 percent in Queens and 15 percent of those on Staten Island, the Guidelines Board says. There’s a long way to go. Phasing out the free ride won’t be painless or popular, but New York needs to let the marketplace decide what rents should be and where people locate. By freeing-up units to the marketplace, much of the current supply constraints can be alleviated and rents won’t skyrocket as drastically on the market-rent payers. Not only that, the beneficiaries of the regulation have had a disincentive to relocate closer to better jobs and affordable areas since they don’t want to give up their sweet deal. Rent price control and the resulting supply constraint is more guilty than zoning restrictions in driving up market rents throughout New York. Under the current regulations, some landlords pay more to their lenders than they collect from tenants of rent-regulated apartments. This helps explain the scale of the wealth transfer to each renter: Vantage’s debt service is an estimated $1,098 monthly on each unit, almost 50 percent more than the average rent. Learn more about the consequences of rent control in a informational series here: Rent Control Part 1: Microeconomics Lesson & Hoarding

Urgent: Kanye West May Die Without This Condo

It’s a beautiful project. I sure hope he gets his condo! Wouldn’t it be great if more entertainers joined in the fight to allow urban density instead of other silly stuff? Kanye’s Blog: HAVE YOU EVER SEEN SOMETHING SO GOOD YOU THOUGH YOU’D DIE WITHOUT IT? More articles on HL23 on Curbed Highline Blog

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