Sunday, July 21, 2019

Rent Control in New York City: The Coprolite Hits the Fan

Stuyvesant Town
The below report reminds me of a friend who had moved to rent-controlled Boston from no rent-control Dallas.

After leasing an apartment on Commonwealth Avenue in the city and with keys in hand she was ready to move in but called the landlord first and asked, "When are you going to put a fresh coat of paint on the walls?"

She quickly learned that what always occurred before moving into an apartment in Dallas never happened under rent-control in Boston.

They told her they don't paint walls between tenants but she could paint it herself if she wanted.

From The Wall Street Journal:
Barely a month has gone since New York passed its new rent-control law, and the predictable problems are fast emerging. Blackstone Group , which owns the Manhattan developments of Stuyvesant Town and Peter Cooper Village, is putting renovations on hold, reports Crain’s New York Business.

“In light of the recent legislation, we are in the process of evaluating capital investments at Stuy Town,” a Blackstone spokeswoman said. Maintenance, such as fixing leaks, must legally continue. But Crain’s, citing an unnamed source, says “renovations to vacant units would stop, as would potentially larger construction projects.”

Together the two properties cover roughly 24 city blocks. They include more than 11,000 apartments, some of which fall under the state’s rent regulations. Because the complex was originally built in the 1940s, sprucing up is necessary.

The old rules at least gave landlords some leeway to recoup costs. When an apartment became vacant, rent could rise 20%. If rent passed $2,774, the regulation ended, and the market rate could be applied. The new law axed those provisions, lowering the incentive to invest and update properties.

Stuy Town and Blackstone are making the news because they’re enormous, but the same logic applies to every building owner. Economists are more or less unanimous in calling rent control destructive. The only short-term winners are people who’ve already locked in.

The Stuy Town tenants association favored the new rent law. No wonder: Its president told another newspaper in 2016 that she moved in 35 years ago and was still paying less than $1,400 for a one-bedroom. You might call that the low price of stagnation, but wait until neighboring apartments deteriorate around her.
Price controls of any kind distort markets and generally result in an inferior product emerging.


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