New York’s Self-Destruction: Rent Control

Commentary, Frontier Centre, Housing Affordability, Manitoba, Winnipeg, Worth A Look

“[R]ent control appears to be the most efficient technique presently known to destroy a city — except for bombing,” Swedish economist Assar Lindbeck observed in a 1972 book. It has been particularly destructive in New York City:

  • New York has maintained price controls on rent since World War II, and as it took over buildings abandoned by landlords at one point owned 70 percent of Harlem.
  • Prior to rent control, builders regularly completed 30,000 units a year, or 90,000 at the peak in 1927.
  • However, household formation exceeded housing increases in every year of the 1990s, peaking at 44,700 new in 2000; during the boom, in 1998, developers completed only 11,432 units and rehabilitated 6,967.
  • Only 30 percent of rental units are exempt, so their rents naturally soar, and high prices are then used to justify price controls
  • .

    William Tucker estimates the direct costs of rent control at $2 billion a year, exclusive of the effect of shrinking the property tax base.

    A Manhattan Institute study by Henry O. Pollakowski, a housing expert at the Massachusetts Institute of Technology, concluded, “tenants in low- and moderate-income areas receive little or no benefit from rent stabilization, while tenants in more affluent locations are effectively subsidized for a substantial portion of their rent.”

    By contrast, a new Pollakowski on the effects of a statewide referendum terminating rent controls in Cambridge, Mass. in place from 1971 to 1994. Pollakowski found that Cambridge deregulation was followed by a boom in housing investment.

    For Manhattan Institute Study