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Rent regulation is fundamentally fair: Don't swallow the line that some tenants lose because others win

October 29, 2018

Reprinted from the Daily New Opinion Section – October 28th, 2018

My mother was raised in a rent-regulated apartment in Brooklyn and then moved to a regulated apartment in Manhattan. She knows from personal experience the system helps sustain affordable neighborhoods.

But some of her friends aren't sure what to think about rent regulation. They think interfering with free markets can unjustly create winners and losers. With rent laws set to expire in June, New Yorkers will be hearing a lot more about this.

So what about it: Has one renter lost because someone with a rent-regulated apartment won?

Nope. Rent regulation works for the great majority of New Yorkers — it's only the real estate speculators who lose out. Here's why.

Let's start with what rent regulation is not. It is not an entitlement program. Instead, the system moderates the pressure of an overheated market for everyone. The great majority of New Yorkers — low-, moderate- and middle-income people alike — have almost no negotiating power, since housing is a basic necessity and the vacancy rate for moderately priced apartments is minuscule.

The mechanism of rent regulation is straightforward: You get a written lease, an annual rent increase set by a publicly appointed board and protection from eviction unless you break the rules. When there is a vacancy, the increase for the next tenant is moderated. That's it.

So, how does rent regulation maintain affordability if it isn't a subsidy program? My mother's building in Flatbush, Brooklyn, shows how it works. Built decades ago, the building been bought and sold many times — with five sales in the past 30 years alone. Each time it traded hands, the building didn't sell for the greatest profit the owner could hope for. Instead, the price reflected that rents were modest and that tenants could not be suddenly evicted.

Records show that the selling price averaged 10 times the rent roll in recent transactions. With that important ratio, rent regulation kept the building's cost, profitability and affordability in balance at each sale.

What does it look like to a tenant in that building? Most of the apartments are rent regulated, but there are some recent market-rate rentals. Those tenants probably pay a higher rent than their neighbors across the hall, and might wonder if they are subsidizing the long-time residents. But that's not how the system works: It's the lower sales price and more modest profit expectations each time the building changes hands.

Diminishing speculation and meeting the needs of residents rather than speculators without spending taxpayer dollars? That's good public policy.

Multiply the example of my mother's building by the almost one million regulated apartments in New York City, and that's how the system helps to keep neighborhoods more affordable.

One common argument against rent regulation is that it slows the construction of new housing units. But that claim doesn't hold up. Over the past 20 years, the private market in New York City has built at a remarkable pace, averaging over 20,000 new units a year.

The problem with the system today isn't that it can't work the way it was intended because more and more landlords are finding loopholes in the law and harassing tenants out of affordable apartments. This speculation-fueled displacement crisis is undermining the system.

Our response should be to strengthen the system and close the loopholes. It's not rent regulated vs. unregulated tenants; it's real estate speculators vs. the rest of us. No need to wonder which side to be on.

This was originally published on the Daily News Opinion Section.

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