With the average asking rent rising over $3,000, New Yorkers continue to wonder “Why is the rent so high?”. Business Insider Writer Josh Barro detailed several key reasons in an article titled “The 8 Reasons WHY New York Rents Are So Ridiculously High” to offer insight into the rising cost. He attributes factors such as limited space, high property taxes, and high constructions costs. Interestingly enough, #3 on his list is “Rent Control”. Here is an excerpt:
3. Rent stabilisation raises your rent if you’re not rent stabilised. While the average rent for available apartments in New York City is now over $3,000, the U.S. Census Bureau says renters in New York City were only paying a median of $1,125 in 2011. What gives?
The answer is, there are lots of cheap apartments in New York. You just can’t get one of them, because they’re rent stabilised, and tenants with great rent stabilised deals cling to their apartments until they die.
The Cato Institute produced some great charts on this back in 1997, but the same dynamics still hold in the market today. In cities without rent control, rents for available apartments form a normal distribution around the Census median rent. Here’s a chart of Philadelphia rents in 1997: