Less Regulation to Produce More Housing

What’s the best way to increase the amount of affordable housing in New York City. The New York Times digital edition recently featured a collection of proposals that address this issue.

Most of the proposals were more of the same old: strengthen rent regulations, preserve public housing, tax increment financing, nonprofit ownership and other mechanisms that have been used in NYC to a greater extent than anywhere else, but have all failed to solve the “affordable housing crisis”.

Only one proposed solution has not been tried in New York and it comes from Ed Glaeser, an economics professor at Harvard University, who understands the laws of supply and demand. Professor Glaeser proposes a simple solution of easing housing demand by increasing the supply of housing. And the way to increase supply is to remove the barriers to building created by land use regulations such as zoning, historic preservation and air rights (and we should add rent regulations and labor practices).

But New York City, under Mayor Michael Bloomberg, has moved in the exact opposite direction. Major rezoning, affecting 40% of the city, has downzoned neighborhoods where developers were building higher-density market-rate housing without taxpayer subsidies. Development has instead been funneled into smaller development zones where even greater density will be required, together with subsidies to produce affordable housing.

Governor Cuomo Wastes $6 million in Unnecessary Effort to Protect Tenants

The RSA has just gotten its first look at the some of the ultimate outcomes of the investigations launched by the Tenant Protection Unit (TPU) created by Governor Cuomo within the State Division of Homes and Community Renewal (DHCR) and it’s not a pretty picture.

The RSA received copies of three “Notices of Audit Determination”, each of which involved Individual apartment rent increases (IAI). In each of these cases, the TPU disallowed certain expenses claimed by the owners either because they were not adequately documented or were not considered to be eligible expenses. In each case, the TPU recalculated the legal regulated rent and directed the owner to amend prior rent registrations to reflect a lower legal rent. And, in each of these cases, the actual rent paid by the tenant was not affected because the owners were charging preferential rents which were lower than the legal rent as calculated by the TPU.

These cases raise some serious issues about the justification and the role of the TPU. If the $6 million allocated to the TPU this year alone was intended to protect tenants, then the evidence so far seems to indicate an extraordinary waste of taxpayer dollars because the TPU audits in no way benefitted the tenants in occupancy. However, we suspect that the real purpose of the TPU was to hamstring owners and lay a foundation for further rent restrictions and the TPU is well on its way to meeting that goal. A schedule of allowable costs of IAI’s has never been promulgated and owners must now operate in unchartered waters. We encourage owners to maintain a detailed record of all IAI work going forward including contracts, invoices, receipts and cancelled checks as well as before and after pictures.

Rent and the Single Girl



Posted: March 07, 2013


First came Helen Gurley Brown’s “Sex and the Single Girl.”

Then there was Carrie Bradshaw in “Sex and the City.”

Now, we have Hannah Horvath on HBO’s “Girls.”

When will someone get around to what single women in New York really obsess about: a nice apartment in a decent neighborhood at an affordable price?

Today, more than 725,000 never-married women between the ages of 20 and 34 call Gotham home. Many have come here because they believe New York is the place to be. Especially for those just starting out, many quickly learn that life in the big city can mean sharing an East Bushwick apartment with three strangers because it’s the only place you can afford.

If New York’s high prices simply reflected the true market value, that would be one thing. After all, people have been finding roommates to split the rent for years. But the truth is that the young and unestablished are paying more than they should for their apartments, because the rental market and rental prices are being distorted by rent-control and rent-stabilization policies.

Rent-controlled or rent-stabilized apartments are a sweet deal for those who are in on it — mostly older and more established residents. So the wealthy retiree has every reason to cling to his rent-stabilized pad on Central Park South forever. Meanwhile, the young, the new arrivals and often the less-wealthy are out of luck.

Lena Dunham in “Girls”

These people pay in two ways: First, they have fewer apartments to choose from, because rent control and rent stabilization effectively take a million apartments off the market. According to the Furman Center for Real Estate and Urban Policy, that’s nearly half the total rentals.

Second, the price of artificially lower rents in the regulated sector becomes artificially higher rents in the unregulated sector.

It’s not just single New York women, of course. It’s anyone looking for a place to live here. And so we have a familiar tale: laws promoted as helping average folk actually hurting them.

That’s worth keeping in mind as mayoral candidate after mayoral candidate prattles on about “affordable housing.” Almost always their answer is more of the same interference from government that has created this problem in the first place.

So as HBO gets ready for the Season 2 finale of “Girls,” we’re hoping someone might consider a series showing why, for so many women here, finding a decent, affordable apartment is more difficult than finding a faithful, self-supporting boyfriend.


Source: New York Post

MIT Research Shows Elimination of Rent Control in Cambridge Increased Property Values by $1.8 Billion

What is the cost of rent regulations in New York City?

A recent analysis of the impact of decontrol in Cambridge may offer some clues. According to economists at MIT, property values in Cambridge increased by $1.8 billion in the 10-year period after decontrol in 1994. Interestingly, property value gains were greater for property that had never been controlled than for previously controlled property.

Since there are vastly more rent regulated properties in New York City than in Cambridge, $1.8 billion may be a fraction of the increased property value to garnered by decontrol in New York.

Any economist out there want to extrapolate the potential tax revenue to be gleaned by decontrol in NYC?


                                               – Jack Freund, Executive Vice President, Rent Stabilization Association 

(Views and opinions expressed are those of the author and do not necessarily reflect the policy or position of the RSA.)


The complete study can be accessed by clicking here.

New Report Highlights Long-Term Problem for Subsidized Housing


The Regional Plan Association (RPA) recently released a report that highlights a major problem with affordable housing created through project-based government subsidies: as the government subsidies expire, they create periodic crises which can result in the loss of affordable housing unless they are resolved by new injections of government subsidies. Indirectly, the Report raises the issue of whether or not there are other, more effective, means of providing affordable housing – and I believe there is an evident alternative.

The RPA report, “East Harlem Affordable Housing Under Threat: Strategies for Preserving Rent-Regulated Units, (August 2012)”, estimates that there are 40,500 units of rent-regulated housing in East Harlem. Interestingly, the smallest share of this universe, 9,900 or 25% of the total units, are rent stabilized or rent controlled.These units do not expire, the Report acknowledges, but are subject to some “inevitable” and un-quantified deregulation under current law. The majority of the “rent regulated” universe in East Harlem consists of Public Housing (14,700 units), or 36% of the total. Public Housing units also do not “expire”.

The largest category of affordable housing in the Report, “other rent-regulated housing”,  consists of 15,900 units of housing financed under a hodgepodge of programs including Mitchell-Lama, low-income tax credits, Article 8A loans, J-51 tax exemptions and other City, State and Federal subsidy mechanisms. This category of affordable housing is threatened by the expiration of one or more of the various subsidies involved and has become a focus of attention by other organizations, principally the Furman Center at NYU which has begun to catalogue the inventory of such subsidized housing throughout the City.

The question that keeps occurring to me whenever affordable housing “crises” of this type are discovered is: why don’t we avoid this crisis by providing rent subsidies to needy tenants, via tax abatements to private owners, rather than laboriously construct subsidized housing which we know would require financial restructuring after a defined term?



                                  – Jack Freund, Executive Vice President, Rent Stabilization Association 

(Views and opinions expressed are those of the author and do not necessarily reflect the policy or position of the RSA.)