America's renters -- more than one-third of the nation's households -- are in for trouble. Left-wing politicians are demanding rent regulation from coast to coast. Wherever it is adopted, the result will be a disastrous reduction in the rental housing supply, leaving renters desperate for places to live.
New York City is the poster child for the failures of rent regulation. The U.S. Supreme Court is currently mulling a challenge to the constitutionality of the city's rent regime.
Whatever the justices decide, the public needs to consider less destructive, more targeted ways to help low-income people pay for housing. The court of public opinion needs to consider these facts.
Fact No. 1: Rent regulation isn't targeted to the poor. In New York City, there's no means test. What you need is luck or connections. The mean income of a rent-stabilized apartment dweller is $47,000, but census data shows that tens of thousands of them earn more than $150,000 year. Some occupants use what they're saving on rent to pay for a weekend place in the Hamptons or New England.
The pols don't object --- a sure sign they're calling for rent regulation to help themselves politically, not the poor.
In New York City, 44% of rental apartments are regulated by the Rent Guidelines Board, established in 1969, which sets the maximum amount landlords are allowed to raise the rent. Those limits apply to all buildings of six or more units built before 1974.
In 2022, the RGB set the maximum rent hike at 3.25% on one-year leases, and this year at 3%. Never mind that last year, fuel costs to heat the buildings soared 19% and overall inflation hit 8.3%.
The decisions are political, not economic. Many Democratic politicians vilify building owners as "greedy landlords" and depict themselves as the champions of the downtrodden. It's a scam.
Fact No. 2: Winners and losers. The winners are the lucky few with rent-regulated apartments, and the pols who count on an army of tenant activists to turn out at the polls. The losers are the 56% of renters who don't score a regulated apartment and have to scour neighborhoods for an unregulated place they can afford. They're paying more.
Why? Because regulation causes some landlords to walk away, reducing the overall supply of apartments. The laws of supply and demand mean rents go up. New Yorkers in unregulated apartments are paying the highest rents in the U.S. for a one-bedroom apartment. They are the real victims, and they should be furious.
Yet the left-wing press pretends rent control offers only benefits. The New Republic warns that the Supreme Court challenge threatens "laws that have benefitted the city's tenants for generations." Sorry, untrue -- only some tenants, and not always the neediest.
It's economic madness. The saner way to help those who need assistance paying rent is with a voucher. We offer the needy SNAP debit cards to help them pay for groceries. No one slaps price controls on grocery stores or designates certain stores as "regulated," forcing them to sell at below cost.
Yet New York forces certain landlords to pay what should be a public cost shared by all, an argument made to the court.
Fact No. 3: The Marxist fantasy that rent regulation will help the poor is spreading across the U.S. and Europe as well. Maine and Minnesota have enacted laws allowing municipalities to impose rent regulations. In November 2024, California voters will be asked to approve a proposition allowing local governments to add additional restrictions to the state's existing rent caps.
The laws of supply and demand are international. Berlin froze rents in 2019 and the rental supply plummeted, according to the Ifo Institute, a think tank.
Yet London's Mayor Sadiq Khan is calling for freezing rents for two years. London provides housing vouchers to the poor -- a smarter approach -- but when the city froze the voucher amounts during COVID, fewer apartments were available in the price range. The answer is to raise the voucher amount. Freezing rents will only make the shortage worse.
Ignore the demagogues. The evidence is in: Rent regulation is a political scam. There are better ways to help Americans afford a place to live.
