The Lede: To Raise Rent or Not to Raise Rent – That is the Question
We recently posted an article about the fate of rent regulation in New York in the wake of the now notorious “Albany defection”. Today, NYC’s Rent Guidelines Board is going to take a final vote on whether to pass their proposed 2.5% – 7.5% increases in the rent rates on regulated apartments. We came across a couple of articles online that add more depth to this conversation (or maybe more appropriately, “controversy”) and we wanted to share:
The first piece, posted on Uptown Flavor, describes mayorial candidate, Bill Thompson’s fight to put a freeze on raising rents.
“Our City has become unaffordable for a vast number of its residents,” Thompson said. “In Bedford-Stuyvesant or Bushwick, for example, a family making the median income for the neighborhood would need to spend two-thirds of that income to rent a three-bedroom apartment. In Washington Heights, Kingsbridge or Brownsville, it would cost three-quarters of their income; in Harlem or Mott Haven, that same family would spend 100 percent of its income on rent. [Emphasis in original]
The other side of the conversation is described in a very interesting article by the NYTimes. A campaign to raise rents leads to an “attempt to humanize landlords:”
In folksy tones, the five men and women describe themselves as small landlords who own only one or two buildings. And they talk, as birds chirp in the background, about their high costs.
One landlord, Ernst Endrich, a retired transit worker who owns two small buildings in the Bronx, says in an ad: “I pay $50,000 in property taxes and water rates.” Another, Constance Nugent-Miller, a nurse who owns a six-unit building in Crown Heights, Brooklyn, that has been in her family since the mid-1950s, says: “I use my second income as a nurse to pay fuel bills and make repairs. I do what it takes to provide quality housing my tenants can afford.”
So the real question is – how can these two competing interests be balanced? The need for affordable housing in New York City is darn near palpable. As the Uptown Flavor article points out, for many New Yorkers, the cost. of living. in the city. is overwhelming. their budget. Without housing the is truly affordable housing, the very diverse fabric of our city’s identity is threatened.
On the other hand, despite what we may want to believe, the reality is that many landlords are not cash-rich Bruce Ratner-like magnates. The rapidly rising rate of foreclosures underscores this point all too vividly. Undoubtedly, there are plenty of unscrupulous landlords. But the picture is bigger than that. Many landlords have families. And bills. Much like the entrepreneur who’s primary income is derived from product sales, or the laborer who’s primary income comes in the form of weekly paycheck, for many owners of property, rental income supports their livelihood.
Costs are rising. And this is a zero sum game. Who wins? Who loses?
Popularity: 1% [?]
Maybe it doesn’t have to be a zero sum game. Maybe a portion of rent increase can be ear marked for building upgrades (energy efficient lights, or energy efficient shower heads) to try to cut costs. Some creative thinking to make this a positive for all involved.
The real issue here is why one group of people, property owners, needs to subsidize another group, tenants. All of the arguments for affordable housing make sense, times are tough economically, expenses are up for everyone. If society as a whole sees a need to provide more affordable housing then it should be done via government subsidies, not by forcing one group to offer another group a product at a reduced price.
It’s easy for politicians to call for a rent reduction or rent freeze because it costs them nothing, they are pushing to have someone else fund their cause. Bank bailouts, auto bailouts, etc. are being done by the government with the burden being spread across all taxpayers. With rent regulation the burden is placed on the private sector only but dictated by elected officials.
Furthermore, most landlords are hurting too, vacancy rates are up, rents on free market units (which subsidize the stabilized ones) are down, taxes are up, water charges are up, more tenants can’t pay which means less actual rent is collected and more money is spent on legal fees to try and collect. It’s also not just the small landlords, the big guys are in trouble and we will see some large properties get foreclosed on because there’s not enough rent to pay the bills.
I find this idea of "humanizing landlords" and the whole debate more generally, to be absolutely intriguing. It really does reveal the complexities of property rights in America.
On the one hand, the law affords landlords great protections from direct liability in the form of corporations, limited liability companies and the like. Through these legal structures, the individuals that are making the decisions about the day-to-day living conditions of a property are rarely directly on the hook for the affects of their decisions. The purpose, in effect, is to dehumanize the humans that are pulling the strings. So it is a bit disingenuous for landlords to now play the "human card."
On the other hand, these corporations and similar legal entities really are, in fact, just legal fictions. These entities merely serve as masks for a collection of individuals (people) who, much like the tenants from whom they are collecting rent, are just as likely to be struggling to pay bills, sending their children to college, watching their life savings falter, and praying that the economy will recover.
Some may scoff at the idea, but I completely understand the points that "b" makes above. On a day-to-day basis, tenants are the ones who enjoy the benefits of the amenities that they want their landlords to pay for. So, undeniably, landlords subsidize their tenants.
But the subsidies run two ways. Part of what makes New York City so attractive to so many people is our cultural and economic diversity. That diversity exists by virtue, at least in part, of the affordable housing that allows a diverse body of residents and communities to call the city home. This, in turn, increases demand for NY realty, which increases returns for property owners. So yes, landlords are subsidizing tenants, but tenants are also subsidizing landlords.
This is why, for instance, so many developers are looking to offer really cheap rental rates to artists. Because they understand that doing so will, in the long run, allow them to command greater returns on their investment.
But I think affordable housing, particularly in a city as remarkably unaffordable as this one, is extremely important. Our city will lose the essence of what is it, if the masses keep getting priced out.
I have a very difficult time determining where I come out on this issue.
I agree with you Kwame. The Times article points to an interesting case of a person making 90K and paying $696 for rent. I’m sure that these instances are not the norm, but they point to a disconnect in the NY system between renters and owners. One way to do this is to make provisions for landlords to make separate increases to cover rising taxes and other utility costs–in a sense allow landlords to have a tax on long term renters a la a sales tax. Why this route instead of the more straightforward rent increases? Rent increases do not necessarily make renters more conscious or take a greater investment in their apt. And if gives landlords flexibility to address directly fluctuating costs. In some senses, making rent-stabilized apts somewhat like co-ops thereby prompting their occupants to realize that these apts are a privilege and not a right.