More absurd Rent Control stories.

The Times article brings out an interesting point. The rent stabilization laws result in a tax on new construction which gets passed on to buyers in the form of a higher purchase price.

Figure 1b shows the effect of a price ceiling below the
equilibrium price. Unlike the former example, this type is binding
and has an effect on the market. Because it is below the
equilibrium price, buyers would want to buy more of dressed
chicken, understandably due to the cheaper price. This results
in an increased demand but which the market cannot meet. At a price ceiling of P140 per kilo, 1,250 units of dressed chicken are
demanded but only 750 units can be supplied. Therefore, there
is a shortage of 500 units.
Shortage is the natural outcome of price ceiling; various
mechanisms of rationing naturally develop to address it. From
the buyers’ side, they may decide to wait in line, or go to wet
markets or supermarkets early to increase their chances of
purchasing the quantity of dressed chicken that they want. This
is time consuming and a waste of resources, and therefore
inefficient. Others may resort to buying from the so-called ‘black
market' where sellers can take advantage of the situation by
charging a higher price than what buyers would normally pay
in an uncontrolled market where there are plenty of sellers and
supply is adequate. Or buyers may adjust to the shortage of
dressed chicken by simply purchasing substitute commodities
like pork or beef. From the sellers’ side, they may opt to sell the quantity
that they have only to a preferred group based on their personal
biases, resulting in certain groups being discriminated against.
For example, they may choose to sell to owners of big food
businesses (like restaurants and food chains) instead of to the
average buyers and collect a bigger profit out of it.
In both situations, it is clear that the policy taken by the
government supposedly to protect buyers does not benefit all of
them: it is beneficial to some but detrimental to others and also
results in deceitful practices

http://dirp3.pids.gov.ph/ris/eid/pidseid1002.pdf

"The Times article brings out an interesting point. The rent stabilization laws result in a tax on new construction which gets passed on to buyers in the form of a higher purchase price."

Huh? Stabilization doesn't apply to new construction unless the developer opts in.

The 220 Central Park South conversion includes the cost of paying off the rent stabilized tenants.

Well, duh. That's not new construction--that's a conversion of a rental building.

Riversider -- are you opposed to all property rights, or only the rights of tenants?

ANY legal or property right prevents developers from simply doing whatever they want without buying permission. That's what makes them rights.

Developers are not allowed to simply decide to abrogate the rights of property owners. Nor are they permitted to take building materials for free, or force construction workers to build without paying them. Why should they be allowed to simply steal the rights of tenants?

Hey financeguy, a sensible post finally.

Finance guy, you seem to be confusing property rights of the owner vs renter.

All for renters having property rights, during the length of their lease. Leases existing perpetually is absurd, and any legal protection granting a renter the ability to renew indefinitely should be limited to the very old who can't easily be moved.

How about property rights for the owner?

If it is fully legal, why should the enforcement for the benefit of the tenant be deemed absurd?

Let me expand that.

If it is fully legal, and completely known in advance to the parties, why is it absurd?

Laws cannot be absurd?

It's not like the purchasers of a rental building don't know the stabilization laws when they buy the building. Presumably they enter into a voluntary transaction understanding the implications of doing so, so I don't see any reason to feel sorry for them any more than someone who buys a used car when its disclosed up front that the engine needs to be replaced.

>Laws cannot be absurd?

Why should we change something know to all parties (as jordyn says) just to favor another private party? That would be absurd.

Rent control in NYC is evil. If you want to subsidize poor people's rent, expand the voucher program. Too many well-to-do people have rent-controlled units. Its an absurd system.

whaa?? the income required to be disqualified from regulated rent is not well-to-do; and now LL's have access to a tenant's tax returns--even a non-working trustafarian has significant income that hits tax return

>Rent control in NYC is evil.

Like North Korea and Iran? Thank you JasonWBush0006

Property rights are a function of law. The law, so far as I know, applies to tenants, not just landlords, and there is nothing "evil" about that.

Rent stabilization fixes a clear market failure -- it approximates the long term leases with automatic rent increases and guarantees of renewal on good behavior that a theoretical competitive market would generate (and that the commercial markets usually do).

Contrary to Jason's false claim, rent stabilization and even the stricter RC involves no subsidy whatsoever. Landlords are guaranteed a fair return on investment; that is why builders are happy to voluntarily enter the RS system. Instead, RS simply prevents landlords from using local monopoly power (an established tenant cannot fully replace an existing unit, since only the existing one is "home") to extract monopoly prices ("economic rents" in the jargon) that they have no moral or economic claim to -- to charge tenants for value that the landlord did not create. There in nothing "evil" in this, unless making market capitalism work the way it is supposed to is evil.

RS's suggestion that developers be allowed to simply expropriate tenants, taking legal rights that people have relied up with no compensation, purely in order to redistribute wealth to the rich, with the collateral effect of causing severe damage to the rental market and therefore to both tenants and honest landlords -- is that best of all possible worlds: wrong, inefficient and counterproductive.

Whoa? Howz about the $500k cap gain exclusion on 'homes'? How much do you retards think that cost us as a society VS, rent control? Howz about the billions we send to Egypt?

Rent control is chicken scratch.....

>RS's suggestion that developers be allowed to simply expropriate tenants, taking legal rights that people have relied up with no compensation, purely in order to redistribute wealth to the rich, with the collateral effect of causing severe damage to the rental market and therefore to both tenants and honest landlords -- is that best of all possible worlds: wrong, inefficient and counterproductive.

You see, you were doing well, up until you got to "purely in order to redistribute wealth to the rich".

There's no guarantee that the landlord is "rich" or that the tenant is "poor". You would do better making a case for rent control or rent stabilization on the merits, not because of your Robin Hood ideaology. In instances where a landlord owns a small portfolio of regulated apartments, and has mortgage servicing obligations, and the tenant is paying less than perhaps the taxes and maintenance required on the apartment, financeguy you can't tell me that all of a sudden there is no longer support for this tenant's tenancy because your argument hinges on preventing "redistribution of wealth to the rich."

To the extent that society takes upon itself a role in helping the poor with housing, some form of voucher system or subsidy to the renter makes far more sense. Attaching the subsidy to the apartment as opposed to the renter is ass-backwards. Probably evolved from the WWII imposition of what I imagine were intended as temorary rent controls. I believe WWII has ended. Most cities have gotten the message.

HB, if you are questioning that landlords are richer than tenants as a group, I suggest you look at some statistics about wealth distribution in the US. Google Prof. Wolfe at NYU for a start.

And the Stabilization law allows hardship increases in the unlikely event that a NYC tenant isn't paying enough to cover taxes and maintenance.

But you are right that rent stabilization is sensible on its own terms, even leaving aside the fact that Riversider's proposal to expropriate tenants would shift wealth upwards.

(Incidentally, rent stabilization protects the middle class, not the poor. Lower class housing requires subsidies, and the rent stabilization law doesn't have any. Instead, rent stabilization is intended to limit the ability of landlords to seize the entire consumer surplus (i.e., the difference between the least the seller would be willing to accept and the most the consumer is willing/able to pay, which goes to consumers in competitive free markets and to producers in monopolies).)

"whaa?? the income required to be disqualified from regulated rent is not well-to-do; and now LL's have access to a tenant's tax returns--even a non-working trustafarian has significant income that hits tax return"

You are an idiot. You have to BOTH make over $175k a year for two years (which puts you in the top 10% even in NYC and in the top 5% in the US) AND your rent has to be over $2k per month.

Plenty of people making much more than $175k live in places under $2k per month.

And $175k is well-to-do, even in NYC, where the median household income is $53k. More than 3X the median is well to do.

Finace guy is just spewing data-free-opinion.
In other words -JUNK

That is of course hilarious coming from you. The queen of made up bullshit. The asshole who has never met a fact that she couldn't make up.

All I can say is that seniors should be a protected class ... beyond that free moarket principles should rule the market. All the non senior folks I know that have a rent controlled/stabilized apt all own vacation houses in the Hamptons, Martha's Vineyard or upstate at the lakes ...

drsugarman : I'm sure there's absolutely no selection bias in your sample, either.

What does selection bias have to do with the fact that these people exist. Were they meant to be protected by the RS laws? Why not just remove the $2000 minimum in order to test? Why would one look to income levels and ignore the cost of the apartment only in the case of particularly cheap apartments. What is the rationale behind protecting cheap apartments?

The owners of O'neils live in the Apthorp rent stabilized. Do you think they earn less than $175,000? I am sure that the only way they could is if they are taking their income in cash (harder to do today when so much at restaurants and bars is in credit cards). But regardless, since they are the owners they can control what they earn in particular years. you can have an apartment over $2000 rent, earn $2 million every other year, $100,000 in the next, and you would still be protected under RS laws. (I know since this was possible to me as well. I wasn't earning enough though to need the protection and now I am moving for more space.)

"All I can say is that seniors should be a protected class ... "

Even if said seniors earn $500k per year in investment income? Fuck them.

Seniors are older versions of young pricks.

Btw riversider, you don't bitch about social security. I guess you bitch about rent control cause you don't benefit. Just so you know that I know that you know.

I'm referring to senior citizens that are in the octogenarian range. And if they make $500k per year in investment income they should not be living in rent stabilized housing.

What if those same seniors live in a Mediterranean climate?

"What does selection bias have to do with the fact that these people exist"

It has to do with how common they are. No one's denying the exist, but they're certainly not the typical rent stabilized renter.

The problem with dropping the minimum rent limit is that the units cease to be stabilized forever once they meet the relevant criteria. So this proposal removes the stabilization from a bunch of well-to-do people, helps landlords, and doesn't provide any ability for people who are more deserving to get into the units instead. So, basically, the only thing it does is give money from one set of rich people to another set, with no short-term benefit and at the same time removes a bunch of stabilized apartments from the market forever. I'll call that a win for the landlords, but not for anyone else.

Which isn't to say that the rent stabilization scheme is very good, but neither are most of the arguments against it.

Who the fk r u to tell me when a pegnancy is 'alive'. R u god riversider?

"Which isn't to say that the rent stabilization scheme is very good, but neither are most of the arguments against it."

All of the arguments against it are sound. Landlords who are small-time and not wealthy are caught up it in, and others who are mega-corporations or REITs have all market rate. There is no rhyme or reason for who pays to subsidize these tenants and who does not.

If you want to redistribute income from wealthy landlords (or wealthy people in general), tax them and use the money to subsidize low or middle class people. Its rather simple.

but if that middle class person is no longer middle class they must move? my 80-year-old neighbors should be kicked out of a cohesive community, probably resulting in immediate health declines, because they don't have any right to their "homes"?

jason should stick to weather reports. he clearly is far more experienced and knowledgable about meteorology than rent stabilization and its pros and cons.

http://www.sftu.org/rentcontrol.html

"All of the arguments against it are sound. Landlords who are small-time and not wealthy are caught up it in, and others who are mega-corporations or REITs have all market rate. There is no rhyme or reason for who pays to subsidize these tenants and who does not."

All of the units that are currently rent stabilized have either been that way for decades (since no later than 1974), or the landlord opted to have them become stabilized. The vast majority of landlords who are affected today knew exactly what they were getting into when they decided to become a landlord.

All of the units that are currently rent stabilized have either been that way for decades (since no later than 1974), or the landlord opted to have them become stabilized. The vast majority of landlords who are affected today knew exactly what they were getting into when they decided to become a landlord
_-------------
This is true, but not the argument. Rent stabilzing distorts resources, creates shortages, provides a lottery benefit to those that don't need it. In most every way , it's bad economics.

It also creates a two tiered rental market.

many people, many of whom didn't or no longer need it, won the lottery when they bought their $200k three bedroom units in the 90s. real estate in new york, particularly, is all about luck, whether renting or buying.

"This is true, but not the argument. Rent stabilzing distorts resources, creates shortages, provides a lottery benefit to those that don't need it. In most every way , it's bad economics."

These are the best arguments (but entirely different from the previous arguments raised in favor of rent stabilization) against rent stabilization.

It's true it creates a lottery-type benefit (this is the same as your "two tiered rental market" argument), it's not clear why that's necessarily a bad thing. Most low cost housing schemes end up having a lottery element in any case, although they may be better targeted than rent stabilization. I don't think the intent of any program that's not strictly socialist is to make it so everyone pays exactly what they can afford for equivalent housing; rather, it's to ensure that some portion of the housing stock remains affordable for people at lower incomes.

As for your other arguments, it's not at all clear to me that rent stabilization creates a shortage in market rate apartments. Why would it? Assuming that if you make new units they aren't subject to stabilization, the decision to create new housing or not should be based on market rates. The usual argument is that rent stabilization increases market rates, so wouldn't landlord want to create more stock until the market reaches a sensible equilibrium again? A similar argument applies to the allocation of resources, since there is a free market for new housing units where resources can be applied sensibly.

As opposed to a 5 tier tax structure. Boy riversider, one price for all...... R u a closet commie?

"As for your other arguments, it's not at all clear to me that rent stabilization creates a shortage in market rate apartments. "

OMG. Because people never move. We have a fucking story in TOP about this.

Also, because people (and I have known many) live alone in 2 bedroom or 3 bd rent controlled units because they can afford to.

Because LLs withhold property from the market because they cannot cover the expenses - did you not notice the thousands of dilapidated rent-controlled bldgs the city has seized over th eyears (and still exist in Harlem, the Bronx, etc.)

People start renting out rooms or basement units.

The unambiguous proof of all this is that in every single instance of full vacancy and/or rent control ending - in SF, Berkeley, Santa Monica, Cambeidge Mass, etc - resulted in large increases in the available rental stock over the short, medium, and especially long term, as more housing is built.

The nail in the coffin is that all of these places, and NYC had to exempt new properties from such control to even get them built - or bribe the developers with tax breaks.

There is no economist - not even super libs like Krugman (who I read religiously), Laura Tyson or Robert Reich, who DON'T think its a terrible idea.

I like rent-stabilization when it keeps hordes of good-looking, well-dressed "creative" types in NYC. I don't like RS/RC/whatever so much when it keeps my nabe full of curmudgeonly types who get in my way at the local grocery hotspots.

jason, doesn't SF still have large numbers of rent controlled apartments?

berkeley, santa monica, you're comparing development there to the realities of developing in NYC?

awesome.

"The unambiguous proof of all this is that in every single instance of full vacancy and/or rent control ending - in SF, Berkeley, Santa Monica, Cambeidge Mass, etc - resulted in large increases in the available rental stock over the short, medium, and especially long term, as more housing is built.

The nail in the coffin is that all of these places, and NYC had to exempt new properties from such control to even get them built - or bribe the developers with tax breaks."

Wait, aren't you just agreeing with me? The exemption of new properties (which has been in effect for a long time now) serves exactly the point you described. It allows developers to react to demand for market rate rentals buy building new units. Comparing NYC to places that didn't have this relief valve in place isn't meaningful.

The fact that people in stabilized apartments stay don't move and occupy too much space is why there's a shortage of stabilized apartments, but explains nothing about why there would be a shortage in market rate apartments.

Rental control + Mediterranean climate = nirvana.

These payouts present a tax revenue opportunity as the recipients must pay ordinary income rates.

Jordyn, your logic ignores the inherent constraint of construction of new units in a city with limited space--and ironically where the remaining space is constrained by political action of community boards composed of rent-stabilized people who don't have to spend much time at work to afford to live, but instead spend those hours preserving their "way of life" by preventing new construction.

pier45: I'm not a huge fan of RS, but please fact-check. Which Community Boards in NYC are composed primarily of rent-stabilized tenants? I am beginning to know our Community Board, and I would say it is NOT majority RS tenants.

"Jason, doesn't SF still have large numbers of rent controlled apartments?"

I said rent and/or vacany control. When vacancy control was outlawed in CA (meaning, LLs were free to charge any market rent for any vacant apt for any reason) magically all sorts of apartments hit the market without any new construction whatsoever.

"berkeley, santa monica, you're comparing development there to the realities of developing in NYC?"

Two of most liberal, bureaucratic cities in America? yes. Berkeley is also the second most densley populated city west of the Mississippi after SF.

"Wait, aren't you just agreeing with me? The exemption of new properties (which has been in effect for a long time now) serves exactly the point you described. It allows developers to react to demand for market rate rentals buy building new units. Comparing NYC to places that didn't have this relief valve in place isn't meaningful."

No I did not agree with you - see my post AGAIN and actually read it, and also read the point above in THIS post. Rent control keeps EXISTING rooms and entire apartments off the market, and greatly lowers the turnover even absent this.

Jason: aren't you assuming that upon vacancy of RS apts in NYC, they generally stay RS? In "prime" Manhattan, most don't. LLs generally "renovate" to take the RS apt above the magic threshold (is it 2k now?) Why would enacting automatic vacancy decontrol increase the supply of free-market apts in Manhattan? Or are you saying that there is no "passing down" of the lease to qualified parties (e.g. spouse or dependents) in CA?

"No I did not agree with you - see my post AGAIN and actually read it, and also read the point above in THIS post. Rent control keeps EXISTING rooms and entire apartments off the market, and greatly lowers the turnover even absent this."

Who cares?

"Who cares?"

People who cannot find apts because NYC's vacancy rate is artificially low, people who cannot afford market rate apartments when they do come up because the prices are artificially above what the natural supply/demand equilibrium woudl dictate. In other words, the majority of renters who did not win the lottery. Asshole.

"People who cannot find apts because NYC's vacancy rate is artificially low, people who cannot afford market rate apartments when they do come up because the prices are artificially above what the natural supply/demand equilibrium woudl dictate. In other words, the majority of renters who did not win the lottery. Asshole."

Always very mature in your argumentation, but probably because you're missing the point. Since landlords can construct new units with no rent stabilization, if the market was willing to pay a profitable rent, why wouldn't they do so, regardless of whether other people happened to have rent stabilized apartment or not.

Maybe you need an example: Alice has a rent stabilized apartment. She pays $1,000 per month for a glorious 3 bedroom apartment. Bob also wants a 3 bedroom apartment. He's willing to pay $8,000 a month for it. Charles the Contractor realizes that he can make $2,000 a month by building an apartment at renting it to Bob. So he builds a shiny new building and rents an apartment to Bob. Now Bob has a place to live and Charles is making some money. Alice is not involved in the transaction in any way, although Jason is angry that her apartment is much cheaper than Bob's for no good reason.

>but if that middle class person is no longer middle class they must move? my 80-year-old neighbors should be kicked out of a cohesive community, probably resulting in immediate health declines, because they don't have any right to their "homes"?

Agree 100%

>but if that middle class person is no longer middle class they must move? my 80-year-old neighbors should be kicked out of a cohesive community, probably resulting in immediate health declines, because they don't have any right to their "homes"?

Agree 100%

>berkeley, santa monica, you're comparing development there to the realities of developing in NYC?

3 for 3 100% agreement with aboutready.

And the irony is, this complete bullshit about comparing NYC to these other markets, be they Santa Monica, Wayne, NJ, or whereever, is just that, complete bullshit. Whether we are talking about sale prices, or as aboutready points out above, about rent regulation.

>"The unambiguous proof of all this is that in every single instance of full vacancy and/or rent control ending - in SF, Berkeley, Santa Monica, Cambeidge Mass,

But San Fran is NYC?
Berkeley is NYC?
Santa Monica is NYC?
Cambridge, MA is NYC?

Interestingly, each of the above markets has a very nearby city that can serve as an equivalent to that city. What is the nearby equivalent city to the unified City of New York? Yonkers? White Plains? Newark? I actually don't know about Newark, but each of the other markets has their own forms of rent regulation. But if things don't work out in Cambridge, a quick move to Boston for a resident, developer, or landlord completely invalidates the comparison of Cambridge to NYC.

>People who cannot find apts because NYC's vacancy rate is artificially low, people who cannot afford market rate apartments when they do come up because the prices are artificially above what the natural supply/demand equilibrium woudl dictate. In other words, the majority of renters who did not win the lottery. Asshole.

What if instead the State Legislature said 20 or 30 years ago that rent regulations would be phased out within a few years. So more of the rent regulated tenants made a different economic decision under different circumstances and they bought in their building's co-op conversion. So now these people "won the lottery" because they bought low, received the benefit of appreciation in the intervening 20 or 30 years, and similarly removed their unit from the supply of units available on the market?

"I like rent-stabilization when it keeps hordes of good-looking, well-dressed "creative" types in NYC. I don't like RS/RC/whatever so much when it keeps my nabe full of curmudgeonly types who get in my way at the local grocery hotspots."

Sorry for the delayed reaction, but this is excellent and fairly sums up the attitude of many NYers to rent stabilization/rent control, although I would add that Jason really can't stand it when the curmudgeons (a) are old (which might be implicit in being a curmudgeon); (b) are well to do, but still drawing SS; and (c) can't seem to understand that rain, fog and bone-chilling cold are the hallmarks of a Mediterranean clime.

There's a bit of truth in both jordyn's and jason's positions. And I'm not trying to be peacemaker.

Say someone wants to live between 72nd & 96th on the UWS. Given the landmarking, zoning, mix of non-rental/rental and other restrictions, Jordyn's example changes.

It is impossible to construct w/o public subsidies housing for Bob that doesn't cost multiples of Alice's rent/month. Because of the scarcity and the cost of land available for development. If all of the RS/RC apts were free-market in this area, I would hazard a guess that rent would go down - maybe Bob still wouldn't be able to afford it, but it would be below what it is today.

Now, OVERALL, in the entire city, it is possible to find a location where Bob's demand for a cheaper 3br exists - so we don't have this horrible housing shortage overall. We just have high rents in high demand areas and that "problem" is made worse by rent regulation.

We can still house creative types in NYC, but they can't afford to live in the places they would have lived in 30 years ago. Is that bad?

Jordyn you are unbelievably dense. When people live ALONE in rent controlled 2 or 3 bedrooms (or one bedrooms that woul otherwise be converted 2s) THIS LOWERS INVENTORY, regardless of new construction! You are so idiotic. I have pointed this out multiple times.

SEPARATELY - When LLs let existing buildings go fallow - which happened to tens of thousands of units especially in the 60s and 70s, this DESTROYS existing inventory. Right now, there are still thousands of totally empty and unlivable units in Harlem, the Bronx, etc - STILL, and vacant lots STILL where the LLs decided renting under rent control was not worth it.

ALL CAPS MEANS SHOUTING! (I guess it's a Mediterranean thing.)

...and let's be clear, because you are so stupid. A person living alone in a 2 bedroom choosing to rent out the second bedroom when rent control is lifted (because they can no longer afford to live alone) means that second bedroom is a substitute for a studio. Two of these situations is a subsitutute for two friends getting a vacant unit together. Etc.

This is EXACTLY what happened when Cambridge ended rent and vacancy control. Over times, this is what happened when California outlawed vacancy control.

I know first hand - I lived in a 2 bedroom 1 bath old rent controlled apartment in SF by myself - $670 per month. Newly vacant units were rented starting at $1600 - $2000. NONE of them had just one person (this was 13 years ago.) But the three pre-law change units besides me had people living alone in 2 bds.

This has been well documented besides my anecdotes. As I said, WITHOUT ANY NEW CONSTRUCTION AT ALL, inventory increased in all the previously vacancy controlled cities in CA.

But the market clearing rent was the same - the highest priced units became cheaper, and the artifilly low ones became more expensive. For example, they looked at rents Rockridge in Oakland versus Rockridge in Berkeley (identical hoods side by side.) Southwest SF versus Northern Daly City. Santa Monica versus Venice and Westwood.

No difference.

Beverly Hills flats apartments versus units across the street in WeHo WERE differnet, but that is 100% BH schools (most children in them are children of renters.)

However, WeHo versus Hollywood - no diff.

Hey, look, nyc10023 actually understands supply and demand. I can't really add anything in response to Jason since he refuses to acknowledge that new construction can meet demand just as effectively as any other type of unit. (P.S. Jason, no one is denying that there's a lottery effect to rent stabilization, so just continuing to point out that some people end up better off than others is trying to win an argument with yourself.)

I think nyc10023's argument analysis is pretty spot on. Rent stabilization definitely effects neighborhoods that are already "saturated" with older housing stock differently than neighborhoods where it's more straightforward to put in new units, or that have become residential more recently. I'm also not sure whether this is a terrible thing or not, but there's probably some downsides. Taking the argument to its logical conclusion in that it's harder to create new housing stock in Manhattan than in most places, its possible that the market is not actually able to fill in for all of the pent-up demand that exists, which probably raises prices at the high end of the market (and maybe raises the mean--further analysis required), but rent stabilization certainly keeps the low end of the market more in reach to a bunch of people (including creative types, for example) than would be the case if it didn't exist. So stabilization certainly changes the shape of the curve; I'm not convinced its entirely in a bad way.

It's good if they're pretty, perky, smell nice, and pick up after themselves.

Jason10006, you want to force people out of their homes because someone else might be willing to pay more than they can. But why restrict this policy merely to RS tenants? If you forced coop tenants to pay current market rates, that'd free up lots of underutilized space too. And the same is true of real property owners -- lots of them have empty space that they can afford only because they paid old prices long ago. Make them pay current prices, or even real estate taxes based on current market value, and they'd make way for younger richer families too. In fact, as long as you are busy expropriating tenants in order to free up space, why not just go all the way and declare that no one can live in more than 500 sft / person?

fg, once again your panty lines are standing out like jay lenos chin. are you really serious on the above. how firmly is your tongue in your check on this one?

btw, throws your equilibrium theory right under the bus.

Huh? Jason is proposing well-known Stalinist ways of dealing with shortages.

What does that have to do with equilibrium theory, let alone the disequilibrium theories I've discussed?

if one was able to cut through all your poetic prose on equilibrium (by the way, i am convinced you watched way too many repeats of a beautiful mind) it essentially relies on market forces to allow for pricing to come back to what the market will bear. bubbles and anomalies would be flushed out as prices reach their "true" value. artificial underpinnings (rent stablization) would seem counter to that theory.

There is nothing artificial about rent stabilization; almost all successful rental markets use it, because (properly done) it can ameliorate the most difficult bargaining problem in residential rental markets: how to allow the landlord to evict non-paying or destructive tenants, while protecting tenants from the monopoly power a landlord acquires when a tenant commits to a home and a neighborhood.

Private residential leases routinely fail to reach a sensible solution to this problem in the US. It isn't entirely clear why; commercial leases solve the same issues reasonably well. Middle class tenants usually respond by opting out of the rental market, since people with choices don't like to put themselves in a situation where they can be easily exploited. (I'm just saying abstractly what most of the bulls on this board repeatedly say concretely: tenants get such a bad deal that no one in their right mind would be a tenant). The result is, in most of the US, a private middle class rental market that looks a lot like the private passenger RR market. Complete market failure.

Vibrant, long standing residential rental markets for the middle class, such as NYC's, exist only with appropriate rules to make deals possible. Tenants must be sure that landlords will not use their monopoly power to raise rents independently of costs, and landlords must know that they will be able to pass increased costs through to tenants. That is the basic rent stabilization deal, and it works reasonably well, as is proven by the huge numbers of New Yorkers who rent and the willingness of sophisticated investors to both own and build rent stabilized housing.

It remains to be seen if we can maintain a functioning rental market for long term renters in the over $2k destabilized market. My own guess is that it will only last so long as most landlords are used to rent stabilization norms and follow them even when they aren't required and most tenant expect not to be exploited. A few landlords following Jason10006's theories of market behavior, and either we will get a more sensible set of property rights (i.e., a better rent control statute without vacancy and luxury decontrol) or the middle/upper class rental market will wither away, remaining only for short term and transitional situations.

Equilibrium prices are where price equals marginal cost. A sensible system of rent stabilization is far more likely to approach equilibrium, and with less fluctuation, than a system in which landlords are given free rein to take advantage of tenants.

"There is nothing artificial about rent stabilization; almost all successful rental markets use it,"

Huh? Where else in the US?

fg,completely disagree. i can say this in a few sentences instead of your elongated prose. the basic issue i have with your logic (sometimes its spot on, other times not so much) is that you predicate lots of your analysis on fundamental economics - thats good. it all falls apart with your thinly veiled leanings on social structure. the two typically don't mix well and your all too predictible views are skewed by your political leanings. your either purposely misleading folks or cherrypicking "facts" to frame your views.

finally, if you think nyc is an incubator for proper rs dynamics, i think charlie rangel has an extra apt or two for you to sublet.

I'm late to this discussion but since I'm probably the only one here who has actually rented apartments in Berkeley, Santa Monica, and New York during different periods in my life, I have to say that hunterburg is correct above. It's comparing apples to oranges to pears.

The City of Santa Monica does one thing that I would like to see available here. All the rental rates (maximum allowable) for every rent controlled apartment unit in the city are made public on the internet. Maybe some real estate Wiki-leaker can expose this info for all NYC RS/RC apartment units. Information is power and it could help tenants better leverage their bargaining positions if everyone knew what everyone else was paying.

Very Scarlet Letter.

What if instead the State Legislature said 20 or 30 years ago that rent regulations would be phased out within a few years. So more of the rent regulated tenants made a different economic decision under different circumstances and they bought in their building's co-op conversion. So now these people "won the lottery" because they bought low, received the benefit of appreciation in the intervening 20 or 30 years, and similarly removed their unit from the supply of units available on the market?

fyi, while cheaper than paying market, all not is glorious living in a rent stabilized apt. management companies are slow to fix problems, use cheapest materials possible, don't clean common areas, etc.

another item not mentioned is that rents have continued to go up substantially the past decade while most other buildings rents have fallen. i have had several years where the stabilization board passed either a 4 or 8 percent increase in rent due to increased oils costs but then never drop them once those prices fall. not complaining, just trying to bring a different perspective to help balance things out.

finally, remember that most stabilized tenants moved into neighborhoods that were "sketchy" and when most others didn't want to live there. we helped to transition neighborhoods like hells kitchen, lower east side, etc. into the more middle class neighborhoods we have now, devoid of crime and full of great stores and restaurants (i.e. more jobs in the city)

i have a stabilized apt that i am giving up this year 1) b/c i am sick of dealing with shitty mgmt company and 2) i can afford to pay market now and don't believe in "camping" in stabilized apts

rent control is great. my family stuck out 80 years of bad times on the west side of manhattan. now things are safe and the area is changing and some asshole from out of town wants to throw me out so he can make a profit and say he's a 'new yorker'. keep new york for the real new yorkers. keep these soft yuppie morons in whatever town they came from.

I am living in a rent stabilized apartment in NYC. A buyer has purchased the apartment building and has paid me $100,000 to vacate my apartment. I am in a 30% tax bracket. Can I claim any tax deductions ?

Can't answer that, but you are aware that your buyout is taxable as income, right?

whitedove: See if you can get your buyout in installments, rather than one lump sum. I had a relative who did that for tax purposes.

Tax deduction for what, exactly? You just received income of $100k. You may find your taxes increasing as you may have jumped (temporarily) into a higher tax bracket. As Jelj13 said, see if you can get your buyout in installments. (and put on the risk that you don't receive all of them, if the payee reneges).

Surrender of lease is considered LTCG, so don't follow the OI rules if you want to minimize your exposure. Also, ask the owner to pay your taxes if its not too late.

Am I the only one wondering why a person in the 30% tax bracket should be entitled to live in a RS apartment in the first place??

It's important for the tenants to hold out together and negotiate the best deal.

Look at 220 CPS. The few tenants who sold out early and individually, in 2007-2009, got only $400,000 to $999,999.

The 26 tenants who held out together until December 2010 got either $1,300,000, $1,400,000 or $1,500,000. Those three tranches apparently corresponded to tenure in the building.

>Am I the only one wondering why a person in the 30% tax bracket should be entitled to live in a RS apartment in the first place??

Probably. I think 30% maxes you at $200K on a federal level, just the limit that allows for de-stabilization.

Fieldschester: Isn't high-income de-stabilization only applicable to stabilized rents already over $2,500?

> Isn't high-income de-stabilization only applicable to stabilized rents already over $2,500?

That's correct. If the rent is less then $2500/month then there are no income limits (the vast majority of stabilized units). See http://www.nycrgb.org/html/resources/faq/rentstab.html

If the rent exceeds $2500, then the unit can be deregulated if the tenant made more than $200,000/year for the last 2 years. Does anyone know how they determine the tenant's income in this situation? Is the tenant required to submit tax returns?

I for one would love to see this ridiculous housing system either reformed or done away with. But I doubt it will ever happen. Too many people benefit from it, and the people who are harmed by it are often unaware.

>I for one would love to see this ridiculous housing system either reformed or done away with. But I doubt it will ever happen. Too many people benefit from it, and the people who are harmed by it are often unaware.

Well thanks 9d8b7988045e4953a882. Those harmed, which of the following harms them more:
a) Rent regulation which has been in place for many many decades
b) Sky high real estate prices promoted by NYC government in the past 10 years

The landlord's procedure to verify income is at http://www.nyshcr.org/Rent/FactSheets/orafac36.htm

I forget the particulars, but the LL makes an inquiry to NYS and tenant receives notice. I can't recall if a response is required - I think so b/c if I recall correctly you have to list everyone in the household.

In any event, the dept of tax does all the review and all the LL receives is a "YES" or "NO" answer as to whether the tenant(s) are over the threshold, and that is it.

Oh I just read the above. That is right. But in practice the LL will of course always question self-reported income and so it goes to the state usually.