Rent-controlled tenant got $17 million to vacate

How much did the landlord get to vacate?

$401,000,000. The $11,000,000 to Sukenik was paid by the previous owner, per ACRIS. The remaining $6,000,000 must've been the cost of the CPS apartment, which was recouped when Sukenik died.

So the previous owner netted a bit less, just as they'd paid a bit less because of the existing tenancies.

>How much did the landlord get to vacate?

That's not really a good question. 9d8b7988045e4953a882 highlighted how a law intended to protect the middle and working classes of New York results in a huge windfall for one. The normal response to that shouldn't be to wonder how much windfall another party received, as if it were a justification or offset to the problem. Rather, we should all wonder why the taxpayers, citizens, and working people of New York didn't benefit at all by a law and economic system that was intended to benefit them collectively.

financeguy's selfish question reminds me a lot of Animal Farm, of the kleptocrats of the former Soviet Union or of the billionaire ruling elite in China. Congratulations financeguy, Putin is proud, you can go and fight with his cause against the people of Ukraine.

how much will you pay to fight putin?

Oh, fer crimean out loud, troll ... rent regulations are not to intended to protect the middle and working classes of New York so much as to protect New York from becoming a land of nothing but oligarchs. The apartment in question should not have been deregulated at all, not by the lord, and not by the tenant.

>The apartment in question should not have been deregulated at all, not by the lord, and not by the tenant.

And so you also disagree with financeguy's tit for tat.

>how much will you pay to fight putin?

$8.75

HB, you missed the point. The OP's envy has led him/her astray.

Landlords and protected tenants have property rights. One of those rights is that they are entitled to prevent future development unless they agree to waive their rights, and they are entitled to charge for that waiver. That gives them the ability to demand high prices if they happen to be sitting on land that has become attractive. Generally, they've done nothing at all to "deserve" this windfall -- it's not a reward for hard work or brilliance or contributions to society, but just a lottery win to the person who happened to be sitting in the right location. Many people on this board have received or aspire to receive this payment; few of them intend to do anything to deserve it.

The rent stabilization laws, like the laws that allow landlords to refuse to sell just because someone else wants to use the land for something else, have various sensible justifications. Property rights create stability and protect people's settled expectations. Tenants, as a group if not as individuals, are largely responsible for creating the value that this fellow was able to appropriate. Landlords' ability to hold out for high fees deters development and is a key reason why the cost of living in NYC is so high, but it also limits what otherwise would be intolerably high rates of change.

But point is: whatever the justifications are for allowing the landlord at this location to profit from the sums the rest of us paid to build and maintain Central Park, the streets, the subways, the economic infrastructure that gives that land value, and from the work and creativity of millions of people who've made NYC an exciting place to live and a profitable place to work -- exactly those same justifications apply to this tenant.

Tenant and landlord alike profited from a system that has other goals, but inevitably gives lottery tickets to a handful of lucky people. If justice were the goal, an Eisenhower-style income tax (90% on income over $1m) or a Henry George land profits tax (heavy tax on land profits, since they are never earned) ould be the obvious solution. Not abolishing property rights or expropriating tenants or landlords.

NWT - I'm surprised it's so little. $11m out of $400m -- this tenant needed a better lawyer.

> How much did the landlord get to vacate?

You confuse the distinction between an owner selling his property and a non-owner being paid to vacate. Admittedly, the rent regulations blur this distinction.

>HB, you missed the point. The OP's envy has led him/her astray.

No, but I can't say it has led you astray, because you've been astray a long time: not understanding that your "Eisenhower-style income tax (90% on income over $1m)" will destroy wealth, incomes and growth at all levels.

A 90% rate is not taxation. It is theft.

9d8b... Both protected tenant and landlord have legal rights from the same source, and the same lack of moral entitlement. Both are being paid to vacate and to transfer their legal rights. The only difference is you identify with one and envy the other.

As for 90% marginal taxation, it merely reflects the benefits the privileged receive from society. See John Locke.

HB:

And you say this is obvious because the post-war period in the US and Europe through the early '60s, when we had this tax in place, was a period that destroyed "income, growth or wealth at all levels"? Or is it because high-tax Scandinavia and Germany are so obviously poorer than low-tax Portugal or Uganda, and NYC has so much less wealth than Mississippi? Or is it because the old high-tax California had the worst university system in the world while the effects of lower taxes have been obviously superior?

We have both theory and evidence here. Economic growth was far higher when we had high taxes; it has dropped significantly since we switched to coddling the upper classes under Reagan.

This is, of course, exactly what real economic theory predicts: the most productive investments all require well-funded governments, and many must be done by the government itself: infrastructure, education, R&D, basic science and much of the arts , most natural monopolies including nearly all utilities and most transportation, law enforcement and creation of sound markets, social insurance that creates the security people need to take risks and innovate.

High taxes mean that the government has the resources to invest in high return projects that the private sector neglects. This is so important than even with a fair amount of wasteful spending on the military, government spending drives growth more consistently and more successfully than the private sector (which itself tends to be quite wasteful -- see the dot.com and housing booms, let alone current billionaire housing in NYC).

Just as importantly, pressing income into the middle classes creates more demand, which drives private sector investment, which creates jobs for those who want them, which increases wages, which increases productivity, which keeps growth high in a virtuous circle. Moreover, high marginal tax rates on the rich give those with choices an incentive to work harder and smarter -- to create value instead of just using finance to shift risk to those unable to bear it, finding ways to extract more from the middle class or lobbying for rules to perpetuate their incumbency.

FG--glad to have you back.
I appreciate your thoughtful, well-written P's of V.

Well said, throughout this thread.

Between you and NWT, perhaps SE aint dead?

Thoughtful and well-written are nice code words for saying you are wrong but articulate and detailed. If yikes agreed and thought you were right, he'd say you are right.

I am going to go out on a limb and guess that John Locke probably would not have been a supporter of 90% tax rates.

hb, you don't comprehend the meaning of "well said"? Dumb and obnoxious is no way to go through life.

Finance guy is a sower of confusion. According to him, everything is the opposite of what you would believe: 90% tax rates increase economic growth; rent stabilization has stimulated development of rental units in NYC; rent-regulated tenants are no different than owners; people who oppose the politics of envy are guilty of envy; one should react to a rent-controlled tenant receiving $11 million not with disgust but with the reaction "this tenant needed a better lawyer." He associates himself with John Locke but is more closely aligned with Friedrich Hegel.

oh come on....

the only sower of confusion is you and your multiple, obnoxious identities.

finance guy is a clear thinker, an excellent writer and a rare voice of reason.

Haha, a ringing endorsement from C0C0 could be interpreted in multiple ways.

why don't you spell it out? you know you're dying to. come on, field burger.

Aboutready, does the judge tell your hubby "well said" and then does your hubby know he's won the argument or the case?
Yikes can return and tell us he agrees with fg. c0c0 too, notice he said everything, but not that fg is correct or that he agrees with fg.

Clearly rent stabilization has increased the number of rental units in NYC.

Are you aware of ANY city anywhere in the world that has a viable rental market for the middle class without rent controls of some sort? No one with choices is ever going to rent if the landlord is permitted to up the rent whenever it is inconvenient for the tenant to move (which, of course, includes anytime there are school age children in the home. Markets can only succeed with a regulatory system designed to make them work.

Rent stabilization creates the middle class market. It then spills over into the high rent market, where most of the large landlords follow something like rent stabilization norms and avoid taking advantage of their legal right to exploit.

There is a reason why the large landlords support rent stabilization. They are smart enough in their greed to understand why the system works.

" one should react to a rent-controlled tenant receiving $11 million ... with disgust" --

Why do you hate capitalism so much? All markets reward people who happen to be in blocking positions; it is a necessary side-effect of property rights. And it is the reason why successful capitalist countries have progressive income tax systems.

Can you point to any relevant difference between the windfall this tenant received and the windfall the landlord received? Or, for that matter, to the windfalls of the finance professionals who bought most of the apartments built in the spot?

Neither tenant nor landlord nor most of the ultimate buyers produced anything useful. Instead, they used their legal right to block the producers until they were paid off. Most of the buyers were equally innocent of any social utility -- they made their money by using a similar property or IP government-granted monopoly, by helping institutions hide or shift risk to the uncomprehending, or helping corporate officeholders controlling money to avoid law or internal regulations limiting their risk-taking behavior.

And, no, chanting "owner"/ "tenant" isn't a substitute for actual analysis. We abolished the aristocracy in this country at independence.

well put finance guy. I often state that some of those in our society reaping financial windfalls are like someone falling out of a plane; landing in a stack of hay; getting up and saying "I'm a great skydiver."

>And it is the reason why successful capitalist countries have progressive income tax systems.

We do.

>Can you point to any relevant difference between the windfall this tenant received and the windfall the landlord received? Or, for that matter, to the windfalls of the finance professionals who bought most of the apartments built in the spot?
Neither tenant nor landlord nor most of the ultimate buyers produced anything useful. Instead, they used their legal right to block the producers until they were paid off. Most of the buyers were equally innocent of any social utility -- they made their money by using a similar property or IP government-granted monopoly, by helping institutions hide or shift risk to the uncomprehending, or helping corporate officeholders controlling money to avoid law or internal regulations limiting their risk-taking behavior.

Convenient shift of topic. You do realize that yikes makes his money day trading, providing no value to anyone, just skimming off others. And he dislikes elementary school teachers but supports Michael Vick. Go figure.

> Why do you hate capitalism so much?

I am pro-capitalism. Rent control is not a feature of capitalism.

"There is a reason why the large landlords support rent stabilization. They are smart enough in their greed to understand why the system works."

I don't know if this is true or not.

In Manhattan, you don't believe that the gap (median rent for rent stabilized v. market rent) is so wide that in the end the LL would benefit. You release a ton of free-market inventory, so obviously prices are going to drop but people forced outside would want some of this inventory especially now that they can afford it. I think the gap is to wide in Manhattan.

http://furmancenter.org/files/publications/HVS_Rent_Stabilization_fact_sheet_FINAL_4.pdf

In Manhattan, median rent for a stabilized apt is only $1295 compared to market-rate $2625. That's a difference of $1330 per month or nearly $16k per year.

Consig: Do you think it is valid to assume that people with choices would voluntarily put themselves into a situation where a profit-maximizing, short-term oriented landlord could force them to change neighborhoods or schools?

End rent stabilization and you lose the middle class as tenants. W67 and Inonada have incomes high enough to take the risk of an exploitative landlord and play the game back. The poor have no choice but to accept exploitation. Ordinary people, on the other hand, will defend themselves the only way they can -- by leaving the rental market. That's what they've done in every US city that does not have some form of rent stabilization. Why do think NYC would be different?

All capitalist countries provide rent controls of some variety.

When the system is well designed (as in Switzerland, a capitalist country 9d8b apparently has never heard of), nearly everyone rents. This makes sense. On the one hand, very few people are wealthy enough to make a large undiversified investment in a single real estate unit a sensible investment. When a properly functioning rental market exists, most people are far better off using it, and mostly they do. Moreover, any country is better off with less of its wealth tied up in non-productive housing investments and more available for productive purposes, so sensible capitalist countries seek to structure their housing markets to provide cheap, stable housing prices. WIthout the dream of speculative gain, again, most people find they have better things to do with their money than tie it up in housing that can be more efficiently provided by specialists.

When the rent regulation system is poorly designed -- just zoning and imputed lease terms providing for notice before termination, as in much of the US -- only people in transition or unable to borrow rent, and they are willing to pay enormous prices to get out of the rental market. As you might have noticed if you paid any attention to the housing bubble we recently had, or read any of the extensive commentary on this board by (non-stabilized) former renters explaining why it makes sense to pay 2x higher prices to buy rather than rent.

I am not talking about middle class or exploitation or should we have rent stabilization laws.

I was only challenging the premise that landlords support rent stabilization in Manhattan. Before you went off on a diatribe, I commented on one specific point in your post that I don’t agree with.

> End rent stabilization and you lose the middle class as tenants.

- there are no income limits on rent stabilization if the rent is below $2500/month as per the 2011 law
- middle-class people rent market-rate apartments in NYC and throughout the United States. One of the reasons that market-rate rent is so high in NYC is that only 39.1% of rentals are non-regulated and can be freely bid on.
- who are you to attempt to engineer the housing market (not capitalism--government controlled housing market) to result in a particular distribution of low, middle, and upper class?

> I was only challenging the premise that landlords support rent stabilization in Manhattan.

I would argue that market-rate landlords benefit from RS. Less competition, so they can charge higher rents. Everyone looking for an apartment must fight for the 39.1% of the rental market that is non-regulated.

"I would argue that market-rate landlords benefit from RS. Less competition, so they can charge higher rents. Everyone looking for an apartment must fight for the 39.1% of the rental market that is non-regulated."

In your specific example, perhaps if the landlord owns a building that is fully renting at market rents and doesn't own any other properties with RSTs. Then they benefit from the restraint on the supply.

The original quotes was "large landlords support rent stabilization" my assumption was these LARGE LLs have many properties with both RSTs and non-RSTs.

I would encourage everyone to read this article from CATO. It's from 1997, but the concepts are still valid.

How Rent Control Drives Out Affordable Housing:
http://object.cato.org/sites/cato.org/files/pubs/pdf/pa274.pdf

9d8b is "disgusted" by the idea that the law might permit a tenant to profit and -- despite the evidence of practice and theory -- thinks that functioning rental markets have no place in capitalism.

This view must make coops quite a puzzle. In a coop, the tenants rent from and collectively control a corporate landlord. The law, in turn, requires the landlord to treat all tenants equally -- it is illegal for the landlord to raise the rent on one unit without proportionally doing the same to others. The primary reason for this convoluted system is, of course, to duplicate the effects of rent stabilization: the landlord can pass through cost increases, but is barred from raising the rent just because market conditions or tenant immobility might allow it to profit by doing so.

Indeed, since the coop system only works because of the legal requirement that the landlord treat tenants equally, it is itself a rather elaborate form of rent regulation. Is that anti-capitalist too?

Coop tenants, of course, often profit quite nicely from their (heavily regulated and restricted) right to sell their leasehold rights. Are those profits disgusting too? Or does disgust only apply when the plebes profit?

> The original quotes was "large landlords support rent stabilization" my assumption was these LARGE LLs have many properties with both RSTs and non-RSTs.

Agreed, I stand corrected.

>The primary reason for this convoluted [co-op] system is, of course, to duplicate the effects of rent stabilization:

Aboutready, still well said?

The well said was a quote about finance guy by cc. I was merely pointing out your inability to comprehend a simple phrase. Keep up, you're lagging.

That was a rather convoluted reply, aboutready. Maybe time for another vacation to recharge?

@financeguy:
"Generally, [landlords] have done nothing at all to "deserve" this windfall -- it's not a reward for hard work or brilliance or contributions to society"

FG, if you don't believe that developers and/or landlords perform a valuable service by:
- putting capital at risk to create new housing;
- employing contractors, construction workers, architects, RE professionals, etc;
- dealing with mind-numbing amounts of red tape, zoning, permitting regulations;
- managing the buildings, managing tenant complaints, being ultimately on the hook for literally everything that goes wrong with the building;

then, well, I guess landlords contribute nothing of value. But I'd bet that nobody would do this for free, irrespective of whether it is "a reward for hard work or brilliance".

"Indeed, since the coop system only works because of the legal requirement that the landlord treat tenants equally, it is itself a rather elaborate form of rent regulation."

Not really. In the coop, the shareholder puts capital at risk and maintains an economic interest in his/her unit and the building, good times and bad. In a rent-regulated apartment, the tenant has no skin in the game and can come and go as he/she pleases. The coop shareholder has a rational, economic interest in maintaining and improving the condition of the apartment. For the rent-stabilized landlord it is more complicated.

Cities without reasonable rent regulation, or with none at all are often afflicted by urban flight. Large LL's with long term stakes in these markets hear this loud and clear.

LL's who have bought rental properties with large numbers of RST's at much lower prices than those with mostly free-market tenants lobby most vociferously against RS laws. Their motives are quite transparent. They get a windfall if laws change. Flipperoo--big bux for nuttin!

And these are the same jerks who get all worked up about tenants like the guy at 15 cpw--or freeloading lazy good for nothing plain old working class RST's.

what a strange thing! CATO research finds regulation harmful! hahahaha

I agree with yikes' second paragraph except where he starts talking baby talk like a disturbed pervert that you don't want anywhere near your daughter.

You have issues. You're creepy.

I agree with what aboutready said.

AVM: Developers and management companies perform useful services, often at reasonable prices in relatively competitive markets. They are not the same thing at all as landlords, even if the same companies are often in all three businesses.

Landlords take some (limited) part of the financial risk associated with a building (although usually quite a bit less than tenants and financing sources) and may put up some (usually a small part) of the capital tied up in a building or unit. But mainly they expect to be paid for their blocking rights -- to get out of the way of other people who have more use for the property.

Your claim that RS tenants have no skin in the game is strange. I'd have thought the person actually using the property has the largest concern of all. In any event, it appears to be contradicted by the reality that RS tenants are more stable and have longer average tenure than either "owners" or lenders.

Yes rent stabilized tenants are stable.

Sukenik's brother died the other day. His obit is in today's paper.