5 Myths About Rent Regulation

Oksana Mironova

Myths about rent regulation have been around for decades and have had a significant influence on how housing policy is made. With New York State’s rent regulation laws up for renewal this spring, and with a new wave of progressive legislators taking office, now is as crucial a time as ever to know what’s fact and what’s fiction.

Here, we outline five common myths about rent regulation. Read our full report “Rent Regulation in New York City: How it works, what went wrong, and how to fix it” for a history of rent regulation in New York City and our policy recommendations for 2019.

 

Myth 1. Rent regulation is a handout for the rich

In reality, rent regulated apartments house significantly more low-income New Yorkers than NYCHA and subsidized housing combined (365,000 compared to 182,000 in 2017). Low-income households make up 38 percent of total rent regulated households.

Rent regulated housing is available to everyone regardless of income, so, yes, some higher-income people do live in regulated apartments. But that number is only about 13 percent. By far, rent regulation benefits low-income people the most.

This myth got a boost in the early 1990s from lifestyle articles about celebrities living in rent regulated apartments, creating a false narrative about who the typical rent regulated tenant was. Organizations representing landlords used this narrative to lobby the New York City Council, which passed a bill in 1994 that allowed landlords to deregulate apartments when monthly rents reached $2,000.

 

Myth 2. “It will be like the 1970s”: Rent Regulation and Housing Abandonment

In the 1970s, policymakers like Charles Urstadt, housing commissioner under Governor Rockefeller, blamed rent regulation for property decline and abandonment, arguing that landlords did not have the incentive to maintain their portfolios because regulation limited their income. The actual cause for the urban decline was much more complex, including factors like redlining and global economic restructuring. (We dive into all that in our full rent regulation report.)

Researchers debunked this myth in the 1980s with empirically-informed evidence showing that cities without rent control faced just as severe property decline and abandonment as cities with rent control.

In a more recent example, a study of 161 New Jersey communities tested the impact of rent control (both its presence and its relative strictness) on housing quality and foreclosure rates. The study found no significant impact on either when controlling for apartment size, income, race, and median rents.

Despite the evidence against it, this myth continues to pervade arguments against rent regulation. In a 2018 New York Post article, an anonymous “real estate insider” said, “These young people don’t remember what the Bronx looked like in the 1960s and 1970s, when there was disinvestment and boarded-up and vacant buildings.”

 

Myth 3. Rent regulation sends supply down and rents up

A dominant argument against rent regulation is that it restricts housing supply as landlords remove units from the rental market to make a larger profit, lowering vacancy rates and driving up rents.

A 2018 study of the San Francisco rental market found that landlords exploited the Ellis Act, which allows them to remove buildings from rent control by demolishing them or converting them to condos, and the overall number of rental units in the city declined.

The finding that landlords will exploit rent control loopholes to generate a profit in a gentrifying real estate market is undoubtedly true. But in reality, loopholes in the laws, rather than rent control laws themselves, are the source of these problems.

If it were true that regulation restricts supply and causes rents to rise, then we would expect to see the removal of regulation cause rental prices to stabilize or even drop. That historically hasn’t been the case.

In New York City, the adoption of the 1969 Rent Stabilization Law was partially motivated by the dramatic rise in rents that followed the gradual loosening of rent control in the 1950s and 1960s. Rather than encouraging a balance within the rental market, the rental vacancy rate plummeted and rents skyrocketed.

(Get a history of rent control’s evolution in New York in our full report).

And when Massachusetts outlawed rent control in 1994, the rental markets in Boston and Cambridge did not stabilize. Rents rose quickly in both formerly regulated and never regulated units. In Cambridge, inflation adjusted advertised rents for a two bedroom apartment went up from $1,163 in 1996 to $1,700 in 2003. In neighboring Boston rents went up from $882 in 1995 to $1,600 in 2003.

 

Myth 4. Rent regulation creates “winners” and “losers” among renters

Critics argue that rent regulation encourages tenants to “hoard” apartments, constricting the overall supply of available units and causing rents to rise. The winners are a few “undeserving” tenants who hoard rent stabilized housing; the losers are “deserving” tenants who are forced to pay higher rent elsewhere.

When critics talk about “hoarding,” they mean one of two things: occupying an apartment that’s too large for their household size, or staying in an apartment for a too lengthy period of time. Data shows regulated renters are actually more likely than unregulated renters to live in crowded conditions. And renters of any kind are more likely to live in crowded conditions than homeowners.

For many people, especially in high cost cities like New York or San Francisco, the costs of moving or buying a home make mobility difficult or impossible, making the ability to stay in your current home invaluable.

Eliminating rent regulation could only affect the balance of supply and demand and lead to lower rents if existing tenants are displaced. Without a clear vision about where existing regulated low-income tenants would end up, arguing that they should be displaced to create space for theoretical new tenants is both unrealistic and cruel.

 

Myth 5. Rent regulation hurts small landlords

Organizations that advocate against rent regulation often hold up small, neighborhood landlords as victims of a fundamentally unfair system.

Here’s the first clue that this is a myth: several trade groups representing affordable housing landlords, including ANHD and NYSAFAH, have voiced support of stronger rent regulation laws in 2019.

According to the Rent Guidelines Board (RGB), from 2015 to 2016, the net operating income for all rent stabilized housing grew by 4.4%. This was the 12th consecutive increase, and RGB’s research shows consistent growth regardless of building size or borough.

Additionally, the “typical rent regulated landlord” has evolved from small, mom and pop landlords to large landlords or financial investors. This shift began in the mid-2000s, when private equity firms purchased 100,000 units (about 10 percent) of the city’s rent stabilized housing stock. Today, investors continue to buy up rent stabilized properties and systematically exploit rent law loopholes to drive up rents.

 

Check out the full report, "Rent Regulation in New York City: How it works, what went wrong, and how to fix it":

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