Rent Control and Quality

Imagine paying less than $157 per month for two conjoined studios in the upper east side of New York. That is the result of the government-imposed regulation known as rent control — something that is apparently increasingly becoming scarce.

A recent New York Times article notes the following:

While it is less true today, rent-regulated apartments have provided some New Yorkers with very comfortable lives. [John] Burke, who grew up in Ireland on a farm outside Galway, moved to New York in 1964 to be close to his brother upstate and his 100 relatives in Massachusetts. He worked in restaurants and bars and collected decades of tales of celebrity sightings and romances. He moved into his current apartment in 1977, when the rent was $65, and filled his closets with handsome clothes.

But the report also notes the unintended consequences resulting from this dubious form of government price controls:

The deteriorating low-priced apartments still exist partly because landlords have little financial incentive to make renovations or apply for rent increases. Stabilized rents increase by order of the local Rent Guidelines Board, typically around 3 percent a year, while controlled rents can go up only if the landlord files an application for an increase with the state, a laborious process. And the state will not allow a rent increase if an apartment has major housing code violations.

Mr. Burke says he has spent $13,500 on repairs and $11,000 taking his landlords to court over the conditions. “It’s been hell,” he said. “Now you see, it’s no bargain.” (Photo by Robert Caplin for The New York Times)As is the case with many forms of price controls implemented by well-intentioned government regulators, the quality of the price-controlled product or service is greatly diminished. It’s financial incentives that motivate landlords to maintain good upkeep and improvements to the apartments they rent out. Benevolence cannot often be relied on.

Void of these incentives, occupants of rent-controlled apartments will be left in sub-par dwellings. It’s just one more example of the good intentions of politicians and regulators meeting the cold, hard reality of basic economics.

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