MIT Researcher Stands Rent Control Assumption on Its Head
The June 7th issue of The Economist's story on "New York's Crazy Rent Controls" (p. 25) uses two studies by Henry Pollakowski to show that changing from a regulated to an unregulated market leads to an increase in housing investment, and from his latest research described below, that relatively rich tenants in mid-Manhattan are now the biggest beneficiaries of New York rent control.
Rent control is an issue that never seems to die in crowded East Coast cities. Only last fall, the Mayor and the City Council jousted over reviving controls in Boston. This spring, New York’s City Council voted to extend rent regulation there. Henry Pollakowski, the Center for Real Estate’s resident housing expert jumped into the fray with an op ed piece published in the New York Post (March 13). His message was clear and unexpected, rent regulation in New York City helps the rich more than the poor.
How can this be? Pollakowski, who recently completed a study of rent stabilization in New York, admits he was surprised by his findings. Results showed that in neighborhoods where non-affluent renters are concentrated - Brooklyn, Queens, Staten Island, Upper Manhattan, the Lower East Side - tenants are typically paying market rents now, once the quality of the rental unit is taken into consideration. On the other hand, in affluent areas of Manhattan - Midtown, the Upper East Side and the Upper West Side - residents, particularly long-term tenants, pay more than $400 less than their neighbors in unregulated units.
What does this mean for the New York debate over rent stabilization. First and foremost, if rents were deregulated, tenants in the outer boroughs would not see rent increases. Of course in affluent areas of Manhattan where 75% of the units are regulated, there would be rent increases ranging from 16-28% for deregulated units. But as the regulated units came into the market they would create “significant downward pressure” on market rents. Overall, “the increases would be far less than the current rent benefits,” Pollakowski concludes. But will his unexpected findings have any impact on the debate?