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Rent Control vs. Keeping Landlords Happy

Jonathan Miller writes about the housing economy and other aspects of real estate. He began a real estate blog, the Matrix, in 2005, and has written a column for He is co-founder of Miller Samuel, a residential real estate appraisal company, and the commercial valuation firm Miller Cicero.
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The past few weeks have offered a window on the tensions between landlords and tenants in New York's real estate market.

Amid the political machinations in the city and the state's capital, the New York State Assembly let rent controls lapse, temporarily placing more than 2 million tenants in housing limbo. A tentative deal has since been worked out to extend the regulations for four years but the details are not yet available.

The episode serves as a reminder that rent increases on regulated apartments are set by the government and applied across the market, while the expenses landlords pay to operate an apartment building are subject to market conditions.

Take a look at the chart below, which shows the net difference between the increases allowed on a one-year lease and the annual change in landlord expenses. There has been a deficit in 14 of the past 18 years (2015 is on pace to be a net gain).

Of course, landlords try to make up the difference by charging market rents on some apartments that become vacant, something they have been allowed to do since a rule change in 1997.

Without that change, the government probably would have had to allow bigger rent increases on regulated apartments. Either that or the city might have revisited what happened 40 years ago, when thousands of multifamily units were abandoned as landlords walked away when expenses far outpaced allowable rent increases. And yet fewer rent regulated apartments mean less affordable housing in the city. 

Let's hope the government can keep treading the fine line between keeping rents affordable and allowing landlords to earn enough to maintain the housing stock. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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Jonathan J Miller at

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