A Victory for Rent Control in New York....

...and a defeat for many people who are going to want to be able to find an affordable apartment in New York in the future. It's another example of the often insidious notion that receiving any apparent government "benefit" (and I fear all too often this is what pure anti-"vulgar libertarian" thinking can lead to--the idea that no market freedom is legitimate or to be cheered until all government intervention that might give a special benefit to some entity is ended) means that the government can call all the shots.

I'll let Joan Gralla at Reuters explain it:

Thousands of New York City apartment renters on Thursday won a major court victory that could help them keep lower rents but may drive landlords into foreclosure and crater city tax revenues. New York state's top court ruled that the owners of a huge Manhattan apartment complex, Stuyvesant Town and Peter Cooper Village, could not raise regulated rents to higher free market rates because the landlords are getting tax abatements.

The Court of Appeals gave thousands of Stuyvesant Town and Peter Cooper Village tenants -- and as many as 100,000 other renters around the city -- "the comfort that the rest of us enjoy...the right of renewal on the same terms and conditions of the previous lease," said Alexander Schmidt, the lawyer who sued on behalf of nine tenants in the East Side complex.

The consequences for the city's coffers, other apartment owners who also get tax abatements, banks and investors, could be grim under what lawyers said was the worst case scenario: a ruling that Thursday's court decision should be retroactive. New York's trial court will make that decision, the state's top court decided.

It's interesting, and of course to be expected, that Gralla frames the downside of this in terms of how it might hurt government coffers. The real bad part is the lack of freedom it gives to the building owners--and the lack of incentive to provide apartments for all future New Yorkers that will create widespread aggravation and shortages down the line.

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  • ||

    What's especially amusing is how proponents of rent control delude themselves into believing it's some sort of egalitarian thing--when in reality it's exactly the opposite--everyone pays big, except for the lucky few.

  • anon||

    "In another example of the often insidious notion that receiving any apparent government "benefit" (and I fear all too often this is what pure anti-"vulgar libertarian" thinking can lead to--the idea that no market freedom is legitimate or to be cheered until all government intervention that might give a special benefit to some entity is ended) means that the government can call all the shots."
    Wha?

  • Paul||

    It's interesting, and of course to be expected, that Gralla frames the downside of this in terms of how it might hurt government coffers.

    What, Brian Doherty didn't get the memo? I can reference, on a daily basis, 18 stories from the MSM before 9am that hand-wring over how some tax cut, some relaxation of regulation, some free, unregulated activity by the citizenry will hurt government coffers.

    Journalists like to think they're "tough on government". They're not. They may be tough on an administration... on a politician. But they are the biggest cheerleaders for government that exist...anywhere.

  • ||

    In a very real sense, the Fourth Estate is rapidly pouring into the new bottles of alternative media.

  • Fist of Etiquette||

    Does demanding, "How is the government going to pay for these tax cuts," count as being tough on government?

  • John Collins||

    One does not "pay" for tax cuts. You "pay" when somebody gives you something, not when you allow them to keep what is already theirs. The appropriate question is "how will government spending need to be reduced because of these tax cuts." I could easily think of a few ways....

  • Fist of Etiquette||

    I'm beginning to think my humor doesn't come across well in print.

  • Mango Punch||

    I'm beginning to think my humor doesn't come across well in print.

    I'm sure 'print' has nothing to do with it.

  • Mainer||

    I got it

  • Attorney||

    I have a soft spot for rent control. It's the issue with which the camel of libertarianism got its nose under my tent.

  • ||

    Strangely, this statement could be interpreted two opposite ways. Was the camel entering or leaving?

  • Attorney||

    Doesn't this expression always mean entering?

  • ||

    Almost always, yes, but then again "soft spot" is usually used in support of a position.

  • Attorney||

    Doesn't this expression always mean entering?

  • Mango Punch||

    More importantly, when did you get your nose in that camel?

  • ||

    I thought it was a sexual allusion.

    All of you seem to be missing something important--tax abatements. These landlords applied to participate in a program that lowers their taxes in exchange for providing a certain percentage of "affordable" housing units.

    If they didn't want to be part of the program, they shouldn't have chosen to join it.

  • ||

    tim's right. While rent control is bad, the specific issue here is that Tishman is hurting because they paid $5.8 billion for an asset now only worth around $2 billion and they elected to take the tax abatements. Once you owe the government a favor, they own you. Kind of like another organization...

  • ||

    It's the issue with which the camel of libertarianism got its nose toe under my tent.

    C'mon, Attorney. You've got to tow the lion here. Cliche metaphors have to be tweaked for amusement.

  • dhex||

    "What's especially amusing is how proponents of rent control delude themselves into believing it's some sort of egalitarian thing--when in reality it's exactly the opposite--everyone pays big, except for the lucky few."

    actually, the majority of apartments in new york city are under some kind of rent control or stabilization scheme. (70% iirc)

  • ||

    64% and its about 1 million regulated units.

    http://www.osc.state.ny.us/osd.....2_2010.pdf

  • mark||

    still a lucky few

  • ||

    I clicked over to the Vulgar Libertarian essay. What a douche. He starts out with stereotyped Randian strawman, and then proceeds to whine about the tyranny of the market. This is why I try to avoid the libertarian left.

  • ||

    Perhaps, Brandybuck, if you had Kevin's ability to express himself, your avoidance of the so-called libertarian left might be worth discussing. On topic, rent-controlled markets in this country are outnumbered by those in which contracts may be redrawn at will by landlords and renters. Seems to me that landlords in NY could pull out their monies and reinvest somewhere else. I think part of the larger point here is that there is an incentive to stay in NY and take a revenue beating -- otherwise, no sensible businessman would stay. I have no sympathy for landlords who buy into rent-controlled markets.

  • ||

    Ah yes, truth can be determined by one's ability to express oneself. Got it. And once we smash the state, then we start in on those ingrates trying to make a profit.

  • Independent||

    "Ah yes, truth can be determined by one's ability to express oneself."

    Next thing you know we'll be electing a President based on his ability to give inspirational speeches!

  • ||

    No, but idiocy can be determined by the use of phrases such as "What a douche."

  • Zeb||

    No it can't. That is just an absurd statement to make.

  • ||

    I don't know about self-expression, but our friend Andrew sure has self-contradiction down:

    Seems to me that landlords in NY could pull out their monies and reinvest somewhere else.
    I have no sympathy for landlords who buy into rent-controlled markets.

    In order to pull your monies out, you have to sell. In order to sell, you have to find a buyer. But by all means, keep up the condescension.

  • ||

    """. I have no sympathy for landlords who buy into rent-controlled markets."""

    Why should you. In the '80s they were buying crappy buildings for under $100,000 and fixing them up, then selling them for a few million 15 years later.

  • Chrispy||

    It's also a big incentive for landlords to let their buildings fall into disrepair. If it's illegal to charge the market rate, lower the market rate until it matches the maximum rate allowed.

  • tarran||

    Ding! Ding! Ding!

    Christy gets it!

    That's why this decision is a loss for renters! Yeah, they'll be paying a pittance for their apparment. But the heat won't work, there will be roaches, and the super won't give a shit.

    But hey, at least they aren't getting gouged!

  • ||

    I believe the landlord could be fined by the city for those sorts of things. But Christy is right insofar as nothing not required by law will be done to improve/maintain the apt.

  • John Collins||

    Then I guess we'll need more laws, huh? To keep landlords from behaving rationally and all.

  • Ratko||

    "..could not raise regulated rents to higher free market rates because the landlords are getting tax abatements."

    And this is classic modus operandi by government, they make nothing so can only give what they take, but don't worry they have a heart that's why there's a program to help you not be destroyed by them, I mnean if you are destroyed they can't extract more taxes from you, so the citizen takes the offering and forfeits control to the government.

    Anyone who thinks they're about to get "free" medical is an idiot.

    What people do to themselves I would never consider interfering with. Unfortunately, the social engineers of the new left will not rest until they have complete and absolute control over all.

    Societies can't make themselves you know, that would allowing sub standard inferior humans who are certain to make just horrific choices if given the chance.

    Lucky for us we have a master race among us and even more fortunate is they already have a master plan for us. That's just how superior they really are. Our darling little master-planners.

  • ||

    They take our tax money, supposedly for our own good. Then, any benefits we receive from the taxes come with strings attached.

  • anonymous||

    "Lucky for us we have a master race among us and even more fortunate is they already have a master plan for us. That's just how superior they really are. Our darling little master-planners."

    Ha! I knew they were reptilians.

  • guy in the back row||

    The secret designs of the secret designers?

  • ||

    "Keep your dirty government hands off of my government-subsidized real estate empire" lol

  • Robert||

    The Reuters link wouldn't come up for me. So can someone here summarize the issue and ruling?

    Rent stabiliz'n was for a limited term in return for a tax abatement for the same limited term. So what was the issue here? An extension of the terms?

  • ||

    Wait a minute...

    the right of renewal on the same terms and conditions of the previous lease

    Really? Is that a New York thing?

  • JW||

    Doncha just love these rights?

    They pop out of thin air as if by magic.

  • Chrispy||

    And at the same time, actual rights disappear just because they aren't specifically noted in the Constitution (or even in spite of being expressly guaranteed).

  • @||

    The 9th Amendment is so routinely shit on that it may as well be deleted.

  • Barack Obama||

    This is one of the many improvements that will appear in my forthcoming Constitution 2.0.

  • Some Guy||

    It's other places, too, but mostly in New York. I think there are a few things you have to qualify for it to count. But there are people that have lived in a place for 50 years and are paying their original rent from what I understand. Occasionally one of them has an "accident" and it ends up being pinned on the landlord who was going broke subsidizing the apartment of someone who had more money than they did.

    Why rent control isn't used more as clear and measurable proof of government creating a broken system that so obviously harms the majority for no clear or even arguable societal benefit at all, I have no idea.

  • Scott||

    No, not that I've experienced as far as state-wide. City's a bit different. I just had my rent upped by 300 a month in the new lease on Long Island. They said it was to "bring the price in line with the market". Bah.

  • jtuf||

    Oh dear. I went to public school. I better guard my brain.

  • Kolohe||

    Don't like rent control, not one darn bit, and not a fan of 'rent stabilization' which is not quite the same thing and what most NYC apartments in that 70% # dhex cites above fall under.

    But without reading more details, it looks like people got tax abatements in return for restrictions on what rent they could charge.

    And then those people with the tax abatements reneged on those deals, got sued in court and lost.

    Well, a deal's a deal. The tax abatement may be bad public policy, for some of the reasons stated above but it didn't have to be taken.

    I know one of the staff the other day wrote that he wasn't a fan of 'he who pays the piper calls the tune' but that's the way the world works, and really can't any other way.

  • Chrispy||

    I'm not sure if "a deal's a deal" is fair to invoke in this case. Clearly if the landlords knew in advance what they were getting into (and weren't otherwise pressured by the government) then they should take the good with the bad. But the linked story is not at all clear that that's the case.

    All too often these days the rules are changed on the fly to suit whoever happens to be in power at the moment. The same thing happened with the Chrysler bankruptcy, and it'll probably happen more in the future. It's not safe to assume that the rules were (or even can be) known in advance. If it's only now being made clear that the tax abatements came with a rent control provision, then the defendants shouldn't be held accountable.

  • ||

    The real bad part is the lack of freedom it gives to the building owners--and the lack of incentive to provide apartments for all future New Yorkers that will create widespread aggravation and shortages down the line.

    Yes, but think of the socio-economic diversity provided by blocks of dilapitated rent-controlled apartments. Imagine the ambience of the urban graffiti, the rats scuttling through the walls, the ancient stained carpets. What would New York be without these?

  • ||

    "Unfortunately, the social engineers of the new left will not rest until they have complete and absolute control over all."

    Social engineers of any stripe will never rest, no matter how much power they gain. They will argue forever about the details of control and will subject us all to constantly shifting rules, regs, and administrative law-making that will be hard or impossible for us to comprehend, much less follow. Monitoring and punishment for non-compliance will become ever more intrusive and punitive.
    Wait a minute - I'm describing modern America.

  • ||

    I wonder if land owners can give back the tax abatement amount and set rents wherever they deem appropriate. A simple ROI decision if allowed.

  • Mango Punch||

    YTD New York City rents are down 6.4%

  • ||

    Because less people can afford a $6000 a month apartment. Apartments that rent below $2000 don't go down, only up.

  • ||

    Wow, I think you might just be onto something here dude!

    RT
    www.anonymous.ua.tc

  • Todd S.||

    More on the upcoming Stuyvesant debt implosion coming here: (see the "Commercial Real Estate" sections; also, be warned that there's some serious financial jargon in these articles)

    http://www.annaly.com/mc/FIDACCommentary03-09.pdf

    http://www.annaly.com/mc/annal.....topost.pdf

  • ||

    A lot of my outrage on this leaked when I saw that the reason they got stuck with rent control is because they took tax abatements.

  • masstexodus||

    In Massachusetts we got rid of rent control years ago via initiative petition, and the sky did not fall.

  • Pied Piper||

    If you're going to dance the dance, then you gotta pay the piper. While I agree that rent control ultimately can hurt the landlord who still must pay for services at uncontrolled rates, in this instance I cannot generate too much pity for these guys since they accepted government tax abatements.

  • Clarity||

    What some of you are missing, including the commenter directly above, is that when the govt offered the tax rebates everyone knew that landlords would have no rational option other than to accept them otherwise their competitors that did accept them would be more profitable and powerful and able to offer more rental unit for less real money since they were getting tax rebates. The govt interfered and offered competitors the equivalent of steriods.

    The govt knows entrepreneurs are rational competitors, and cynically institutes the juiced up steriod program in the form of tax rebates, and then later says ha ha ha you took our money you greedy evil free marketers and now we own you!

    The incredible cynicism of govt interfering in the free market and then blaming the entrepreneurs for responding to these market skewing "incentives" the govt creates out of tax payer money is beyond ridiculous.

    If you think that is proper for govt, then you and I have very different opinions of the appropriate role of govt in the world.

  • Kevin||

    Hmmm ... are these lease agreements discharged in bankruptcy? It would seem weird to consider the thing that drove you to ruin "assets."

  • JB||

    Retarded fetuses.

    God, can you miscarry these fuckers already?

  • Kevin||

    I wonder what level of government control might be justified by my taking advantage of income tax credits and deductions.

  • ||

    What some of you are missing, including the commenter directly above, is that when the govt offered the tax rebates everyone knew that landlords would have no rational option other than to accept them otherwise their competitors that did accept them would be more profitable and powerful and able to offer more rental unit for less real money since they were getting tax rebates.

    Not sure I'm buying this. If the package deal included tax bennies and rent control, or no tax bennies and no rent control, then the competitors willing to take the tax bennies had no economic advantage, unless the tax bennie/rent control deal really was more profitable.

    In which case, the developer took the more profitable deal. No tears here.

    The only outrage I might be able to summon up is if the city changed the deal and tacked on rent control after the developer signed on the dotted line for the tax bennies.

  • ||

    ""The only outrage I might be able to summon up is if the city changed the deal and tacked on rent control after the developer signed on the dotted line for the tax bennies. ""

    I'm pretty sure that not the case, and I know it's not with Stuytown.

    The problem, and and an issue at trial was the city wasn't enforcing. They had kinda turned their heads when landlords were violating the agreement to the abatement. Only when Stuytown was sold was this issue brought to court and lack of enforcement was discovered. So the judge ruled according to law, and the landlords that have gotten away with, are now under scrutiny.

  • ||

    There is a free market solution to rent stabilization that is in effect. Well, more like a payoff

    Currently an apartment can come out of rent stabilization if it is completely renovated. Which, as pointed out earlier, most of these apartments do need renovating. So the landlord buys the tenet out. They offer people money to move, and once the apartment is vacated, they renovate, then charge market rate.

  • ||

    The decision (available at nycourts.gov, No. 131) says, "If the statute imposes unacceptable [financial] burdens, defendants' remedy is to seek legislative relief."

    This is true and good. While I personally find rent control to be destructive and ill-advised, we should all want judges to interpret the law as written, not the law as we wish it to be.

  • ||

    In the case of Peter Cooper and Stuyvesant Town, since they were built after World War II, it's rent stabilization, not rent control. Parkchester, which Met Life built at the start of the war, fell under the NYC rent control rule, and along with the Riverton complex in Harlem, were the first housing properties Met Life built that were sold off.

    Rent control locked in pre-WWII rents in New York City for half a century, while rent stabilization allowed for rent increases, but only at very limited levels. However, Met Life could raise rents on vacated apartments to market levels even before the sale to the Tischman partnership. That produced the upside-down situation where tenants in the more desirable locations closer to the mass transit on First Ave. would keep their Peter Cooper-Stuy Town apartments for years, and benifit from the rent stabilization rules, while apartments in the less desirable locations, like in ST around 14th St. and Ave. C would vacate more often, meaning the least popular locations had the highest rental rates.

    Tischman gambled -- mostly with other people's money -- that they could use changes in the law combined with improvements in the apartments and infrastructure, wanted or not by the tenants, to bring those apartments above the $2,000 a month rental levels that triggered their reclassification as "luxury" apartments. The artificial efforts to keep the rates low were then matched by an artificial effort to suddenly jack up rents to levels around $45,000 a year for a two-bedroom, two bathroom unit (the unit improvements to trigger that were put at roughly $40,000 per apartment, so the payback on each unregulated apartment would have been relatively quick). Had the trust not overbid four years ago by about $1.5 billion when they bought the complex from Met Life, they wouldn't have had to be as nakedly ambitious as they were in trying to jack the rents to meet the interest payments, and they might have had a better chance of winning the ensuing court battle (since there are PCV-ST tenants who do live to file lawsuits against their landlord, justified or not).

  • Tim Starr||

    If rent-control/stabilization were means-tested, it would soon cease to exist. One possible rule: no one gets to pay a controlled/stabilized rent if their income is greater than their landlord's.

  • ||

    Then alot of people would still have rent control/stablization. Few slumlords are left. Realty companies have been buying them out. There would be a few that would have to leave, but not as much as you think, or would have 15 years ago.

    Using Stuytown as an example, I doubt many residence earn more than Tishman properties.

  • Alice Bowie||

    I'll tell ya. I make almost $200,000 per year...and I still can't afford to live in Manhattan.

    A 2br/2bath 1200 sf place is $3,500...at best.

  • Kevin Carson||

    Brandybuck--truth can be determined, among other things, by the ability to give some indication of having actually read what you criticize.

    Where, exactly, did I denounce the "tyranny of the market"? Quotes, please.

    In that post, I presented the market as good without qualification, and denounced state-enforced privilege and artificial property rights as evil without qualification. The main point of the post was the tendency of some libertarians to defend actually existing corporate capitalism AS IF IT WERE a free market.

  • ||

    Framing this terms of "government" and "private corp" is knee jerk political and irrational. Two actors made a deal, one party sold their deal to a buyer (who happened to be a spinoff of the seller), who then tried to break the deal that they profited from enormously. Now because that deal is being enforced I'm supposed to feel bad for buyer?

    Sorry, if you make a deal that gives you huge buckets of money for 2.5 generations, you hold up your end of the deal. I don't care if it's two people in suits shaking hands, two companies, or a company and municipality.

  • ||

    Interesting post I read recently on rent stabilization.
    http://neighborhoodnyc.com/blo.....s-to-know/

  • ||

    What a mess this turned out to be. I've been living in Manhattan for over five years and still don't know too many people living in rent stabalized apartments. They are just too hard to come by. During my years of searching for apartments in NYC I have still yet to find rent stabalized listings on sites like Craigslist, www.SkipBrokers.com and www.StreetEasy.com. There should be a site dedicated to listing rent stabalized buildings, now that would be great.

  • Saint Paul Apartments||

    Interesting post. I believe that rent stabalized is good.

  • ||

    Since I first considered doing a blog, I've envisioned a recurring feature called "Vulgar Libertarianism Watch," or some such. At one point, I toyed with the idea of making that the name of the blog, and devoting most of my effort to reporting on the kind of faux "free market" analysis that consists of an apologetic for big business. But although there would be more than enough such material to keep me blogging indefinitely, I decided such an exclusive focus would be too much of a one-trick pony.
    More info - http://onlinenursinggraduate.c.....n-nursing/

  • www.itunes.com||

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