Though The New York Times is playing this like a one-percenters-get-to-screw-the-poor-even-more story, the paper's article today on a court case that "poses a major risk to…millions of other New Yorkers who live in rent-stabilized apartments" is an unintentional exercise of showing just what kind of warped outcomes are produced by the city's severe rent stabilization laws. The underlying case is as follows:
* 79-year-old widow Mary Veronica Santiago has lived for 50 years in a two-bedroom East Village apartment near Tompkins Square Park. A neighborhood that was truly frightening a quarter-century ago, and desirable now. Her rent-stabilized rent is $703 a month.
* Two years ago, Santiago's husband died, and she filed for bankruptcy. The Times is unconvincing on the timeline here—"after her husband died, Mary Veronica Santiago fell behind on her bills, and the creditors began to call," yet somehow she fell behind fast enough that she filed for bankruptcy that same year? Anyway, Santiago had a reported $23,000 in debt, mostly in credit cards, so she filed for bankruptcy hoping that her lack of assets would help make the sum disappear.
* Though her landlord was not one of her creditors, he was notified of the case, then offered to pay all of Santiago's debts and lawyer fees, keep her in the apartment for the rest of her life "at a similar rent under a non-rent-stabilized lease" (that's a NYT paraphrase of the bankruptcy trustee), but with the caveat that she not be allowed to pass on the lease to her 50-year-old son. That's right—in New York City, you can put your rent-stabilized apartment in your will, and hand it off to the next generation of $703-a-month payers.
* Santiago refused this pretty damned generous offer.
In one of those unintended consequences ironies that rent control has become famous for, Santiago's court case, currently at the U.S. Court of Appeals for the Second Circuit, could end up allowing bankruptcy creditors to treat tenants' rent-stabilized leases like the assets they most obviously are. Or, in Timesspeak:
At a time when housing affordability and income inequality have been driving the debate in the mayoral race, the bankruptcy case could add another element of uncertainty to New York City's efforts to preserve housing for people with low incomes.
Reason.tv on NYC rent control: