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Few would argue that New York City is mired in a housing crisis — as defined by high prices and low vacancies. There’s good evidence for that conclusion. The most recent federal New York City Housing and Vacancy Survey reported a vacancy rate of just 1.4%, “a stark contrast to the 4.54 rate in 2021”. Over the same period, median monthly rent rose from $1,500 to $,1641 — and that includes everything from luxury high-rises to public housing.
These sorts of figures drive an ongoing search for solutions to the problem — including, most recently, Mayor Adams’ Dec. 12 announcement of a new city Charter Revision Commission to consider, as he put it, how to “deliver as much affordable housing to working-class New Yorkers and their families.”
A thorough examination of New York’s housing policy — both at the city and state level — could include a growing body of economic research regarding rent regulation, which affects the 960,000 “rent-stabilized” apartments whose price is set not by the market but by mayoral appointees. Rent stabilization may provide a good deal for those lucky to benefit from it. But as economists from across the political spectrum increasingly concur, it ultimately harms the city’s housing market for many.
Research into the impact of rent control has a long history. Back in 1997, the Harvard economists Edward Glaeser and Erzo Luttner described the “misallocation of housing” that rent controls creates. That was their term for a mismatch between what renters might need and what they choose because the price is cheap — such as folks who might only need a small apartment, but live in a big one because they can afford it.
More recently, in 2018, the liberal Brookings Institution cited the same problem: “Once a tenant has secured a rent-controlled apartment, he may not choose to move in the future and give up his rent control, even if his housing needs change.” This “misallocation,” Brookings continued, is not without major consequence, most notably “empty-nest households living in family-sized apartments and young families crammed into small studios.”
Last year’s Census analysis of New York housing data suggests that’s exactly what is happening here — as young people crammed into subdivided studios with multiple roommates know well. The difference between rent-regulated and market-rate housing in the Big Apple is stark: Only 94,000 (24%) rent-stabilized tenants had moved (either in or out) in the past year, compared to 221,000 (57%) of market-rate tenants. Rent-stabilized tenants are more likely to stay put — forming a kind of housing blockade for newcomers or households with kids who need more bedrooms. As per the Census, the long-term rent-stabilized tenants were not necessarily low-income: 30% reported incomes above $100,000 a year—in keeping with notorious stories of the actress Mia Farrow and Congressman Charles Rangel enjoying rent-stabilized units. (Farrow inherited hers through her family, as the law permits.)
There can be ill-effects on housing quality too, economists are finding, in ways that harm rent-stabilized tenants themselves. In February, 2024, ceonomists at the St. Louis Federal Reserve Bank looked at the physical effects of rent controls. They concluded that “while rent-control policies do restrict rents at more affordable rates, they can also lead to a reduction of rental stock and maintenance, thereby exacerbating affordable housing shortages.” Similarly, new research in the Journal of Housing Economics from March 2024 concluded that “even tenants in the controlled dwellings can suffer from rent control, as maintenance of such dwellings can be reduced, leading to a decreased housing quality.”
Once again, the most recent findings from New York reveal these very same market conditions. Its review of “reported housing problems” found that there are more tenant complaints about rodents, leaks, cracks and heating in rent-stabilized units than in the non-regulated. The numbers are striking: 376,000 reports of rodents in regulated units (39% of all), compared to 240,000 in market-rate units (22% of all).
The repair needs of older, rent-regulated buildings can even lead to owners simply abandoning them, as Maggie Brunn, president of Brooklyn’s A&E Real Estate, has said. “When an apartment has been lived in for 20 or 30 years, those limits [on rent increases] don’t even come close to the actual costs of rewiring, plumbing and the basic improvements you’d need to rent an apartment that a family would be proud to call home. That means more and more of those desperately needed low-rent apartments are sitting vacant.” That problem has been exacerbated by 2019 New York state legislation which sharply limits rent increases even for rising costs such major capital repairs.
Burgos of the NYAA estimates at least 10,000 of such “ghost apartments” lie vacant — because their owners “aren’t allowed to recoup their costs. Inflation, property taxes, insurance.” As a result, he says, “banks won’t lend to them.” That’s exactly what Brookings has found. “Rent control can also lead to decay of the rental housing stock; landlords may not invest in maintenance because they can’t recoup these investment by raising rents.”
“The system,” says Burgos, “is not working either for owners or tenants.” But how could this deeply established system — existing, in one form or other, for more than 50 years — actually be adjusted?
The experience of another major world city, Buenos Aires, Argentina, suggests doing so might not bring on the chaos and price-gouging tenant advocates would suggest. Late last year, libertarian-leaning Argentine President Javier Milei simply “scrapped” rent controls, as reported in The Wall Street Journal. The effect, it reported, is that “the Argentine capital is undergoing a rental-market boom. Landlords are rushing to put their properties back on the market, with Buenos Aires rental supplies increasing by over 170%. While rents are still up in nominal terms, many renters are securing better (or at least fairer) deals, with a 40% decline in the real price of rental properties when adjusted for inflation.”
Simply scrapping rent control like in Buenos Aires would be far more difficult in regulation-laden New York, of course. But, as Burgos notes, even permitting the de-regulation of vacant units could lead to significant improvement — without affecting current tenants. What he calls “vacancy control” stands in the way of the rent increases owners need to invest simply to comply with building codes and lead abatement laws — rather than leaving units vacant. The city’s Charter Commission could help by reducing property taxes or water rates for regulated units.
But even a rapid deregulation might not be that consequential in much of the city. Census survey reports that the typical market-rate rent ($2,000) is not fantastically higher than the typical regulated rent ($1,500). In The Bronx, the typical rent for all units — including non-rent stabilized — is just $1,200. Market rents, in other words, can be close to regulated rents in lower-cost neighborhoods. Combined with a wave of vacant units coming back on the market and new investments, New York might follow (or at least tiptoe) in the footsteps of Buenos Aires.
Such a move would not only benefit renters, it would save the city the expenses associated with an agency most metropolises don’t possess, the Rent Stabilization Guidelines Board, whose staff sets rent increase recommendations and monitors compliance. What’s more, property owners — including mom-and-pop landlords who own just a few buildings — would no longer have to incur the red tape headaches of registering their buildings every year — and either mailing or hand-delivering the required forms and fees, to be paid, for each unit, both to the state ($13) and the city ($20). Failing to do so means a $500 fine — per apartment.
There have been attempts, led by the owners’ lobby, the Rent Stabilization Association (now part of the New York Housing Association), to upend the price control regime through the courts — without success. Most recently, the US Supreme Court declined a challenge based, in part, on the argument that rent regulation was effectively a legal “taking of an owner’s property, without compensation.”
The fact that property owners sought to overturn rent regulation through the courts makes clear how difficult it is to change the system legislatively. But city and state officials should take notice of the changing leadership in Washington. In the first Trump Administration, a White House Executive Council singled out rent control for criticism, writing that it can lead to “restricted supply [which] ends up hurting some of the lower-income renters they are intended to help.”
New York City’s budget relies on Washington for $100 billion in revenue, including from the Department of Housing and Urban Development — which could attach strings to that aid, including revisions to rent regulation or calling for it to end. Once back in office, Donald Trump — as he often does — could prove a wild card and deregulate New York City’s housing market.
Howard Husock is a senior fellow in domestic policy at the American Enterprise Institute.
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