Monday, February 8, 2010

Taxpayers, Meet Your Tenants

More evidence on the sullied history that is rent control (HT: Newmark's Door):

By the 1980s tenants were paying rents 30 years out of date. Waiting lists stretched out 22 years in Stuyvesant Town, 100 years for Peter Cooper Village. (If rent-controlled tenants don't leave feet first, they usually pass the apartment on to relatives.) ... The house-to-house warfare was so intense that New York had created special housing courts to handle the pandemonium. ... So why is this of interest to anyone outside New York? Well, through the magic of federal mortgage guarantees, the U.S. taxpayer will soon be shouldering the burden of subsidizing 25,000 regulated tenants... .

In any normal housing market, landlords are focused on attracting tenants, fixing up properties and maintaining a reasonable level of service. With rent control, however, you want to get rid of your tenants. ... Deprived of any chance of evicting tenants, the only thing the landlord can do is reduce services. So another layer of law is necessary saying that if landlords don't provide heat or make repairs, the tenant doesn't have to pay rent. Now the tenant has an interest in seeing things fall apart. One of the most common confrontations involved a rent-controlled tenant refusing admission to the repairman sent to fix the leaky sink. In the end, the tenant can just create his own violations -- a missing smoke alarm, graffiti in the halls. "Paying rent in New York is really optional," one landlord after another told me. "It's lucky more people don't know the law."

...One Chinese woman, whose property-owning family had been murdered by the Communists, had been running an apartment house in Harlem. After one tenant refused to pay rent for two years, she finally got an order of eviction. The tenant responded by firebombing her office. She took him to criminal court. The judge looked at the case and said, "This isn't a criminal case, it's a housing matter." Back they went to housing court. The housing judge overturned the eviction. For firebombing her office, the tenant got to keep his apartment. "I think I'm going back to China," she told me. "Over there they just kill you and get it over with. Here they torture you first."...

It was Margaret Thatcher who said, "Socialism never works because you eventually run out of other people's money." In New York, this has definitely been true for the poor. Their landlords' money eventually ran out -- which is why the city ended up owning 100,000 abandoned apartments in poor neighborhoods. (Officials put decals in the windows to make it appear people were still living there.) The great advantage for affluent tenants, however, is that the money never seems to run out. First Met Life, then Tishman Speyer, and now the U.S. Treasury are always there to be endlessly exploited.

And, so, Mr. and Mrs. American Taxpayer, you're the new landlord! Welcome to your job of subsidizing 25,000 New York City rent-regulated tenants.

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