The Voodoo Economics of Rent-Stabilization

By how much? That’s the only real question facing the Rent Guidelines Board as it makes its annual decision this spring on raising rents for the city’s one-million-plus rent-stabilized apartments.

Since stabilization started in 1969 as an answer to the booming rents in newer postwar buildings, the board has never voted not to raise rents. Sometimes, it OK’s big increases by landlords (like last year’s 7.25 percent jump for two-year leases), and sometimes the board approves only a slight hike (like 2 percent).

But there’s more to it than simple degrees.

What seems a plot easy enough to power an episode of Law & Order—greedy landlords versus tenants just trying to get by in America’s priciest city—remains actually quite complicated.

Rent stabilization, perhaps the city’s most successful affordable-housing initiative of the late 20th century, remains a paradox for tenants and landlords.

For the one group, it’s a reassuring bulwark against a relentlessly more expensive market, yet a bulwark that seems to recede with each passing year; for the other, it’s an obstacle to reaping greater—perhaps record—financial gains, though gains can be regularly had. For both, it’s a chronic pain, fraught with the sorts of socioeconomic pressure bearing down on New York City as a whole.

Last year’s final vote on what turned out to be the biggest rent hikes since 2004 was interrupted by angry tenants and their supporters for more than two hours. The vote, held in the Great Hall at Cooper Union, was finally held toward midnight—amid protests so loud that, according to The New York Times, board chairman Marvin Markus had to shout the vote into his microphone so that the stenographer could take it down.

Mr. Markus was first appointed to the board in 1979 by Mayor Ed Koch, and then reappointed by Mayor Michael Bloomberg after an 18-year hiatus. Mr. Markus, a Bensonhurst native, is a managing director at Goldman Sachs by day; his work on the nine-member board, which includes tenant and landlord representatives, remains a largely thankless task.

“Owner reps don’t vote for [the increases] because they don’t think it’s enough,” Mr. Markus told The Observer on Tuesday. “And the tenant reps don’t vote for it because they think it’s too much. Everybody’s got a different reason in their own mind as to why they voted for the number that’s eventually promulgated.”

Looking at the steady march of votes by the board to increase rents makes the body’s work seem merely a rubber stamp to landlord demands. The board last spring voted to allow landlords a rent hike of up to 4.25 percent for one-year leases and the 7.25 percent increase for two-year ones.

Look a little more closely, however, and the board’s work seems less a stamp and more a buffer. Rent stabilization in today’s rental market saves millions of New Yorkers from having to pay what are record-high market-rate rents.

The Voodoo Economics of Rent-Stabilization