The Struggling Landlord, and Other Real-Estate Tales

lab nyobsrentstablex The Struggling Landlord, and Other Real Estate TalesOn Oct. 18, a state judge’s decision evicted Bianca Jagger from a rent-stabilized Park Avenue apartment she’d had since the 1980’s. Soon after, the latest round of objections to rent stabilization in New York City poured forth.

“Why the hell,” as New York magazine understandably put it, “does someone like Bianca Jagger get to have a rent-stabilized apartment, anyway?”

The New York Sun: “New York’s price controls on rent are so silly and socialistic that they deserve to be wiped off the books.”

At present over 1.04 million apartments protect roughly two million residents from what’s this year become the most viciously expensive apartment market in New York’s living memory. Rents reached records by October: A studio in a nondoorman building below 100th Street in Manhattan fetched an average of $2,151, according to a report from brokerage The Real Estate Group New York.

Mick Jagger’s ex (and interior designer Jade Jagger’s mom) had been paying $4,614 a month under the myriad of state laws that govern rent regulation, including stabilization. Ms. Jagger, a British citizen, could not keep the place, the judge ruled, because she was in the U.S. on a temporary tourist visa, according to the Associated Press.

Opponents of rent stabilization often assert that stabilization helps drive up the rents of market-rate apartments and then helps keep the rents high. Their logic runs like this: that the artificially low rents on stabilized apartments force landlords to raise rents on market-rate ones.

Not necessarily—or, to be exact, no one really knows.

It’s up to landlords if they want to raise market-rate apartment rents to compensate for any lost profit from owning stabilized ones as well. The system devised by the state does not put the onus on market-rate apartments to fund stabilized ones in any sort of one-to-one correlation—apartments are stabilized based on the construction or renovation dates of buildings—and no such correlation outside of state law has been proven.

In a city where market-rate apartments (including owner-occupied ones) outnumber stabilized apartments over two to one, the idea of the struggling landlord seems laughable. Indeed, if any do feel squeezed by ownership of stabilized apartments, the state offers hardship benefits if they can prove they’re not turning enough of a profit, according to the city’s Rent Guidelines Board.

Mostly, objection to rent stabilization stems from that unexamined contempt for an imagined class of freeloading rich people working the system: that someone with the means to pay market rate will land in an apartment—sometimes an opulent apartment—with an artificially low rent that’s likely to last for that person’s lifetime. It’s almost impossible for landlords to turn an occupied stabilized apartment market-rate.

The greater danger is not that a few wealthy individuals slip into stabilized apartments but that literally millions of New Yorkers would be tossed into an apartment market where rents have become unhinged from market realities.

Like studios, larger apartments’ rents have ascended to all-time highs in many places. In Manhattan, the average rent for a one-bedroom in a nonluxury building below 100th Street was nearly $3,000 by the end of October, according to The Real Estate Group; for two-bedrooms of similar quality, it was $4,069. Meanwhile, a report out last week from investment-sales firm Marcus & Millichap concluded that the vacancy rate for Manhattan buildings with at least 40 apartments would stay below 3 percent for the next several months.

If anything, the market rate seems just as unmoored from market forces as stabilized apartments—yes, demand dictates price, and landlords should be able to charge legally what they can get, but price has grown beyond value in many cases. After all, no one would buy a lawn mower for $10,000 simply because he or she needed a lawn mower; there are alternatives to lawn-mowing.

For housing in New York City, what’s the alternative to opting out of the rental market—the sales market? That’s even more expensive. Westchester County? Jersey City? A box under the Brooklyn Bridge?

The median household income in New York City was an estimated $46,480 in 2006, according to the Census Bureau, below the U.S. median. Rent-stabilization provides a bulwark against the grim math of living with New York City housing, something Bianca Jagger, after 20 years, has to confront (though press reports do say she has another place in London). Don’t envy her.