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... modern system controls over 200, 000 apartments in New York City in 1999. The owner of these apartments cannot voluntarily raise the apartment price and to evict tenants. The rent control is losing it ground to the vacancy decontrol that seems to present a wonderful alternative to rent control since early 1980 s. The controlled apartment units in modern day New York are only 6. 4 % of the total apartment for rent figure in Big Apple.
As a comparison in 1975, the city controlled over 2 million apartments. The government now controls the units of those tenants that occupied the apartments since 1975 or have their children occupying these apartments since that time, or if the apartments were built before WWII. Otherwise, the apartments that are built now are unregulated. The current system restricts the owners to raising the apartment price by no more than 7 % annually to achieve the maximum allowed rate that is renewed on a bi-annual basis. Also if the landlord experiences extra expenses with the given apartment (brings in new equipment or cleans the sewage) the price can also be adjusted for these actions. The owners also are not allowed to harass the clients and force the into tricky agreements that would benefit the owners.
If the owner is found guilty of rent overcharges they might be forced into paying back the proper amounts to the tenants (De Roy, 2001). Here I would like to comment on how the abolishment of the regulation system will benefit the given groups of people in New York in order to fully understand the necessity of the deregulation of the rental in New York city. a. current landlords.
Most of the current landlords (100 %- 6. 4 % = 93. 6 %) are free from any regulation and would not notice the deregulatory movement taken by the city government in the attempt to remove any rent regulation in New York. Still, the current landlords try to go with the flow and charge for their apartments as much as everybody else and not force the clients into any agreements out of fear that the proper agency will penalize them for such actions against their tenants. After there will be no regulation whatsoever, the existent landlords will be free from any obligation to go with the flow and would be able to increase the apartment rent price by as much as they would want causing the tenants to worry (Billings, 2002). b. current renters. The current renters are not afraid of any abrupt price increases as applied to their apartments due to their belief that they will be protected by the proper agencies.
They know that if the landlord overcharges them for the rent, they would be able to receive the money back after some time. They know that they are not going to be tricked into some shady lease renewal scheme and if it still occurs the proper rent regulatory agency will take care of it. After the deregulation they would not be so sure that they are not tricked or are paying the proper price, yet should they have any suspicion they still would be able to consult proper agency for help and protection. c. people currently looking for an apartment in NYC. The people looking for new apartments to rent in New York City will not be much affected by the given policy.
Due to the competitive market the New York city has for rented space the regulated 6. 4 % would not influence much the general price level in new York city. The some price increase would certainly be expected due to the market reaction to the liberalization policy for rents, yet it is not expected to raise substantially unless some force majeure event occurs. One of such effects could be in my opinion, the massive immigration of Iraqi to New York after the USA is making there a real war. d. government officials. The government officials are not influenced by this policy directly in any way.
The fact that in order to be a government official they have to have an apartment in the first place makes them immune to the rental price increases. Yet the indirect affect on the politicians could be the negative turn of the market should the deregulatory policy proves to be wrong. If the New york Prices after the deregulation skyrocket and do not return to the normal level causing multiple seniors and monetary unprivileged to go on the streets and sleep under the Brooklyn bridge it would be the government that everyone would blame for such outcome. It would be the government that would immediately have to do some adjustment to the prices if New York starts to see Afghanies, Iraqi, and Indonesians move there fleeing from the US bullets and missiles that devastated their homelands. Yet, still should the policy prove to the correct without causing much market price distortion the political figures would bear the fame for such timely and socially accepted actions from hundreds and thousands of landlords who currently are regulated. e.
prospective landlords. So far the existing regulatory system regulates the apartments that were built before 1948 ( WWII) or where the tenants or their children lived since the early 1970 s. In other words, if the prospective landlords want to rent the newly built apartment they are not regulated, yet if they buy the apartment built in 1942 from the relatives of the deceased landlord they are currently are regulated. I assume that the majority of the landlords will provide new apartments rather than to re-buy the old (before WWII) apartments from each other. The prospective landlords will not have to notice any deregulation because it would not touch them in whatever ways. Speaking about the assumptions that my opponents might make as to that the deregulation would horrifyingly increase rent prices, numerous homeless individuals and reduction of disposable income individual tenants.
I am going to answer each of them separately. High rent prices. As it has been noted earlier the current regulated sector is only 6. 4 % of the total rental space in New York City that is mostly limited to the building built before WWII and the buildings occupied by seniors, and the poor. Other apartments are not regulated and they are able to set the price virtually whatever they believe is good for them. After the deregulation process takes place I would like to note, the existent 6. 4 % would have to compete with the other apartments for the clients.
Apparently, if they were charging their clients less than the market price, they would certainly adjust the price levels to the adequate market level or maybe somewhat higher depending on the location of the buildings and the district perceived prestige of occupancy. Thus, one should not expect to have massive rent increases in New York City. Still I would like to note that should anyone attempt to corner the rent market in New York, i. e. buy a large number of apartments to reduce the supply thus pushing the prices up would be able to do it due to the absence of any rent regulations (De Roy, 2001). Homeless everywhere.
This is also not going to be the case. At present as it has been mentioned before the government pays virtually $ 60 million in unearned tax revenues to support the poor and the senior citizen by providing the landlords who house them substantial tax reductions. As a result of that the landlords are willing to lower the prices. If the government decides to unregulated the market yet still stay with the subsidy program for the senior and the poor, it could do so, because deregulation does not have anything to do with subsidy removal for the poor and senior citizen. It should be noted that many would prefer to receive tax cuts on the existent revenues, rather than watch the sudden tax increases [that would happen if the landlords stop housing seniors and poor] that would eat up a major portion of their profits (Billings, 2002). The homeless would still receive the subsidies and remain in the town regardless of whether the market is deregulated or not.
No new homeless would be expected to appear in the city for the fact that the modest price increases that could happen after the deregulation takes place would certainly generate additional government revenues that consequently could be given out in form of subsidy or whatever. The personal disposable income that is the income a person has after paying all the bills due is also not likely to suffer after the deregulation takes place in New York. The modest price increase that might be the case (no one really knows how much can 6. 4 % of the market move the whole rent market) after the deregulation would raise the rent by no more than 8 % which is usually a much smaller figure than the annual salary increase for many individuals. Still the homeless would suffer these 8 % (assumed figure) regardless of be it 10 % or 5 %. The government role would be to provide them with subsidies and assure that they have a proper housing. So far a small 8 % increase in rent price would not cause a great number of people to go bankrupt and become homeless.
The personal income that will be lowered by a bit is going to somewhat benefit the landlord and the government in the form of tax. In conclusion I would like to say that the deregulation of the rent market in New York is going to mostly benefit the New York community for the fact that the landlords would be eager to exercise their freedoms and allow the market forces to take care of the prices. The expected miniscule increase in prices that can possibly be cause by the deregulation of the 6. 4 % of the total housing is not going to put people out of the houses and cause them to live under the Brooklyn Bridge. The American nation being the worlds most affluent nation would not notice any substantial increase in the apartment price or the small decrease in their personal income.
At the same time, the people would be given more freedom as to charge whatever they believe could be earned from the apartments, while the extra revenue generated by such rent increases could be collected as taxes by the city government and be given in the form of a subsidy to the poor and the senior citizen for whom any price increase is painful. Bibliography: Literary sources: Steve Billings, the role of free markets in the US economy, Oxford University Press, 2002. Thomas De Roy, The rent market in New York, NY Random House, 2001. Angel Brown, What we know about deregulation?
McGraw Hill, 2001. Government Sources: 1. Report of the Temporary State Commission on Rental Housing, Vol. 1, March 1980, pp. 1 - 42. 2. Public Law 421, 77 th Congress; 56 Statute; 50 U.
S. C. , Section 901 - 916. 3. Ibid, pp. 1 - 57. 4. Chapter 250 of the Laws of 1950. 5. Report of the Temporary State Commission on Rental Housing, Vol. 1, March 1980, pp. 1 - 59. 6. Chapter 21, Laws of 1962 (the Local Emergency Housing Rent Control Act). 7.
Report of the Temporary State Commission on Rental Housing, Vol. 1, March 1980, pp. 1 - 67. 8. Ibid, pp. 1 - 76. 9. See Dennis Keating, 1987, "Landlord Self-Regulation: New York City's Rent Stabilization System, 1969 - 1985, " Journal of Urban and Contemporary Law, vol. 31, no. 77. 10. Enacted June 26, 1970, as Local Law 30 of 1970. 11.
Chapters 371 and 1012, Laws of 1971. 12. Chapter 372, Laws of 1971. 13. Keating, Dennis, 1987, "Landlord Self-Regulation: New York City's Rent Stabilization System 1969 - 1985, " Journal of Urban and Contemporary Law, vol. 31, no. 77, pg. 93. 14. Chapter 576, Laws of 1974 (including the Emergency Tenant Protection Act). 15. Chapter 403, Laws of 1983. 16.
Hardship increases, while still on the books, are seldom if ever used, since Local Law 30 established the Maximum Base Rent (MBR) system.
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