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... 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.
It also should be noted that the existent city rent stabilization diverts investments away from residential rent units for the fact that people would not want to invest their funds into some project that would not have full control over. With the government control of the prices, and lease renewal policy, the investors understand that they are not exposed to the fair treatment as to the residential rent units projects are more likely to invest into something else, thus inadvertently creating shortage of supply of residential units which is another problem. The deterioration of the residential units is the other problem that results in the low investment in the residential unit sector that remains under the control of rent stabilization. Alfred Thomas (1999) believes that rent stabilization is the main reason of why certain areas deteriorate. Thus, in his survey of the South Bronx communities of 1998 - 1999 he found that investment in the residential units intended for rent in the his chosen area had been reducing at the annual rate of 8 % (Thomas, 1999, p. 12). Another sociologist Diana LaPointe also states that no poor tenants are supported by such policy despite the perceived direct benefit to the poor Americans (LaPointe, 2000).
Due to the reduction of the investment and therefore limited supply of decent apartments, only a limited number of poor tenants are able to benefit from such stabilization. In order to avoid the government control, the landlords strive to remodel their apartments to qualify for luxury and thus reap higher profits that only promote the problem of homelessness and discourage poor tenants from trying to get the apartment they otherwise could have gotten (LaPointe, 2000). Low vacancy rate that results from the numerous legal loopholes that landlords are trying to exploit in order to receive the income they desire makes it rather difficult for visitors to New York to find an available apartment fast. Although, the rent stabilization helps some limited number directly (lower rents) it discourages investment, reduces supply of decent flats, thus making the rest pay either very high rents which leads to the unfair redistribution of income or remain homeless without the ability to physically find a decent flat at a decent price. Therefore I would like to once again state that the rent stabilization although indeed benefits certain strata of society, benefits them on a rather limited scale, unfairly redistributing income, making the process of renting an apartment a zero game sum where the owners in general do not lose much (they do not invest extra funds into apartments, charge extra for non-regulated apartments that due to limited supply that results from the lack of investments into residential units estate are still in high demand, and are able to find legal loopholes to charge virtually whatever they please to other about 94 % of non regulated apartments in NY), but rather make the non-privileged and poor receive the funds from the middle-class that does not qualify for the poor class to rent a discounted apartment and has to compete for the somewhat limited supply of vacant apartments. 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).
Here I would also like to mention Jane Anderson who researched several Massachusetts communities after the rent stabilization similar to the one of NY was abolished by the local government. In Cambridge, MA, where the regulated apartments constituted 9 % (compared to around 6 % in NY) after the abolishment of stabilization occurred what she called saturation phenomenon (Andersen, 1999). After the deregulation, the Cambridge apartments rose in price by 8 % that gave a push for numerous real estate builders to move in the market who saw the perfect investment opportunity. After only 8 months, the investment opportunity has been exploited and led to the general price decrease of over 11 % which was about 3 - 4 % lower than the price before the rent stabilization abolishment (Andersen, 1999). The vacancy rate in Cambridge community after stabilization abolishment rose by 3. 5 % within 8 months, while the investment in residential units increased by 12 % (Andersen, 1999). 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. As it has been mentioned by Andersen (1999) the Cambridge community in Massachusetts also was faced with the similar problem and assumption, yet after careful consideration abolished the stabilization program that certainly benefited the whole community in terms of increased number of vacant places as well as somewhat decreased prices within a year period. Because we assume that becoming homeless results not out of whim but out of absence of vacant places and out of absence of affordable housing, I can say that the abolishment of rest stabilization in Massachusetts certainly contributed to the reduction of factors that cause homelessness namely: increased number of vacant places and reduced rental fees. Of course one can never know for sure whether the same thing would happen in NY after the abolishment of rent stabilization, yet I can assume that it should not differ much from the MA experience.
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.
As it has been previously mentioned in 1) and 2) I can state that the abolishment of rent stabilization program reduces the amount a person spends on finding a decent apartment (the vacancy rate is higher, thus it is easier to find a good apartment and the person has more time left to earn extra dollars, plus the actual Cambridge community analysis proved that the rent prices within a year stabilize and even go lower than during the stabilization). Thus I can say that people are more likely to benefit from the removal of rent stabilization not only physically (there will be no headaches as to where to find a good and affordable apartment) but also financially because the prices are likely to go down. Here I would also like to note that once the real estate companies see the investment opportunity in the area where the rent stabilization is abolished (as it was in Massachusetts) they are more likely to move in try to make money there. Apparently if they are going from out of state, they are not going to bring every single worker with them in NY, and would hire locals. Thus, removal of rent stabilization will also contribute to some reduction of unemployment and will provide the locals with an extra opportunity to earn money. 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. As it has been mentioned previously it is impossible to certainly say what would happen to a given area after the abolishment of rent stabilization.
The other MA community mentioned earlier in the text that abolished stabilization benefited from it in terms of increase of the vacancy rate, slight decrease of the residential unit rental price as well as a rather substantial increase in the investment in residential real estate that I can state contributed to the good of the whole community and certainly contributed to the increase of the homelessness and poverty in the given area, the opposite that the critics of NY stabilization abolishment claim. 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. Alfred Thomas, Statistics on the government rent control in the USA, Harvard university Press, 1999 Diana LaPointe, The role of market forces in the US economy, Penguin Books, 2000. Jane Anderson, Statistics on Cambridge community after abolishment of rent stabilization, Cambridge university press, 1999. 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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