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Example research essay topic: York City Rental Housing - 2,655 words

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/ 5, 8 New York Citys rent stabilization system In the following essay I am going to examine New York Citys rent stabilization system and make a statement that the abolishment of the given rent stabilization system would have mostly beneficial effects on the NY community as a whole. I will state that rent stabilization act of NY in fact benefits the rich (mostly affluent individuals in lower and mid-Manhattan districts) and is of no use to the majority middle-income and minority lower income NY residents. I will also state that the abolishment of NY rent stabilization would not contribute to the massive rent increases as is presently considered. Due to the fact that the NY residents outside Manhattan will be receive any noticeable subsidies, their rent increases would be negligible. At the same time in rich districts of Manhattan after the abolishment of the rent stabilization system would certainly contributed to the downward movement of rent prices and if not reduce them, than at least leave them depressed.

I will comment on the history of the rent regulations in the USA (New York), how it presently works, what groups of people will be affected including current landlords, current renters, people currently looking for an apartment in NYC, government officials, and prospective landlords. Speaking about the history of New York State's rent regulation I would like to note that the big Apple has the Nations longest regulatory history. The regulations remained due to the markets inability to provide the decent supply of affordable housing in the state. Therefore, the local governments in order to halt any rent market distortions and shortages intensively regulated the market in which only 5 % of the total rental space was vacant at any moment.

Such low figure demanded long term control of the NYs rental space with the modern day over 1. 5 million of New York 3. 3 rental housing places being highly watched by the local governments and agencies (De Roy, 2001). It should also be noted that the rent regulation in some or another form existed in New York throughout the XX century. The first regulatory document was the New York Rent law of 1920 that came into existence by the state legislature as a response to the rapid price growth in New york metropolitan area that was caused by numerous immigrants coming to New York from Europe that was experiencing WWI. The so called first wave of immigrants and price increases finished in 1929 making the act obsolete (Brown, 2001). This statement certainly is meant to show that the demand for apartments and therefore their prices can be caused by external factors (migration) and unless the market forces take care of it can cause frequent change of policies: from government control of pricing to the abolishment of such control and temporary swings in the real estate business and investment in that area. Another regulation happened in the late 1940 s as a response to another rapid rental space price increase caused by incoming immigrants fleeing the countries exposed to WWII.

The emergency price control act of 1942 (Public Law 421, 77 th Congress; 56 Statute; 50 U. S. C. , Section 901 - 916. ) was enacted. This law regulated the priced based on various communities and the district prestige. After the WWII the act ceased to exist due to the market forces regulations. Big Apple Rent Control.

In the early 1960 s the government of New York decided to control the rent prices of 2. 5 million apartments across the city and its suburbs. Therefore, it decided to control only the apartments built before the WWII. The owners were allowed to increase the rent prices of their apartments if their apartments were yielding them less than a fair price of 4 % annual return from the price of the apartment. The government allowed the owners to charge a 12 % vacancy allowance, and they were also allowed to increase the rent price if they could justify it by bringing in the new equipment like TV sets, refrigerators, etc (Brown, 2001). The owners were not allowed to increase the price without any reason. It should be noted that the government took control of other areas of New york state besides New York city controlling the housing in Albany, Erie, Nassau, and Westchester.

It should be noted that at present the government still controls the apartments in these areas, although more and more deregulation (Report of the Temporary State Commission on Rental Housing, Vol. 1, March 1980, pp. 1 - 59. ) is applied to luxury apartments (or the ones that yield their owners $ 500 /mo plus). New York City Rent Control. In 1962, the existent rent regulations were amended on the basis of assumption that the market forces will take care of the prices. The government decided index the rent prices to the market price rather than to the benchmark that the 1950 represented. Such deregulation allowed virtually any owner to claim to have a reason and hardships to increase their housing rent price. Such increases on virtually any housing in New York led to the government revision of such amendments and control of the rents (Brown, 2001).

Also I would like to note that in 1963, New York City enacted a new law that regulated the building density in the city thus discouraging many builders to install new houses in the center of New York but rather move to the suburbs. The law contributed to the creation of additional sky scrapers that would go high yet consume little space on the ground. Thus I would like to note that many houses would build up additional stores to benefit from the area that they already consumed. The result of such law was the appearance of the new Luxury apartment class, where the owners wanted to benefit as much as possible from the existing limited space. The rental price increased, and so did the vacant housing rate that in 1964 was already 5 %. The luxury apartments possess the rate of 8. 9 % and comprised the apartments that yielded more than $ 300 /month.

This loophole that the owners tried to create to assure that they yield maximum profit without additional building space (Report of the Temporary State Commission on Rental Housing, Vol. 1, March 1980, pp. 1 - 67. ) What I would also like to note that according to Billings (2002) the emergence of a lot of luxury apartments created the downward pressure on the price (some of them could be rented for $ 200 /month) and often yielded concessions such as 2 month-rent free (Billings, 2002). In the late 1960 s early 1970 s the real estate balanced the prices: already in 1970 the New York wide vacancy rate was as low as 2 %. The land lord therefore drastically increased the prices oftentimes by as high as 100 %. The tenants were not protected whatsoever and had to move to the suburbs. In response to the tenants demands, the new stabilization act as enacted and affected 500000 apartments in New York city (De Roy, 2001). I should also like to note that the New York major Lindsay John, was rather easy on the landlords and required the owner of the post WWII apartments to join an association of RSA (rent stabilization association) that was created to support the given law.

If the owners did not join the association and did not pay the dues they were subjected to regulations, yet after it was apparent that the New York was unable to control every owner in the city the apartment owners refused to pay. The sister organization of RSA, RGB (Rent Guidelines Board) was created to represented the real estate interests as well as balance it with the public interests. Another regulatory organization CAB (conciliation and appeals Board) was created to settle the disputes between the apartment owners and tenants. What should be noted is that the RSA was very influential in New York. This organization lived on the membership fees, as well as on the consulting fees it yielded from tenants and landlords.

The activities included lawsuits against the landlords of the tenants, RSL administrators, regulation of advertising on rents, and the assessment of the negative sides that the rental could provide to the city (Brown, 2001). At the same time the negative side of the RSL as the virtual absence of regulation of the landlords. Thus, if a tenant filed a complaint that the rent price was rather high which was not a frequent case, the landlord then had to submit to the organization the history of his rents. Yet if he refused to do it, the RSL could not do anything to force the landlord to do so. The police authority CAB depended in its financing on the RSA and oftentimes did not have an adequate amount to send the squads to any desired place. Thus, due to the absence of the actual regulatory agencies or the mechanisms to do so, the landlords were free do ask for virtually whatever price they wanted for their apartments.

At some point of time in the 1970, the RSA was even forced to return the funds generated from the landlord membership fees to the tenants who were allegedly forced by their owners into higher price brackets (De Roy, 2001). This certainly appeared like a problem to the NY government that subsequently decided to take the prices under their control to benefit the poor and unprivileged, yet consequently damage them as it will be seen in the way of limiting rental space supply, increasing the prices for other tenants, unfairly redistributing income and diverting investment in residential units. As a result of such self-regulation that existed in New York from 1965 till 1984 and proved to be highly ineffective and abusive, the RSA was forced into giving up its role as a regulatory agency whatsoever. Even though RSA exists even today, it is nothing more than a trade association that represents the New York Land lords (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).

The RSL also instituted the lease control that obliged the landlords to offer their tenants the obligation to renew the lease if they wanted to occupy the given apartment thus locking in the high prices. I should note that the three year requirement was abolished in 1984 by the state government. The landlord were found to be cheating on the tenants forcing them into fraudulent agreements and lease renewal processes. They threatened not to renew the lease if the client disagreed with annual price raises, while it was a law that no landlord can refuse to renew the lease. Rent Stabilization Act of New York was another attempt by the government to stabilize the prices in 1972. This system obliged the owners to earn no more than 8. 5 % of the total property value annually, thus somewhat preserving abnormal price rises.

The maximum possible rent is adjusted on the bi-annual basis in order to remain up do date with the general price level in the economy of the New York City. The landlord could increase the property price by some 7 % annually to reach to maximum allowed (Maximum collectible rent, MCR) earning of total 8. 5 % of the property value (Brown, 2001). The law also protected the low income citizen from the unauthorized price increase that would compromise their living ability in New York City. The so called SCRIE (senior citizen rent increase exemption) protected the seniors from unwanted and unexpected price increases.

The poor are also protected by the fact that New York City provides a subsidy in the form of tax reduction for landlords who house the poor citizen. As a result of such tax concessions the New York City annually loses around $ 60 million in lost tax revenues in housing the poor only. Similar programs have proved to be socially effective and accepted in other areas of New York state and the USA also. The modern day city officials do not like the idea of forgoing the $ 60 million in tax revenues and are currently thinking about abolishing the SCRIE and poor men subsidy (Billings, 2002). The 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...


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