Medicine to Kill the Patient
Controversy about New York State’s expansive new rent-regulation law has centered on New York City. It’s the city, after all, that has more than 1 million rent-regulated units, whose owners no longer expect rent increases even when physically upgrading apartments but who also face long delays in evicting disruptive, nonpaying tenants. The new law applies statewide, though, permitting municipalities to adopt rent regulation if they choose, and some cities in New York’s declining upstate are considering it. A clear-eyed look at their housing markets should convince them otherwise.
Under the law, municipalities can adopt rent regulation only if they first declare a “housing emergency,” which requires a vacancy rate of less than 5 percent. A superficial look at some upstate cities can give the impression that rental markets there are, indeed, tight. For instance, state data indicate that Buffalo—the largest upstate municipality—has an official vacancy rate of 5.6 percent. But that figure reflects only those 18,000 housing units both vacant and for rent. HUD data tells another story: Buffalo has an additional 30,000 vacant units not for rent—they’re neglected—bringing its real total vacancy rate to more than 9 percent. Buffalo has a problem with housing abandonment, not rising rents or gentrification. So, too, in Rochester, where the official vacancy rate for the entire metro area (including better-off suburbs) stands at 5.5 percent, while the total vacancy rate is almost 7 percent. HUD does not track the city alone, but metro Rochester has 18,800 vacant units not on the rental market.
Embracing rent regulation will strangle the investment that declining upstate towns so badly need. Kingston, for instance, is considering rent regulation, because, says Mayor Steve Noble, too many owners of large housing complexes are charging rents that force tenants to pay more than 30 percent of their income for housing. This is the same city, however, that passed legislation in 2016 to deal with the problem of “zombie houses,” buildings that have been “abandoned, vacant, or boarded up for long periods of time.” In other words, Kingston desperately needs a rising rental market, such that owners or buyers of its zombie properties might have an incentive to renovate. Isolated pockets of higher rents are not the problem.
Rent control has emerged as a polarizing local issue. Challenging Noble, Republican Vince Rua notes that the law would mean that “renters will be living with worn appliances and floors, and never see another paint job in their lifetimes.” The mayor charges, in return, “Rua does not care about affordable housing.” We could see the same dynamic emerge in Rochester and Albany, both considering undertaking a rental-housing vacancy survey, the first step toward adopting regulation.
Upstate officials should ponder not only the actual vacancy rates in their cities—including abandoned housing—but perennially low rates of new investment. Buffalo, for instance, has, over the last five years, averaged just 227 new building permits; the comparable figure for Syracuse is 223, and just 131 for Albany. These are cities that should be hoping for more development, not worrying about its alleged detrimental side effects. Upstate New York has suffered population loss and, as the Empire Center’s E.J. McMahon has reported, many cities, such as Cortland, are becoming centers for concentrations of low-income housing-voucher holders. Property owners in struggling cities have an incentive to accept housing vouchers, the value of which is often higher than market rents, and reliably paid by the government. These owners have little incentive to invest in property renovation because their tenants are, bluntly speaking, charity cases. Such “Section 8 ghettoes” in small cities are a nationwide phenomenon.
If the potential extension of rent regulation statewide in New York offers any good news, it’s that the prospect is galvanizing property owners. They were blindsided by the legislation, passed without public debate near the end of the last legislative session. At a recent meeting of small property owners in Buffalo, I heard concerns about potential loss of income—because of the increased difficulty in evicting delinquent tenants—and even an unwillingness to rent to lower-income tenants because of limits on security deposits. These owners are working people who rely on the income from their properties and are prepared to fight politically. Tenant organizers who helped sneak statewide rent control through the legislature may find that they’ve awakened a sleeping giant.
