Rent Regulations: The Cost of Good Intentions

When first enacted our system of Rent Regulations was intended to relieve the housing shortage created by World War II. Since then its purpose has expanded to include the creation and preservation of affordable housing. While this is indeed a laudable goal and necessary for the health of our city, an examination of the cost of rent regulations reveals that as well-intentioned as the system may be, rather than creating and preserving affordable housing the system instead has had just the opposite effect.

In previous blogs I've estimated that New York City's system of rent regulations is costing almost $2 billion per year to operate. According to city budget estimates, it costs the city $50,000 to create one unit of affordable housing. Assuming that this $2 billion a year of lost revenue could be leveraged to create an annual $10 billion pool of investment capital then the city would be able to construct 200,000 units of affordable housing every year if our system of rent regulations was eliminated. When you compare this to Mayor Bloomberg's ambitious plan for affordable housing which calls for the construction of a total of 165,000 units by the year 2013at a cost of $7.5 billion (and which has been described as "the largest municipal affordable housing plan in the nation's history ") it gives you some idea of the opportunity lost to the city every year as result of the operation of our system of rent regulations. Further, if the system were eliminated altogether tomorrow, the one million units of housing that are now regulated by the system could be completely replaced by newly constructed, better quality housing, within five years!