New York City, scene of so many governmental misadventures over the past half century, has recently produced a resounding success. Vigorous, clever policing has produced a remarkable decrease in crime as normally understood. However, rent control, properly understood, is white-collar crime - theft of a portion of the value of landlords’ property. It is theft perpetrated by politicians acting in their accustomed role as tireless defenders of the strong, the intense, the numerous and the organized. No one seriously disputes that rent regulation creates housing shortages while increasing the stock of cynicism among people who know they are benefiting from theft. Rent regulation will die unless it is reauthorized by June 15. Amazingly - no, come to think about it, not really - it may be extended, in some form, thanks in part to three Republicans who have approaching rendezvous with voters.
In 1943 the federal government enacted rent controls as part of the blizzard of wartime price controls. After the war, New York, where for years compassion was the generic rationale for folly, extended rent control, lest peace be hell for renters. In the capital of liberalism, hell was understood as having to pay the market price for something. Since then control has been supplemented by rent ““stabilization.’’ Today 2 million people live in the 1.1 million units that are rent-regulated in some way.
The regime of regulation is written to expire every three years, but always has been renewed, in part because the regime creates the criterion for renewal. That is, rent regulation is justified as a response to a housing ““crisis,’’ defined as a vacancy rate of less than 5 percent. Rent regulation is a recipe for a permanent ““crisis’’ because, by suppressing the return on landlords’ investments, it discourages the construction of new units.
The current rate of construction - 8,000 units per year - is the lowest since the 1930s. Call this retro-government for nostalgia buffs: policy has reproduced a bit of the Depression. The supply of housing relative to population is actually declining. Rent regulation discourages home ownership, so New York’s 28 percent home-ownership rate is less than half the norm in large American cities. Rent regulation also discourages upkeep of existing units. Indeed, the way many landlords get out from under unprofitable properties is by abandoning them. That is why the city government is a landlord on an ever-expanding scale, taking custody of up to 10,000 abandoned units a year.
This year Joseph Bruno, the majority leader of the state Senate, a Republican from upstate (of course), vowed to make sure that rent regulation expires. When this vow sent tremors of terror through some of Manhattan’s tonier precincts, Bruno said, ““Let ’em move to the Bronx.’’ In Manhattan, the capital of snobbery, he might as well have gone all the way and said (if you will pardon the use of shocking language in this family publication) ““to New Jersey.''
In this era of risk-averse career politicians, it is axiomatic that difficult change is impossible in an election year or the year before an election year, which exhausts the available kinds of years. Mayor Rudolph Giuliani is up for re-election this November, and Gov. George Pataki and Sen. Alfonse D’Amato are up in November 1998. These Republicans have examined the law of supply and demand and have concluded that the demand for relief for landlords is much less important than the supply of votes to be won from renters who regard below-market rents as an entitlement. In contemporary politics, ““entitlement’’ is a synonym for ““desire.''
Rent regulation is an example of the activity to which economists apply the generic label ““rent-seeking.’’ That involves private economic interests (in this case, renters) enlisting public power to confer advantages on themselves or disabilities on rival interests (in this case, owners of rental property). Rent-seeking is unlovely, but it also is the real national pastime. And it produces an interesting problem, particularly for contemporary liberalism, the core value of which is compassion, meaning the prevention or amelioration of pain.
Some liberals say, sure, if the world were a blank slate, we would not write rent regulation on it. However, the memory of most New Yorkers runneth not to a time before regulation. So the expectations, living choices and family budgets of many people reflect the assumption that rent regulation, like most government programs, will be immortal. Therefore it would be (the slapping sound you hear is liberalism’s trump card being played) uncompassionate to take away something that people have come to count on. Few liberals arguing this way argue for, say, compassionate respect for subsidies from which tobacco farmers have benefited.
Still, a case can be made for a phased climbing down from some irrational systems of dependency. But gradualism puts off until tomorrow - always a day away - the ending of the more novel nuttiness that has mutated into entitlements.
Such as? The entitlement - this, in restless America - to live forever where you are living now. Governor Pataki’s proposal for partial and gradual deregulation - very partial and gradual: there would be no date certain for actually ending rent control - preserves the right of tenants to bequeath their rent-regulated apartments to relatives, in-laws and - the city is the capital of advanced thinking - domestic partners. What began as a derogation of landlords’ property rights has long since become a renters’ property right in a coerced discount, an heirloom to be passed down the generations.
