Rent Control

From: Jacob Weisberg To: Malcolm Gladwell

Dear Malcolm,

       Government policies, whether good or bad on balance, usually have both beneficial and harmful consequences. In my column, I tried to argue that although rent control has many obvious disadvantages, it nonetheless has had a number of positive effects on New York City. While these benefits don’t justify keeping rent controls forever, they do argue for a gradual phaseout rather than the shock-therapy approach that you, the Cato Institute, and Milton Friedman favor.
       It’s possible that rent control is that rare thing: a government policy with no up side whatsoever. It is also possible that while rent regulation has some beneficial consequences, I’m wrong about what they are. But I don’t think I am.
       First, on what you call my “cool buildings” argument: Most opponents of rent control want new construction and criticize rent control for preventing it. I agree with them that ending rent control would bring a lot of new construction, but dispute their assumption that extensive new construction would be a good thing. You appear to agree with me that a lot of new construction would be undesirable, but dispute the prevailing view that rent control forestalls it.
       It does seem counterintuitive that rent regulation should inhibit new construction. An artificial shortage drives up prices, which ought to provide an incentive for builders to do their thing, since new buildings aren’t rent-regulated. But developers contend that rent regulations inhibit construction anyhow, for three reasons. First, rent regulations suppress demand. I might be able to afford a spanking new $2,000 one-bedroom apartment, but if I’m paying $1,000 for one that’s worth $1,800, I’m likely to stay put. Second, in Manhattan, the only new housing built without subsidy is luxury housing. While there is demand for these super-pricey apartments, it’s satisfied by the construction of a few thousand units a year. Third, given the clout of the rent-control lobby, developers simply don’t trust New York politicians not to enact controls on new buildings retroactively (something they have done twice in the past). If you still doubt me, you might consider Boston, where rent control was recently abolished, and which is experiencing its first residential construction boom in several decades.
       As for your argument about nice old buildings getting neglected because landlords can’t make a buck in New York City–have you been to Detroit or Philadelphia recently? Plenty of buildings get abandoned in cities without rent control. If you want to talk about New York, you have to distinguish between Manhattan and elsewhere. In Manhattan, the high tide of abandonment is long passed. In some places, rent control actually may have mitigated the situation by encouraging middle-class people to stay in the city (preventing it from reaching what you might call a “tipping point”). The Upper West Side went from the run-down neighborhood of West Side Story to the appealing place it is today with rent controls firmly in place. By the way, it now has fewer abandoned buildings than any other part of the city, despite being the area most drastically affected by rent control. As for New York outside of Manhattan, as you yourself have written, rent control isn’t much of a factor one way or the other in the outer boroughs, where market prices remain largely below the fixed ones.
       May I make a suggestion for our next round? If you want to answer my “cool buildings” argument, you might want to challenge my tendency to foist my own aesthetic judgments on people who don’t share them. Not everybody agrees that antiquated plumbing and temperamental antique elevators are an essential aspect of New York City’s charm.
       On what you call my “quirky people” argument: I think you’re straining pretty hard to resist the obvious here, which may account for why it’s so hard to figure out what you’re trying to say. I think what you mean is that the people deterred by rent control might well be just as interesting as the people retained by rent control. In any individual case, of course, you may be right. The cranky old lady who never leaves her $500-a-month apartment down the hall from me may be occupying space that would otherwise by filled for $1,500 by the next Julian Schnabel, smashing saucers and spreading joie de vivre. But on balance, I think the city derives an intangible cultural benefit from having the broadest possible range of incomes, which is the effect of rent control. Under the Gladwell plan, those earning less than about $55,000 would be gone from Manhattan, replaced by people earning that amount or more. Unless, of course, you’ve decided that insulating some poor and/or elderly people from the free operation of the market is a good idea after all, in which case I’m sure you’ll let me know in our next round.