Rent Control

From: Malcolm Gladwell To: Jacob Weisberg

Dear Jacob,

       Somewhere along the way to constructing the most heroically counterintuitive argument on rent control imaginable (an attempt I admire wholeheartedly, by the way) you seem to have forgotten what exactly rent regulation is. Don’t feel bad. Most of the others on your side of this debate have done the same thing. But since this is, after all, SLATE, a magazine devoted entirely, so far as I can tell, to the enunciation and refinement of economic first principles, I thought we’d take a step backward. Ready?
       Let’s start with my absolute favorite sentence from your last response, the bit about how rent regulation, paradoxically, aided the gentrification of the Upper West Side. “In some cases,” you write, “rent control actually may have mitigated [housing abandonment] by encouraging middle class people to stay in the city. … 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.” The temptation to unpack every one of the words in this sentence is, I have to admit, nearly overwhelming. (Was it really rent regulated tenants who turned around the Upper West Side, for example, or was it large scale co-op conversions of Riverside and West End Avenue in the 1980s?) I’m going to show a little restraint, though, and just focus on your tantalizing use of the term “middle class.”
       OK. Rent regulation–both rent control and its younger cousin rent stabilization–is essentially a regulatory scheme that rewards that selection of Manhattanites who have occupied their current apartments more or less continuously since the last round of regulation was enacted: Let’s say, for the sake of argument, 1970. Since landlords can raise rents essentially only when apartments are vacated, the kinds of apartments that tend to get vacated (i.e., bad apartments) are the kinds of apartments that tend to have the highest rents–and, as such, that tend to be available at any given time. (Who stays in a $2,500 one bedroom with a view of an airshaft for longer than a year?) The kinds of apartments that tend to have the lowest rents, on the other hand, are the nicest and largest apartments, since those are the apartments that tenants would have been least likely to leave over the last 25 years. A quarter of all rent-controlled tenants, for example, have apartments with at least four rooms per person. (Only one in 12 people in the rest of the city has a place that big.) Half of all rent-controlled apartments have between two and four rooms per tenant. Meanwhile, the shortage created by the fact that the best apartments are locked up, essentially, in perpetuity drives up the rents on all other apartments well above what they would be otherwise. What we have, in short, is a two-tiered system. One set of people have apartments that are much larger and cheaper than they would otherwise be. One set of people have apartments that are much smaller and more expensive than they would otherwise be. We have Winners and we have Losers.
       Now, as far as I can tell, Jacob, your argument is that the Winners include a lot of interesting middle class people who would otherwise have left the city–which is absolutely true. The random group of people who happened to live in great apartments in 1970 include–like any random group of people–many members of the middle class. But there are also several middle class people among the Losers and, in fact, because they couldn’t find a good apartment at a decent price, many of those middle class Losers left the city. What you’re saying is that you like the middle class Winners and don’t care much for the middle class Losers. But this is what I’m confused about. On what basis do you prefer the Winners to the Losers? We know that the Winners, by virtue of being in their apartments since 1970 or thereabouts, are probably a lot older on average than the Losers. Do you really think older people are more important to Manhattan than younger people? I happen to feel the opposite, actually, but I’d be interested in hearing your thoughts on this. I suspect, when it comes to the Upper West Side, that what happened is the opposite of what you think. I think that its resurgence has less to do with the fact that Winners stayed than with the fact that Losers stayed–that they agreed to bite the bullet and pay exorbitant rents, or they got around the gross inequities created by rent regulation by buying into the co-ops that have flourished in that area over the past 20 years. Of course, maybe I’m wrong. Maybe all those new bars and stores and restaurants on Amsterdam and Columbus are being run and patronized by 70-year-old dowagers with four bedroom, $460-a-month apartments on Central Park West.
       At the end of your response, you claim that the end of rent regulation would mean that “those earning less than about $55,000 would be gone from Manhattan, replaced by people earning that amount or more,” but at this point your argument got so confusing that my head began to hurt. Are you saying that the big difference between Losers and Winners is that Losers are richer? In which case, does that mean you believe the resurgence of the Upper West Side was the result of a regulatory strategy that convinced poor people to stay and rich people to leave? Wow.