New York City housing is in full-on crisis mode. City officials consider a vacancy rate — the number of available apartments divided by the number of rental properties — below 5 percent a “housing emergency.” Data from 2023 found a vacancy rate of 1.4 percent, the lowest figure since 1968, and this trend shows no signs of slowing.
Under current laws, apartment rates will rise by 2.75 percent for one year leases and 5.25 percent for two year leases. These rules apply to roughly one million apartments or 44 percent of New York City’s rental supply that qualify for rent stabilization. After more than five decades since the city first implemented this system in 1969, the time has come to do away with rent stabilization altogether.
We can look to Argentina to see the merits of such a policy reform. In December 2023, Argentine President Javier Milei repealed the country’s rent control laws as part of his movement to deregulate the economy. The result was a 170 percent increase in the housing supply and a 40 percent decrease in real rental prices since October 2023 as landlords’ properties, previously held off the market in favor of more cost-effective options, suddenly became available in the housing market.
Supply is the driving factor behind fluctuations in rental prices. New York City lacks the same supply of off-market properties as Buenos Aires. Instead, the city places the 26,000 rent-stabilized apartments unavailable for rent back on the market,making the vacancy rate nearly double at 2.57 percent. With landlords being forced to charge below-market rates, many lack the funds necessary to meet maintenance costs. This is the case even for large institutions. For instance, according to Bloomberg, Sugar Hill Capital Partners sold 13 apartment buildings for a 54 percent loss just four years after acquiring them. New regulations limited the amount of rents they could raise after post-renovation, lowering their per-apartment renovation budget from $60,000 to $15,000. Investing in lower-income housing is simply less profitable, leading Sugar Hill’s Managing Partner Margeret Grossman to shift her focus to luxury projects.
Another factor weighing down supply is the tendency for rent-stabilized residents to hold on to their properties as long as possible. Those lucky enough to get their hands on these apartments find themselves paying a fraction of the going market rate. Plus the low vacancy rate, they have every reason to stay forever.
This phenomenon often comes at the expense of necessity. Take for example a family living in a three bedroom rent-stabilized apartment for $3,000 per month. Once their kids move out, they have no incentive to move to a one bedroom property and pay the median $4,500 per month rent. However, the long stable stay comes at the expense of the next generation of families who need those extra bedrooms. Therefore if New York City scraps the rent stabilization policy, tenants will be able to move freely without fear of losing an unbeatable deal.
The city’s current efforts largely center around new housing developments including plans to convert 64 office buildings into new housing. This conversion is one part of Mayor Eric Adams’ goal of turning office space into 20,000 apartments over the next decade.
However, New York City residents don’t have a decade to wait for another percent to be added to the housing supply. According to a February study from SmartAsset, single adults require a salary of $138,570 to live “comfortably” in NYC. Meanwhile, the median salary lags far behind at $74,694 and there’s no end to skyrocketing rents in sight without urgent action.
An unregulated housing market would see an immediate influx of tens of thousands of newly-listed units, encourage fair and frequent turnover from tenant to tenant, and benefit renters and landlords alike. The time has come to do away with rent stabilization, and the clock is ticking.
The Zeitgeist aims to publish ideas worth discussing. The views presented are solely those of the writer and do not necessarily reflect the views of the editorial board.
