While Mayor Bloomberg has been trying to provide incentives and programs for middle- and low-income housing in the city, the speaker of the City Council, Christine Quinn, is preparing one of the most destructive pieces of legislation to come along in years — all disguised as a tax credit for renters in New York. Her plan amounts to a huge transfer of wealth from those who earned it to those who are already subsidized by government housing policy. It comes at a time when one would think a top priority for the city would be to be sustain the real-estate expansion it has been enjoying in recent years.

For all the attention to the boom in luxury condominiums and co-ops in Manhattan and to the beginning of a phase out of rent control and under Governor Pataki, there are still vast numbers of New Yorkers living in government-controlled housing. The city’s 2005 Housing and Vacancy survey lists 1.08 million units of rent-controlled or rent-stabilized housing in the city, units for which the government sets the price at a below-market rate. On top of those are another 179,000 units that are part of the New York City Housing Authority, which house more than 5% of the city’s population. Together the rent-controlled, rent-stabilized, and public-housing apartments exceed the number of owner-occupied units, which is 1.01 million.

The number of private, nonregulated rentals is a mere 697,000, and tens of thousands even of those are subsidized with Section 8 vouchers. The homeownership rate in New York is growing, which is a good thing. It has affected the political dynamic in the city, with homeowners worried about property values more likely to vote Republican. But the city’s growth is nonetheless hampered by a housing market in which the government is a huge player. The result is a housing “emergency” that has persisted in New York for generations.

What the speaker is now proposing is to hand those million New Yorkers who already benefit from below-market-rate housing yet another subsidy. She will today propose a “renters tax break” — a $300 tax credit for New York City residents who pay rent. Individuals earning $43,000 a year or less would get the credit, as would married couples earning $54,000 a year or less, families of three earning $65,00 a year or less, and families of four earning $75,000 a year or less, according to the speaker’s office.

It’s nice to see a Democratic City Council speaker waking up to the unduly high state and local tax burden borne by New York City residents. But the way to improve the situation is to cut marginal income tax rates on all taxpayers, and, for that matter, the taxes on sales. More government meddling in the housing market will likely prove counterproductive. We wouldn’t be surprised to see free-market rents increase by the amount of the “tax break,” in much the same way that colleges raise tuition when the government offers education “tax breaks.”

The right move for the council is to be looking at tax policies that relieve the tax burden on all taxpayers, not proposals that encourage renters to keep their incomes below some arbitrary ceiling. Such a ceiling will only encourage “off-the-books” work for cash that doesn’t get declared as income, a problem already rampant in the lower reaches of the New York labor market.

In the meantime, the political power grab for the New York real-estate market extends beyond the City Council chamber all the way to Albany, where, if Democrats win control of the state Senate, one of their first moves will be to alter the point — $2,000 a month in rent — at which Governor Pataki and the Legislature set rent stabilization to phase out. The Legislature is said be chafing to keep rent stabilization in place until an apartment’s rent reaches $4,000 a month, the practical effect of which would be to keep those million apartments under a government price control regime for two more generations.

That is a move that would cost millions for the investors who have just paid top dollar for big rental apartment complexes such as Peter Cooper Village, Stuyvesant Town, and Starrett City. Their purchases were made based on the idea that the rent-stabilized units would soon become market rate. The Democrats, as a political matter, appear to see an upside in making the tenant class feel indebted to them for subsidies. Surely there is an upside here for a politician who can explain to the ordinary New Yorker that his taxes are subsidizing those getting a special deal and who can articulate how the government intervention distorts the market to the detriment of all those seeking to make their home in this city.