Rent stabilization, the theory goes, is supposed to help stabilize the cost of living for poor and moderate-income inhabitants of one of the most expensive cities in the world. But, as the Sun's David Lombino reports this morning, rent stabilization might just be stabilizing something else: the market for second homes in Florida, Connecticut, and upstate New York. Well-off New Yorkers are using the five-figure windfall of rent stabilization to buy second homes.
Mr. Lombino describes such examples as that of a retired developer splitting time between a rent-stabilized apartment and his $1 million house outside Geneva, Switzerland. Over the years, the "outing" of a rent-stabilized celebrity - like Mia Farrow, who had a $2,900 a month, 11-bedroom apartment on Central Park West, or Cyndi Lauper, who rented $989 a month quarters on West End Avenue - has generated an occasional stir, but defenders of rent control and stabilization argued that such cases were merely flukes. Now, however, it appears to be common for better-off New Yorkers to take advantage of loopholes in the rent laws. The former president of the Rent Stabilization Association, John Gilbert, told Mr. Lombino that there are "thousands of examples."
Such examples may be shocking in a city where the market-rate rents are among the highest in the nation, but it's important to lay the blame at the right address. We don't fault the tenants Mr. Lombino found, or others like them, for taking advantage of the opportunities New York's rent laws create. The problem is rent stabilization itself. As a Manhattan Institute scholar, Peter Salins, wrote in a 2004 report on rent regulation, the law "makes housing for all but its already vested beneficiaries scarcer and more expensive, mainly to the detriment of the same New Yorkers - immigrants and moderate-income households - who are also disadvantaged by the other regulatory contributors to the housing gap."
The solution is almost certainly not more "affordable housing" of the type Mayor Bloomberg has been touting. It would be far better to eliminate market distorting price controls while also increasing the supply. That will be hard; our editorial of November 11, "New York's Home Front," described some of the many obstacles to building new units in the city. But Mr. Lombino's article hammers home the point that the current system is dysfunctional. More of the same won't be any better.