Emulating the "Massachusetts miracle": eliminating rent laws in New York City

Real Estate Weekly, Nov 30, 1994 by Ruben Klein, Carol Keenan

Just as a praying mantis eats its own limbs for food, so too has the city of New York been consuming major parts of itself by permitting the rent and other regulatory laws, as well as the housing court to devour the city's housing stock.

But, if Massachusetts can reject its rent control laws and initiate a move into a free market for rental housing, why can't New York?

The elimination of the counterproductive, restrictive rent laws in the Bay State has been called "a miracle." New York badly needs such a miracle.

Massachusetts accomplished its miracle this past Election Day when a majority of the Bay State electorate voted against their own rent laws. They did this by approving an initiative called Question 9, passing it 51 to 49 percent. A bare majority yes, but enough to win some relief for owners and some hope that the state's housing stock will be improved by investors who have been turned off by the rent laws.

The new law will end all rent control in Massachusetts beginning January 1. We congratulate Massachusetts voters for their good sense and Massachusetts owners for their good fortune.

We are pleased to note that New York owner groups are contacting their Massachusetts counterparts to learn about the tactics and strategies that brought the miracle about. We urge governor-elect George Pataki to take note.

Judging by the recent election here and nationally, many voters are opting for traditional values. Hopefully this will translate on the local political scene into a willingness to rely more on the free market to regulate the housing market than to rely on government officials who may have a vested interest in keeping the rent regulations on the books.

Those who are supposed to know about such things have reported that Massachusetts voters opted to get out from under the rent laws for reasons that apply to New York and which we've discussed in these columns.

According to one report, the rent laws in the Bay State hurt owners of small rental apartment properties. This is hardly unique to them. The rent laws have hurt, and in fact are still destroying, owners of small property in New York City. For example, a few weeks ago, this paper reported that, citywide, real estate tax delinquencies were rising for smaller apartment buildings. Also suggesting the widespread harmful impact of the rent laws, there has been a rise in tax deliquencies this year even among owner-occupied cooperative and condominium apartments.

All the details of the momentous development in Massachusetts have not been reported yet in the New York media, but according to the reports we've read, the tide turned against the rent controls because they hurt a large number of elderly owners of small properties who were living on fixed incomes and counting on the returns from their rental property investments. They, just like owners in New York, were being squeezed by high costs, taxes and below market rentals. The difference between them and us, at least so far, is that they were able to use the mechanism of the initiative to do something about it. How they were able to convince a majority of the voters to help them is a story I'm looking forward to reading.