Will a Rent Freeze Fix NYC or Make it Worse?

The Journal.

Ryan Knutson hosts a discussion on the implications of New York City's upcoming rent freeze intended to address the housing affordability cr

Key takeaways

• Emily Eisner notes that over 50% of NYC renters are paying more than 30% of their income on housing costs.
• Kenny Burgos argues that rising operating costs, including insurance and taxes, make the rent freeze untenable for many landlords.

Main topics

• NYC Rent Freeze
• Housing Affordability Crisis

Notable quotes

The rent is too damn high.

Conclusion

The episode highlights the fundamental conflict between providing imme

Transcript preview

Speaker 2 (0:05) Earlier this month, I asked a crowd in Manhattan one of New York City's most classic questions. How much do you pay in rent? I want to see it by a show of hands. How many people here rent? Look at that. That's amazing. That's like most people. Does anybody want to say how much they pay in rent? Anybody pay the least? Anybody want to brag about their situation? Andrews for $1,200? You served and you live in New York City? On the Upper East Side! Speaker 2 (0:43) Is that Monica from Friends with the rent-controlled apartment? There's a housing crisis in America, and New York City is no exception. In response, New York City is implementing a rent freeze next month. That means that for about a year, it will be illegal for many landlords in the city to raise the rent on their tenants. But rent freezes are very controversial. Some economists think a rent freeze is a good tool to address a broken housing market, and others think it's actually harmful. Speaker 2 (1:14) The rent is too damn high. Agree or disagree? Speaker 1 (1:20) Agree. Duh. Speaker 3 (1:23) Agree, but for who? Because my friend over here had $1,200 rent for a two-bedroom. Speaker 1 (1:28) At Speaker 2 (1:30) this live taping of The Journal, I sat down with two housing experts who have two different takes on the housing crisis. You can watch a video of our conversation on Spotify. Welcome to The Journal, our show about... Speaker 2 (1:48) I'm Ryan Knudson. Coming up on the show, what's wrong with the rental market and how to fix it. New York City is a complicated housing market. So let's start off with some basics. Rent control has existed in New York in some form or another for nearly a century. At first, rent control kept many landlords from being able to raise rents at all. And then in the 1970s, rent regulations evolved into something called rent stabilization, meaning rents could go up, but only by an amount set by the city's rent guidelines board, or the RGB. Most apartments in New York used to be rent stabilized, but that number has shrunk over the last few decades. And today, there are about 1 million rent-stabilized units in New York, which is about half of the city's rental supply. At our live event in New York a few weeks ago, I discussed the housing crisis with Emily Eisner and Kenny Burgos. Emily is the executive director and chief economist at the Fiscal Policy Institute, an independent think tank focused on economic policy in New York. And Kenny is the CEO of the New York Apartment Association, which represents landlords, including those that own and manage thousands of rent-stabilized homes. Speaker 2 (3:17) How bad is it? How would you characterize how bad the housing situation is in New York City? Speaker 1 (3:23) Okay, I would characterize it as quite bad, but I kind of do want to just take one step back quickly and say that the median rent in the city is about $1,700 to $1,800 a month. And I just think that that usually strikes people as quite low when they hear it, so I just wanted to level set on that. 30 years ago, it was about $1,000 per month. Adjusting for inflation, so like accounting for all other price changes and wage changes, it's gone up by over 50%. Now it's, yeah, 1,700, I guess. So there's been a huge shift in the distribution of rents in the city, even after accounting for regular inflation. And it's really squeezing people's incomes and budgets such that now renters, over 50 % of renters are paying over 30 % of their incomes. in their housing costs and something like 30 % of renters are paying more than 50 % of their incomes and housing costs. So in Speaker 2 (4:22) other words, the rent is very expensive for a lot of people. A lot of people in New York are rent burdened. Speaker 1 (4:26) Yeah, rent burdened. How would you describe the situation for landlords, Kenny? I Speaker 3 (4:31) would say right now we have a scenario where, especially in recent times, we have a high level of distress happening, particularly in the rent-stabilized housing stock. And we'll talk more about sort of how we got there and what's happening. But basically, you have a scenario where you have tenants that are unhappy about the current housing scenario and property owners that are unhappy about the current housing scenario. So that tells you everyone is unhappy. Clearly, something has to be fixed here. Speaker 2 (4:55) Affordability is obviously an issue in every city. So do you think that New York is... just emblematic of what's happening everywhere? Or is New York uniquely bad? Speaker 3 (5:03) I mean, New York has always been known to be a very expensive city and affordability has been the buzzword, certainly for the past few years. And not just a buzzword, it's Speaker 2 (5:09) a Speaker 3 (5:09) very real issue. We've all seen, you know, high inflation coming in the past few years. We've seen our own groceries increase. We've seen costs increase across the board. But I think New York has a unique experience here. One, because everyone wants to come and live here because it still is the greatest city in the world. But with that level of demand, is being met with such a level of scarcity and lack of housing supply that it's forcing people who are looking for rents today to pay some pretty exorbitant prices. So you said earlier the rent is too damn high. And my response would have been, yeah, if you are looking for a new free market