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Rent-Control Follies

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If Alex or Tyler at Marginal Revolution [2] would blog on this story [3] in today’s Washington Post, they’d do so under their heading "Markets in Everything."

Here’s the summary of the story: Landlords in New York City hire professionals – called "facilitators" – to negotiate with tenants of rent-controlled apartments in the hopes of enticing tenants to move out. In many cases, the sums of money paid to agreeable tenants run into the hundreds of thousands of dollars.

The reason for such payments – the reason a market in facilitators has arisen – is New York City’s perverted policy of rent control. Gotham’s rent-controllers generally prohibit all but minuscule increases in rental rates – except when tenants voluntarily move out, at which time the permitted adjustments in rental rates (to be paid by the new tenants) are typically much larger. Relatedly, if a landlord wants to convert his apartment building to some other use, his tenants can often prevent such conversions simply by refusing to abandon their apartments.

What’s a landlord to do? Answer: pay tenants to leave.

It’s perverse, of course, as understood by this landlord quoted in the Post story:

"In every other city landlords want to keep people in their homes as long as possible," chuckles Richard Aidekman, who owns 10 apartment buildings here. "Only in New York is the goal to get them out."

Keep in mind – if landlords use sizable carrots to entice their tenants to move, landlords surely also use sticks. Can anyone really expect that New York City landlords will be attentive to their tenants’ complaints about, say, lack of adequate heat, low water pressure, poor plumbing, and surly doormen?

In this Post story, the reporter refers to New York City’s rent-control regulations as "tenant-friendly." Hmmm. In what way is a policy that encourages suppliers (landlords) to run way their customers (tenants) friendly to tenants?

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