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When you listen to most New York politicians speaking about the current economic crisis the City is facing, you always hear a reference to the fact that, although spending and services need to be cut, conditions will not revert back to the way things were in the 1970′s.  I think there is one exception and that is that during the 1970′s the welfare system in New York was out of control. The expectation of entitlement was at an all time high and if the package of bills endorsed by the Assembly gets adopted by the Senate, we could have a 1970′s level of entitlement expectation within our housing system. Forget about “Rent Control” or “Rent Stabilization”, given the pending legislation, why not just call it “Rent Welfare”.It is not surprising to me that there is a groundswell of momentum to promote a more pro-tenant environment among elected officials. For most politicians, getting re-elected is their main goal and taking an anti-tenant position is political suicide. In private they will tell you that the system is overly protective of tenants but simply cannot take this position publicly. MIT and The Wharton School have completed studies demonstrating that the elimination of rent regulation would result in lower average rents citywide.Some of the proposed changes include eliminating high rent vacancy decontrol, raising the bar on income decontrol from the current $2,000 to anywhere from $2,700 to $5,000 and the means test level of income from $175,000 to about $240,000 with an indexing provision, eliminating the present method of implementation of preferential rents, reducing the vacancy bonus from 20% to 10% and reducing the increment that can be added to the monthly rent resulting from renovations to an individual unit. Another potential change which would have a profound effect on the system is the proposed repeal of the Urstadt Law which would place oversight of rent regulation in the hands of the city as opposed to the state. This would likely result in the City Council, which is extraordinarily pro-tenant, taking over which would probably vaporize the Rent Guidelines Board and  determine rent increases themselves.Owner advocates have said that, should the present bills become law, we could see a wave of  foreclosures which would not be good for the landlords or the tenants and that fundamentally changing the rules in the middle of the game is not fair. While foreclosures may indeed increase, this will have a relatively short term impact on the housing stock. Sure the services in the buildings are likely to decrease during the foreclosure process but, ultimately, the lender will resell the property at a lower market value, a new owner will take over and the property’s operation will get back on track.  The longer term impact is that the proposed changes will lower property values thus eroding the real estate tax base which is needed now, more than ever, to address record level buget deficits. The incentive to upgrade apartments would be greatly diminished causing, what is already an aging housing stock, to rapidly deteriorate. Vacancy decontrol created tremendous incentive for owners to invest heavily in improving the qualityof the housing stock.There is a great need for affordable housing in New York but for the public sector to ask the private sector to provide it in this fashion is not the solution. Incentives for the creation of new affordable housing units is an easy fix but is politically unpopular. Giving tenants effective ownership of their buildings through a far reaching entitlement program is not a good thing for the city. Let’s hope, in this way, we do not return to the 1970′s.

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