Rent regulations are considered a birthright by New Yorkers, and increasingly popular in Albany as well, where a slew of new bills are considering expanding tenant protections. Mainstream economic theorists, though, have long belittled such laws, arguing that they reduce both the quality and quantity of housing and make housing problems worse in the long run.

A new Columbia Business School study, though, argues that opponents of rent control and other affordable-housing measures are missing a key benefit of such programs. Where previous studies have focused narrowly on such negative effects as reduced housing supply and increased market rents, they've failed to account for one major positive: reduced fear for low-income workers that loss of a job will lead to loss of a home.

"In the New York City market there is a lot of inequality and very little insurance provided through the tax code," Columbia Business School real estate and finance professor Stijn Van Nieuwerburgh, the lead author, explained to Gothamist. "Housing affordability can add value as an insurance mechanism. My message is yes, there are distortions [to the market], but the benefits are also there."

So, is economics as a field catching up to what everyone already knows is true, or what?



"Economists typically have taken a narrow view towards rent control...but we've found that expansion of rent control in major cities provides real benefits," https://t.co/KpE8SuFVuC — Oksana (@OksanaMironov) April 9, 2019

The authors of the study built what they call a "workhorse" mathematical model of the New York City housing system, incorporating rent-controlled housing units, public housing, Mitchell-Lama housing, and all other government-assisted or regulated housing in New York City. (It did not, however, include rent-stabilized units.) They then applied changes to rent control and zoning policies to see what would happen.

As it turned out, the city's total overall welfare went up when rent control was increased. The negative effects of reducing housing supply, the model showed, were outweighed by the positive effects of reducing the fear of losing a home if you lost a job. (Van Nieuwerburgh explained he converted less tangible measures into the equivalent amount of cash value that people would be willing to give up to obtain them: "A welfare gain of 1 percent from a policy change means that this household would be willing to give up 1 percent of consumption every year to live in this new world with the new policy.")

However, Van Nieuwerburgh and his co-authors concluded that rent control policies in New York City would work better if they were more narrowly targeted to poorer residents, who benefit more from the increased security of a guaranteed low-rent home. He also would encourage establishing a system where people had to re-qualify every few years.

"The message is if you increase rent control, you have modest welfare gains, but if we fix the system we can get large welfare gains," he said.

Although rent control has been used for decades in New York City, Los Angeles, San Francisco and Washington, the policy tool has been relatively rare elsewhere. That may be changing. In February, Oregon became the first state to establish rent control statewide.

The Columbia study comes at a critical time in Albany. Progressive state lawmakers are pushing a plan to expand rent regulation and, in the process, reviving a debate about whether such price-setting policies can depress a city’s economy.

Upstate Democrats have specifically pushed back against a proposal backed by Assembly Speaker Carl Heastie to expand the Emergency Tenant Protection Act of 1974 (ETPA), which regulates rents in buildings larger than six units that were constructed before 1974, according to a story in the Albany Times Union. Municipalities would have the ability to opt in to the program, as long as they can show that their housing vacancy rates are below 5 percent.

Aside from New York City, Westchester, Nassau, and Rockland counties are the only places currently eligible for ETPA.

"Our initial reaction is thanks but no thanks," Assemblymember John McDonald, who represents Cohoes, a city in Albany County, told the Times Union. "What works for Brooklyn may not work so well in Watervliet."

Assemblymember Pat Fahy of Albany worried that ETPA would have a “chilling effect on development.”

But Brooklyn Assemblymember Steve Cymbrowitz, who chairs the chamber's Housing Committee, argued that the real estate lobby has used “scare tactics” to drum up opposition to rent protections.

"Rent regulation has helped hundreds of thousands of people to live in [New York City],” he said.