Do you have the right "real estate karma" to rent here? The UWS Harmon house with its three rent-regulated tenants.
NEW YORK DAILY NEWS
April 24, 2012
Supreme Court should have taken the Harmon rent control case
by James Panero
Current law allows for lavish living, practically for free
On Monday, the U.S. Supreme Court refused to hear an appeal from James and Jeanne Harmon, the owners of two townhouses on West 76th St. who have challenged the constitutionality of rent control.
In Harmon v. Kammel, the Harmons claimed that such controls meant that the government has essentially made them the private funder of a welfare program. It had also illegally taken their property in violation of the 5th Amendment, which reads that “no person shall be . . . deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”
Rent control, they argued, has taken their private property “without just compensation.”
When the Harmons took ownership of their two small buildings, which had been in the family since 1949, they also got the tenants occupying three rent-controlled apartments. By law, these tenants now lease their apartments at 59% below market rate with lifetime tenure and generous succession rights.
A decade ago, one of Harmon’s tenants even bragged to a newspaper that he lived there “practically free” due to his great “real estate karma.”
Monday’s Supreme Court decision might only sound like a setback for landlords like the Harmons, but really it’s bad news for our entire city, which has long been the victim of a disastrous and near fatal experiment in price fixing. This is especially true for neighborhoods like the upper West Side, where I have been a lifelong resident.
Rent control was an “emergency” measure put in after World War II that stayed on the books for political convenience, even as it nearly bankrupted our city’s aging housing stock. These laws, which came out of a fear of the dangers of the free market, in fact demonstrated how government-manipulated pricing could be far more destructive than market forces.
With rents, services and evictions all regulated by the legislature and the courts, the city and state became the absentee landlords of neighborhoods like the upper West Side.
Power flowed from a politician’s apparent ability to depress rental rates for existing tenants while “taking on” the buildings’ now captive owners for diminishing services.
The city’s price controls, among the most stringent in the country, meant that the rate of apartment turnover plummeted. This created an artificial apartment shortage that continues to raise the rental rates of new construction. Since lower rent also meant that existing owners had less revenue for upkeep, for years aging buildings decayed for lack of funds, meaning that politicians could exert even greater rhetorical leverage over their “slumlord” conditions.
Historically, rent control has exacted its heaviest toll on the very tenants it purports to serve. The wealthy could maintain multiple residences while keeping their sprawling and under-used rent controlled apartments off the market.
Corrupt tenants learned to manipulate their rents even further by calling in phony complaints to the Department of Buildings and suing for bogus “diminution of services” in order to tie up rate increases in litigation (the practice remains commonplace today). Meanwhile, average, honest renters became hostage to the artificially depressed rents of their apartments as rent control diminished surplus and drove up the prices of alternative rental apartments.
Even as their building and their neighborhood collapsed around them, they were often unable to afford to relocate and became increasingly captive to the whims of a political class that purported to have a say in rental rates.
What saved New York wasn’t rent control. It was the cooperative revolution. Stocked with rent-controlled and rent-regulated tenants, the aging buildings in neighborhoods like the upper West Side, despite their grandeur, became next to worthless to their owners.
In the 1970s and 1980s, non-eviction plan coop conversions finally allowed owners to sell shares of their buildings to their own rent-controlled and rent-stabilized tenants, who could then invest their capital and sweat equity into the restoration of the neighborhood. Rather than taking on the landlords, as landlords themselves they took on the squalor of their neighborhood and restored areas like the upper West Side to what we see today.
Despite the damage done to our neighborhoods, rent control and rent regulation still feeds our city’s political machine. In 2008, Rep. Charlie Rangel, with a reported net worth of $566,000 to $1.2 million, was even caught taking up four rent regulated apartments for his personal use.
If the courts won’t take it on, the time has come for New Yorkers to do the right thing in the voting booth and say no to a system that has given their politicians a free ride while damaging their neighborhoods almost beyond repair.