Not very long ago, I read an article in a real estate news publication, “Real Deal,” which covered the terribly “messed up” housing voucher situation in the rent-controlled City of New York. The article noted that “for one glorious week last June, the city opened a rent-voucher portal that had been closed for 15 years” and the result was that 600,000 New York residents applied for Section 8 Housing Choice Vouchers distributed by the New York City Housing Authority. To qualify, tenants applying for Housing Choice Vouchers must make very little money as the income threshold for an individual is $54,350 a year and $69,900 for a family of three.

The issue here, though, was two-fold. First, there were only enough vouchers for 200,000 New Yorkers although “200,000 is 200,000” after all and at least one-third of those who applied, could have potentially received some sort of housing relief after all. However, there was a second and much more challenging issue. For those 200,000 potentially fortunate, lottery winning and hoping to be housing voucher recipients, there were no places to utilize the Housing Choice Vouchers. You see, the New York Housing Authority had the ability to “take” applications and “give” some housing vouchers to New Yorkers, but there was no ability to “place” the lucky few, poor souls in housing. That is the sad reality in New York City and also the sad reality here in Los Angeles although currently on a smaller scale.

Sadly, as Real Deal’s article pointed out, “No…200,000 New Yorkers did not get a lifeline. They got on a waiting list to get a lifeline.” There were and currently are very few available apartments in New York City to be found before eligible vouchers expire 180 days after they are issued. Now “why is that” you may ask? Well, the short answer is rent control, and New York City has “really, really bad” rent control regulations…yes, far worse than we mere mortals here in California.

You see, in New York, there’s no vacancy de-control so when there’s a vacancy, owners can only increase rent by a very small percentage for the next tenant coming in. But that’s only if there is a vacancy and a new tenant does come in – more and more, and there’s 10’s of thousands of these across the five boroughs of the Big Apple, owners today are keeping their units vacant because they cannot afford to fix them up when there is a vacancy, or it just doesn’t make financial sense for them to do so. Additionally, New York renters can transfer their cheap rental units to their next of kin as if they own their units, and owners have no say in the matter.

As a result, there are some really crazy rental stories that have come out of the City of New York, like Nora Ephron who moved back to the City in 1980 following her divorce to journalist, Carl Bernstein (remember Carl “All the President’s Men” Bernstein?). And, lucky for Nora, after her divorce, she rented a rent-stabilized 8 room apartment in The Apthorp building on the Upper West Side of Manhattan for a very long time…in fact, for decades. Her apartment cost her $1,500 per month (plus paid off the tenant who she got to move-out with $24,000) – she lived at the building until she passed away decades later having paid far below market rent for decades at the detriment of her landlord who had been forced to subsize a very wealthy tenant. Another one, Mia Farrow inherited her rent-controlled apartment overlooking Central Park near East 73^rd street from her parents – her 11-room apartment was featured in Woody Allen’s file, “Hannah and Her Sisters,” and Farrow’s rent was, of course, not even close to market.

Reason Magazine once wrote of New York City rent control:

“It’s no secret that ‘one-percenters’ have occupied more than their share of Manhattan’s rent-controlled apartments. High profile freeloaders of the past include New Yorker editor William Shawn, singers Carly Simon and Cyndi Lauper, TV personality Alistair Cooke, Metropolitan Museum of Art Director Philippe de Montebello, former Kennedy speechwriter Ted Sorensen, screenwriter Nora Ephron, Mick Jagger’s ex, Bianca, and Mayor Ed Koch (D). Manhattan Congressman Charlie Rangel (D-13th District) famously pigged out on four rent-controlled pads—three to live in and one for his campaign office.”

So, what does all this mean? Well, cheap rent equates to long-term or even lifelong renters which equates to severe housing shortages. Although she lived alone, Ephron took up 8 rooms because she secured a lifetime of what was “cheap” rent. In fact, studies have shown that because of rent control, there is a “mis-match” created where one person, whose children may have moved out as adults and a spouse divorced or passed away, may occupy a three-bedroom apartment leaving less supply for the next family looking to occupy that rent-controlled, suitable for a small family apartment – it just does not pay under rent control to give up a cheap 3-bedroom apartment and move to what would invariably be a much more expensive, less affordable one-bedroom apartment. And so, it unfortunately goes in New York City with its tight, 1.4% vacancy factor and no room for the lucky housing voucher recipients – or at least they felt lucky until hitting the streets of the Big Apple in search of a roof over their heads.

Swedish economist, Assar Lindbeck, once said of rent control, “In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.” Another way of putting it is, “rent control simply does not work.” The wealthy often end up with a large share of the rent-controlled units – a study from a few years ago had shown that 25% of occupants in rent-controlled apartments in New York City earned more than $200,000 per year, yet in effect, they were also being subsidized by their landlord with below market rent. It is a situation of the lower income versus the rich bidding for the same units. The wealthy often figure out how to displace lower income renters to secure the “treasure” of below market housing.

Rent control incentivizes residents to stay in their apartments practically forever, and often until they die regardless of changing occupancy (e.g., family downsizing) or increasing income. Rent control is merely a systematic failure at absolutely every conceivable level.

As the Real Deal reported in its article, after nine months, the New York City Housing Authority processed just 12,000 of the 600,000 applications for the 200,000 available housing vouchers, and just 318 lucky individuals were placed in housing. That’s not such a great outcome for a city of more than 6 million renters, is it? Sadly, so much of this story is true for very similar, Los Angeles Area jurisdictions that have adopted these draconian, anti-free economy rules that continue to constrict and punish those of us who have sacrificed and invested in our communities to provide badly needed housing. If we could only get some balance put back into these one-sided regulations, then perhaps we will have a chance to survive and thrive.

For nearly 5 decades, we have had rent control regulations in place, yet will we ever learn? Rent control stinks!

Written by Daniel Yukelson

Daniel Yukelson is currently the Executive Director of The Apartment Association of Greater Los Angeles (AAGLA). As a Certified Public Accountant, Yukelson began his career at Ernst & Young, the global accounting firm, and has since served in senior financial roles principally as Chief Financial Officer for various public, private and start-up companies. Prior to joining AAGLA, Yukelson served for 15 years as Chief Financial Officer for Premiere Radio Networks, now a subsidiary of I-Heart Media, and for more than 3 years as Chief Financial Officer of Oasis West Realty, the owner of the Beverly Hilton and Waldorf Astoria Beverly Hills where he was involved with the development and construction of the Waldorf. Yukelson was formerly Chairperson of the City of Beverly Hills Planning Commission and served on both Beverly Hills’ Planning Commission for 6 years and Public Works Commission for 3 years.