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Vacant Apartments in New York City

07/18/2009

We are shocked, shocked, to read in Gotham Gazette: Unlocking the Apartment 'Warehouse'

[a homeless advocacy group] found that 24,000 apartments could come out of the vacant buildings and lots they canvassed. The report noted that while the count only covered Manhattan, "highly visible clusters of boarded-up buildings in neighborhoods exist throughout the five boroughs." Picture the Homeless said that the vacant property could house the entire homeless population of New York City.

The report then goes on to ask why there are so many vacant apartments? According to a pro-landlord group:

  • "the property is tied up in an estate"
  • "the landlord might think that using the property would not be profitable"
  • "structural problems with buildings"
  • "property owners who tired of managing"

 

Throw in a couple more reasons from the "Housing Not Warehousing Coalition"

"Warehousing today is all about gentrification. That's all it's about," he said. "If you're holding on to a building, paying and maintaining the cost of taxes, sitting on an investment you're not profiting from, it's for a reason, and it's because you plan on making more money in the future."

Making more money in the future: that sounds pretty evil, huh?. But wait, government to the rescue:

Councilmember Tony Avella, a Queens Democrat running for mayor, is working on a bill aimed at stopping landlords from keeping vacant property off the market.

How anyone can write an entire article about vacant housing in New York City and not mention rent control, or really any rational explanation for this phenomenon, boggles the mind. In one of the most crowded and expensive cities in the world why are there empty apartments? Are landlords stupid? Do they not want to make money?

That rent controls produce a shortage at the controlled price with reservation demand above the controlled prices is one of the most basic conclusions of economics.

All of the other problems mentioned in the article could be caused by rent control as well. Property tied up in an estate? Most business firms do not shut down when they pass into an estate, they continue to operate. The executors of the estate could still manage the property for income, like any other business, were there an incentive to do so. The property is not profitable? This might change if it could be rented at a higher price. Structural problems? Capital consumption common in rent-controlled areas because landlords try to cut costs rather than raise prices. Owners tired of managing? Why not hire someone to manage?

Anecdotally, I know of several instances of off-the-market property in San Francisco where I live and which has rent control. Owners have told me the reason is that, once you lease a property, you cannot terminate the rental very easily. This means that you cannot get the property back for your own use if you wish to use it for yourself or family members. (There are some exceptions to this, it's complicated...).

I'm not familiar in detail with the ins and outs of New York rent control. At one point in time, the rent control was associated with the unit, not the tenant, which provided a incentive for a property owner to with hold units to avoid establishing a controlled rent. I know that there has been some liberalization over the years, however, Wikipedia links to this New York Times article which states that the state legislature has made the rent control law even more strict.

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