EDITORIAL: Another rent control failure in NYC

Nevada’s legislative Democrats have flirted with rent control as a means of addressing high housing costs. But their proposals have, thankfully, lacked sufficient support. Perhaps they should consider New York City’s predicament.

Mayor-elect Zohran Mamdani wants to bring sweeping changes to the Big Apple. One of his most popular proposals is to “freeze the rent.” The proposal has populist appeal. New York City rents remain exceptionally high. The median rent of a one-bedroom apartment in November was around $4,400, according to the rental site Zumper. That’s more than $50,000 a year.

High prices aren’t a new phenomenon there. For decades, New York City has tried to make itself more affordable with rent control and rent stabilization programs. This year, the Rent Guidelines Board determined that future one-year leases could increase by 3 percent. If he gets his way, Mr. Mamdani will reduce that to 0 percent.

There’s an immediate problem with this plan. Last month, the New York Housing Conference noted that the owners of tens of thousands of units are losing money. The nonprofit, which bills itself as “N.Y.’s affordable housing advocate,” warned that widespread defaults are looming. The rent-stabilized apartments aren’t generating as anticipated, while expenses have jumped dramatically. For instance, insurance costs averaged a 25 percent annual increase over four years, the group found.

“Simply put, about half of these buildings are not collecting enough rent to pay their bills,” the report noted.

Freezing the rent will make this problem much worse and reduce the quality of the city’s housing stock. For property owners, maintenance is the largest category of discretionary spending. So if money is tight, maintenance gets delayed.

“If this continues for several years, the physical condition of the building will deteriorate and/or the building will run out of ways to cut costs and they will default on their loan,” the group wrote.

That’s not just a problem for private-sector apartment owners. The government is backing their loans.

“Over the past 10 years, the city has invested more than $13 billion in city capital funding for affordable housing,” the report pointed out. Defaults could “impact the bond rating of the Housing Development Corporation.”

If this happens, it “will lead to higher borrowing costs for the city, which can impact the mayor’s entire affordable housing plan,” the group noted.

To prevent this, the group called for reduced water and insurance costs along with a $1 billion bailout to subsidize apartment owners. In other words, a new government intervention is needed to fix the problems created by the previous government intervention.

This is not a road that Nevada should not travel. Rent control is a failure. Let the market work.