Moses Kagan on Real Estate

Rent control and slums

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Spent a bunch of time recently talking to tenants in a 1920s building.

They told the story of how their building turned into a slum. In a nutshell: The owner 30 years ago used to live in the building. He took a lot of pride in the building and fixed all problems immediately. Then he died and the building started changing hands every few years.

Somewhere along the way, the new owners stopped investing in the building. Graffiti appeared and wasn’t promptly removed. So more graffiti appeared. No one upgraded the electric, even though tenants used more and more of it for big TVs, A/C, etc. So outlets started blowing out (and not being replaced). The old waste lines corroded, leading to more and more sewage back-ups into the units. The hallway lights went out and weren’t replaced. Eventually, no one came to take out the trash and keep up the garden, so the tenants started to do it themselves (with varying results).

Tenants started to turn-over a lot and the new owners filled units with whomever they could find: often undesirable tenants paying low rents. And no one remembered to raise the rents on the tenants who stayed.

Now, the rents are low and no one can raise them because of rent control. There is now a powerful incentive for the tenants who can handle the decay to stay, even as the building some of them grew up in falls apart around them.

When you read in your Econ 101 textbook that rent control creates slums, this is what they’re talking about.


Written by mjkagan

09/24/2012 at 7:33 am

Posted in Rehabbing, Rent Control

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