Skyscraper city dreads high-rise rents

Cost of living in New York set to soar, reports David Usborne
New York - To scurrying Manhattanites sex and money are important, but their biggest obsession is where they live. Have they found a place to rent? Is the neighbourhood right - below 96th Street anyway? And did they get a deal?

Understand that and you will understand the tizzy gripping the city over negotiations under way in Albany, the state capital, on the fate of rent control laws that date back five decades. Are these nigh-sacred limits, which apply to about 2 million New Yorkers, about to be killed off?

It seems so, although perhaps not overnight. But, unquestionably, the process spells a revolution, the likely impact of which is being hotly debated.

It may bring sanity to a wildly distorted housing market; but it could also drive out from the Apple many who could find themselves unable to stay - including the artists, writers and entertainers that give the city its rich mix.

Introduced during the Second World War to protect tenants from greedy landlords exploiting a housing shortage, the controls have since earned a certain infamy for helping the wealthy far more than they do the city's poor.

There was the case, for instance, of Mia Farrow's sprawling 11-room apartment overlooking Central Park for which she used to pay a piddling $2,300 a month.

Farrow has since moved on (driven to Connecticut after her break-up with Woody Allen). But there are still myriad examples of young professionals enjoying rents far below fair market rates - brokers, lawyers and even an occasional British broadcaster. Alistair Cooke, of Letter from America fame, pays $2,078 a month for his rent-controlled park-view pad on Fifth Avenue.

The control system applies to about a third of New York's rental units.

In essence, it allows the state to decide by how much a landlord can raise the rent (usually hardly at all) and guarantees every resident tenure for his or her life and beyond to the lives of their children. If the curbs were lifted, rents in parts of Manhattan would rise by at least a third.

Economists have long scorned the controls as a damaging anachronism - New York is meant, after all, to be the belly of the capitalist beast, not a last bastion of socialist regulation. They argue, for instance, that they have discouraged developers from building new housing in New York which has made a long-term shortage in the city has just got worse.

"Next to bombing," Assar Lindbeck, the Swedish economist once said, "rent control seems in many cases to be the most efficient technique so far known for destroying cities, as the housing situation in New York City demonstrates".

Landlords, naturally, would agree. Finally, with a realignment towards Republicans in Albany, they have found ears sympathetic to them. Joseph Bruno, the Senate leader, says he will block renewal of the laws when they expire on 15 June. In the lower Assembly, Speaker Sheldon Silver, a Democrat, insists they be renewed in toto.

Now New York Governor, George Pataki, is offering a compromise.

The effect will be to phase out controls, but more slowly. He suggests ending them now for the wealthiest tenants - anyone earning $175,000 or more - and liberating apartments from the controls when a tenant dies or moves out.

Whether his middle way will be followed soon enough to avoid a showdown next month, remains to be seen. In the meantime, all parties are edgy and unhappy. Tenants' groups, in particular, have condemned the Pataki proposals as Mr Bruno's in disguise.

The end of rent control would mean increases in apartment rents of up to 35 per cent in large swaths of Manhattan, including Greenwich Village, the Financial District and the Upper East and West Sides.

The prospect prompted Michael McKee, of the New York State Tenants and Neighbors Coalition, to warn: "If you want New York City to be a vibrant, diverse community, with artist and writers and creative people, then rent regulation is very important. Without rent regulation, creative people will be gone".