Home Budget & Tax News Ithaca, New York Considers Canceling Residents' Rent

Ithaca, New York Considers Canceling Residents’ Rent

The college town of Ithaca, New York, wants to cancel rent for the 7,500 renters in the town.

The city’s Common Council passed a resolution asking the city to request the state’s permission to cancel rents and prevent evictions from residential and some commercial properties, The Real Deal reports.

“Ithaca is the first municipality to pass a measure to cancel rent on the premise that not doing so would endanger the health of its residents—skirting the need for legislative approval, or specific approval from [New York Governor Andrew] Cuomo, who has not supported canceling rent,” The Real Deal reports.

Ithaca Mayor Svante Myrick supported the proposal, as did tenant activist groups.

The plan would implement “a series of actions that read like a laundry list of landlord nightmares,” The Real Deal reports. “The mayor would forgive three months’ rent for any resident, prohibit eviction of residential or small-business tenants, and ‘obligate’ landlords to offer lease extensions at the current rent level.”

A bill under consideration in the New York Legislature would subsidize rent to landlords whose tenants cannot keep up their payments, with means testing for rent-assistance recipients. The proposal would use $100 million of federal money, though sponsor Sen. Brian Kavanagh (D-Manhattan) acknowledges the available funding would not cover the program.

Tenant groups oppose the bill in part because the means-testing would exclude people living in the country illegally.

In a Heritage Foundation paper on the federal Low Income Housing Tax Credit (LIHTC), authors Adam MichelNorbert Michel, and John Ligon argue that rent subsidies overwhelmingly benefit already-wealthy people, not the renters.

“The value of the LIHTC is largely captured by investors and intermediaries, not renters,” the authors write. “Thus, even if federal or state governments decide that low-income renters indeed need a subsidy worth $8 billion a year, the LIHTC is an inefficient way to distribute the money. In the Journal of Real Estate Economics, Gregory Burge estimates that only 35 percent of the tax credit is captured by renters in the form of lower rent. [Gregory S. Burge, “Do Tenants Capture the Benefits from the Low-Income Housing Tax Credit Program?” Real Estate Economics, Vol. 39, No. 1 (Spring 2011), pp. 71–96.] Combining Burge’s estimates with those of other scholars, economist Ed Olsen estimates ‘that tenants capture at most 24 percent of the development subsidies’ for low-income housing.”

The main problem is government regulations that make housing unaffordable for many people, the Heritage authors state.

“Current policies in most large cities drive up housing costs due to strict rules and regulations that effectively prohibit new low-cost construction or renovations,” the authors write. “Without new construction, housing costs rise and people are quickly priced out of the market, creating large reductions in economic welfare. The LIHTC and other housing subsidies are largely treating the symptom of high housing costs, rather than the cause of overly restrictive land-use regulations. Reforms to make it easier to privately build and finance new and expanded housing developments of any type would go a long way toward relieving the current upward pressure on rent in America’s cities.”

Writing in Townhall in 2018, columnist Ben Shapiro said housing subsidies lead to a cycle of further problems.

“Democrats routinely complain about the price of rent in major cities but then institute rent control and subsidized housing, driving up the cost of development,” Shapiro writes. “In order to deal with the rising costs of rent, they push for an increase in the minimum wage, which causes more unemployment. Then they tax the businesses they’ve already penalized in order to pay for the unemployed.”

Instead of subsidies, the Heritage authors recommend “deregulatory reforms, such as local zoning and building code reforms” as “a powerful tool to expand housing supply and lower rental prices.”

S. T. Karnick
S.T. Karnick is the director of publications, a research fellow for The Heartland Institute, and the managing editor of Budget & Tax News.

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