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Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
1
Rent Stabilization and Housing Affordability:
A Case of Policy Transfer from Berlin to New York City
Fernando Ruiz.
Fernando Ruiz is an urban historian dedicated to the study of
the relations between policy and urban environments. He
graduated from the University of Guadalajara in Mexico in
2014, from the master’s program in History at The City
College of New York in 2017 and is currently studying a MS
in Urban Policy and Leadership at Hunter College in New
York City. In 2015, his book La Cruz de Plazas.
Transformacion Urbana: Guadalajara 1947-1959, was
published as a result of the award granted by the National
Autonomous University of Mexico, the most recognized
university in Latin America.
New York City and Berlin despite their overall differences and urban challenges, present
similarities in a common core related to the preservation and production of affordable housing for
low-income inhabitants. After the 1970s both cities experienced an abandonment of public housing
programs, leading to the privatization of large amounts of public housing. This process worsened
the conditions of housing and inequality for both cities. While both cities experienced a similar
process, the strategies being implemented to tackle the housing demands are not the same.
In New York City alone, it is estimated that there are 424,949 units to cover the needs of
extremely low and very low-income households. However, the number of households in this
economic bracket ascends to 979,141, leaving an approximate of half a million New Yorkers at
the expends of private markets. To tackle this crisis, in 2014 the city introduced Housing New
York: A Five-Borough, 10 Year-Plan with the intentions of preserving and building housing
affordability, with different strategies to enforce rent stabilization and build more housing. In the
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
2
same fashion, in 2015 in Berlin, the Senate Department for Urban Development and the
Environment introduced a new law known as the “Rental Price Brake.” Among other things, this
law created an organism to conduct oversight and fix a standard median rent within the different
districts of the city, slowing and controlling the rent increases throughout the city.
Though both localities seem to be following a similar path, it can also be argued that the
implementation of these strategies will have a different impact, in relation to how these policies
will work in the context of different social and governmental structures. In Germany, for example,
cities have better control over local issues, while the United States, cities are weakened by certain
laws. Despite these differences, regulation policies that succeeded in Berlin can work for New
York City, but to allow this process to effectively develop, laws and regulations implemented in
the 1970s such as the Urstadt Law, should be repealed for the greater benefit of affordable housing.
The Affordable Housing Crisis in New York City
New York City is experiencing a housing affordability crisis. Data shows that the supply for
extremely low-income and very low-income units is declining at a fast pace. To understand this in
context, an extremely low-income household is that whose income is approximately less than
25,000 a year for a 4 people household. A very low-income household is that whose income is
approximately more than 25,000 but less than 41,000. This translates into a problem when supply
is not enough to adapt to the needs of this sector of the population. It is estimated that in the city
there are only 424,949 units that adapt to the needs of this group, whose rent expenses should not
be more than 30% of their income to avoid rent burden. However, data shows that in the city there
are 979,141 extremely low and very low-income households. Thus, the city’s affordable housing
stock cannot cover the demands of more than 50% of the New Yorkers in most need (HNY, 2014).
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
3
Adding to this, New York City rents and housing stock are not responding properly to this
problem. Since 2000 the median rents have gone up by about $300, while the median income of a
renter household increased only an estimated of $145 per month. This problem is also intensified
when we consider that the housing stock in the city grew only by about 8%, while the adult
population went up nearly 11% (Austensen et al, 2017), a trend that is not receding. One of the
most important factors generating this trend is the abandonment of housing programs and
regulations such as Rent Control and Rent Stabilization. Between 1994 and 2012 the city’s Rent
Stabilized stock was reduced by 152,811 units (HNY, 2014). These programs aimed to protect
rents from raising to unreasonable levels, helping the city cope with population increases and
housing provision. Yet, New York City is not unique to this problem, cities like Berlin have also
experienced a crisis and similar circumstances since both cities abandoned policies to protect
renters, but now, different efforts are also in place to ameliorate the affordable housing crisis.
New York City and Berlin in Context
The process of privatization of public or rental housing markets in New York City and Berlin has
its beginnings in the processes of globalization and the opening of markets in general. “The
globalization of capital markets heightened competition among governments, under pressure to
both maintain social welfare and supporting domestic business, and attract foreign investment, a
pressure they often seek to resolve by entrepreneurial means” (Fields and Uffer, 2014). Advanced
capitalist states may not find support for subsidies or public and social housing, favoring
homeownership, deregulation of rents, and the transference of this portfolio to the private sector.
In the United States, public housing has only ever constituted a minor portion of the overall
housing stock, and like in other developed countries, homeownership receives more funding than
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
4
public or rented housing. By the 1970s “federal policy imposed sharp funding reductions and a
moratorium on new public housing construction and more recently has incentivized demolition of
older developments” (Fields and Uffer, 2014). Declining property values, the loss of
manufacturing industry and thus, low-employment rates, forced the government to cut off
financing to housing programs. By 1971 New York’s suburbs had more than half the metropolitan
population, and half of its manufacturing, retail jobs, and restaurants. By 1976 the city lost 600,000
jobs, and by 1980 the city has lost a million residents (Bloom and Lasner, 2016). The city opted to
decentralize public housing programs, introducing strategies such as Section 8 Housing Choice
Vouchers, that allowed qualified renters to use these incentives out of the public housing stock,
promoting housing searches in the private rental market.
More importantly, the biggest loss during this period came with the introductions of bills
such as the Urstadt Law. This law has a great impact on the present problems of the city because
prohibits cities and other local governments from enacting any rent regulation stricter than the state
law. In other words, the New York City Council and Mayor are largely unable to protect tenants’
rights (Cavadias, 2017). This law propelled Vacancy Decontrol, providing an enormous incentive
for landlords to evict tenants, because it allows them to increase rents dramatically for new renters
after the previous tenant has left its unit. After passing this law in 1971, harassment of tenants and
profiteering exploded, affecting tens of thousands of tenants throughout the city.
In the United States, the loosening in the efforts to preserve housing affordability through
government control, returned rent-stabilized units to the private market. Criteria for rent
stabilization for formerly subsidized housing was weakened by Republican lawmakers. In New
York City this process was exploited by private investors during the 1990s and 2000s economic
expansion, and from 1997 to 2007 exits from assisted housing programs spiked, lifting income and
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
5
rent limits from 40,000 apartments. The high rent/vacancy decontrol provision helped landlords to
move rents over the deregulated ceilings, allowing a 20% or more rent hike upon vacancy. Of
nearly 200,000 units deregulated between 1994 and 2008, high rent/vacancy decontrol was the
leading source (Fields and Uffer, 2014).
In the same fashion, in Germany throughout the 1980s and 1990s, housing policy became
more market-oriented, increasingly promoting homeownership and market approaches to social
housing and shifting from supply-side to demand-side subsidies. Germany traditionally provided
a considerable amount of publicly subsidized housing. However, growth expectations were
overestimated, and population loss and economic decline generated a fiscal crisis, impeding the
state to bridge its deficit between the expenditures and tax revenues. In 1991, Berlin owned 19
housing companies holding approximately 480,000 housing units – 28% of the entire housing
stock. The economic decline and population loss that generated a fiscal crisis motivated the
privatization of state-owned housing stock and abandonment of social housing subsidies. In 1995,
the city government instructed its housing companies to sell 15% of their housing units. These
measures were taken with the intentions of improving budgetary constrictions, and by 1998, the
government of Berlin ended subsidies for new social housing construction (Fields and Uffer,
2014). By the 2000s the municipal government and corporations privatized their public housing
stock, in response to this switch of goals oriented to profitability.
While privatization was intended to contribute with financial resources to modernize the
housing stock in Berlin, its housing demand was low. In contrast to New York City, which had a
rental vacancy rate of 3.19% in 1999, Berlin’s housing market was more relaxed, with a citywide
vacancy rate of 7.1% in 1997. Though other differences are also pointed out between these cities,
and despite different rental market conditions, New York City and Berlin encouraged the entrance
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
6
of private equity real estate investment, culminating in the loss of public housing stock. (Fields
and Uffer, 2014). For both cities, the change of course in the strategies to tackle housing demands,
led to a process of gentrification and inequality, propitiating a wave of development of high rental
markets, generating a boom in property value, displacement, and a housing affordability crisis.
Current Strategies
New York has long been a pioneer in housing policy and has made important improvements to
tackle affordability. Housing policy efforts in the last decades can be traced back to the intentions
to rebuild its housing stock that gave birth in 1985, to the Ten-Year Plan for Housing promoted by
Mayor Koch, marking a precedent for big city expenditures on public housing. This plan enlisted
a wide variety of players and can be understood in three general categories. First, several programs
provided low-interest loans to owners of occupied dwellings for upgrading and repairs. Second,
several programs provided subsidies for new construction projects, which typically built
affordable, owner-occupied homes. Finally, much of the plan was focused on the in-rem housing
stock. Buildings from the city’s inventory of in-rem property (both vacant and occupied) were
conveyed at no cost or for a nominal amount to nonprofit or for-profit developers (Furman Center,
2006). Thus, this plan focused on incentivizing repairs in the affordable housing stock and was
successful in doing so, yet, it did not protect rent-stabilized units. Nonetheless, the current
problems the city experiences today are different, if property abandonment and population loss
was the challenge in the 1980s, rent affordability and stabilization are today’s most important
challenges, and different strategies must be applied.
In 2014, Mayor De Blasio introduced Housing New York: A Five-Borough, 10 Year-Plan
that follows the previous trend of preserving and building housing affordability. Among different
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
7
strategies, the city intends to protect tenants in rent-regulated units more aggressively. The plan
outlines how the administration plans to create 200,000 units of affordable housing, from which
80,000 will be new units, 120,000 will be preserved, targeting a wide range of incomes (HNY,
2014). Moreover, to preserve units that are currently affordable, the city’s intentions are to ensure
that landlords are not illegally deregulating rent-stabilized units or taking advantage of the vacancy
and luxury decontrol provisions. With this, the plan intends to revert some of the damages caused
by the deregulation process that took place in the 1990s, that allowed private investment to take
over the housing rental market.
On the other side, since 2012 Berlin has already set in motion different strategies as well
as a city's development plan. In this way, the Housing Coordination Centre will pave the way for
the rapid realization of new residential construction with key partners being the six state-owned
housing companies. Working together with these firms, the Senate set up an "Alliance for Social
Housing Policy and Affordable Rents” (SDUDH, 2018). This plan considers more than 80 housing
associations in the city, expecting as a result construction competition and bringing into force a
tenancy obligation regarding social housing. Even if plans for both cities may look similar, the big
difference lies in Berlin’s stronger policy approach to rent control all over the city’s housing stock.
However, Berlin and Germany in general, have a high number of renters, helping in fostering
consensus on renter-friendly legislation. It also means that Germany has more wealthy renters,
empowered people among their ranks, the sort of people who in other countries, (like the United
States) might be owner-occupiers pressing for greater rights as landlords (O’Sullivan, 2015).
By 2015 in Berlin, the Senate Department for Urban Development and the Environment
has introduced a new law known as the “Rental Price Brake.” Among other things it created the
Alliance for Social Housing Policy and Affordable Rent to oversight and fix a standard median
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
8
rent within the different districts of the city, slowing and controlling the rent increases throughout
the city. Also, the housing stock of the municipal societies was set to grow, through purchase and
new construction: from 277,000 dwellings in 2015 to 300,000 in 2016. This, under the ideals that
a larger proportion of publicly owned housing will help to stabilize the rental market. Some of the
specific goals of this program are that a rent increase for a tenant household should not exceed
30% of the household’s net income, to limit the general rent increases in privately-funded housing
to a maximum of 15% within 4 years, in so far as permitted by the Berlin rent index. The municipal
housing societies limit building modernization contributions in privately-funded housing to a
maximum of 9% of expenses incurred per year. Also, rents should still be affordable after
modernization measures have been carried out (ASHPAR, 2015).
It is known that New Yorkers now must spend an unacceptably high share of their income,
and this rent-burden, where more than 30% of income goes to rent expenses, affects nearly every
income group in every neighborhood across the five boroughs, and even if rent stabilization policy
is on the charts, it works on a different logic. In New York City’s rent-stabilized apartments a
landlord can “increase your rent by a percentage determined by the Rent Guidelines Board, which
becomes a hot-button issue every year. Unlike other affordable programs, the rent does not depend
on your income level” (Nonko,2017). Yet, high rents are not only a local problem. A new report
by the National Low-Income Housing Coalition found that there is still nowhere in the country
where a person working a full-time minimum wage job can afford to rent a decent two-bedroom
apartment, even the $15 hourly wage touted by labor activists would not be enough to make
housing affordable in most states (Gibson, 2018).
Thus, the main attribute of the “Rental Price Brake” lies on its capacity to regulate rents
citywide. In regions where the rental price brake is very effective and permanently dampens the
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
9
increase in rents, is in areas where new lease rents for existing apartments used to climb by more
than 4.8% per year. Now, rents under the rent price brake averaged around 3.0% on average in
parts of Berlin. And against all critics of this program, the German Institute for Economic Research
states that: "The rent brake works in regions where rents have risen sharply, and the bottom line is
better than their reputation - the expectations were simply too high in many places" (DIW Berlin,
2018). Nonetheless, the rental price brake should not be perceived as the sole solution to the
housing market problem, because the demand for housing still rising faster than new apartments
are being built, and price regulation can only give time and keep the rents in check until the
situation on the housing market relaxes. Therefore, to achieve in New York City, policy outcomes
must be oriented to privileging the public welfare and using private resources only as a leverage
for the biggest purpose of housing affordability. If income is not rising dramatically for New
Yorkers to be able to afford a decent rental, then the rental market must be controlled to level the
relation income/expense. Yet, the challenge is in retrieving the power to localities.
Current Governing Systems and Contextual Variables
The political and social characteristics of each city can be a factor that will determine the
long-term positive effect of these policies in tackling the housing affordability crisis. In addition,
the differences between these two regions lie on the conformation of society, in the United States
centering the individual as the most important factor, while in Europe, locating the community in
the center of decision making. In other words, in the United States “freedom is ‘negative,’ taking
form primarily as the lack of governmental restraint.” While in Europe, “freedom is ‘positive,’
taking form as the ability to flourish through the identity and support provided by the community”
(Norton and Bieri, 2014). Thus, the United States model has a preference to focus the government
powers over the needs of individuals, postulating the government as a third party in play, while in
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
10
the European model, the government is perceived as part of “us” focusing its functions on the
communal welfare. These philosophical, cultural and governmental trends differentiate both
regions. For instance, the role of communal property is attached to the German form of governing
and decision making, while in the United States private property plays a central role in
policymaking and practices. Hence, these differences translate into how the decision making
happens. European countries follow a more horizontal approach over these decisions and that is
determined by the changing conditions of areas, while in the United States, decisions come from
a more vertical power structure that does not respond effectively to the changing conditions. In
European cities, this process favors the proper functions of the urban network, while in the United
States can develop in ineffective policies that overlook the common good of society. Moreover,
Germany's federalist structures stipulate that states and municipalities are responsible for housing.
And even if the “Rental Price Brake” was pushed by the federal level, it was adopted by cities who
saw in this law a benefit from their localities.
Thus, the United States political system and specifically the New York State government
are constraining the city to take control over these issues, by focalizing resources on specific local
problems. Bills like the Urstadt Lawi
(named after Charles Urstadt, former Governor Nelson
Rockefeller’s housing commissioner) in New York State prohibits cities and other local
governments from enacting any real and effective rent regulation laws, weakening the powers of
the mayor, impeding the housing affordability crisis to be tackled from all fronts. And even if we
have a historical record of successful policies for housing affordability, such as Rent Control and
Rent Stabilization programs, the powers of New York City authorities are not enough to ensure
that more units do not fall into “luxury” turnovers. This law impedes the city to revisit such
programs, to adapt to the demands and modern problems of the city, and to re-introduce bills as a
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
11
measure to regulate housing throughout the city in the same fashion that Berlin is effectively
undertaking. In addition, American culture is strongly attached to the value of private property and
ensuring the permanence and increase of property value, impacting negatively low-income
households and excluding them from better-developed areas. More importantly, private developers
are discouraged by rent regulations, because it fights against dramatic property value increases and
market speculation.
Therefore, initiatives that seek to tackle the housing affordability crisis can find strong
resistance from stakeholders, policymakers and “real-estate lobbyists” whose interest is the
profitability of housing other than the social welfare. Bills like the Senate Bill S1492 (Kreuger et
al, 2013) aiming to remove provisions prohibiting the city from strengthening rent regulation laws
to provide more comprehensive coverage than state laws, have been unsuccessfully introduced.
Only a policy window, would offer a more favorable forecast for this bill to pass the Senate and
repeal the Urstadt Law housing provisions.
Conclusions
New York City and Berlin share similarities related to the preservation and production of
affordable housing for low-income inhabitants. After the 1970s both cities experienced an
abandonment of public housing programs, leading to the privatization of large amounts of public
housing. This process worsened the conditions of housing and inequality for both cities. While
both cities experienced a similar process, the strategies being implemented to tackle the housing
demands are not the same. Berlin presents a more favorable forecast because its political systems
and structures protect the social wellbeing before private interests. More importantly, Berlin’s
political structures allow it to keep control of the problems and solution in its locality. Thus, Berlin
Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning
and Policy (New York, NY. December 2018).
12
is capable to implement aggressive policies to re-establish public housing programs, but also to
make them accountable citywide.
It would be useful for New York City to incorporate in current policy efforts key
advantages from the Berlin’s “Rental Price Brake,” such as a real affordable housing preservation
program to enforce housing codes, creating a permanent pathway to housing preservation.
Moreover, a rental observatory is needed to determine and control private market rental prices and
increases over time, establishing “rent ceilings” for different areas citywide. The rental markets in
New York City are not showing signals of a compelling stabilization, and aggressive measures are
needed to avoid a deeper housing crisis. However, this would require repealing regulations such
as the Urstadt Law to allow the city to develop stricter controls inside the city boundaries. A
process to amend or repeal rent regulation policies is not that far from reality, because these laws
are constantly revised. Rent laws are up for revision again in 2019, and even if they are surrounded
by a troubled history of private and political interest, the deregulation path-dependency followed
by policymakers must be broken to enact policy in favor of a better future for New Yorkers.
Bibliography
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Austensen, M., et. al (2017). State of New York City’s Housing and Neighborhoods in 2017. NYU Furman Center.
http://furmancenter.org/files/sotc/SOC_2017_Full_2018-08-01.pdf
Barr, M., J. (2016). New York City’s Housing Crisis. OUPblog, Oxford University Press's.
https://blog.oup.com/2016/09/new-york-housing-crisis/
Bloom, N., D., & Lasner, M., G. (2016). Affordable Housing in New York: The People, Places, and Policies that
Transformed the City. Princeton University Press.
Cavadias, M. (2017). A Brief History of Rent Regulation in New York. Hypocrite Reader.
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Dailey, J., (2014). De Blasio Unveils 10-Year, $41B Affordable Housing Plan, Curbed New York.
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DIW Berlin (2018), Rental Price Brake is Better Than Their Reputation, But Cannot Solve Housing Market Problem
Alone. German Institute for Economic Research.
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Fields, D.J. & Uffer, S. (2014). The Financialization of Rental Housing: A Comparative Analysis of New York City
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Paper 06 – 01. New York University.
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Gibson, K., (2018). Minimum Wage Doesn’t Cover the Rent Anywhere in the U.S. Money Watch CBS News.
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i
For more and brief information about this law visit: http://www.tenant.net/tengroup/Metcounc/Apr99/urstadt.html

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Fernando ruiz, rent stabilization and housing affordability, a case of policy transfer from berlin to new york, 2018.

  • 1. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 1 Rent Stabilization and Housing Affordability: A Case of Policy Transfer from Berlin to New York City Fernando Ruiz. Fernando Ruiz is an urban historian dedicated to the study of the relations between policy and urban environments. He graduated from the University of Guadalajara in Mexico in 2014, from the master’s program in History at The City College of New York in 2017 and is currently studying a MS in Urban Policy and Leadership at Hunter College in New York City. In 2015, his book La Cruz de Plazas. Transformacion Urbana: Guadalajara 1947-1959, was published as a result of the award granted by the National Autonomous University of Mexico, the most recognized university in Latin America. New York City and Berlin despite their overall differences and urban challenges, present similarities in a common core related to the preservation and production of affordable housing for low-income inhabitants. After the 1970s both cities experienced an abandonment of public housing programs, leading to the privatization of large amounts of public housing. This process worsened the conditions of housing and inequality for both cities. While both cities experienced a similar process, the strategies being implemented to tackle the housing demands are not the same. In New York City alone, it is estimated that there are 424,949 units to cover the needs of extremely low and very low-income households. However, the number of households in this economic bracket ascends to 979,141, leaving an approximate of half a million New Yorkers at the expends of private markets. To tackle this crisis, in 2014 the city introduced Housing New York: A Five-Borough, 10 Year-Plan with the intentions of preserving and building housing affordability, with different strategies to enforce rent stabilization and build more housing. In the
  • 2. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 2 same fashion, in 2015 in Berlin, the Senate Department for Urban Development and the Environment introduced a new law known as the “Rental Price Brake.” Among other things, this law created an organism to conduct oversight and fix a standard median rent within the different districts of the city, slowing and controlling the rent increases throughout the city. Though both localities seem to be following a similar path, it can also be argued that the implementation of these strategies will have a different impact, in relation to how these policies will work in the context of different social and governmental structures. In Germany, for example, cities have better control over local issues, while the United States, cities are weakened by certain laws. Despite these differences, regulation policies that succeeded in Berlin can work for New York City, but to allow this process to effectively develop, laws and regulations implemented in the 1970s such as the Urstadt Law, should be repealed for the greater benefit of affordable housing. The Affordable Housing Crisis in New York City New York City is experiencing a housing affordability crisis. Data shows that the supply for extremely low-income and very low-income units is declining at a fast pace. To understand this in context, an extremely low-income household is that whose income is approximately less than 25,000 a year for a 4 people household. A very low-income household is that whose income is approximately more than 25,000 but less than 41,000. This translates into a problem when supply is not enough to adapt to the needs of this sector of the population. It is estimated that in the city there are only 424,949 units that adapt to the needs of this group, whose rent expenses should not be more than 30% of their income to avoid rent burden. However, data shows that in the city there are 979,141 extremely low and very low-income households. Thus, the city’s affordable housing stock cannot cover the demands of more than 50% of the New Yorkers in most need (HNY, 2014).
  • 3. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 3 Adding to this, New York City rents and housing stock are not responding properly to this problem. Since 2000 the median rents have gone up by about $300, while the median income of a renter household increased only an estimated of $145 per month. This problem is also intensified when we consider that the housing stock in the city grew only by about 8%, while the adult population went up nearly 11% (Austensen et al, 2017), a trend that is not receding. One of the most important factors generating this trend is the abandonment of housing programs and regulations such as Rent Control and Rent Stabilization. Between 1994 and 2012 the city’s Rent Stabilized stock was reduced by 152,811 units (HNY, 2014). These programs aimed to protect rents from raising to unreasonable levels, helping the city cope with population increases and housing provision. Yet, New York City is not unique to this problem, cities like Berlin have also experienced a crisis and similar circumstances since both cities abandoned policies to protect renters, but now, different efforts are also in place to ameliorate the affordable housing crisis. New York City and Berlin in Context The process of privatization of public or rental housing markets in New York City and Berlin has its beginnings in the processes of globalization and the opening of markets in general. “The globalization of capital markets heightened competition among governments, under pressure to both maintain social welfare and supporting domestic business, and attract foreign investment, a pressure they often seek to resolve by entrepreneurial means” (Fields and Uffer, 2014). Advanced capitalist states may not find support for subsidies or public and social housing, favoring homeownership, deregulation of rents, and the transference of this portfolio to the private sector. In the United States, public housing has only ever constituted a minor portion of the overall housing stock, and like in other developed countries, homeownership receives more funding than
  • 4. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 4 public or rented housing. By the 1970s “federal policy imposed sharp funding reductions and a moratorium on new public housing construction and more recently has incentivized demolition of older developments” (Fields and Uffer, 2014). Declining property values, the loss of manufacturing industry and thus, low-employment rates, forced the government to cut off financing to housing programs. By 1971 New York’s suburbs had more than half the metropolitan population, and half of its manufacturing, retail jobs, and restaurants. By 1976 the city lost 600,000 jobs, and by 1980 the city has lost a million residents (Bloom and Lasner, 2016). The city opted to decentralize public housing programs, introducing strategies such as Section 8 Housing Choice Vouchers, that allowed qualified renters to use these incentives out of the public housing stock, promoting housing searches in the private rental market. More importantly, the biggest loss during this period came with the introductions of bills such as the Urstadt Law. This law has a great impact on the present problems of the city because prohibits cities and other local governments from enacting any rent regulation stricter than the state law. In other words, the New York City Council and Mayor are largely unable to protect tenants’ rights (Cavadias, 2017). This law propelled Vacancy Decontrol, providing an enormous incentive for landlords to evict tenants, because it allows them to increase rents dramatically for new renters after the previous tenant has left its unit. After passing this law in 1971, harassment of tenants and profiteering exploded, affecting tens of thousands of tenants throughout the city. In the United States, the loosening in the efforts to preserve housing affordability through government control, returned rent-stabilized units to the private market. Criteria for rent stabilization for formerly subsidized housing was weakened by Republican lawmakers. In New York City this process was exploited by private investors during the 1990s and 2000s economic expansion, and from 1997 to 2007 exits from assisted housing programs spiked, lifting income and
  • 5. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 5 rent limits from 40,000 apartments. The high rent/vacancy decontrol provision helped landlords to move rents over the deregulated ceilings, allowing a 20% or more rent hike upon vacancy. Of nearly 200,000 units deregulated between 1994 and 2008, high rent/vacancy decontrol was the leading source (Fields and Uffer, 2014). In the same fashion, in Germany throughout the 1980s and 1990s, housing policy became more market-oriented, increasingly promoting homeownership and market approaches to social housing and shifting from supply-side to demand-side subsidies. Germany traditionally provided a considerable amount of publicly subsidized housing. However, growth expectations were overestimated, and population loss and economic decline generated a fiscal crisis, impeding the state to bridge its deficit between the expenditures and tax revenues. In 1991, Berlin owned 19 housing companies holding approximately 480,000 housing units – 28% of the entire housing stock. The economic decline and population loss that generated a fiscal crisis motivated the privatization of state-owned housing stock and abandonment of social housing subsidies. In 1995, the city government instructed its housing companies to sell 15% of their housing units. These measures were taken with the intentions of improving budgetary constrictions, and by 1998, the government of Berlin ended subsidies for new social housing construction (Fields and Uffer, 2014). By the 2000s the municipal government and corporations privatized their public housing stock, in response to this switch of goals oriented to profitability. While privatization was intended to contribute with financial resources to modernize the housing stock in Berlin, its housing demand was low. In contrast to New York City, which had a rental vacancy rate of 3.19% in 1999, Berlin’s housing market was more relaxed, with a citywide vacancy rate of 7.1% in 1997. Though other differences are also pointed out between these cities, and despite different rental market conditions, New York City and Berlin encouraged the entrance
  • 6. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 6 of private equity real estate investment, culminating in the loss of public housing stock. (Fields and Uffer, 2014). For both cities, the change of course in the strategies to tackle housing demands, led to a process of gentrification and inequality, propitiating a wave of development of high rental markets, generating a boom in property value, displacement, and a housing affordability crisis. Current Strategies New York has long been a pioneer in housing policy and has made important improvements to tackle affordability. Housing policy efforts in the last decades can be traced back to the intentions to rebuild its housing stock that gave birth in 1985, to the Ten-Year Plan for Housing promoted by Mayor Koch, marking a precedent for big city expenditures on public housing. This plan enlisted a wide variety of players and can be understood in three general categories. First, several programs provided low-interest loans to owners of occupied dwellings for upgrading and repairs. Second, several programs provided subsidies for new construction projects, which typically built affordable, owner-occupied homes. Finally, much of the plan was focused on the in-rem housing stock. Buildings from the city’s inventory of in-rem property (both vacant and occupied) were conveyed at no cost or for a nominal amount to nonprofit or for-profit developers (Furman Center, 2006). Thus, this plan focused on incentivizing repairs in the affordable housing stock and was successful in doing so, yet, it did not protect rent-stabilized units. Nonetheless, the current problems the city experiences today are different, if property abandonment and population loss was the challenge in the 1980s, rent affordability and stabilization are today’s most important challenges, and different strategies must be applied. In 2014, Mayor De Blasio introduced Housing New York: A Five-Borough, 10 Year-Plan that follows the previous trend of preserving and building housing affordability. Among different
  • 7. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 7 strategies, the city intends to protect tenants in rent-regulated units more aggressively. The plan outlines how the administration plans to create 200,000 units of affordable housing, from which 80,000 will be new units, 120,000 will be preserved, targeting a wide range of incomes (HNY, 2014). Moreover, to preserve units that are currently affordable, the city’s intentions are to ensure that landlords are not illegally deregulating rent-stabilized units or taking advantage of the vacancy and luxury decontrol provisions. With this, the plan intends to revert some of the damages caused by the deregulation process that took place in the 1990s, that allowed private investment to take over the housing rental market. On the other side, since 2012 Berlin has already set in motion different strategies as well as a city's development plan. In this way, the Housing Coordination Centre will pave the way for the rapid realization of new residential construction with key partners being the six state-owned housing companies. Working together with these firms, the Senate set up an "Alliance for Social Housing Policy and Affordable Rents” (SDUDH, 2018). This plan considers more than 80 housing associations in the city, expecting as a result construction competition and bringing into force a tenancy obligation regarding social housing. Even if plans for both cities may look similar, the big difference lies in Berlin’s stronger policy approach to rent control all over the city’s housing stock. However, Berlin and Germany in general, have a high number of renters, helping in fostering consensus on renter-friendly legislation. It also means that Germany has more wealthy renters, empowered people among their ranks, the sort of people who in other countries, (like the United States) might be owner-occupiers pressing for greater rights as landlords (O’Sullivan, 2015). By 2015 in Berlin, the Senate Department for Urban Development and the Environment has introduced a new law known as the “Rental Price Brake.” Among other things it created the Alliance for Social Housing Policy and Affordable Rent to oversight and fix a standard median
  • 8. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 8 rent within the different districts of the city, slowing and controlling the rent increases throughout the city. Also, the housing stock of the municipal societies was set to grow, through purchase and new construction: from 277,000 dwellings in 2015 to 300,000 in 2016. This, under the ideals that a larger proportion of publicly owned housing will help to stabilize the rental market. Some of the specific goals of this program are that a rent increase for a tenant household should not exceed 30% of the household’s net income, to limit the general rent increases in privately-funded housing to a maximum of 15% within 4 years, in so far as permitted by the Berlin rent index. The municipal housing societies limit building modernization contributions in privately-funded housing to a maximum of 9% of expenses incurred per year. Also, rents should still be affordable after modernization measures have been carried out (ASHPAR, 2015). It is known that New Yorkers now must spend an unacceptably high share of their income, and this rent-burden, where more than 30% of income goes to rent expenses, affects nearly every income group in every neighborhood across the five boroughs, and even if rent stabilization policy is on the charts, it works on a different logic. In New York City’s rent-stabilized apartments a landlord can “increase your rent by a percentage determined by the Rent Guidelines Board, which becomes a hot-button issue every year. Unlike other affordable programs, the rent does not depend on your income level” (Nonko,2017). Yet, high rents are not only a local problem. A new report by the National Low-Income Housing Coalition found that there is still nowhere in the country where a person working a full-time minimum wage job can afford to rent a decent two-bedroom apartment, even the $15 hourly wage touted by labor activists would not be enough to make housing affordable in most states (Gibson, 2018). Thus, the main attribute of the “Rental Price Brake” lies on its capacity to regulate rents citywide. In regions where the rental price brake is very effective and permanently dampens the
  • 9. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 9 increase in rents, is in areas where new lease rents for existing apartments used to climb by more than 4.8% per year. Now, rents under the rent price brake averaged around 3.0% on average in parts of Berlin. And against all critics of this program, the German Institute for Economic Research states that: "The rent brake works in regions where rents have risen sharply, and the bottom line is better than their reputation - the expectations were simply too high in many places" (DIW Berlin, 2018). Nonetheless, the rental price brake should not be perceived as the sole solution to the housing market problem, because the demand for housing still rising faster than new apartments are being built, and price regulation can only give time and keep the rents in check until the situation on the housing market relaxes. Therefore, to achieve in New York City, policy outcomes must be oriented to privileging the public welfare and using private resources only as a leverage for the biggest purpose of housing affordability. If income is not rising dramatically for New Yorkers to be able to afford a decent rental, then the rental market must be controlled to level the relation income/expense. Yet, the challenge is in retrieving the power to localities. Current Governing Systems and Contextual Variables The political and social characteristics of each city can be a factor that will determine the long-term positive effect of these policies in tackling the housing affordability crisis. In addition, the differences between these two regions lie on the conformation of society, in the United States centering the individual as the most important factor, while in Europe, locating the community in the center of decision making. In other words, in the United States “freedom is ‘negative,’ taking form primarily as the lack of governmental restraint.” While in Europe, “freedom is ‘positive,’ taking form as the ability to flourish through the identity and support provided by the community” (Norton and Bieri, 2014). Thus, the United States model has a preference to focus the government powers over the needs of individuals, postulating the government as a third party in play, while in
  • 10. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 10 the European model, the government is perceived as part of “us” focusing its functions on the communal welfare. These philosophical, cultural and governmental trends differentiate both regions. For instance, the role of communal property is attached to the German form of governing and decision making, while in the United States private property plays a central role in policymaking and practices. Hence, these differences translate into how the decision making happens. European countries follow a more horizontal approach over these decisions and that is determined by the changing conditions of areas, while in the United States, decisions come from a more vertical power structure that does not respond effectively to the changing conditions. In European cities, this process favors the proper functions of the urban network, while in the United States can develop in ineffective policies that overlook the common good of society. Moreover, Germany's federalist structures stipulate that states and municipalities are responsible for housing. And even if the “Rental Price Brake” was pushed by the federal level, it was adopted by cities who saw in this law a benefit from their localities. Thus, the United States political system and specifically the New York State government are constraining the city to take control over these issues, by focalizing resources on specific local problems. Bills like the Urstadt Lawi (named after Charles Urstadt, former Governor Nelson Rockefeller’s housing commissioner) in New York State prohibits cities and other local governments from enacting any real and effective rent regulation laws, weakening the powers of the mayor, impeding the housing affordability crisis to be tackled from all fronts. And even if we have a historical record of successful policies for housing affordability, such as Rent Control and Rent Stabilization programs, the powers of New York City authorities are not enough to ensure that more units do not fall into “luxury” turnovers. This law impedes the city to revisit such programs, to adapt to the demands and modern problems of the city, and to re-introduce bills as a
  • 11. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 11 measure to regulate housing throughout the city in the same fashion that Berlin is effectively undertaking. In addition, American culture is strongly attached to the value of private property and ensuring the permanence and increase of property value, impacting negatively low-income households and excluding them from better-developed areas. More importantly, private developers are discouraged by rent regulations, because it fights against dramatic property value increases and market speculation. Therefore, initiatives that seek to tackle the housing affordability crisis can find strong resistance from stakeholders, policymakers and “real-estate lobbyists” whose interest is the profitability of housing other than the social welfare. Bills like the Senate Bill S1492 (Kreuger et al, 2013) aiming to remove provisions prohibiting the city from strengthening rent regulation laws to provide more comprehensive coverage than state laws, have been unsuccessfully introduced. Only a policy window, would offer a more favorable forecast for this bill to pass the Senate and repeal the Urstadt Law housing provisions. Conclusions New York City and Berlin share similarities related to the preservation and production of affordable housing for low-income inhabitants. After the 1970s both cities experienced an abandonment of public housing programs, leading to the privatization of large amounts of public housing. This process worsened the conditions of housing and inequality for both cities. While both cities experienced a similar process, the strategies being implemented to tackle the housing demands are not the same. Berlin presents a more favorable forecast because its political systems and structures protect the social wellbeing before private interests. More importantly, Berlin’s political structures allow it to keep control of the problems and solution in its locality. Thus, Berlin
  • 12. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 12 is capable to implement aggressive policies to re-establish public housing programs, but also to make them accountable citywide. It would be useful for New York City to incorporate in current policy efforts key advantages from the Berlin’s “Rental Price Brake,” such as a real affordable housing preservation program to enforce housing codes, creating a permanent pathway to housing preservation. Moreover, a rental observatory is needed to determine and control private market rental prices and increases over time, establishing “rent ceilings” for different areas citywide. The rental markets in New York City are not showing signals of a compelling stabilization, and aggressive measures are needed to avoid a deeper housing crisis. However, this would require repealing regulations such as the Urstadt Law to allow the city to develop stricter controls inside the city boundaries. A process to amend or repeal rent regulation policies is not that far from reality, because these laws are constantly revised. Rent laws are up for revision again in 2019, and even if they are surrounded by a troubled history of private and political interest, the deregulation path-dependency followed by policymakers must be broken to enact policy in favor of a better future for New Yorkers. Bibliography Alliance for Social Housing Policy and Affordable Rent [ASHPAR] (2015). https://www.stadtentwicklung.berlin.de/wohnen/wohnungsbau/download/mietenbuendnis/pro_mietenbuendnis_en.pdf Austensen, M., et. al (2017). State of New York City’s Housing and Neighborhoods in 2017. NYU Furman Center. http://furmancenter.org/files/sotc/SOC_2017_Full_2018-08-01.pdf Barr, M., J. (2016). New York City’s Housing Crisis. OUPblog, Oxford University Press's. https://blog.oup.com/2016/09/new-york-housing-crisis/ Bloom, N., D., & Lasner, M., G. (2016). Affordable Housing in New York: The People, Places, and Policies that Transformed the City. Princeton University Press. Cavadias, M. (2017). A Brief History of Rent Regulation in New York. Hypocrite Reader. http://hypocritereader.com/81/rent-regulation-nyc Dailey, J., (2014). De Blasio Unveils 10-Year, $41B Affordable Housing Plan, Curbed New York. https://ny.curbed.com/2014/5/5/10103592/de-blasio-unveils-10-year-41b-affordable-housing-plan DIW Berlin (2018), Rental Price Brake is Better Than Their Reputation, But Cannot Solve Housing Market Problem Alone. German Institute for Economic Research. https://www.diw.de/de/diw_01.c.578224.de/themen_nachrichten/mietpreisbremse_ist_besser_als_ihr_ruf_kann_wohnungsmarkt problem_aber_nicht_allein_loesen.html
  • 13. Fernando Ruiz, The City University of New York, Hunter College, Department of Urban Planning and Policy (New York, NY. December 2018). 13 Fields, D.J. & Uffer, S. (2014). The Financialization of Rental Housing: A Comparative Analysis of New York City and Berlin. Urban Studies. http://eprints.whiterose.ac.uk/95307/1/Fields%20Uffer%20Financialization%20of%20rental%20housing%20in%20NYC%20and %20Berlin%20Oct%202014.pdf Furman Center for Real Estate and Urban Policy, (2006). Housing Policy in New York City: A Brief History, Working Paper 06 – 01. New York University. http://furmancenter.org/research/publication/housing-policy-in-new-york-city-a-brief-history Gibson, K., (2018). Minimum Wage Doesn’t Cover the Rent Anywhere in the U.S. Money Watch CBS News. https://www.cbsnews.com/news/minimum-wage-doesnt-cover-the-rent-anywhere-in-the-u- s/?fbclid=IwAR3mDqXZZ4ZqIBj5qTtSm_pqaKq_5zo4PYSZtHkIYGXl_4CW26ndpYgAFfo Global Cities and Affordable Housing: Berlin (2018). PD &R. https://www.huduser.gov/portal/pdredge/pdr-edge- trending-121117.html Housing New York: A Five-Borough, Ten-Year Plan [HNY] (2014). http://www.nyc.gov/html/housing/assets/downloads/pdf/housing_plan.pdf Kreuger, L., et al. (2013) Senate Bill S1492 https://legislation.nysenate.gov/pdf/bills/2013/S1492 Norton, R. K., & Bieri, D. S. (2014). Planning, Law, and Property Rights: A US–European Cross-national Contemplation. International Planning Studies. http://www.david-bieri.com/docs/NB_PlanningLawPropertyRights_IPS14.pdf Nonko, E., (2017). New York apartment guide: rent control vs. rent stabilization: Everything you need to know about rent control in New York City. Curbed New York. https://ny.curbed.com/2017/8/28/16214506/nyc-apartments-housing-rent-control O’ Sullivan, F., (2015). Berlin's New Rent Control Laws Are Already Working, CityLab. https://www.citylab.com/equity/2015/07/berlins-brand-new-rent-control-laws-are-already working/398087/?utm_source=nl__link1_070915 Senate Department for Urban Development and Housing [SDUDH] (2018). Housing Strategy - Expanding the City's Quality of Life. https://www.stadtentwicklung.berlin.de/wohnen/wohnungsbau/en/strategie/index.shtml i For more and brief information about this law visit: http://www.tenant.net/tengroup/Metcounc/Apr99/urstadt.html