In my previous post, I wrote about a ruling by the rent-guidelines board in Kingston New, York. That ruling reduced rents for 1,200 units in controlled by the city’s rent control ordinance. Another ruling allows tenants to protect rent increases between January 2019 and August 2022. If allowed to stand, these ruling sets a very dangerous precedent. There are two implications of the ruling that are worthy of attention.
The first implication is that contracts are meaningless in Kingston. If the city can unilaterally and arbitrarily reduce rents, then the city can reverse any element of any contractual agreement. A lease is a contractual agreement codifying the terms and conditions by which a tenant can occupy a rental housing unit. The city has announced that it, not the parties involved, will determine those terms and conditions.
In principle, if the city can do this for rental agreements, the city can do it for any voluntary agreement. The judgment of the parties to the agreement is irrelevant. The city will determine the terms and conditions by which individuals can engage in trade. As an example, the city could determine that grocers have raised prices too much and force them to reduce prices and refund money to customers. Or, if the city determines that wages haven’t increased enough, employers could be forced to retroactively give employees raises. And this gives rise to the second implication.
Retroactive laws will destroy businesses in the city. Since the law only applies to landlords at the moment, we will examine it from that perspective.
If the rulings stand, no rational person will want to own rental property in Kingston. Doing so would be financial suicide. Any profits earned in past years could be wiped out by a new ruling requiring retroactive reductions in rents, as well as refunds for increases deemed “excessive.”
These rulings were enacted to allegedly protect tenants. Ultimately, it will be extremely harmful to renters. The housing stock will decrease, and that which remains will deteriorate because owners do not have the money for maintenance and improvements. By focusing on the short-term benefits to some renters, the city has passed laws that will ultimately be harmful to those it intends to help.