A History of Rent Control in New York City with Richard Epstein | EP189

Richard Epstein is our returning guest. Richard is an American legal scholar known for his writings on torts, contracts, property rights, law and economics, classical liberalism, and libertarianism. He is the Laurence A. Tisch Professor of Law and director of the Classical Liberal Institute at New York University, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution
 
 In this episode, we talked about:

- Richard’s View on Rent Control

- Rent Stabilisation VS Rent Destabilisation

Transcriptions:

Jesse(0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time.

Jesse (22s): And what was characteristic of Justice Holmes and most of the scholars at that time is they were not always focused on the essential difference between competitive markets on the one hand, and monopolistic situations on the other. And so he said, rent control is dealing with this instability of one form or another. And you could never conceive about the fact that the instability is something that would induce new entry by other people, which bring the market back into equilibrium, and that the regulation that you wanted to put into place would in effect, stop that from ever happening.

Okay, well first of all, strict rent control, as it was originally defined, was you put a price in at a given point in time and you do not change that price at all. And so the control is very fixed. What then happens is the variation on that could be one of two. One is when the unit turns over to an independent person, you can then raise the rate.

Jesse (1m 22s): Hey, my name's Jess Golin. You're listening to Working Capital, the Real Estate Podcast. Today we're diving into one of the most enduring and controversial policies in American and Canadian housing Rent control. New York City first adopted rent control regulations over 70 years ago in the aftermath of World War II when policymakers sought to stabilize housing costs amid shortages. Since then, rent control and rent stabilization have become fixtures of the city's housing market. Defendant has protections for tenants, but also criticized for discouraging new development, distorting prices and reducing housing quality.

Few places embody this tension more than New York, where some tenants pay well below market rents well just across the hall. New renters pay multiples more for landlords, investors, and policymakers. This creates one of the most complex operating environments in US real estate. And now with New York elections on the horizon, the future of these policies is once again in question, will the political wins bring more restrictions or will there be a push to liberalize the markets and incentivize new housing supply? The outcome will have profound implications, not just for renters, but also for property owners, developers, and the broader investment landscape.

To help us unpack the history of the economics and legal framework of rent control, I'm joined by Professor Richard Epstein of NYU School of Law, one of the most respected voices in his field, known for his work on law and economics, property rights and regulation. This is a conversation that goes beyond the surface level talking points. It gets into the real consequences for housing markets, investment and urban development. So without further ado, my conversation with Richard. Richard, it's, it's been quite a while since we last spoke. As usual, a lot's transpired over the past year.

How are you doing today?

Richard (3m 4s): Well, I'm doing fine. Very busy. I have to go and teach property law in a couple of hours. And one of the topics which will co