Emergency Tenant Protection in New York: Ten Years of Rent Stabilization

New York City\u27s rent stabilization system was designed as an alternative to the rent control system. Rent stabilization looked to the owners for supervision as a way to benefit not only the system but tenants through an informed and experienced administration. Unfortunately, the system has had its fair share of shortcomings as rules have become technical, complex, and ill equipped to address the concerns of tenants. This comment examines the stabilization system\u27s history and its current status. Though the current system has flaws, the flaws can be fixed and must be to protect NYC tenants and owners

Haggling for Rents, Relational Contracts, and the Theory of the Firm

In this paper, a formal rent-seeking theory of the firm is developed. The main idea is that integration (compared to non-integration) facilitates rent-seeking for the integrating party, but makes it harder for the integrated one. In a one-period model, this implies that the rent-seeking contest becomes more uneven and the parties rent-seek less. Here, integration is optimal. In the infinitely-repeated version of the model, it is also possible for the parties to enter a relational contract, under which each promises not to engage in rent-seeking. Such a contract must be self-enforcing, for it cannot be enforced by court. It is shown that integration makes the relational contract less easily sustainable, as, due to its cost advantage, the integrating party gains more from deviating than any party under non-integration. Hence, integration is preferred, if relational contracts are not sustainable, while, otherwise, non-integration may well be preferred. Moreover, it is shown that the model’s predictions are in line with many empirical facts on the choice of ownership structures

The $20,000 Stove: How Fraudulent Rent Increases Undermine New York's Affordable Housing

New York is city of renters, with 2.1 million rental apartments. The majority of those apartments -- 1.4 million -- are regulated under the laws of Rent Stabilization and Rent Control. One of the key benefits of rent regulation for our city is that it keeps rent levels predictable, an important benefit for working- and middle-class neighborhoods.There is a major loophole in the system called the "1/40th program". This loophole allows a landlord to raise the rent on an unoccupied apartment by passing the cost of physical improvements to the next tenant by raising the monthly rent an amount equal to 1/40th of the total cost of the improvements. There is no oversight of any kind of the 1/40th program. Landlords are allowed to unilaterally impose 1/40th rent increases without prior approval, or even documentation. As a consequence of this lack of oversight, fraudulent abuse of the 1/40th program is increasingly common. This includes, for example, claiming a rent increase based on $40,000 when only$10,000 was actually spent on improvements. The lack of oversight of the 1/40th program has led to widespread fraud, and a significant loss of affordable housing. The state housing agency must accept a more active oversight role of the 1/40th program by using its current authority to audit increases and inform tenants residing in apartments where the landlord has filed a 1/40th increase. Additionally, tenants and housing advocates are calling for legislative changes that would extend the amortization formula from 40 months to 84 months and give the state housing agency a stronger oversight role by authorizing it to approve rent increases. These changes are necessary to discourage fraud, ensure that the law is upheld, and preserve affordable housing

The Value of Rents and the Likelihood of Conflicts

This paper extends the prey--predator model of Grossman and Kim (1995) to analyze the relation between the value of the contested rent and the emergence of a conflict. We show that an increase in the value of the rent makes the conflict equilibrium more likely. We also analyze the case where the valuation of the rent is different for the two players. We find, for example, that a conflict equilibrium may occur even though the predator has an important disadvantage in warfare. That's when its valuation of the rent is sufficiently high compare to that of the prey.Conflict-size

Economic Convergence and Rent-Seeking in Iran

The neoclassical growth model predicts convergence of productivity or per capita output levels across regions. If participation in the labor force is constant, convergence of per capita income is implied. We investigate this hypothesis for the Iranian economy using data on demand deposits as a proxy for GDP. Furthermore, the analysis controls for the effects of rent seeking. Due to its impact on the allocation of resources, rent-seeking is likely an impediment to overall growth. The results support absolute ß-convergence across Iran's provinces and provide some evidence on the adverse effect of rent seeking on regional convergence.Regional convergence, rent-seeking, economic growth

Owner-Occupied Housing as a Hedge Against Rent Risk

Many people assume that the most significant risk in the housing market is that homeowners are exposed to fluctuations in house values. However, homeownership also provides a hedge against fluctuations in future rent payments. This paper finds that, even though house price risk endogenously increases with rent risk, the latter empirically dominates for most households so housing market risk actually increases homeownership rates and house prices. Further, the net effect of rent risk on the demand for homeownership increases with a household's expected length of stay in its home, as the cumulative rent volatility rises and the discounted house price risk falls. Using CPS data, the difference in the probability of homeownership between households with long and short expected lengths of stay is 2.9 to 5.4 percentage points greater in high rent variance places than low rent variance places. The sensitivity to rent risk is greatest for households that devote a larger share of their budgets to housing, and thus face a bigger gamble. Similarly, the elderly who live in high rent variance places are more likely to own their own homes, and their probability of homeownership falls faster with age (as their horizon shortens). This aversion to rent risk might help explain why older households do not consume much of their housing wealth. Finally, we find that house prices capitalize not only expected future rents, but also the associated rent risk premia. At the MSA level, a one standard deviation increase in rent variance increases the house price-to-rent ratio by 2 to 4 percent.

Competition and Performance: The Different Roles of Capital and Labor

Neoclassical economists argue that competition promotes efficiency. They consider technology as given though. In the long run technological progress is an important determinant of the level of welfare and Schumpeter argued that monopoly rents help entrepreneurs to capture the gains of R&D and hence to invest in it. We investigate the overall effect of competition on performance. Performance is measured by TFP-growth. As a negative measure of competition we use rent. Rent is defined as the excess factor rewards over and above their perfectly competitive values (marginal productivities). Input-output analysis enables us to calculate rent for the Canadian sectors over a thirty-year period and to decompose it in its capital and labor components. In line with the literature we find that rent has no significant influence on productivity. We find an interesting result however: the components influence performance in opposite directions. Capital rent has a positive role and labor rent a negative one. The neoclassical economists and Schumpeter seem both right, but the mechanisms differ. The use of rent as a source of funding for R&D applies to capital and the argument that rent yields slack pertains to labor.mathematical economics and econometrics ;

Rent-seeking competition from state coffers in Greece: a calibrated DSGE model

We incorporate an uncoordinated redistributive struggle for extra fiscal privileges and favors into an otherwise standard dynamic stochastic general equilibrium model. Our aim is to quantify the extent of rent seeking and its macroeconomic implications. The model is calibrated to Greek quarterly data over 1961:1-2005:4. Our work is motivated by the rich and distorting tax-spending system in Greece, as well as the common belief that interest groups compete with each other for fiscal privileges at the expense of the general public interest. We find that (i) the introduction of rent seeking moves the model in the right direction vis-à-vis the data (ii) an important fraction of GDP is extracted by rent seekers (iii) there can be substantial welfare gains from reducing rent seeking activities.Fiscal policy;rent seeking;welfare

Haggling for Rents, Relational Contracts, and the Theory of the Firm

In this paper, a formal rent-seeking theory of the firm is developed. The main idea is that integration (compared to non-integration) facilitates rent-seeking for the integrating party, but makes it harder for the integrated one. In a one-period model, this implies that the rent-seeking contest becomes more uneven and the parties rent-seek less. Here, integration is optimal. In the infinitely-repeated version of the model, it is also possible for the parties to enter a relational contract, under which each promises not to engage in rent-seeking. Such a contract must be self-enforcing, for it cannot be enforced by court. It is shown that integration makes the relational contract less easily sustainable, as, due to its cost advantage, the integrating party gains more from deviating than any party under non-integration. Hence, integration is preferred, if relational contracts are not sustainable, while, otherwise, non-integration may well be preferred. Moreover, it is shown that the model’s predictions are in line with many empirical facts on the choice of ownership structures.Integration; non-integration; relational contracts; rent seeking

Aid and Rent-Driven Growth: Mauritania, Kenya and Mozambique Compared

This paper conceptualises foreign aid as a geopolitical form of rent in order to help distinguish the conditions under which aid is detrimental to sustained economic recovery from those where it is beneficial. Foreign aid shares with natural resource rent and contrived (i.e., government monopoly) rent the property of being a large revenue stream that is detached from the economic activity that generates it, and elicits political contests for its capture. Rent-driven models suggest such contests have two adverse effects: (i) they deflect government incentives into rent-channelling at the expense of promoting wealth creation; and (ii) the resulting political allocation of the rent distorts the economy and precipitates a growth collapse, which is protracted. In this context, the three principal causes of aid failure identified in the literature (corruption, a poor policy environment and Dutch disease effects) are all symptoms of the destabilizing impact of rent streams on immature political economies. Consequently, the deployment of foreign aid to revive collapsed economies runs the risk of perpetuating rent-seeking and thereby postponing essential economic restructuring. This paper compares the varied impacts of aid on the development trajectories of Mauritania, Kenya and Mozambique. It argues ...Africa, aid, rent, resource curse, economic development