The Citizens Budget Commission issued a report today that concluded that "it would be counterproductive to expand the scope of rent regulation" in New York City, arguing that "future modifications of rent regulations should be considered as part of a longer-term effort to reduce barriers to housing supply and to promote affordable housing in New York City."

"From 1994 through 2008," the report maintained, "at least 190,000 units were removed from regulation, although additions to the regulated stock lowered the net decrease to about 118,000 units. In 2009 and 2010, in response to calls for expanded regulation, legislation was passed by the State assembly to limit future deregulation and to restore to regulation most of the units deregulated since 1993. In May 2010, Governor David Paterson proposed raising the rent threshold for deregulation and extending rent regulation for eight years beyond its current expiration in 2011. Legislative deliberation on these proposals is underway."

The report found that "rent regulation reduces rents for most affected units to levels significantly below that for comparable unregulated units, but these 'discounts' are not well-targeted. Based on 2008 data, the average discount provided by rent regulation is about 31 percent. This represented an average rent reduction of about $5,500 annually per housing unit....The highest-income households receive the largest average benefit, a discount about one-third greater than that for moderate-income households."

"Assuming that rents in unregulated units average about 15 percent higher than would be the case if all private rent units were deregulated..., some 669,000 households in 2008 in unregulated units paid a total of $1.9 billion," it said, "or an average of about $2,800 per household per year, more in rent than would be the case if all units were deregulated."

"Tenants in the relatively small (about 40,000) number of units subject to rent control, an older form of regulation," it continued, "tend to over consume housing by staying in large units after their family size declines; their medium number of rooms per person (3.03) is nearly double that among tenants in unregulated housing (1.67). Second, tenants in the far larger number of units subject to rent stabilization tend to under-consume, presumably staying in smaller units in order to benefit from the discount from regulation; their median number of rooms per person is 1.49, below that in the unregulated sector (1.67)."

Benefits now available to low-and-moderate income households should not be reduced, the report recommended, but "the poorly targeted benefits can be removed at an accelerated pace by phasing out regulation for higher-income households."

It recommended that the long-term contraction in the scope of rent regulation should be accommodated by an expansion of other more effective programs to promote affordable housing. "The guiding principles for this initiative should be to focus on keeping rent-income rations for low- and moderate-income households below a threshold of about 30 percent, to rely primarily on competitive markets to set prices for housing, and to maximize reliance on federal funding that than local funding for subsidiaries to lower-income individuals."

"The current gap between affordable rents and actual rents is enormous," it concluded, adding that "Adequate federal funding to close the gap is not a realistic prospect. Therefore, for the foreseeable future, the role of state and local government should be to be evaluate the efficiency and effectiveness of existing affordable housing programs and other policies, such as zoning, that affect housing investment, to experiment with additional programmatic models, and to expand their financial commitment as economic and fiscal conditions improve."