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Megan McArdle

Megan McArdle - Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and The Economist. More

Megan was born and raised on the Upper West Side of Manhattan, and yes, she does enjoy her lattes, as well as the occasional extra-dry skim-milk cappuccino. Her checkered work history includes three start-ups, four years as a technology project manager for a boutique consulting firm, a summer as an associate at an investment bank, and a year spent as sort of an executive copy girl for one of the disaster-recovery firms at Ground Zero … all before the age of 30.

While working at Ground Zero, Megan started Live From the WTC, a blog focused on economics, business, and cooking. She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism. She has worked in various capacities for The Economist, where she wrote about economics and oversaw the founding of Free Exchange, the magazine's economics blog. She has also maintained her own blog, Asymmetrical Information, which moved to The Atlantic, along with its owner, in August 2007.

Megan holds a bachelor's degree in English literature from the University of Pennsylvania and an M.B.A. from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington, D.C., where she is still trying to figure out what one does with an apartment larger than 400 square feet.

Empty Apartments, Stupid Laws

By Megan McArdle
May 9 2011, 1:25 PM ET Comment

New York's rent control laws are often blamed for its low vacancy rate.  Operating in concert with the difficulty of assembling sufficiently large parcels of land, and the extremely tough building rules (which I'm told can drag the time-to-completion of development projects into decades), they have both raised the cost of building rental housing, and lowered the potential return.  This is especially true for housing aimed at lower-to-middle income tenants, because New York City has twice previously reneged on commitments not to control new housing, and has flirted with doing so again fairly recently.  Ultimately, all of this means that a large number of potential tenants are competing for a very small number of potential apartments--and the sub-3% vacancy rate is born.


Yet in San Francisco, one writer argues that rent control is having the opposite effect:  it's keeping the city's vacancy rates artificially high.  Why?  Because a growing number of landlords don't want to rent their places at all; it's too much hassle for too little reward.

Koniuk, who himself lives in suburban Belmont, gave a half-interest in the building to his older son in 2007 so he could evict a tenant and move in himself. But under San Francisco's extraordinarily pro-tenant housing laws, landlords can do this only once per building.

So while Koniuk desperately wants to move his younger son into the building's other four-bedroom apartment, he cannot. He is exploring legal options. Robert Murphy, who has lived there for 30 years without a lease, remains, paying $525.82 a month.

Last spring, Koniuk offered Murphy $45,000 to move out. Murphy's lawyer demanded $70,000, a sum Koniuk says he does not have. Meanwhile, the city's Rent Board notified Koniuk that he was allowed to increase Murphy's monthly rent this year by $2.63.

Murphy did not respond to several phone messages left over a two-week period. Harold Jaffe, the lawyer who wrote the demand letter, said he no longer represented Murphy.

Murphy is afforded extra protections as a renter because he is more than 60 years old. Koniuk might still be able to evict Murphy and allow his younger son, Adam, to move in by invoking the Ellis Act, which would entitle Murphy to about $10,000 in compensation and give him a year to vacate. But doing so would impose permanent restrictions on the Divisadero building's future use, seriously depressing its value. And should 24-year-old Adam decide to move elsewhere, the Koniuks would be legally required for a decade to offer Murphy his old apartment, at his old rent. Invoking the Ellis Act would also mean that any new tenant to the unit, should Murphy decline the chance to return, would also be entitled to Murphy's old rent amount for many years to come. So the Koniuks would likely opt to just leave it vacant.

Increasingly, small-time landlords like Koniuk are just giving up. One of his Divisadero Street neighbors has left two large apartments on the second and third floors of her building vacant for more than a decade, after a series of tenant difficulties. It's just not worth the bother, or the risk, of being legally tied to a tenant for decades.

Of course, this leaves us with a little conundrum: why would rent control have different results in two different places.  On the other hand, I'm hard-pressed to explain such a high vacancy rate in a pretty desirable location.


Update: Commenters point out that the SF laws are different (you can change the rent to whatever you want when the tenants leave, but the apartments never "decontrol" the way high-rent apartments in NYC.  Also, the writer above appears to be using a non-standard vacancy statistic; comparing apples-to-apples (only apartments which are on the market), SF vacancy rates are also low.


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