Can rent stabilization make home buying easier for New Yorkers?

It seems obvious at first glance: More rent control in New York City will encourage people to stay in their leases rather than buying their own homes.

But like a lot of economic forces, rent control can also have unexpected effects.

As this month’s historic mayoral election in the city has put rent control in the spotlight, let’s take a closer look at how this policy affects homeownership.

How rent control affects homeownership

New York City mayor-elect Zohran Mamdani’s campaign advocated for freezing stabilized rents. This could insulate more New Yorkers from rent inflation.

This is welcome news to many renters, but in our multifaceted housing market, public policies can create ripple effects that go beyond this month’s rent payment.

In fact, rent control could make it easier for New Yorkers to buy their own home.

Why buy when rents are stable?

Rent controls were widespread in the 1940s as World War II necessitated more economic regulations than usual. Yet homeownership rose in the city during that decade.

In the same way, more rent control now could sweeten the deal for new home buyers. Like almost everything in capitalism, it boils down to supply and demand.

Rent controls can change supply and demand dynamics by:

– Encouraging property investors to sell their rental units: When they can’t raise rents, owners of rental units may be more likely to convert their units to owner-occupied homes. A bigger supply of homes for sale decreases demand, and when demand goes down, prices tend to follow.

– Discouraging renters from leaving their leases: With more renters staying in their leases because of rent stabilization, competition among home buyers can decrease. Again, less demand can lower prices, creating new opportunities for buyers.

– Decreasing property values: Less income from rent can lower property prices in buildings, making homes easier to afford.

In short, rent control can put more apartments up for sale, creating more opportunities for home buyers.

Rent control can discourage homebuying, too

The same economic forces that drive up the supply of housing units for sale can also have the opposite effect.

For example:

– Rents could balloon in non-stabilized units: Higher rents in unregulated areas could drive more renters into the housing market, increasing demand and, along with it, prices.

– Deferred maintenance could inspire more buyers: Some landlords may be slow to address maintenance problems when they’re earning less rental income from a unit. This has a tendency to inspire renters to buy their own homes, increasing demand.

– Lower rental income can inspire investors to retain more units: Frozen rents could make it harder for some landlords to convert rental units into owner-occupied units since they can’t raise rents on other units.

In a housing market as complex as New York City’s, detangling causes from effects is difficult. Usually, policy changes create a mix of results that can vary from neighborhood to neighborhood.

But one thing is clear: Rent stabilization could create new opportunities for New Yorkers who want to own their own homes.

What all this means for individual NYC renters and buyers

Whether you should keep renting or buy your own home in the city is a personal choice.

Local policies like rent stabilization, along with global economic forces that help shape interest rates, can influence this decision. But each resident gets to decide what’s best for their budget and their future.

If you’re thinking about buying in the next few months or even next year, start by improving what’s easiest to control: your personal finances.
Improving your credit profile and saving up a down payment can put more homes within reach.

A mortgage preapproval can show where you stand as a buyer at the moment. Better’s preapproval can show your shopping range in as little as three minutes with no impact on your credit score.

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