The Rent Freeze, and a Return to the 1970s - by Arpit Gupta
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The Rent Freeze, and a Return to the 1970s<br>How a Second Generation Rent Stabilization System Quietly Became First Generation Rent Control
Arpit Gupta<br>Jun 28, 2026
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Last Thursday, the Rent Guidelines Board, on which I have served for the last five years, voted to freeze rents on New York City’s roughly one million rent stabilized apartments.<br>I cast the lone no vote.<br>Thanks for reading Arpitrage! Subscribe for free to receive new posts and support my work.
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This vote is the occasion for two pieces I published this week: one making the case against the freeze, and one arguing what the city should do next to deal with it. The backdrop behind these pieces is the fiscal strength of the city’s economy, which is being potentially disrupted itself. This relates to another piece I wrote earlier this month about AI and city’s economy. All three pieces, ultimately, are about one question: whether New York City remembers the lessons of the 1970s.<br>1. The Case Against the Freeze (City Journal)
Article: The High Cost of New York’s Rent Freeze<br>The basic reason I voted against the freeze is straightforward: it would hold rents flat while expenses keep growing, and a large share of the stabilized stock has no other way to raise revenue:<br>These buildings have few ways to increase revenue beyond the adjustments allowed by the Rent Guidelines Board. Freezing their rents while their expenses remain uncapped is therefore a threat to their long-term financial viability. The nonprofit lender Community Preservation Corporation estimates that roughly a third of its rent-stabilized mortgages do not generate enough income to cover mortgage payments.
We know how the process ends:<br>The city has been through this cycle before. During the 1960s, 1970s, and 1980s, large numbers of rent-regulated properties fell into financial distress, which resulted in foreclosures and eventual takeover by the city. Further freezes could produce similar results by making more properties financially unviable…
Turning the ratchet further, without corresponding reductions in costs, threatens to turn a large portion of the rental stock into an expanded version of the New York City Housing Authority: more buildings owned or effectively controlled by government and increasingly dependent on public support…
The lesson is that freezing the price of a service indefinitely while its costs continue to rise does not produce cheap or abundant service. Instead, it produces deteriorating assets and, eventually, public bailouts and takeovers.
Second to First Generation Rent Control
The core issue here is the city’s rent control has slowly morphed from a 2nd Generation Rent Control system to a 1st Generation one. The distinction is:<br>First Generation Rent Control — Price ceilings that keep prices basically nominally flat within and across tenancies.
Second Generation Rent Control — Allow price increases within tenancies based on operating cost or inflation considerations, and accommodate larger changes across tenancies to reset close to market rates (vacancy decontrol), or in response to maintenance needs.
Prior to 2019, New York City had a largely functional second generational rent control system in its Rent Stabilization system (alongside a smaller first generation system). We have now seen, thanks to the tenant movement, two big shifts in this structure.<br>The first is the HSTPA, a 2019 law which removed many of the escape valves within stabilization. Previously, rents could be raised when apartments turned over; units could exit the stabilization system entirely after they crossed a deregulation threshold; and owners could recover the cost of capital work and apartment improvements. These provisions were not uncontroversial, and the tenant movement was correct they were sometimes abused. But collectively they provided some slack on the revenue growth to the system.<br>Mark Willis was one of the first people to realize what this actually means for the rent board. By shutting down most of the other available sources of revenue, it means that the RGB is now essentially the only source of revenue increases for a large chunk of the rent stabilized stock. So, structurally, you can’t really persistently offer below-inflation increases (as happened in the de Blasio) years without now affecting substantially the viability of the buildings.<br>The huge challenge for the rent stabilized stock is this effect happened at the same time as Covid: which put massive upward inflationary pressure on buildings, while also affecting the income of tenants.<br>This put the RGB in an impossible position during the post-Covid years. To follow our mandate, we need to accommodate larger revenue increases than typically; at the same time that the ability of tenants to pay remains challenged. The Board tried to balance these interests by voting for increases which were below our estimates...