Finding an affordable place to live in New York City is notoriously difficult, but the city’s severe housing shortage isn’t simply the product of high demand. It’s also the predictable result of rent regulations that remove thousands of units from the market. A pair of new Wall Street Journal reports—one on a federal lawsuit challenging New York’s rent-stabilization law, the other on the widening financial distress in “affordable” housing buildings—should resonate far beyond Manhattan. For policymakers in Milwaukee, St. Paul, and Chicago, the message is clear: rent control doesn’t protect tenants in the long run. It destroys housing.
Consider the case filed last week by New York landlords Pashko and Tony Lulgjuraj. Their Washington Heights building has been fully rent-stabilized for decades. Two units had tenants for more than 40 years, including a two-bedroom legally capped at $710 a month—far below any market-based rent in the city. When the tenants finally moved out, the brothers discovered that the apartments required expensive updates to meet modern code. But state law limits rent increases on vacant units to no more than 4.5%—nowhere near enough to recover the cost of repairs. The rational response? Leave the apartments empty.
They are not alone. The Census Bureau estimates that as of 2024 more than 26,000 rent-regulated New York apartments sit vacant because landlords cannot legally charge enough to make them habitable. When regulation forces property to operate at a loss, the plaintiffs argue, it becomes a “taking” under the Fifth Amendment. Their suit—backed by the Institute for Justice—asks the courts to recognize that regulating a vacant apartment into permanent unprofitability is unconstitutional.
The economic consequences show up at scale. Another WSJ report highlights New York’s “affordable housing” sector, where publicly financed, rent-restricted buildings are now failing financially. Operating costs—especially insurance, utilities, and repairs—have soared. Insurance alone has risen more than 25% per year since 2019, often exceeding the monthly rent. Meanwhile, allowable rent increases have averaged under 2% annually. The mismatch is so severe that half of these buildings can’t collect enough rent to cover their bills. Many now face default, which could trigger a wave of taxpayer-backed bailouts.
This should be an urgent warning for Midwestern cities flirting with similar policies. St. Paul became the first U.S. city in decades to impose strict rent control—originally capping increases at 3% with no exemption for new construction. The results were immediate and punishing: developers canceled projects, construction permits collapsed more than 80%, and the city has spent the last two years scrambling to unwind the damage.
Illinois, meanwhile, recently lifted its statewide ban on local rent control—opening the door for Chicago activists to push measures similar to New York’s. If adopted, the Windy City would replicate the very conditions that have ravaged New York’s housing stock and destabilized its banks. Several lenders, including New York Community Bancorp, have already required capital infusions due to losses tied to rent-regulated buildings. When banks, landlords, tenants, and taxpayers all lose, it’s time to rethink the model.
Milwaukee isn’t New York, but the laws of economics don’t change with geography. Wisconsin has so far wisely prohibited local rent-control ordinances. But political winds shift, and the Midwest doesn’t need to learn these lessons the hard way. Housing affordability improves when cities permit more supply—faster approvals, less red tape, sensible density—not when they freeze rents and hope economics will politely comply.
Rent control sounds compassionate. In practice, it creates exactly what Milwaukee, St. Paul, and Chicago must avoid: fewer units, poorer conditions, distressed buildings, and higher taxpayer costs. The problems playing out on the coasts are not accidents. They are previews.