In October, I wrote about Stuyvesant Town and Peter Cooper Village in New York, a multi-billion dollar apartment community boondoggle for which some state employee retirement systems are on the hook as lenders.
Politicians in New York are now putting pressure on Fannie Mae and Freddie Mac to guarantee the loan payments.
The main reason that the loan payments are in default and in need of a bailout is that the landlord lost a court battle (in 2009) to "decontrol" the tenants' rents. Middle (and higher) class tenants are living in upscale apartments at rents that are far below the market rate. Those below-market rents are now being subsidized by various teachers' retirement plans from across the country, Fannie Mae and Freddie Mac and, ultimately, the taxpayers.
The American Spectator article linked above is significant not only for its description of the consequences of the government bailout, but for its depiction of life under rent control in New York. As municipalities become more oppressive in their regulation of rental properties, our own reality will get closer to the world that the Spectator describes.
Check back here later for more updates on rent control and the consequences for investors and tenants.