Home – With Affordable Housing Hard to Find, States Weigh Ending Local Rent Control Bans

With Affordable Housing Hard to Find, States Weigh Ending Local Rent Control Bans

 Saying it would “provide immediate relief to Oregonians struggling to keep up with rising rents and a tight rental market,” Oregon Gov. Kate Brown (D) signed legislation in February making her state the first to adopt a statewide rent control statute.

 

With similar proposals in play around the country, it may not be the last.

 

Under SB 608, rent increases in Oregon will now be limited to no more than 7 percent a year, plus the annual change in the consumer price index. The law also limits a landlord’s ability to evict tenants without a reason after they have lived in a property for a year, though a landlord still has wide latitude to evict for reasons like non-payment of rent or violating a lease agreement. The law also exempts rental properties that are less than 15 years old. Landlords who violate the law could be forced to pay tenants three months’ rent as well as other damages.

 

Brown also acknowledged the state’s lack of adequate housing supply, urging lawmakers to commit another $400 million to help increase that housing stock.

 

A shortage of affordable housing is also a major issue in California, where lawmakers are pushing their own regulations on local housing measures. On April 24th, the Senate Committee on Governance and Finance endorsed SB 50, a controversial bill that would force local governments to allow higher density developments in areas near mass transit. The next day, the Assembly Housing and Community Development Committee endorsed another blow to local control by approving AB 1482, which would cap annual rent increases at 5 percent above the Consumer Price Index. Both bills are now with their respective Appropriations Committee.

 

The approval drew a positive response from Gov. Gavin Newsom (D), who released a statement shortly thereafter saying he was “grateful” for passing the measures and warning that “the California Dream is in peril” if lawmakers don’t act to address housing affordability.

 

“People across this state shouldn’t be forced to spend their whole paycheck to keep a roof overhead,” he added. “But that’s increasingly the case throughout California.”

 

But another rent control bill – AB 36, which would have allowed cities and counties to impose rent control on single family properties built after 1995, something current law prohibits - did not fare as well. The bill’s author, Assemblyman Richard Bloom (D), pulled it before it could be voted on, a likely sign he did not have the votes to gain passage.

 

That doesn’t bode well for the bill’s future, and the group behind California’s failed Proposition 10, a 2018 ballot measure that would have overturned the statewide prohibition on rent control that AB 36 targeted, has already filed paperwork to get the matter back on the ballot in 2020.

 

Prop 10 was one of many ballot measures nationwide last November aimed at making housing more affordable. According to the National Conference of State Legislatures, voters in six states endorsed measures covering “an array of financing strategies, “including general obligation bonds, tax exemptions and other tax reforms, and allowing municipalities to fund privately owned affordable housing developments.” But none drew the kind of well-funded opposition that Prop 10 faced.

 

René Moya, a spokesperson for Housing is a Human Right, said polls overwhelmingly show public support for the cause. He blames Prop 10’s defeat on “the nearly $80 million that the landlord lobby, corporate landlords and the real estate industry plowed into the opposition campaign.”

 

Moya says the new proposition drive will focus on amending the law rather than overturning it. It would also notably exempt “mom and pop” landlords, defined as those not owning more than two rental properties, and rental properties 15 years old or newer. He says his group, which is the housing arm of the Los Angeles-based AIDS Healthcare Foundation, would possibly have pushed ahead with the ballot measure even if AB 36 had not been pulled, pending what a final version would have looked like. With the bill now gone, the effort will definitely move ahead.

 

California is hardly alone in seeing rising rents. While data from the California Department of Housing and Community Development shows a nearly 25 percent spike in average rents in the Golden State since 2000, a survey of Census data by Governing magazine shows rents in cities of 100,000 or more nationwide since 2000 have actually gone up by 31 percent. Some of the biggest spikes occurred in rapidly growing cities in Florida, Texas and Arizona.

 

It’s a serious concern given that many cities are also experiencing drastic increases in both the number of residents that forego home ownership and the stock of rental housing owned by absentee investors. This impacts everything from a city’s tax revenues to the condition and upkeep of neighborhoods.

 

Measures to allow local governments to implement rent control are currently pending in New York, Colorado and Massachusetts, although similar legislation recently stalled in Illinois in spite of Gov. J.B. Pritzker’s (D) support for doing away with the local bans. A proposal to overturn a Washington state ban on local rent control ordinances didn’t get out of committee last year, but the bill’s author, Rep. Nicole Macri (D), has indicated she is weighing a measure to cap rent increases for next session.  

 

Even if these bills or others like them become law, there is no consensus on whether rent control actually helps or hurts the effort to increase affordable housing. Advocates on both sides of the issue cite studies that support their point of view.

 

Opponents point to a recent study of rent control in San Francisco conducted by three Stanford economics professors that showed it was a boon for renters living in rent-controlled housing, but a bust for everyone else. According to the researchers, since the law’s inception in 1994 landlords have increasingly opted to transform their real estate holdings from rentals into owner-occupied condos, which are not covered under the law, or to redevelop them to garner a similar exemption. The result has been an overall 25 percent decrease in the number of people living in rent-controlled housing.

 

That isn’t surprising to Norm Miller, the Hahn Chair of Real Estate Finance at the University of San Diego. Miller says rent control laws serve mostly to disincentivize developers and real estate investors from producing more rental housing at a time when cities and states need it more than ever. If anything, he says, big institutional investors will “play games” to get tenants out in order to raise rents.

 

“There are no credible studies saying that rent control works in the long term,” he says.

 

A new study from the Columbia Business School begs to differ, albeit for a different reason than the impact on rental housing supply. According to lead researcher Stijn Van Nieuwerburgh, a real estate and finance professor at the university, rent control provides something almost no other policies can offer: a semblance of insurance that a low-income renter won’t be forced out of their home by a sudden, dramatic spike in their rent.

 

“In the New York City market there is a lot of inequality and very little insurance provided through the tax code,” Van Nieuwerburgh told Gothamist in April. “Housing affordability can add value as an insurance mechanism. My message is yes, there are distortions [to the market], but the benefits are also there.”

 

According to LexisNexis State Net, there are at least 129 rent control-related bills currently pending across 10 states. Most of them are in New York, where Gov. Andrew Cuomo (D) has indicated he supports reform of some Empire State rental laws.

 

In nearby Massachusetts, Gov. Charlie Baker (R) is more resolute in his feelings: he opposes HD 1100, prefiled legislation that would give Bay State cities the power to implement rent control. In March, Baker told State House News Service that rent control “would stifle the production” of new housing. 

 

“That’s exactly the wrong direction to go in. What we need to do here in Massachusetts is build more housing,” he said.

 

That doesn’t appear to be a deterrent to Rep. Mike Connolly (D), the bill’s co-sponsor, who told WBUR in Boston that he would like to see the governor and lawmakers take a comprehensive approach that includes both rent control and Baker’s previously-filed proposal to increase state funding for new housing development.

 

“We are facing an ongoing emergency in the shortage of affordable housing,” Connolly said. “This is really a response to many constituents who, both homeowners and tenants, who look at the current rental market and realize we’re facing an emergency of displacement, of homelessness, of rising costs.”