The Cost of Rent Control is Pretty Hefty

We have seen in New York over the last 50 years how rent control has failed and how few rent control apartments actually remain throughout the five boroughs.

For Mountain View, California, who recently adopted the Measure V Rent Control program, elected officials and city residents are quickly learning that the price tag associated with rent control is a major risk.

Tenant coalitions fought valiantly for Measure V for years. We can only wait to see if whether or not the program will succeed in the Santa Clara city.

City Tries to Avoid Lawsuits on Affordable Housing Plan

We told you earlier that NYC’s inclusionary zoning and other extortionate new housing construction policies might be subject to legal challenges based on litigation in other States and now, the City administration seems to have woken up to the threat and is reviewing actions that might thwart such a threat. Still, the real question remains: who would bring such a legal challenge?

International Events Highlight Rent Control Deficiencies

A public opinion poll finds that a majority of Britons are in support of a call by the Labor Party in England to re-impose rent controls, which were eliminated by the Thatcher government in the 1990’s . This is paradoxical since the movement is motivated by the increase of rents in privately owned housing, which is again playing a vital role in the English housing market after having been all but eliminated by decades of rent control. The Britons do not seem to have learned that seeking to assure affordability by limiting rents can have devastating effects on the rental stock.

On the other hand , Spain seems to have learned from its mistakes. As of the first of the year, rent controls on commercial and retail properties have been eliminated. Spain’s commercial rent controls have been in place since the Franco regime and led to deterioration of these establishments.

New York State politicians would do well to look at experiences of rent control around the world before reflexively extending local rent regulations.

European Court Rules Rent Controls Unconstitutional

If the US Supreme Court tackles another property rights takings case it may want to take notice of a recent Euro Court decision involving an old rent control law in Malta. The European Court of Human Rights ruled recently that a Maltese rent control law dating back to 1979 was unconstitutional because it failed to strike a balance between a community’s need for housing protection and the landlord’s fundamental rights. As a result, Malta will now amend its law to provide for minimum rents, regular rent increases based on an index, and the elimination of inherited tenancies.

Win Some, Lose Some for Owners Throughout the Country on Election Day

As owners in New York City breathed a sigh of relief as Republicans gained clear control of the New York State Senate, owners in Bayonne, New Jersey celebrated a victory as well. Despite strong efforts by tenant advocates, the referendum to end vacancy decontrol in Bayonne failed once again in the November 4th elections. Approximately 58% voted in favor of maintaining vacancy decontrol and ended a two-year long battle by the Bayonne Tenant’s Organization.

Three years ago, Bayonne adopted vacancy decontrol and allowed property owners to apply to have units in their buildings removed from rent control if a tenant willingly moves or is evicted. Tenant advocates immediately petitioned against the law on the November 2012 ballot, but came up short. However, Bayonne will allow this petition to keep appearing on ballots every two years as long as 10 percent of the number of voters from the previous election sign the petition. Back in April, tenant advocates collected nearly 2,000 signatures that allowed the initiative to appear on this November’s ballot. Tenant advocates have already promised to keep the battle going and will seek to end vacancy decontrol in November 2016.

Unfortunately, owners throughout the country were not able to feel the same sense of relief as owners in New York City and Bayonne did. On Election Day in Santa Monica, California, residents voted in favor of Measure FS, which will give the local Rent Control Board the opportunity to discuss and possibly raise the Santa Monica Rent Control registration fee to $288 per unit per year from $174.96. Property owners will now be responsible of paying half of the fee with their tenants. Prior to the vote, the law allowed the Board to authorize owners to pass through 89 percent of the registration fee to their tenants.

Teaneck Rent Freeze a Similar Story to the New York City RGB Nightmare

On Tuesday, October 21st, the City Council of Teaneck, New Jersey voted in favor of a rent freeze, but assured property owners it is one-time event. After the 5-1 vote in favor of the rent freeze, Council members told owners that the rent freeze would be removed next year and that the consumer price index of operating costs for owners would be considered in determining the increases in rents for tenants.

The problem with this decision is simple: rent increases are supposed to be promulgated based on objective facts, such as the consumer price index, which shows the change in costs that owners deal with to maintain their buildings on a yearly basis. Teaneck owners are in a similar position that New York City property owners faced just five months ago. Despite rising costs for New York City owners, Mayor Bill de Blasio pushed for a rent freeze from before he took office right through the morning of the final Rent Guidelines Board vote this past June.

Just like in Teaneck, the de Blasio Administration assured the housing industry that a looming rent freeze, a campaign promise from de Blasio, would be a one-time deal. After out-maneuvering Mayor Bill de Blasio and the RGB, the housing industry was able to obtain at least some level of rent increase although they were the lowest in City history. The future of rent increases in Teaneck is unknown, however, the nightmare will continue next year for New York City owners when all nine members of the RGB will be Mayor de Blasio appointees with an agenda that quite likely will seek to finally obtain that rent freeze.

Tenant Relocation Ordinance Struck Down by Federal Judge

Property owners in San Francisco celebrated a major victory on Tuesday, October 21st when United States District Court Judge Charles Breyer struck down Supervisor David Campos’ Tenant Relocation Ordinance. The ordinance, which was called unconstitutional by Judge Breyer, required owners to pay tenants who were evicted under the Ellis Act the difference between their current rent and the cost to rent the same-sized apartment at market value as a relocation fee. The relocation requirements which were struck down are far less onerous than relocation provisions required under the Rent Stabilization Law in New York City.

Under the ordinance, a tenant’s relocation payout for a more expensive unit could have reached as high as $100,000. With this court ruling, current Ellis Act payouts will be capped at $4,500. Judge Breyer said the law violated property rights because it was requiring owners to pay for conditions that they did not cause, such as the vast increase in the prices of rental housing and the gap between market rates and maximum charges to the San Francisco’s rent-control law.

The Judge stayed his decision until Friday, October 24, 2014 in order to give City attorneys time to determine if they will appeal the decision. The property owners in this case were represented by the Pacific Legal Foundation which will certainly continue this legal battle if the case is appealed.

Newark Property Owners Fighting Recently Passed Ordinance in Court

In May, property owners in Newark suffered a major blow when the Newark City Council passed an ordinance aimed at making it more difficult for owners of rent-controlled apartments to raise rents. Now, owners are fighting back in court against the legislation, stating that the ordinance is too difficult to understand and follow.

The new ordinance caps annual rent increases for all properties “to the Consumer Price Index (CPI) for the previous twelve months for the New Jersey area, as established by the Federal Bureau of Labor Statistics.”. Owners say that no such index exists and that the Federal Bureau of Labor Statistics publishes monthly CPI’s on a delayed basis. Following the passing of this law, a newly formed owner’s group called the Newark Apartment Owners association filed a complaint in Essex County Superior Court and asked the judge to order an immediate stay to the law and declare the ordinance unconstitutional. The judge allowed the law to take effect on June 20th, but stated that the ordinance could be struck down at any time in the future. Before the new ordinance was passed, owners were permitted to raise rents annually by 5% if their building has 49 units or less and by 4% if the building has more than 49 units. Owners could also ask the City of Newark to raise rents up to 25% in vacant apartments if they were able to show proof that they spent $100 or more in making an individual apartment improvement. Now, owners are fighting the new legislation in court and contends that the wording of the law is too vague and unfairly places a burden on property owners to interpret the law.

Just days after the Newark law went into effect, New York City property owners celebrated a victory over the City Rent Guidelines Board when an impending rent freeze was narrowly avoided with the lowest rent guidelines in City history approved. Although the approved rent increases do not come close to covering the rising costs for New York City owners, thwarting what seemed to be an inevitable rent freeze was a major victory. The timetable is unknown for this new legal battle for Newark owners, however, perhaps they can soon feel the same sense of relief that New York City owners were able to achieve earlier this year.