Housing plan sparks arguments on rent control, just cause evictions



By Wendi Jonassen

After several hours of confusion and bickering, last week the Richmond City Council approved a housing element—a part of the general plan that will address land use and housing development throughout the city—just in time to meet a deadline to be eligible for a state-issued $44 million grant.

But although the entire housing element contains more than fifty sub-sections, there are still four sections of the plan the council left undecided, which could affect rent control, eviction laws and low-income housing requirements in Richmond. Those four subsections cover enforcing stricter just cause eviction protections, establishing rent stabilization and a rent control board, creating a community land trust, and restricting the circumstances in which a developer can pay “in-lieu” fees instead of building low-income housing.

All of these subsections are either controversial or are only in beginning stages of research. At last Tuesday’s meeting, after two and half hours of discussion and over 20 speakers from the community, the council did not actually vote to implement any of these items. Instead, they spent several hours arguing before voting to allow the Planning Division to spend the rest of the year doing research on them.

“The only thing we will have to do now and between the end of the year is come back to the city council with studies,” said Hector Rojas, a senior planner in the Richmond Planning Division.

As rent soars throughout the Bay Area, the population in Richmond is expected to grow by 10,380 households between 2010 and 2030 according to the Planning Department. With the Lawrence Berkeley Nation Lab coming to Richmond, many expect that to add to the population boom, in addition to adding jobs. That’s raised concerns about gentrification—that low-income residents will be pushed out of Richmond.

Today, Richmond is a Bay Area leader in low-income housing. Neighboring cities average meeting 32 percent of their affordable housing needs while Richmond sails above with 300 percent of its affordable housing options met, according to a 2002 report done by the Non-Profit Housing Association of Northern California.

However, homelessness continues to be one of Richmond’s biggest issues. Richmond has the largest homeless population in Contra Costa County, with 2,266 homeless people or families according to the Planning Department.

No one, not even experts in the Planning Department, yet knows how the four controversial elements could affect Richmond as the city braces for the population boom. The planning department will spend the year talking to other cities about their policies on similar matters, looking over statistics, and talking to elected officials to try to get a better idea of what Richmond needs to do to attract developers and money, while still providing for the low-income population. For example, when Councilmember Nat Bates asked for solid data on eviction problems, Rojas said that that was an area that needs more study.

“We do need a year’s time to look over this and that is not including outreach to the community, talking to stakeholders, and making our own recommendations on each and every one of these programs,” Rojas said. “There are a lot of questions.”

The answers to those questions will affect housing development, land-use, rent, tenants’ rights and low-income housing in Richmond for many years.

Rent Control

At the last council meeting, the rent control element of the plan easily took over much of the debate between councilmembers, residents and property owners who were ready to cite statistics and voice concerns.

If implemented, this clause would enact rent controls, which are limits on how much and how often landlords can raise the rent. In order to do this, Richmond would need to establish a rent control board that would oversee new developments and manage landlords. The board would only allow landlords to raise rent by a certain percentage every few years to keep rent affordable, but that percentage and the time period for how often landlords could raise rents is not specified in the clause. The Planning Board will spend the year researching to work out these details, Rojas said, unless, of course, they decide rent control won’t help Richmond.

Renting is a key issue since over half of Richmond residents rent instead of owning property. Additionally, 82.4 percent of low-income renter households overpay, meaning that they spend more than 30 percent of their income on housing, according to the Planning Department.

But not all properties will be affected by rent control, no matter what the Planning Department finds in their study. Under state legislation called the Costa-Hawkins Rental Housing Act of 1995, single-family homes and condos occupied after 1996 and any housing built after 1995 are exempt from rent control. The Costa-Hawkins Act also allows landlords to re-set the rent after a tenant moves out.

That exempts close to half of the housing in Richmond from rent control, said Theresa Karr, regional development director of the California Apartment Association, a statewide association for managers or owners of rental properties.

“Take all of those out and what you have left is a huge housing stock in Richmond that was built during World War II,” Karr said. “These are owned by working people, retired now, people who worked hard to have their own piece of America, who are relying on that rent as a part of their retirement income.”

At last week’s meeting, landlords and other rental property owners backed Karr, like Jeffrey Wright, chief executive of the West Contra Costa County Association of Realtors, who stood to speak out against rent control ordinances, saying that it will make Richmond unattractive to new development.

“The facts do not support rent control,” said Wright. “We are not plagued with the situation whereby rents are exorbitant. We often times can get caught up with the emotionalism of a topic.”

As Wright was leaving the public speaking podium, Councilmember Corky Booze said that he agreed with Wright. At the meeting, both Booze and Councilmember Jim Rogers cited problems the city of Berkeley encountered several decades ago. Rent control was established there in 1980, and afterward developers slowed their building of rental units. The total number of rental units dropped by 14 percent between 1978 and 1990, according to the National Multi-Housing Council, while rental units in neighboring cities without rent control rose.

In 2008, backers of Proposition 98, a statewide ballot initiative, sought to ban local rent control measures, but the measure failed.

“I am not convinced at this point that it is appropriate to go forward with rent control,” Rogers said. “I think that there is evidence that there is a movement away from rental units into condominiums purchasing for single-family homes” in the event of rent control.

But groups like the Alliance of Californians for Community Empowerment (ACCE) and Richmond Equitable Development Initiative (REDI) are proponents of rent control, saying that it will protect tenants against unfair rent hikes and protect the community from gentrification. “Landlords are still going to make their money” even with a rent control clause, said Melvin Willis, a member of ACCE, which works with low-income residents, immigrants and working families across California. “Let’s just try to make it more fair for the community.”

Proponents argue that landlords can take advantage of low-income residents if there is no control over rent increases. “We don’t want this city gentrified, as the city grows. We don’t want to put low-income people out,” said Councilmember Jovanka Beckles. And with over half the population paying over half their income on rent, Beckles asks, “If rent stabilization is not the answer, what is? It just makes me wonder, what can we do?”

Mayor Gayle McLaughlin also supports rent control. If more Richmond residents can save some money on rent each month, more will be able to afford to buy homes, she said. “Rent stabilization offers these possibilities … and that offers a better economic development situation for the city,” McLaughlin said.“It is a positive to put roots down.”

Aside from being controversial, funding a rent control board is also costly. Several Richmond councilmembers, as well as Rojas, said that board in Richmond is not financially feasible, arguing that paying board members and keeping records could cost the city half a million dollars a year.

“Some of the cities that do have rent control ordinances spend resources in the millions to run that program,” Rojas said. “We don’t have budget surpluses to create new programs. What we want to do is to see what resources we do have.”

Just Cause

Another controversial item in the housing element concerns the establishment of “just cause” eviction protections, which mean that a landlord cannot evict a tenant without legal proof of wrongdoing such as using the property for drug dealing or prostitution. This appeals to some because just cause ordinances protect renters from being evicted if they complain or simply don’t get along with the landlord. However, a landlord also can’t evict a tenant whom they suspect of illegal activities—such as drug dealing—without getting definite proof from the police, which can be time-consuming and ineffective.

Right now, Richmond’s just cause eviction ordinance only applies to tenants in foreclosed homes. However, the Planning Department is now looking into expanding the just-cause ordinance to include all rental properties and will spend the next year doing research.

Proponents of just cause protections believe they give renters more rights and keep landlords honest. Under just cause provisions, landlords can’t evict a tenant with ulterior motives in mind, such as raising the rent on current tenants, and they must follow legal protocols for eviction.

“I am for just cause eviction ordinances because through knocking on doors and talking to community members, I have found that there are good and bad landlords,” said Willis of the ACCE. For example, Willis said, he has heard stories about tenants moving into buildings that aren’t up to code. The landlord pushes the tenants to get repairs made, and when the tenants complain about the extra work, the landlord threatens to kick them out.

But some of those opposed to just cause call it a “drug dealer protection act” since such ordinances can make it harder to kick out a tenant whom the landlord suspects—but cannot prove through police reports—is engaged in criminal activity.

“As much as they would like you to believe, landlords don’t evict good tenants,” said Karr, whose group opposes just cause. “There is not reason to evict a good tenant. Just cause ordinances are developed to where you have to give multiple notices and you have to give them over and over again. It’s just not as cut and dried as it appears.”

Planning Department officials say they will now take the year to gather input from community organizations, legal aid groups, renters, landlord and property owner groups, and study ordinances from other jurisdictions in California to find the most effective regulations for Richmond.

Inclusionary fees

One portion of the housing element that the council discussed without much bickering was an item regarding inclusionary fees. Inclusionary housing ordinances require that developers set aside a certain number of units for low-income residents. If they choose not to, developers must instead pay an “in-lieu fee.”

Richmond and neighboring cities already have inclusionary housing ordinances on the books with in-lieu fees built in. In Richmond, any complex with ten or more units is subject to the inclusionary ordinance. Other cities in the Bay Area charge a fixed in-lieu fee, but Richmond does it based on a percentage of the construction costs, “which I think is more reasonable,” Rojas said.

Money garnered from the in-lieu fees go back into the city’s housing trust fund, which is used to fund more low-income housing projects. “We will get that pool of money together and build our own project,” Rojas said.

Right now, a majority of developers in Richmond pay the in-lieu fee. As a result, that is leaving fewer units available to low-income residents, Rojas said. What he would like to see is to find ways to encourage developers to include the units, creating a more balanced housing environment.

Since the housing element was passed, Rojas will spend the next year talking to developers and neighboring communities to consider changes to the current fee policy. One option would be to require that developers set aside a certain number of units for low-income buyers, regardless of whether they have paid the in-lieu fee. Another would be to raise the fee, which would make it more economically attractive to developers to include low-income units.

At the last meeting, Councilmember Jim Rogers asked Rojas where Richmond stands in terms of in-lieu fees compared to neighboring cities. Rojas replied, “It’s staff’s opinion that we are pretty much in the middle of the pack in terms of in-lieu fees.”

Rogers responded by asking the Planning Department to push Richmond to a higher bracket—to charge higher in-lieu fees compared to the rest of the Bay Area. “I think that it is appropriate for us to have a policy that puts us on the higher end of the pack,” Rogers said.

But if in-lieu fees get too high, it might scare developers away, leading them to build in neighboring cities. With the expected upswing in Richmond’s population in mind, finding the right balance is crucial. “We want to tweak the ordinance to make it more attractive for developers,” Rojas said, “but if we tweak the ordinance, it might have unintended consequences.”

Land Trust

The last element, and the seemingly least contentious at the last council meeting, was a land trust concept. Community land trusts (CLTs) exist all over California, including in Oakland and San Francisco. They are community-based nonprofit corporations that buy land with the intent of providing permanent low-income housing. “Basically it is a way of subsidizing affordable housing for individuals and families,” said Rojas.

Though Rojas thinks it is a great program to help protect the low-income population, it is very expensive. “The idea would be that now that properties are pretty much every where because of the recession, we would be able to afford more properties,” Rojas said. “But the problem with the program is that we don’t have millions and millions of dollars to search for properties.”

Buying the land isn’t the only expense either. The city would need to pay people to operate the program—file paperwork, organize structures and ordinances—and that can get expensive, especially in an already cash-strapped city.

Rojas said the department is still in the initial planning stages, and that while CLTs are a good idea, Richmond would not be able to fund the project without finding a surplus in their budget next year or cutting some funding from somewhere.

The Planning Department will spend a year studying existing Community Land Trusts in California and nationally, gather input from the community, and determine the most feasibility of a possible Richmond Land Trust, as well as the most effective way to structure the corporation.

What’s next?

The rest of the city’s general plan, with elements addressing schools, land use, and health and wellness, easily passed in April, Rojas said. The less contentious parts of the housing element, including clauses addressing Section 8 vouchers and increasing second-dwelling units (backyard in-law apartments), also passed in April. The Planning Division held off until this January on asking the council to approve the four most divisive components of the housing element. “Because there were controversial issues,” Rojas said, “we wanted to fast-track the rest of the plan.”

But until the entire housing element passed, Richmond wasn’t eligible for the grant-One Bay Area Grant. OBAG is a new program funded by federal stimulus money with a goal of funding “streets projects” that enhance the ability to attract development near transit.

The $44 million grant will cover all of Contra Costa County. “But we think that since our general plan and our housing element is so strong,” Rojas said, “we will get a lion’s share of the funding.” Last Tuesday’s meeting fell just two weeks before the deadline to be eligible for the grant money. The council’s agreement that the city will study the four controversial items, rather than of implementing them outright, was enough to ensure the city’s eligibility for the grant.

The Planning Division now has a year to research each item before bringing them back before the council. Rojas said his department wants to work on developing in a sustainable manner, as opposed to just building outward. “We are looking at the growth that is coming to Richmond,” Rojas said. “We want to develop high-density housing, next to employment, that is transit-oriented.”

“In terms of the whole spectrum, we have so much more positive going for us than the negative,” he said.


Source: Richmond Confidential 

Challenge to Hoboken Rent Control Initiative Gets Court Date


By Daniel Reyes/The Jersey Journal

Arguments by a group of property owners to overturn the Election Day vote that rejected their rent-control ballot initiative will be heard in Superior Court in Hudson County.

The initiative, which was voted down, 8,248-to-8,196, in November, would have exempted buildings with four or fewer units, as well as all condo units, from rent control guidelines. The group of 15 property owners, represented by attorneys Charles Gormally and Sean Smith of Brach Eichler, filed a challenge to the Nov. 6 election result in early December. The court will hear their challenge on Jan. 22.

Arguments by a group of property owners to overturn the Election Day vote that rejected their rent-control ballot initiative will be heard in Superior Court in Hudson County.

Cheryl Fallic, a spokeswoman for the rent control advocacy group Hoboken Fair Housing Association, appeared at a hearing Friday with two motions aimed at quashing the property owners’ request to allow votes that weren’t counted in the election. Both motions were denied.

The votes which Gormally and Smith claim were wrongfully rejected include 92 absentee ballots that would be more than enough to change the outcome of the ballot initiative, which was decided by 52 votes.

“I can’t believe they denied (the two motions),” said Fallic after the hearing.

Fallic described the plaintiff’s case as “flimsy” adding that while she and her supporters were still digesting the news, an appeal of Friday’s ruling wasn’t out of the question.

Gormally understood Fallic’s concern, but felt that due to situations surrounding the election, specifically Superstorm Sandy, taking another look at votes that weren’t counted is “common sense.”

Gormally pointed out that a group of ballots postmarked before Election Day weren’t counted, even though the deadline to vote had been extended to Nov. 9 due to the storm.

He also cited hundreds of people who did not receive absentee ballots until Nov. 9 due to the storm.

“The confusion surrounding the whole process merits consideration,” said Gormally.


Source: NJ.com

Rent Control Across the Globe: Hong Kong CE Says No to Rent Control

01-17 16:03

Rent control will not help to solve the housing problems in Hong Kong, said Chief Executive Leung Chun-ying.

Speaking in the question-and-answer session in the Legislative Council, Leung said rent control will only discourage people from becoming landlords, making those who cannot afford their own flats more difficult to look for homes. He reiterated that he would not want to touch on the issue.

Leung was asked by Civic Party’s Alan Leong Kah-kit, who criticized the Chief Executive for his policies failed to lower home prices.


Source: The Standard Hong Kong

Beware the Comeback of Rent Control

The U.S. rental housing market has come under increasing strain recently. As homeowners with unsustainable mortgages have to leave their homes and fewer home buyers are able to qualify for new mortgages, more people are looking for places to rent. As a result, rental vacancy rates have fallen from 11.1 percent in the third quarter of 2009 to 8.6 percent in the third quarter of 2012. With affordable housing already in short supply, there is growing concern that stronger protections are needed to prevent rents from rising too fast, pricing more low-income and vulnerable renters out of the market.

One idea to protect renters that may be getting renewed interest is rent control. Rent control policies have been tried in a number of cities, first during World War II and later again in the 1960s and 1970s. Relatively few places have rent control today though and most states have laws prohibiting the practice. Given the challenges in today’s rental market, does rent control deserve a second look?


A scan of the research literature revealed very little evidence that rent control is a good policy. Arguments against rent control go back as far as the 1970s and the RAND housing allowance experiments in New York City. More recently, a MIT study of the 1995 repeal of rent control in Cambridge, Massachusetts, found that investment in housing increased after rent control ended, leading to “major gains in housing quality.” A National Bureau of Economic Research paper also examined the Cambridge experience and concluded that “elimination of rent control added about $1.8 billion to the value of Cambridge’s housing stock between 1994 and 2004, equal to nearly a quarter of total Cambridge residential price appreciation in this period.” These findings have been used to argue for removal of rent control in New York and other places.

In a comprehensive overview of the research literature, Blair Jenkins examined studies of different aspects of first-generation rent control (strict price ceilings) and second-generation (limits on increases, also referred to as rent stabilization). The upshot is that, at best, rent control does little harm but probably not much good and, at worst, it has negative impacts on landlords and tenants. There is near universal agreement that strict price ceilings, such as the kind imposed in New York City in the 1940s, are always bad because they severely inhibit housing production and investment. Even those most sympathetic to rent control seem to agree with this.





That leaves the softer, rent stabilization policies, like those currently in place in New York City and Washington, D.C. These regulations place limits on how much landlords can raise rents on sitting tenants, but generally allow much larger rent increases for new tenants. They also often allow exceptions for landlords to pass along certain costs to tenants, such as capital improvement costs or utility charges.

On rent stabilization, the strongest finding in Jenkins’s overview appears to be that tenants in noncontrolled units pay higher rents than they would without the presence of rent control; one reason being that landlords need to make up the difference for lower rents in controlled units. Interestingly, one study found that New York City tenants in controlled units also had higher rents initially, because they were willing to pay more to get into a rent-controlled unit with the understanding that they would have smaller rent increases in the future. The net effect, however, is that tenants don’t save much in the long run—they simply trade higher rents now for lower rents later.

The conclusion seems to be that rent stabilization doesn’t do a good job of protecting its intended beneficiaries—poor or vulnerable renters—because the targeting of the benefits is very haphazard. A study of rent stabilization in Cambridge, for example, concluded that “the poor, the elderly, and families—the three major groups targeted for benefits of rent control—were no more likely to be found in controlled than uncontrolled units.” And, as noted earlier, those in uncontrolled units tend to pay higher rents, so they are actually hurt by rent control.

Given the current research, there seems to be little one can say in favor of rent control. What, then, should be done to help renters obtain affordable, decent housing? A better approach may be adopting policies that encourage the production of more diverse types of housing (different densities, tenure types, unit sizes, etc.), implementing strong regulations and practices to ensure housing quality and to protect tenants from abuses; and providing targeted, direct subsidies to people who need help paying their rents.


Source: The Atlantic Cities

It’s Not Over Till It’s Over: Rent Control Supporters Vow to Continue the Fight


by Al Sullivan

Although voters rejected an effort to maintain rent control by 121 votes, supporters of rent control said they are reviewing their options and will seek to put the question back on the ballot if legal options do not prevail.

With nearly all of the votes counted from Nov. 6, the effort to retain rent control was narrowly defeated with 51 percent to 49 percent of the vote.

County elections officials certified the vote on Nov. 17, and this allows the city to gradually phase out rent control in Bayonne.

The council approved changes to rent control in November 2011 that would allow landlords to opt out of rent control once current tenants move out.

Rent control supporters tried twice earlier this year to have the matter put up as a referendum, and then when those attempts failed, they used another approached the imitative which successfully allowed the matter to be put on the Nov. 6 ballot.

Ed Gilligan, spokesperson for the Bayonne Tenants’ Association, said he was disappointed by the result, but that the group has not given up.

“We’re reviewing our legal options,” he said. “If we have to, we will go out and get more signatures and put it on the ballot again. In Hoboken, they did it twice. The first time they were swamped, but they got organized and won. We weren’t organized and we only got 49 percent of the vote.”

“I think maintaining rent control is where the sympathies of Bayonne people lie.” – Ed Gilligan
Course of action

The Bayonne Tenants’ Association was seeking to preserve rent control in the city after the council voted to do away with it in November 2011, as part of an effort to spur redevelopment in the city.

“I think we were fair in what we did,” said Councilman Ray Greaves. “I didn’t like the first ordinance that we saw [in July 2011], which didn’t protect the people living there. But the changes we voted for do, I think are fair to both landlords and tenants and will help landlords reinvest in their properties, knowing that they will get a fair return on their property.”

The vote results from Nov. 6, which were delayed because of Hurricane Sandy, lets the city council changes remain. These would allow properties to drop rent control once the residents living in them currently leave.

“I don’t think this lost because of the hurricane,” Gilligan said. “Outside groups and the city spent a lot of money to defeat our ordinance that would have kept the old rent control in place. We spent very little and we still got 49 percent of the vote. I think maintaining rent control is where the sympathies of Bayonne people lie. They do not sympathize with out-of-town political operatives who came in here to get rid of it.”

Unlike traditional referendums which would have not allowed the Bayonne Tenants’ Organization to seek another election on the measure for three years, the method they used has no limitation.

“We can put it back on the ballot as soon as we get enough signatures again,” he said.

Gillian said he and his group will likely start a public education campaign ahead of the next round in this battle to preserve rent control.

“I think the next time we can win this,” he said.

Source: Hudson Reporter

Bayonne’s rent control referendum results can’t be certified yet

Bayonne’s rent control referendum results can’t be certified yet

By Anthony J. Machcinski


Despite 98 percent of the machine votes being tallied, the battle over rent control in Bayonne technically isn’t over, with 415 votes separating the two sides.

People hold up campaign signs on Ocean Avenue in Jersey City on Tuesday, Nov. 6, 2012.

The ballot question asked residents if they wanted to overturn the law that allows units to be removed from rent control under certain conditions.

By a 6,568-to-6,153 margin, Bayonne voted Tuesday night to keep the current rent control law.

But with more than 5,000 Hudson County votes not yet counted those sent in by email or regular mail, as well as provisional ballots the referendum will not be certified until tomorrow at the earliest, according to Hudson County Deputy Clerk Janet Larwa.

Larwa said election officials won’t know how many of those are Bayonne ballots until officials go through them all.

Rent control applies to more than 2,000 units in Bayonne, according to city spokesman Joe Ryan.


Source: The Jersey Journal

When Rent Control Ended in Cambridge, Mass.

 When Rent Control Ended in Cambridge, Mass.


Every intro class teaches about price ceilings, and I suspect that 99% of them use rent control laws as an example. Of course, the standard lesson from a supply-and-demand diagram is that price ceilings lead to a situation where the quantity demanded exceeds the quantity supplied, and so while the price of rent-controlled apartments is lower, good luck in finding a vacancy!The slightly more sophisticated insight is what I call in my own intro textbook the problem of “many margins for action.” (Of course, if you are teaching an intro econ class, I encourage you to take a look at my Principles of Economics textbook, a high quality and lower-cost alternative to the big publishers, available here.)  Landlords who face rent control legislation can skimp on maintenance, or hunt for ways to force the renter to bear additional fees or costs. If a large number of landlords act in this way, the feeling of the neighborhood and property values for homes that are not rentals may be affected, too.Cambridge, Massachusetts, has a rent control law in place from 1970 to 1994. It was ended by a statewide vote that barely squeaked out a 51%-49% majority–and ended despite the fact that Cambridge residents favored the continuation of the law by a 60%-40% majority. The law placed limits on rents for all rental properties in Cambridge built in 1969 or earlier. In “Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge, Massachusetts,” David H. Autor, Christopher J. Palmer, and Parag A. Pathak look at what happened. (The paper is published as NBER Working Paper 18125. These working papers are not freely available on-line, but many in academia will have access through institutional memberships. Full disclosure: David Autor is editor of my own Journal of Economic Perspectives, and thus my boss.) Autor, Palmer, and Pathak have data on rents and prices in both controlled rental buildings, uncontrolled rental buildings, and owner-occupied housing. They can also make comparisons to neighboring suburbs that did not have rent controls in place. Here are a few of their more striking findings:

— The rent-controlled buildings in Cambridge, Mass., typically had rents 25%-40% below the level of uncontrolled rental buildings nearby. However, the maintenance of rent-controlled building was often subpar, with a higher incidence of issues like holes in walls or floors, chipped or peeling paint, loose railings, and the like. More broadly, owners of rent-controlled properties had no incentive to do any major fix-ups or renovations, because they would be unable to recoup the costs.

— Rent control laws are still easy to find, if not exactly widespread, in the United States. For example, “New York City’s system of rent regulation affects at least one million apartments, while cities such as San Francisco, Los Angeles, Washington DC, and many towns in California and New Jersey have various forms of rent regulation.”

— Not surprisingly, the end of rent control in 1995 meant that prices of the buildings that had formerly been rent-controlled rose. “Our statistical analysis also indicates that rent controlled properties were valued at a discount of about 50 percent relative to never-controlled properties with comparable characteristics in the same neighborhoods during the rent control era, and that the assessed values of these properties increased by approximately 18 to 25 percent after rent control ended.”

—  More surprising, it turns out that the end of rent control raised the value of all the non-controlled properties in Cambridge, too. Properties that were in a neighborhood with a higher percentage of rent-controlled properties increased in value by more than those in neighborhoods with a lower percentage of rent-controlled properties. Indeed, when rent control ended, the gains to owners of  uncontrolled properties were greater in total than the gains to the owners of rent-controlled properties. “The economic magnitude of the effect of rent control removal on the value of Cambridge’s housing stock is $1.8 billion. We calculate that positive spillovers from decontrol added $1.0 billion to the value of the never-controlled housing stock in Cambridge, equal to 10 percent of its total value and one-sixth of its appreciation between 1994 and 2004. Notably, direct effects on decontrolled properties are smaller than the spillovers. We estimate that rent control removal raised the value of decontrolled properties by $770 million, which is 25 percent less than the spillover effect.”

Taking all of this together, it seems to me like the way to think about rent control–at least in the form that it was enacted in Cambridge, Mass.– is that it creates a situation of low-quality and poorly-maintained housing stock, which then rents for less than uncontrolled properties. If the goal of public policy is to create lower-quality and more affordable housing, there are other ways to accomplish that goal. For example, zoning laws could require that rental complexes include a mixture of regular and small-sized rental apartments, so that the small-sized (and thus “lower quality”) apartments would rent for less. Or those with lower incomes could just receive housing vouchers.

But when rent control is enacted in a way that leads to degradation of a substantial portion of the housing stock, the costs are not just carried by landlords of those rent-controlled apartments. In fact, a majority of the costs may be as a result of spillover effects to real estate that isn’t rent-controlled. When a substantial proportion of the houses in a neighborhood are not well-maintained, everyone’s housing prices will suffer.


Resource: The Conversable Economist blog

Caretaker, Part II

In what promises to be a long tale, Margaret Hearn, a caretaker for two deceased sisters who has laid claim to their $291 a month, rent-controlled three-bedroom apartment on East 12th Street (see below), has given up her own $747 a month rent regulated apartment in Gramercy Park. She may be thinking that this move will help solidify her succession claim, but it is reminiscent of the days when squatters moved into vacant property and dared anyone to remove them.

                                     – Jack Freund, Executive Vice President, Rent Stabilization Association 

(Views and opinions expressed are those of the author and do not necessarily reflect the policy or position of the RSA.)


Caretaker, Part I: “Can You Really Claim Two Rent Controlled Apartments?”


Margaret Hearn Gives Up $747-a-Month Apartment



Margaret Hearn

Margaret Hearn has given up the $747-a-month Gramercy pad she was holding on to as security, while continuing to fight for her $291-a-month, rent-controlled three-bedroom on East 12th Street.

“I don’t want to be there, it’s not home to me,” Ms. Hearn said of the 300-square-foot alcove studio in Gramercy that she has kept for 20 years. She said it was a financial burden to pay for both apartments, and that “nasty comments” from those who read about her living situation persuaded her not to renew her lease, which expires Oct. 31.

Last month, she told The Local she was fighting to keep her East Village apartment because she believes she is the rightful heir to the two sisters who in 2008, she said, asked her to share it with them.

“Win or lose, this is my home. Not because I feel entitled to it, or that I earned it, or anything like that. This is where I’m connected because of my relationship to the ladies. They were my family, and the neighborhood is my family,” she said yesterday.

Among her naysayers is Gregory Bronner, founder of NYC Renters’ Alliance for Housing Choice, who told The Local that Ms. Hearn’s fight is “a travesty for New York,” and that rent regulations should be phased out, with moderate subsidies given to the “truly needy.” He believes rent-regulated apartments “should be available to all New Yorkers” when they enter the market.

“We believe that that apartment should no longer have succession rights. She should go back to her apartment in Gramercy. She should not be allowed to inherit. From a moral perspective, it would be better used for a middle-class family looking for housing,” he said.

Ms. Hearn shot back, “First off, this apartment would be chopped up into tiny bedrooms, and would charge $5,000 a month, I believe. It’s not a question of apartments’ availability; it’s the price of apartments that makes low-income tenants feel that we’re being pushed out. Mayor Bloomberg wants us to live in a box smaller than my college dorm room.”

Ms. Hearn disagreed with Mr. Bronner’s argument that rent-regulated apartments should be phased out, arguing that many “could never afford to live in the neighborhood they grew up in, the neighborhood they have roots to” if not for the right to inherit apartments from their parents. “They’re the shopper in the community, the people that come together when the community needs them, and they bring their different cultural influences to the community,” she said.

Ms. Hearn and a lawyer for her landlord are scheduled for a deposition on Oct. 26.

Source: The Local East Village