Wherever it Exists, Rent Controls Create the Same Inequities

When rent control fails – San Francisco edition

October 9, 2012  |   Posted by: 

Rent control exists to protect the San Francisco apartment renter – who lives in an older apartment building – from price gouging by greedy landlords out to make a buck.

But as we all know, sometimes the best intentions do not produce the desired results. And though rent control has been a very successful protection method for renters for many years, more often than not these days it’s the landlords who are getting gouged by their renters.

It seems that one of the failures of rent control is the possibility of a non-finite leasing arrangement.  Renters who started in an apartment a decade ago, grew successful and prosperous and even moved out into a house or a bigger, better apartment, never ended the lease at their rent controlled place. Instead, they kept renewing it, kept paying rent, and didn’t live there.

Maybe they illegally sublet it to someone who isn’t on the lease at all. Maybe they used it for an office or a secret hideaway where they could escape from their spouse. Or maybe they moved to Marin and used it only on the occasion when they came into the city – and also sublet it for weekends to their friends.

These situations are all too common in the San Francisco rent controlled housing market, which is why some residents – and tenants rights advocates – are calling for an overhaul to rent control. Policing offenders who are abusing the system for their own personal gain should be the job of the Rent Control Board, but they lack the manpower and resources to check up on each and every tenant. And plus – that shouldn’t be necessary. Residency checks for tenancy sound like something out of a totalitarian regime, not live-and-let-live San Francisco.

The SF Chronicle reports that there are still more than 183,500 rent-controlled units, out of 222,165 apartments, in San Francisco. That’s a huge percentage of the housing stock, and gaming the system is patently unfair. How can we better self police the way rent controlled units are being used?

 

Source: Rent Cafe

Voluntary Rent Controls—Now There’s a Concept!

City Council Updates Voluntary Rent Guidelines

Resolution works as a policy statement from the city governing the rents of current tenants.

By Drew Hansen

Alexandria City Council approved a resolution Tuesday establishing the city’s voluntary rent guidelines at an increase of not more than 5 percent in situations where a tenant pays utilities and not more than 7 percent where a landlord pays utilities.

The guidelines were the recommendation of the city’s Landlord-Tenant Relations Board, which analyzed rent data, market forecasts and vacancy surveys.

The resolution works as a policy statement from the city governing the rents of current tenants, Vice Mayor Kerry Donley said. Virginia does not allow rent control and he doesn’t think it ever will.

The rent increase guidelines are largely followed by landlords in the city, officials said. The resolution has been annually revised for about 30 years.

“It is an historic practice in this city,” Donley said. “We actually reduced them a bit this year. It was 5.5 percent and 7.5 percent, respectively, last year and we brought them down a bit this year in hopes Alexandria will remain affordable for existing renters.”

The guidelines don’t cover units coming on the market or units being built.

Donley said the city is seeing a “very vibrant” rental market. Councilman Frank Fannon said about half the city is made up of renters.

“These guidelines offer some hope that existing tenants don’t receive tremendous increases,” Donley said.

Melodie Seau, division chief with the city’s Office of Housing, said her office received just 14 complaints in fiscal year 2012 of rent increases exceeding the guidelines. Seau said the city received more than 30 complaints the year prior.

The new guidelines will be sent to 102 landlords in the city who own medium- to large-sized apartments, Seau said.

 

Source: West End Alexandria Patch

Apparently, Rent Control Schemes Do Not Have to be Rational or Applied Fairly!

 

City of Hoboken prevails in aspect of litigation related to rent control

Oct 04, 2012

HOBOKEN —A Superior Court Judge ruled Thursday morning that the city of Hoboken has prevailed in part of a class action lawsuit regarding rent control, according to a press release from Hoboken City Hall.

The suit was filed against the city by a property owner, on behalf of property owners in town. The suit says the city enforced rent control laws inconsistently for almost 25 years, but then, in 2006, the city changed the laws and began enforcing them in a way that property owners could not comply with. The landlords hoped to recoup damages that they say were caused by the inconsistent enforcement, and also asked for the court to rule that the city has broken state law.

While the suit is not totally resolved, as a result of Thursday’s ruling the city will not have to pay all of the legal fees in the suit, which could have totaled more than $1 million.

The release did not specify what the next step is for the suit in general.

The city was represented by Victor A. Afanador and Marissa L. Quigley of Lite DePalma Greenberg, LLC.

Mayor Dawn Zimmer said, “It is unfortunate that so many lawsuits are filed against the City regardless of their lack of merit, but the positive results in these litigations are an important demonstration of the necessity of ensuring that the city receives the best possible legal representation.”

Source: HudsonReporter.com

Portugal scraps rent controls, alarms low-earners

Portugal scraps rent controls, alarms low-earners

By Barry Hatton on October 02, 2012

LISBON, Portugal (AP) — The peaceful retirement of Teresa Dourado is about to be shattered.

The 77-year-old widow raised two children with her husband in their fourth-floor apartment behind Lisbon’s Campo Pequeno bull-ring. It has been the family home since 1966. Living alone there now among black-and-white photographs of her children and with her husband’s framed paintings, she pays a controlled rent of €100 ($128) a month. That just about allows her to get by on her monthly pension of €414.

But Portugal is scrapping its long-standing rent controls in one of the government’s most radical economic and social reforms since the ailing country needed a €78 billion bailout last year, when it was engulfed by Europe’s financial crisis. Critics say the anticipated rent hikes from next month could price thousands of families out of their homes. At the very least, the change — aimed at boosting and modernizing the economy — will add to the financial burden on those struggling to cope with pay cuts and tax hikes designed to ease the country’s crippling debt load.

“I’m already having trouble paying €100,” says Dourado. “I don’t want charity. I’ve worked all my life. I shouldn’t have to beg for anything.”

The new rent law casts aside protections that date from the early 1900s, and are seen as one of the reasons for Portugal’s economic decay. It’s all part of a plan to jettison a way of life that has been handcuffed to the past, holding back the dynamism needed to put the nation on the path of growth. The measure, long delayed due to its political toxicity, also illustrates how Europe’s financial crisis is snatching away old certainties and expectations — in this case, over something as basic as having a roof over your head.

The change in rent laws was one of the steps demanded in return for the financial lifeline provided by foreign lenders. They identified rent controls as one of the handicaps keeping Portugal mired in stagnation. Similarly, their insistence on labor reforms is taking away long-standing entitlements, such as jobs for life, which choked development, consigning Portugal to low growth and mounting debt. These are precisely the kinds of measures that have triggered massive protests across Europe in recent years, raising questions about the viability of the European project.

The goal of the new law is to free up rental accommodation, making it easier for workers to seek jobs around the country. It also aims to help people avoid racking up mortgage debt; put prime real estate to more productive uses; encourage owners to renovate buildings that are crumbling because they don’t earn enough rent money; and provide work for hard-up construction companies.

Rent controls have long enabled those on a low income to live cheaply in one of western Europe’s poorest countries. The minimum salary, earned by more than 600,000 workers, is €485 ($624) a month before tax. The average salary is around €800 ($1,030). That compares with the U.S. minimum wage of $1,317 a month and an average monthly wage of $3,500.

Portugal’s rent controls aren’t unique in Europe. Germany and the Netherlands, for example, also place some modest limits on rent increases. But their laws are nowhere near as old, comprehensive and rigid as in Portugal, where lifelong contracts with minimal, inflation-linked rent hikes have been handed down through generations.

The government says the new law contains safeguards for low earners. Increases in the rents paid by people like Dourado will be limited to between 10-25 percent over the next five years before full liberalization.

Even so, the scale of the threat to many residents is huge. Last year’s national census showed about 250,000 families are in houses with old contracts, which will now come up for price review. That’s about 1 million people — or almost 10 percent of the population.

Romao Lavadinho, president of the Lisbon Tenants’ Association, has held dozens of public meetings to explain the new law to worried tenants. In one, hundreds of people packed into Lisbon’s Sao Jorge cinema on the capital’s main avenue.

“People are in a terrible state of anxiety,” said Lavadinho, whose association has around 20,000 paying members. It’s not just low earners who are nervous, he says — lawyers, teachers and architects are among those turning up at meetings.

The rent reform hits as Portuguese struggle with other woes.

The cost of living has climbed, even as incomes have fallen sharply due to the country’s austerity drive. The sales tax on gas and electricity, for instance, has jumped to 23 percent from 6 percent, leaving people short for other expenses.

A wholesale reassessment of property values by the tax authorities will establish by how much landlords can begin to charge their tenants. Lavadinho notes that step will also hurt the middle class. In apartment blocks along Lisbon’s main avenues, he reckons, rents could jump from €200-300 a month to €1,000.

The main thrust of the new law is to unfreeze pre-1990 rental contracts. Those contracts still come under a 1910 law that, in the turmoil following the end of the Portuguese monarchy and the establishment of a Republic, sought to contain inflation. It stipulated that the initial rent could be increased only by a government-decreed annual rate, usually just a few percent.

Mindful that there are more tenants than landlords, and eyeing their electoral prospects, governments have long shied away from changing the law to any meaningful extent. The result: 150,000 households currently pay less than €50 in monthly rent, some of them in prime real estate areas, according to census data.

That is also a key to the mystery of downtown Lisbon’s shabby charm. It’s a western European capital trapped in 100-year-old laws that deny landlords the income to refurbish decaying buildings. Portugal’s National Statistics Institute, in a report last year, bluntly stated the consequences: “Lisbon can be used as a textbook case on how to destroy a city without bombing it,” it said.

Luis Menezes Leitao, president of the Lisbon Property Owners’ Association, a national body with some 10,000 members, notes that foreigners find the old law hard to believe. Some people in central Lisbon, he says, pay as little as €5 a month in rent.

“This had to be done sooner or later,” Menezes Leitao said of the legal changes. “Economically speaking, it’s unsustainable.”

Examples of what he calls “a gigantic distortion of the market” are not hard to find.

Susana Paiva’s family owns a building on Lisbon’s central Rossio square which is partly occupied by a hotel. The building’s estimated real estate value is €4.5 million, which at market prices should bring in about €30,000 a month in rent. But the 34-room hotel, whose room prices start at around €150 and rise to almost double that, pays her just €633 a month. The rental contract dates from 1919.

Paiva has one word to describe that: “ridiculous.”

She says the old-fashioned mom-and-pop stores which still abound in the area around her building are surviving only because they pay a handful of euros in rent per month. In effect, landlords are subsidizing businesses, she says.

“Low rents for businesses are pernicious in the 21st century,” Paiva said. “It means that the people running them don’t need to modernize, find new markets, become more competitive.”

By contrast, the Lisbon Commercial Association, which represents the capital’s shopkeepers, predicts the new law will bring “dramatic consequences” as stores, suddenly at the mercy of market forces, shut down and add to the country’s record unemployment rate of 15.9 percent.

Elsewhere in the center of town, a seven-story apartment building owned by Jose Gago da Graca’s family offers another bizarre example.

The tenant in apartment 2E pays €196 a month rent for a three-bedroom apartment. The occupant of 2D, across the hall, pays €1,600 a month for an identical second-floor flat.

That’s because the elderly widow in 2E has been there since 1962 and her faded blue rental contract guarantees her tenancy in perpetuity, with controls on the initial rent which was the equivalent of €14. Her neighbor, who recently moved in when the previous occupant moved out, pays the market price.

“It’s an absurd situation,” Gago da Graca said. “This is a prime, sought-after area.”

For Dourado, the elderly widow, times are hard and will likely get harder.

She vows to keep fighting the center-right government’s policies, joining street demonstrations that have become almost a weekly event.

“They’re not getting me out of here,” she says of her home, and adds a dark threat: “If I have to go I’ll go through the window, not the door.”

 

Source: Businessweek

Can You Really Claim Two Rent Controlled Apartments?

In an item that belongs in the “Only in New York” column, the NY Post reports that a caretaker is laying claim to a deceased couple’s $291 per month, three bedroom, rent controlled apartment even though the caretaker resides in a $747 per month rent controlled studio in Gramercy Park.

You can’t blame the caretaker for trying to improve her situation – after all, if she is successful, she could legally rent out extra bedrooms for a tidy profit—but you would think her chances of success were slim. However, the City’s courts have ruled, in certain circumstances, that rent stabilized tenants may lay claim to more than one apartment so, you never know. This is New York City, after all.

                                                    – 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 fights for $291-a-month rent-controlled pad

By LORENA MONGELLI and JENNIFER GOULD KEIL

An East Village woman claims she can take over a $291-per-month rent-controlled three-bedroom apartment because she tended to its two elderly inhabitants for four years — even though she’s not related to them.

Now the landlord is trying to boot her.

Margaret Hearn, 48, began living at 345 E. 12th St. in 2008, when she became a full-time caretaker for sisters Margaret and Josephine Ruta, whom she met at church.

Josephine died in March. Margaret died last year.

When Hearn returned from Josephine’s funeral, the apartment was padlocked. Her brother cut the lock, and she has moved in.

Margaret Hearn

Margaret Hearn

“I was emotional. I had just been to a funeral, and I felt I was losing it, and this happened,” Hearn said, adding the landlord “wants to remodel the apartment and charge more.”

Similar pads in the building go for $4,400 in rent.

Hearn — who also keeps a rent-controlled $747-a-month studio in Gramercy Park — says the landlord, 339-347 East 12th Street Investor LLC, filed to evict her in May 2012.

Phillip Wartell, a lawyer for the landlord, did not return calls.

 

Source: New York Post

City of Hoboken files complaint about confusing wording on rent control ballot question for November

Sep 10, 2012

HOBOKEN — In November, Hoboken voters will decide on whether to remove rent control from certain buildings once a tenant moves out. The measure is supported by a property owners’ group but opposed by tenant activists. Tenant activists have said the language of the ballot initiative is confusing.

Apparently, the city of Hoboken agrees.

An order to show cause, verified complaint and brief were filed Monday on behalf of the city clerk in relation to the question, according to a city press release.

According to the release, the city believes that the current proposed wording is misleading to voters, and the only way to fully protect their rights is to have the ballot question worded in a clearer manner. The city submitted a version of the question that they think is clearer, although it’s not shorter.

If the court denies the motion to revise the public question, the city has requested the approval of an accompanying interpretive statement alongside the original question. The city also requests that ballots not be printed until the matter is decided by the court.

“Regardless of which side people take on the question of rent control, voters deserve a clear understanding of the issue on which they are being asked to vote,” said Mayor Dawn Zimmer.

Source: Hudson Reporter

Attempts to Re-Establish Rent Controls In Boston Never Died

Rents North of Boston Up 9 Percent in 5 Years; Rent Control Needed?

By John List, Esq. on August 31, 2012 3:08 PM

If there’s one thing that a recession does, especially when there is a housing crisis, it’s to increase rent. In the communities north of Boston, rents increased by 8.9% to an average of $1,427, while vacancy rates dropped from 7.8% to 4% in the same amount of time, according to the Boston Globe.

These factors have led to a shortage of housing for low- to moderate-income renters, reports the Globe. If this trend continues, should Boston or other locales reconsider rent control or rent stabilization?

Rent control is a law or regulation that controls the amount of rent that can be chargedand limits how much rent can increase over time. Some states specifically forbid rent control, while others allow municipalities to enact rent control laws at their option.

In 2003 and 2004, the Boston City Council considered a rent control law. The proposed Rent Stabilization legislation would have applied to all buildings with four or more units, as well as non-owner-occupied three-unit dwellings. The main goal was to limit the times when rent could be increased and the amount that it could be increased.

But the legislation fell through, and so Boston is still without any rent control laws. However, it is unlikely that the law would have kept rent from rising less than it did over the past five years. The law would have allowed for a maximum 5% increase per year for low- to moderate-income, elderly and disabled tenants, and a maximum rent increase of 10% per year for everyone else.

While rent control laws are meant to help people keep lower rents, from this recent report it does not seem like there has been any abuse of renters, at least in the communities north of Boston. Perhaps rent control will come up again in the future if evidence of massive abuse comes to light.

 

Source: Boston Real Estate Law News

Third Attempt by Tenant Advocates to Reinstate Rent Controls In Bayonne, NJ

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Bayonne rent control petition is one step closer to being on November ballot

 

Published: Thursday, August 09, 2012, 4:48 PM
By Rafal Rogoza / The Jersey Journal 
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(Rafal Rogoza/Jersey Journal ) Keep Bayonne Rent Control volunteers collecting signatures outside the Avenue C ShopRite in Bayonne.

The petition, which proposes an ordinance entitled “Keep Rent Control Ordinance,” has met the statutory requirement of a minimum of 563 valid registered voter signatures and was cleared yesterday for introduction to the city council, said Bayonne City Clerk Robert F. Sloan.

 

The petition is an effort to overturn an ordinance passed by the city in November 2011 allowing landlords to remove an apartment from rent control restrictions if the tenant willingly moves or is legally evicted. Prior to the change, the apartment would remain under rent control guidelines forever.
Douglas Wasama, chairman of Keep Bayonne Rent Control, a local rent control advocacy group, said if the petition initiative is successful it would remove any changes that the city council made in November.

 

“The purpose of this act is to establish a method to protect tenants in rent controlled apartments,” reads the proposed ordinance’s declaration of purpose, “which is deemed necessary and proper for the good government of the municipality.”

 

Officials at the Office of the City Clerk have verified 713 valid petition signatures out of the 911 that were submitted on July 25 by Keep Bayonne Rent Control.