Rent Control And The Housing Crisis
Rent Control And The Housing Crisis
Last year, Fortune Magazine reported that there were more than 7,700 people living in shelters or on the streets of San Francisco while there are more than 60,000 vacant apartment units in San Francisco. The people voted for an Empty Homes Tax that went into effect on January 1, 2024, but the tax rate is a rounding error for a corporation waiting for the opportunity to sell the property - $3500 for an empty place 1,000 to 2,000 square feet.
Building more units doesn’t address this kind of malicious opportunism. Litigation might, though – the Department of Justice has filed suit against a real estate software outfit named RealPage, saying its software enabled landlords to collude to raise rents across the United States.
That’s collude, as in collusion, price-fixing, gouging, at the expense of millions of families across the country.
Robert Reich writes “If the present trend continues, by 2030, Wall Street investors may control 40% of U.S. single-family rental homes. Democrats have introduced a bill in both houses of Congress to ban hedge funds and private equity firms from buying or owning single-family homes. If signed into law, this could increase the supply of homes available to individual buyers — thereby making housing more affordable.” The bill has a snowball’s chance in hell.
Which brings us to rent control.
Contrary to conservative talking points, the purpose of rent control is not to put a greater number of affordable rental units into the market. The purpose of rent control is to cap rent increases. Rent control is intended to prevent people from being forced to move out of their homes due to rising housing prices. However, it doesn't make housing more affordable, it just slows the rate at which it becomes less affordable.
That means that the rent won’t go down, but your wages might increase.
And then again, they might not. In 2017, middle-wage jobs represented roughly one-fifth of all jobs in Washington, New York and the Bay Area, making their shares of middle-wage jobs smallest among the large metro areas. According to Vital Signs,an increasingly high median wage for the Bay Area has resulted in traditionally middle-wage occupations like medical assistants and office clerks being classified as low-wage. As a result, the Bay Area's share of low-wage workers is nearly 40 percent, the highest of any of its peer metro areas.
The living wage for a family of four in Marin County, California, according to a Marin County study, is $102,223. This is the amount needed to afford the basics of family life, such as housing, child care, food, transportation, healthcare, taxes, and some miscellaneous spending.
What if you’re a single person? If you want to rent a studio in Marin County, the 2017 fair market rent was $1,915 per month, and you would have needed to earn $38 an hour, and work a 40-hour week. A two-bedroom unit, with a rent of $3,018/month, would require you to make $60/hour. That was 2017. Right now, per Zillow, there are 29 studio apartments for rent in Marin County. They range from $3,600/month to $1,600/month, from 560 square feet to 245 square feet.
Today, the average waiter’s wage in California is $14.13 per hour. In San Rafael, California it’s $20.98/hour.
According to Zip Recruiter the average annual pay, all occupations, in San Rafael as of Sep 22, 2024, is $55,866.
So, if you want to rent a $2,000/month studio apartment, and you have $55,866 annual income, your annual rent is $24,000, which is around 43% of your income. Not the 30% of your pre-tax income used by many as a reasonable guideline for housing costs.
This means that if you are in Marin and you want to have a waiter, or a dishwasher, or a bartender, or a bank teller, or dental assistant, and the rent keeps rising, you will have to do without those service workers. Sorry. They can’t afford to go from where they live to Marin to work for you.
So, all over the country, we have more people needing housing, corporate investors sitting on empty housing, buying up empty housing, and jacking up the prices, flabby laws to regulate them, and finite, overdrafted resources like water, roads, public services, etc. to service increased housing.
So once again, we look at rent control.
New York City has both rent control and rent stabilization, which are forms of rent regulation that limit how much landlords can charge for rent and protect tenants' rights. Rent control applies to apartments built before 1947 where a tenant or family member has lived since July 1, 1971. Rent control is administered using the Maximum Base Rent system, which adjusts the maximum base rent for each apartment every two years. Tenants can challenge rent increases if they believe the owner's expenses don't justify it or if the building has violations. Show the court your expenses, Mr. Trump.*
There is also the NYC Rent Freeze Program, which may be available to people who are 62 or older or have a disability and earn $50,000 or less.
Some California cities have local rent control laws that limit rent increases. In San Francisco, the maximum rent increase is 60% of the local Consumer Price Index. As there are (see first paragraph once again of this piece) more than 7,700 people living in shelters or on the streets of San Francisco while there more than 60,000 vacant apartment units in San Francisco and an Empty Homes Tax that went into effect on January 1, 2024, and the tax rate is a rounding error for a corporation waiting for the opportunity to sell the property - $3500 for an empty place 1,000 to 2,000 square feet – this rent control law is like unto a flaccid phallus.
Los Angeles has rent control rules, currently changing. Per their website, “Annual rent increases are prohibited for rental units subject to the City's Rent Stabilization Ordinance (RSO) from March 2020 through January 31, 2024. Annual rent increases for rental units subject to the City of Los Angeles Rent Stabilization Ordinance (RSO), effective July 1, 2024, through June 30, 2025, is 4%. If the landlord provides gas and electric service to the tenant, an additional 1% can be added. State law requires landlords to provide an advance 30-day written notice for rent increases of less than 10%.”
So if your rent is $3800/month, with the 4% increase and some surcharges, you’ll be paying about $3950/month. That’s an annual rent increase of $1,800.
Fairfax, a town in Marin County, has a rent control ordinance passed by the town council in 2022. It is, how you say, hotly contested.
The Fairfax ordinance has a maximum allowable rent increase, which will be 2.85%, calculated using the April, 2024 CPI. That’s not the item that hits the wasp nest. It is that the town council did not put the question to the voters in the form of a ballot measure. Instead, the council passed a measure that was guaranteed to frighten and infuriate every home owner in town who might consider renting some or all of their house. The ordinance is compound and complex, requires a minimum hour to read in all its parts, and needs a good mind for legal language and inference. Property owners have complained on social media that under the ordinance, they are obligated to register their rental property with the town, that dispute resolution with a tenant requires them to travel to Berkeley to present their case before a hearing board, that the ordinance so favors tenants that they fear that once they rent a space, they will never get the tenant out, and that the time, effort and cost to property owners vastly outweighs the time, effort, and cost to tenants under the ordinance.
It doesn’t matter if those fears are legitimate; they show that the town council erred in creating this attempt at solving a serious problem. This is not good politics, nor good government. This is also why repeal of the Fairfax rent control ordinance is on the November ballot.
Rent control has to hit the right targets. If the issue is corporate property owners that gouge, that’s not going to be accomplished by bombing individual home owners. If the issue is all property owners are raising rents to the gouging level, then all property owners need to be included in a process of ordinance-writing that addresses their concerns as well as those of the tenants. Democracy is messy. The country needs rent control, California needs rent control, cities and towns need rent control. Democracy often means back to the drawing board, let’s try this again.
One item of note, and not much discussed at present: Under Definitions, the Fairfax ordinance reads:
“(4) Rental units exempt pursuant to the Costa-Hawkins Rental Housing Act (Cal. Civil Code §§ 1954.50 through 1954.535). ..”
So, the Costa-Hawkins Rental Housing Act prohibits rent control on single-family homes and houses completed after February 1, 1995. The act also prohibits rent control laws that mandate what a landlord can charge a tenant when they first move in.
The country needs rent control, California needs rent control, cities and towns need rent control.
As of 2023, seven states and D.C. have enacted rent control policies at the state or local level. Thirty-one (31) states have enacted laws preempting local governments from adopting rent control policies. In 12 states, no cities have rent control but rent control was not preempted. To see a map of where local rent control is allowed or preempted, click here.[5]
California has a statewide rent control law, the California Tenant Protection Act of 2019, which limits rent increases and provides eviction protections for most residential tenants. But it doesn’t apply to family homes and condominia and properties built within the last 15 years. California also has the Costa-Hawkins Rental Housing Act, passed in 1995 because landlords and California real estate organizations lobbied strongly against cities’ rent control laws. Costa-Hawkins limits the ability of cities and counties to enact rent control ordinances. It allows landlords to reset rental rates
on rent-controlled units when they become vacant or when the last tenant no longer lives there. This policy is known as vacancy decontrol. And it prohibits "vacancy control,” a type of rent control that limits or prevents landlords from increasing rent when a unit becomes vacant.
A new ballot measure, the Justice For Renters Act, is on the November 2024 ballot. This measure would overturn Costa-Hawkins and allow cities to put new restrictions on how much landlords can raise rent.
If rent control can not bring rents down, can anything bring rents down? Sure. Devastating floods, wildfires, wars, decades of economic depression, decaying property values, all can lower rents. Can any orderly, fair, and just process lower rents?
Boy, I’d love to find out.
12/2/2020
Tenants of various rent-controlled apartment buildings in New York have filed a lawsuit against President Trump and his siblings in the State Supreme Court in Brooklyn, claiming they are the victims of a longtime rent scheme run by their father Fred Trump, The New York Times reports.
The scheme, uncovered by The New York Times in 2018, reportedly involved tacking at least 20 percent onto the cost of building materials or appliances for buildings owned by Fred Trump, with the family then splitting the resulting profit. The family would allegedly then record the false number on an invoice, which they would submit as part of their rent increase application, according to the report.
The scheme then affected tenants, as New York law allows landlords to raise rents in rent-controlled apartments if major upkeep is done to the home. The price difference between what the Trump family paid for the materials and what they claimed they paid therefore ended up costing tenants, the Times wrote.
The new lawsuit involves over 14,000 units spread across 30 apartment complexes belonging to Fred Trump between 1992 to 2004. The plaintiffs are seeking the extra rent paid, plus interest and triple damages, for former and current tenants alike, as the rent current tenants pay is a direct result of rent increases made during the Trump’s time, according to the Times.