“52 percent of voters approved Question 1, an ordinance that puts a hard annual 3 percent cap on rent increases. It makes no allowances for inflation or exemptions for vacant apartments and new construction that are typical in other rent control policies.
The new ordinance doesn’t go into effect until May 2022. Nevertheless, several real estate companies with large projects in the works have already announced that they’re pulling their permit applications.”
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“In response to the developer freakout, freshly reelected Mayor Melvin Carter’s administration sent an email to the St. Paul City Council on Monday saying that while he supported “rent stabilization” as one necessary tool to make housing affordable, the new ordinance passed by voters could use some work.
“Allowing a reasonable return on investment is why virtually every other rent control ordinance in effect today exempts new construction,” reads the email. “The Mayor requests you consider an amendment to exempt new housing construction, which he will sign once it reaches his desk.”
That would make St. Paul’s new rent control policy more similar to those that exist in other states around the country.
Both California and Oregon, which passed statewide rent control ordinances in 2019, exempt buildings that are less than 15 years old from their price caps. New York’s long-standing rent stabilization law mostly applies to apartments built before 1974 or to newer units that received certain tax benefits.”
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“Some economists have argued that even with exemptions for new construction, rent control policies still suppress the value of new buildings and thus deter some amount of new construction.”
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“The 3 percent cap on annual rent increases is itself pretty strict. California and Oregon permit annual rent increases of 5 and 7 percent respectively. Allowable increases at rent-stabilized apartments in New York are typically much lower, and are often in the 1 to 2 percent range.
Both California and Oregon also allow landlords to factor inflation into rent increases. St. Paul’s ordinance makes no allowance for inflation, meaning that if prices rise more than 3 percent, landlords will effectively be required to lower the real rents that they charge. St. Paul’s ordinance also does not allow landlords to raise rents beyond that 3 percent cap for vacant units.
All of this could well encourage landlords to just get out of the rental market altogether and sell their properties to owner-occupiers. Rising home values in St. Paul, where prices have increased 12 percent in the last year, only make this option more attractive for landlords.
This is what happened in San Francisco where an expansion of preexisting rent controls led to a 15 percent reduction in the supply of rental housing, according to one 2018 study. That study found that incumbent tenants benefited handsomely from the limits on rent increases but that their windfall came “at the great expense of welfare losses from future inhabitants.”
Even if the city’s new ordinance is amended to exempt new construction, St. Paul renters, current and future, can expect a similar result.”
“More than 580,000 Americans are homeless. The median sale price for a home has just surpassed $400,000. Homeownership is on the decline.
This, by all accounts, is a national emergency — and one House Democrats had proposed $330 billion to tackle as part of their Build Back Better plan. This package was both a once-in-a-generation investment and also barely enough to scratch the surface. Now, even those proposed investments are being cut down as part of negotiations over the final package.”
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“some in Congress were willing to make substantial investments, very few were willing to tackle the fundamental problem that was making homes so expensive in the first place: lack of supply.
Yes, it’s easier to try to help people afford something expensive than to try and make it less expensive to begin with. But many of the policies that try to subsidize housing can actually make it more expensive. “What you really need if you want to lower those new home prices, is you need to build more homes — and there’s not that much of that in this bill,” says Paul Williams, a fellow at the Jain Family Institute.”
“The idea behind these vacancy taxes is two-fold. First, the financial penalty would incentivize the owners of empty homes—supposedly real estate speculators holding out for higher rents—to put their properties on the market. Second, the revenue from the tax could then be spent on affordable housing programs.”
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“Yet a new report published on vacant properties in San Diego—one of the cities that is now considering a vacancy tax—suggests that any levy on empty units would do little to raise revenue or boost housing supply.
That report, published by the city’s Housing Commission (SDHC), used utility records to determine how many units in the city were left vacant for six months or more. (The study considered a unit unoccupied if its utility usage fell three standard deviations below a 60-month average.)
The SDHC obtained gas and electric records for 468,352 individual units from 2014 to 2019. During those five years, between 1,500 and 3,700 units were vacant for six months or more, giving the city a long-term vacancy rate of between .32 percent and .79 percent.
When examining water records, the SDHC study found 2,183 out of 252,324 units were potentially vacant for six months or more—a vacancy rate of .85 percent.
Contrary to what some politicians think, there isn’t a mass of hoarded homes that would be pushed onto the market by a vacancy tax.”
“Tenants in newly seized units obviously benefit from the lower rents that would come from government ownership. Everyone else would be worse off, as they’d be forced to compete for a smaller share of private units.
This is in effect what happened with Berlin’s brief experiment with a law that froze rents at apartments built before 2014. Rents did indeed stop rising in regulated units, benefiting the tenants who lived in them. But prices shot up dramatically for unregulated units. (In April 2021 Germany’s constitutional court struck down Berlin’s rent control.)
The number of regulated units on the rental market also collapsed, while new listings for unregulated units weren’t enough to pick up the slack.
The rent control represented “a windfall to one group of tenants: those, whether rich or poor, who are already ensconced in regulated apartments,” wrote Bloomberg columnist Andreas Kluth in March. “Simultaneously, they hurt all other groups—especially young people and those coming from other cities—by all but shutting them out of the market.”
There is robust evidence that new housing, even expensive new housing, makes cities more affordable for everyone. Berlin’s leaders should consider ways to boost housing production so the city can continue to grow and thrive, instead of just redistributing existing units to benefit a minority of incumbent renters.”
“With a stroke of his pen, Gov. Gavin Newsom has officially ended the over 100-year scourge of single-family-only zoning in California.
Single-family-only zoning laws make it illegal to build anything but a single-family home on a particular lot of land. Now (with small exceptions like for fire-prone areas) it is also legal to build duplexes.”
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“While overhauling single-family-only zoning might sound revolutionary, the bills are gentle attempts at increasing density: legalizing duplexes and quadplexes and making it easier to build small apartment buildings that provide up to 10 homes. This doesn’t mean single-family homes are outlawed or can no longer be built, but it provides homeowners the option to convert their homes into duplexes or sell their homes to people who want to do so. Before now, it was illegal for someone to convert their home to a duplex on a lot zoned for single-family zoning. Not anymore.
This isn’t a panacea for housing production. UC Berkeley’s Terner Center for Housing Innovation found that SB 9 (the bill that legalizes duplexes) will “modestly accelerate the addition of new units relative to the status quo.” Other laws that restrict the building of new and more affordable homes are still in effect — in particular, local laws around minimum lot sizes will continue to make it illegal to turn single-family homes into duplexes if the existing lot is too small to subdivide while still adhering to the size regulations.
However, the Terner Center finds that “approximately 700,000 new, market-feasible homes would be enabled under SB 9.” That’s a lot! But because many people won’t want to sell their homes or subdivide them themselves, “only a share of that potential is likely to be developed, particularly in the near term. … As such, while important, the new units unlocked by SB 9 would represent a fraction of the overall supply needed to fully address the state’s housing shortage.””
“A housing shortage in cities across the country is costing people more than just money. Unable to find affordable housing closer to the office, an increasing share of Americans are spending extraordinary amounts of time getting to and from work.
The number of “super commuters”—people who spend more than 90 minutes commuting one way—has grown by 45 percent, or three times the rate of the overall workforce, according to a new report from rental website Apartment List.”
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“”I think of this as primarily a symptom of excessive housing costs and lack of supply close to the urban core in the nation’s most expensive markets,” says Chris Salviati, an economist with Apartment List and co-author of the study. “These are places that have been rapidly adding jobs, but not adding new housing to meet that demand.”
That’s true of the ultra-expensive New York City region, which tops the nation both in the number of super commuters and in the percentage of the workforce that super commutes. Some 762,000 people there spend over 90 minutes getting to work, or about 7.2 percent of all workers.
Not far behind is the San Francisco Bay–San Jose region, where 269,000 people (6 percent of the workforce) super commute. That represents a staggering 255 percent increase in the number of super commuters from 2010.
Both have added a lot more jobs and workers than housing over the past decade.”
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“The Apartment List study suggests more transit spending and expanding transit service as a means of improving commute times for riders. Constructing new highway capacity in growing areas with lots of motorists would be another way to speed up travel times, says Feigenbaum.
Congestion pricing, whereby motorists are charged a variable fee to use highway lanes or enter a city’s downtown, could also help reduce travel times for both drivers and bus transit riders.”
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“For every super commuter, there are likely many more people who are either choosing to spend more on housing to be closer to a particular job or who are forgoing better employment opportunities altogether because of the excessive travel times involved.
Both outcomes make people poorer, even if they aren’t spending three hours in traffic.”
“The last two COVID relief bills passed by Congress in December 2020 and March 2021 collectively appropriated $46 billion to cover the massive amount of unpaid rent that tenants have accumulated during the pandemic.
By the end of January 2021, the federal government had released close to $25 billion of that money—including about $1.2 billion to New York state’s ERAP. Subsequent federal grants and state money would fund the program to the tune of $2.7 billion, according to City Limits.
And yet by the end of June, New York had, per U.S. Treasury Department data, managed to spend $0 of its rent relief funds. A month later only $1.2 million had gone out the door.
A major reason for the slow dispersal of funds is that the state’s Office of Temporary and Disability Assistance (OTDA)—which is responsible for administering the program—took until June 2021 to start accepting applications. When it did get an online application portal up and running, tenants and landlords were met with crashing websites, and requests for documents they didn’t have.
Applications would take hours to complete, yet the online web portal lacked a feature allowing people to save their progress and try again later. People who called into a hotline to report problems said that staff often had no answers for them.”
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“most state governments have done a pretty poor job of getting their rent relief programs off the ground. (The speed at which places like Virginia and Texas have managed to disperse funds shows that success wasn’t impossible.)
Nevertheless, New York has earned the distinction of being the slowest. As of Monday, the state has spent $100 million on rent relief, or about 4 percent of total ERAP funds.”
“Too many tenants across the country are living in apartments with unpaid rent piling up, and landlords are facing their second straight year unable to evict people who don’t pay them. The stakes are enormous: a recent study by professors at UCLA and USC estimate that tenants owe $3 billion in back rent in Los Angeles County alone. A recent survey from the Urban Institute noted that a total of 28 percent of landlords have deferred maintenance during the pandemic, the majority citing financial reasons for doing so. Further, 27 percent of tenants reported their maintenance requests were being ignored completely.
In theory, Washington has allocated billions of dollars for rent support for both tenants and the landlords hurt by the moratorium. But in practice that money isn’t going where it needs to go. As of the end of June, only 12 percent of the originally approved $25 billion in rental assistance had reached tenants in need. Still, even if all of the dollars allocated for rental assistance were currently in the hands of renters in need, it still won’t be enough. As Urban Institute researchers concluded that $50 billion is the minimum needed and a CityLab report suggests that it could be over $70 billion.”
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“The cleanest solution would be a government-financed loan program that would benefit both tenants and landlords. It needs to be federal. At this point, only Washington has the scale and scope to head off a crisis whose costs have the potential to tick into the tens of billions with far-reaching, long-term impacts on renters. It needs to provide landlords an immediate guarantee of the recovery of a substantial portion of back rent so that the rental market will restabilize. And a loan program, rather than additional rental assistance to tenants or landlords, solves several of the underlying issues: Tenants do owe back rent, and to pretend otherwise could invite moral hazard on a huge scale. It’s politically more viable, in part, because directly footing a future bill that remains unknown would leave American taxpayers with additional Covid debt beyond the direct costs of the pandemic.”
The Color of Law Richard Rothstein. Liveright Publishing Corporation. 2017. The New Deal Didn’t Create Segregation Richard Walker. 6 18 2019. Jacobin. https://jacobinmag.com/2019/06/the-color-of-law-richard-rothstein-review Dr. Florence Maätita – I.D.E.A. Book Club – The Color of Law by Richard Rothstein Dr. Florence Maätita. 2021