Tag: rent control

Developers Halt Projects, Mayor Demands Reform After St. Paul Voters Approve Radical Rent Control Ballot Initiative

Posted on by Lone Candle

“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.”

Seattle City Council Passes Rent Control by Another Name. Is It Legal?

Posted on by Lone Candle

“The Seattle City Council might have found a clever way around Washington state’s ban on local rent control policies. On Monday, it passed two bills that respectively require landlords to give generous notice to their tenants of any rent increases and to provide relocation expenses to low-income renters who do move in response to large rent hikes.
Current city and state law require landlords to give their tenants 60 days’ notice of any rent increase. One bill passed by the council would increase that notification period to 180 days, likely the longest notification period in the country.

And if a low-income tenant decides to move in response to a rent increase of 10 percent or more, landlords will be obligated to provide them with “economic dislocation relocation assistance” equal to three months’ rent, thanks to another bill passed by the council on Monday.

Both are the handiwork of Councilmember Kshama Sawant, a member of the Socialist Alternative party, who argues the twin bills are needed to protect tenants from a post-pandemic upswing in rents—and from capitalism more generally.

“Today’s victories will benefit tens of thousands of renters in Seattle, who are facing skyrocketing rent increases from profit-hungry corporate landlords and the venture capitalists and big banks who are [fueling] a speculative bubble,” said Sawant after the bills passed.

Landlords were less pleased with the bills’ passage, arguing during public comment that they’d raise their costs of doing business and are, per the Seattle Times, tantamount to rent control.

That latter charge could open up the new bills to legal challenges.

Washington state law preempts municipal governments from enacting laws “which regulate the amount of rent to be charged” and instead reserves that power under the state government.”