Leasing

$171 Million Funding Allocated for RAFT and HomeBase Rental Assistance, Legal Services, Mediation and Tenant Outreach

Governor Baker officially announced today that he will not extend the Massachusetts Eviction Moratorium, allowing the Housing Courts to start hearing eviction cases beginning on October 19. With this announcement came a major new program, called the Eviction Diversion Initiative, put together by the Baker administration, court leaders, and landlord/tenant groups. I don’t want to gloat too much here, but we have heard that our federal lawsuit challenging the Moratorium and our continued advocacy for housing providers played no small role in this decision.

New Funding For RAFT, HomeBase, Other Programs

The Baker Administration is making a $171 million total commitment this fiscal year, with $112 million of new funding to support new and expanded housing stability programs during the remainder of the fiscal year, including: 

  • $100 million commitment this fiscal year to expand the capacity of the Residential Assistance for Families in Transition (RAFT) program to provide relief to renters and landlords impacted by COVID-19;
  • $48.7 million to HomeBASE and other rapid rehousing programs for when tenants are evicted and are at risk of homelessness;
  • $12.3 million to provide tenants and landlords with access to legal representation and related services prior to and during the eviction process, as well as community mediation to help tenants and landlords resolve cases outside of court;
  • $6.5 million for Housing Consumer Education Centers (HCECs), the “front door” for those facing a housing emergency; and
  • $3.8 million for the Tenancy Preservation Program (TPP), to provide case management support and to act as a neutral party to help tenants and landlords come to agreement.

New investments will expand the capacity of the RAFT program and increase the maximum benefit available through RAFT from $4,000 to $10,000 per household, with a goal of helping more families stabilize their housing for six months, or until the end of June if there are school-age children in the household, on their path to recovery.

The Administration is also updating the RAFT program to improve turnaround time on applications, while maintaining program integrity, by allowing landlords who own fewer than 20 units to apply directly for RAFT and ERMA, with consent from tenants.

New Housing Court Procedures

Last week, as I wrote about here, the Housing Court announced a slew of new procedural changes to handle cases post-Moratorium. Under the new rules, cases will be processed under a new two-Tiered system with older cases getting priority, an even stronger push towards mediation, and the vast majority of cases heard through Zoom video-conferencing.

I will be holding a free Zoom webinar on the new Housing Court rules with Jordana Greenman, Esq. on Thursday, October 15 at 12:30pm. Zoom link here: https://us02web.zoom.us/j/2622828798.

CDC Moratorium

When the state moratorium expires, a moratorium established by the Center for Disease Prevention and Control (CDC) will become effective through Dec. 31. The CDC moratorium will effectively prevent evictions for non-payment for qualified tenants who submit a written declaration to their landlord. Gov. Baker’s press release states that “courts will accept filings and process cases, and may enter judgments but will not issue an order of execution (the court order that allows a landlord to evict a tenant) until after the expiration of the CDC order (Dec. 31, 2020).” The new Housing Court rules address cases where the CDC Moratorium may apply.

The Baker administration has created a new FAQ for new Eviction Diversion Initiative here.

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Lengthy Extension of Eviction Moratorium Likely Unconstitutional; Calls for Adequate Rental Assistance Funding Go Unheeded

With Gov. Baker signaling he won’t extend the current Eviction Moratorium past Oct. 17, and Federal Judge Mark Wolf’s ruling that an extended moratorium would likely be unconstitutional, state legislators and tenant rights activists are frantically pushing an even more draconian 12+ month extension of the moratorium along with a rent freeze. The wide-ranging proposal branded as the “Housing Stability Act,” is on the fast track to passage, just clearing the Joint Committee on Housing. The new bill coming out of the Joint Committee is H. 5018, and is causing alarm within the real estate community, with the Mass. Association of Realtors and Greater Boston Real Estate Board coming out strongly in opposition to the bill.

12-36 Month Extension of Eviction Moratorium

The new bill would impose a new extended statewide moratorium on all “non-essential” evictions for at least 12 months after the Covid-19 State of Emergency is lifted by the Governor. This will cover 95% of all evictions, with the only exceptions being for serious criminal activity which threatens the safety of others. The State of Emergency, which is tied to federal disaster funding, will surely be in place until an effective Covid vaccine is available and infection levels are close to zero — which could be years away. Thus, the proposed eviction moratorium could be in place for the 18-36+ months or even longer, on top of the existing moratorium which has been in place since April. The new moratorium, unlike other states’ moratoriums, does not require a tenant to demonstrate a Covid-19 hardship.

The new eviction moratorium would be constitutionally suspect based on the 102-page ruling issued in late September by Federal Judge Mark Wolf considering housing providers’ challenge to the original Moratorium. (I am lead counsel in that case). Judge Wolf called into question the constitutionality of a moratorium which extended further past Oct. 17, ruling that: “A public health emergency does not give Governors and other public officials carte blanche to disregard the Constitution for as long as the medical problem persists.” If this new bill is enacted, rest assured it will face a swift and vigorous legal challenge.

Rental Increase Freeze

The bill imposes an across the board rent increase freeze for the next 12-36 months, regardless of whether a tenant is actually impacted by Covid-19. The bill prohibits housing providers from increasing rent payments in excess of the rental amount in place as of March 10, 2020. The rent freeze will be in place for 12 months after the Covid-19 State of Emergency is lifted. Thus, like the new eviction moratorium, the rent freeze could likely be in place for the next 12-36+ months. This will effectively stop landlords from agreeing to defer rent as an accommodation to financial hardship and enter into a payment plan that recovers the deferred rent through a new lease with a higher payment. This provision would also face legal challenge because it substantially impairs existing leases under the federal Contracts Clause.

Just Cause Eviction Protections

The bill also provides for “just cause” eviction protections to tenants. This has been on tenant group’s wish list for some time now, and has been rejected across the board in the last several years. Under the bill, landlords can only evict for “just cause” if:

  • Tenant fails to pay rent (but no requirement to show Covid-19 hardship)
  • The tenant has materially violated an obligation or covenant of the tenancy or occupancy, other than the obligation to surrender possession upon proper notice, and has failed to cure such violation within 30 days after having received written notice thereof from the owner; 
  • The tenant is committing a nuisance in the unit, is permitting a nuisance to exist in the unit, is causing substantial damage to the unit or is creating a substantial interference with the quiet enjoyment of other occupants; 
  • The tenant is using or permitting the unit to be used for any illegal purpose.
  • Owner intends to make personal use of the unit within 180 days, including personal use or use by family member.

With the just cause protections in place, rental property owners would be effectively prohibited from evicting tenants on a “no-fault” basis, such as terminating a tenancy at will, holding over past the lease term, or refusing a rental increase.

Housing Court Exclusive Jurisdiction For Collection of Unpaid Rent

In a first-of-its-kind proposal, the new bill gives the Housing Court exclusive jurisdiction to hear claims to recover unpaid rent. This is clearly intended to frustrate the collection of unpaid rent by housing providers who are able to file small claims in district courts across the state. The Housing Court will already be incredibly backlogged with pending and new eviction cases after the moratorium, and they have little interest in wasting their scarce judicial resources with small collection cases. This provision will essentially make it nearly impossible to collect unpaid rent balances.

Lack of Adequate Rental Assistance Funding and State Tax Credits

As I have been screaming from the rooftops since the first moratorium was passed, the fatal flaw with all of these proposals is that they remain unfunded. By my calculations, we need at least $300 Million in rental assistance funding. (Taking 100,000 renters at risk of eviction per tenant groups x $3,000 per tenant). The new bill purports to establish a new “Covid-19 Housing Stability and Recovery Fund” but it does not appropriate ANY funds for it. Proponents of the bill simply say that the federal government must fund rental losses. Without adequate rental assistance funding, the burden of Covid-19 impact will unfairly flow down from tenants to small housing providers who are equally unable to sustain those losses.

The new bill also provides for certain state tax credits for rental losses. However, there is a cumbersome application and approval procedure that housing providers must use to obtain these credits, rather than being able to simply claim the credit on personal tax returns. Landlords who claim tax credits cannot proceed with an eviction. Also, state credits are typically quite low (based on 5% state income) so it would not amount to much benefit to owners.

What’s Next?

This bill now moves to the Joint Committee on Rules where it may be amended. Tenant groups are planning a week long push next week to pass this bill. With over 80 co-sponors, it appears the bill has a strong chance of passing on Beacon Hill. The question will be whether Gov. Baker will sign or veto, and whether the State House can obtain a veto-proof 66% vote.

If you are opposed to this bill, I urge you to email the members of the Rules Committee below, as well as your own state rep and senators.

Email addresses for the Governor and all members of the Rules Committee where HD5018 is now under consideration (copy and paste into your email “TO” line):[email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected]Donald H. Wong

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The COVID-19 pandemic is not a blank check for the Governor and other elected officials.” — U.S. District Court Judge Mark Wolf Issues Landmark 102-Page Opinion on Constitutionality of Massachusetts Eviction Moratorium; Gov. Baker Signals He Will Allow Moratorium to Expire On Oct. 17

As readers of this blog know, I, along my colleague Jordana Greenman, Esq., are lead counsel for several housing providers in a federal court challenge to the Massachusetts Eviction Moratorium in the case of Baptiste v. Kennealy, United States District Court – Massachusetts, CA 1:20-CV-11335 (MLW). For the past three months, we have been battling with the Attorney General’s Office over the constitutionality of the Moratorium and whether the court should enjoin it. After five days of hearings and thousands of pages of legal briefing, Judge Mark Wolf has issued a landmark 102-page opinion in the case. The opinion is embedded and linked to below.

“A public health emergency does not give Governors and other public officials carte blanche to disregard the Constitution for as long as the medical problem persists.”

In a nutshell, Judge Wolf declined for now to enjoin the Moratorium, reasoning that legislators had a reasonable basis for enacting it as a temporary emergency measure back in April during the beginning of the pandemic. However, and most notably, Judge Wolf expressed serious concerns over the constitutionality of the Moratorium if it is extended past its current expiration date of Oct. 17. Judge Wolf wrote:

“The COVID-19 pandemic is not a blank check for the Governor and other elected officials. Rather, it should be recognized that “a public health emergency does not give Governors and other public officials carte blanche to disregard the Constitution for as long as the medical problem persists. As more medical and scientific evidence becomes available, and as States have time to craft policies in light of that evidence, courts should expect policies that more carefully account for constitutional rights.”

“In other words, in deciding how to exercise their broad discretion in responding to the evolving COVID-19 pandemic, elected officials have a duty to consider the limitations imposed by the Constitution, rather than merely to rely on courts to remedy any violations of it. As Justice Anthony Kennedy has written, “the very fact that an official may have broad discretion . . . makes it all the more imperative for him or her to adhere to the Constitution and to its meaning and promise.” 

Judge Wolf also recognized that the Moratorium imposes a substantial impairment of leases between housing providers and tenants across the state:

“The rights to evict and recover property if a tenant does not pay rent are important elements of the contractual relationship that a lease creates. The Moratorium deprives the landlords of a remedy for a violation of these rights while it is in effect. It does not prevent a landlord from suing a tenant for rent owed. However, that remedy will often be illusory because landlords are unlikely to benefit from money judgments against tenants who are unable to pay rent during the COVID-19 pandemic or who are unwilling to do so. Therefore, the Moratorium materially undermines the contractual bargain.”

Judge Wolf did rule in our favor that the Moratorium Regulations violate the First Amendment as they force housing providers to provide a state mandated missing rent notice which directs tenants to pro-tenant advocacy groups like City Life/Urbana Vida.

Gov. Baker Signals He Will Not Extend Moratorium Past Oct. 17

Echoing many of Judge Wolf’s concerns, and as the Boston Globe reported yesterday, Gov. Baker suggested he won’t extend the moratorium. Instead, he wants to devise a system that protects both renters and landlords. “We would really like to see if we can put a plan together to make sure that we can do, with the courts, what needs to be done to ensure that people are protected with respect to their housing,” Baker said. “But the longer this thing goes on, the deeper the hole gets, not just for tenants but also for landlords, especially small landlords…who . . . have in many cases already run out of rope.”

We would like to think that our lawsuits and Judge Wolf’s ruling will play a significant factor in Gov. Baker’s ultimate decision whether to allow the Moratorium to expire. We want to make clear that our clients, and housing providers across the state, do not want mass evictions during the Covid-19 pandemic. As we have said from the start, if the state had enacted a large rental assistance funding package from the start, we would likely not be in this situation where thousands of private landlords have been forced to subsidized housing for tenants impacted by the pandemic. We are ready, willing and able to work with the courts and tenant groups to put reasonable safeguards in place to assist tenants if the Moratorium is lifted. I cannot stress enough how important rental assistance funding is.

What is Next? CDC Eviction Moratorium In Place Until Dec. 31, Housing Stability Act

Even if the Massachusetts Moratorium expires on Oct. 17, the new CDC federal eviction moratorium will be in place through Dec. 31. However, the CDC order is far narrower than the Massachusetts moratorium. Tenants must affirmative certify under oath they are financially impacted by Covid-19, and it does not apply to expiration of leases, for cause situations (like bad behavior or criminal activity) and to many “no fault” situations. At a recent Bench-Bar conference, several Housing Court judges stated the court will likely allow service of notices to quit and accept eviction filings unless tenants affirmatively raise the CDC order as an affirmative defense to the eviction. Also, the National Apartment Association and a group of housing providers have challenged the CDC Order in Atlanta federal court. We will see how this will play out.

State legislators and tenant activists also continue to advocate for a 12 month extension of the moratorium through the Housing Stability Act, but again, without meaningful rental assistance funding. A few million dollars in RAFT funding will not cut it. We need upwards of $200 million dollars or more in state rental assistance funding, and unfortunately, that is nowhere to be found right now. Based on Judge Wolf’s ruling, I believe the Housing Stability Act’s 12 month eviction moratorium would likely be unconstitutional.

To all of our faithful supporters, donations to our Legal Fund would also be very much appreciated as we put our law practices on hold for several months now while spending hundreds of hours on this case:  Link: https://paypal.me/pools/c/8orbLzpxbY

Judge Mark Wolf Opinion Pre… by Richard Vetstein

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Over 30 Organizations and Individual Landlords Impacted by Eviction Moratorium File Friend of the Court (Amicus Curiae) Briefs In State Court Challenge

Our lawsuit challenging the Massachusetts Eviction Moratorium Act, which Gov. Baker just extended to Oct. 17, has received national attention in the form of friend of court briefs just filed by a slew of organizations representing the rental housing community, medical and public health profession, tenant advocacy groups, major municipalities, and even the American Civil Liberties Union (ACLU). The Suffolk Superior Court (Hon. Paul Wilson) has scheduled a hearing on Thursday, July 30 at 10AM to consider the Plaintiff Landlords request to issue an injunction stopping any further enforcement of the Moratorium. Below is a list of amicus submissions, and I have created a Dropbox link where anyone can read all of the briefs (which are quite interesting): Dropbox Link Amicus Briefs, Matorin v. Commonwealth of MA.

The small landlord stories are quite compelling. Here are a few excerpts:

  • Jon DaPonte, military vet, tenant owes him $7,000, told him to F-off, destroyed the apt. He cannot do anything about tenant due to Moratorium.
  • Carlos Baez: Small rental owner of multi-family. Tenant owes me $10k, damaging unit, I cannot bring eviction action under Moratorium. “We should all be in this together.”
  • Marie Baptiste: Nurse originally from Haiti. Tenants owe her $18k, won’t even communicate with her. Has limited means, stuck for foreseeable future.
  • Baris Berk: Tenant hasn’t paid since Jan. 1 (before Covid19), owes $14k+, I’m trapped, cannot even send a notice of termination to tenant under Moratorium.
  • Bruce Metcalf: father of special needs daughter, owns small rental property in Rockland. Tenant owes thousands in back rent, has to dip into his own 401k to stay afloat.
  • Mark Horn from Falmouth. Sec. 8 tenant was being evicted for damaging unit. Judge ruled for Mark, and Mark gave tenant 5 month extension to move. On eve of move out, Moratorium passed, and case suspended. “Any short term emergency halt on evictions should have immediately been followed up by a funded solution for how to pay those rents to the landlords providing the essential housing.”

Amicus Brief Submissions

  1. Charles Sachetta
  2. MassLandlords, Inc.
  3. National Institute of Rental Managers
  4. JMA Housing LLC (Jeff Abrams) and Small Landlords
  5. Small Property Owners Association, Cranberry Holdings LLC
  6. Health Law Associates
  7. Jewish Alliance for Law & Social Action
  8. National Housing Law Project/Metrowest Legal Services
  9. City Life/Vida Urbana, Chelsea Collaborative, Lynn United for Change, Springfield No One Leaves
  10. Massachusetts Coalition for the Homeless
  11. ACLU, Harvard Professors
  12. Citizens Housing and Planning Association (CHAPA), Mass. Public Health Ass’n, Massachusetts Ass’n of Community Dev. Corps.
  13. Cities of Chicago, Boston, Baltimore, Cambridge, LA, Oakland, Seattle, Somerville, et al.
  14. Medical Legal Partnership

To all our supporters who are reading this, I would be remiss if I did not bring up the subject of legal fees and donations. At this point, Jordana Greenman and I are basically working for free, and we have many many hours of work going forward. All of our funding has come from generous folks like you, but we need to spread the word out again. Funding link here:  https://paypal.me/pools/c/8orbLzpxbY.  Thank you!!!

Also, please share this post. I have embedded the small landlord stories below, which are quite compelling.

Amicus Curiae Submissions o… by Richard Vetstein on Scribd

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Federal Lawsuit Filed by Marie Baptiste, a Nurse Originally from Haiti Who Is Owed Nearly $19,000 in Back Rent

Updated (9/25/20): Judge Wolf Rules That Extension of Moratorium Past Oct. 17 Likely Unconstitutional; Gov. Baker Signals No Extension

As the Legislature and Gov. Baker consider extending the Eviction Moratorium Act, which expires Aug. 18, a new lawsuit challenging the Moratorium has been filed in Federal Court in Boston. I am lead counsel in the case, along with my colleague, Jordana Greenman, Esq. The case is Baptiste v. Commonwealth of Massachusetts, United States District Court – Massachusetts, CA 1:20-CV-11335 (MLW).

Local Nurse Owed Nearly $19,000 from Tenants

The federal suit is filed by Marie Baptiste, a long time dedicated nurse originally from Haiti, who owns rental property in Randolph. Unfortunately Ms. Baptiste’s tenants owe her nearly $19,000 in back rent, and they refuse to even communicate with her. Under the current Eviction Moratorium, she cannot even send out a notice to quit or start a new eviction case. If the Act is extended, as new legislation provides, she will be forced to house these non-paying tenants potentially for another 12+ months, which will certainly result in financial ruin. The second plaintiff is Mitch Matorin, who owns rental property in Worcester and has a pending Housing Court eviction against his tenants who owe him $7,200 in back rent. Ms. Baptiste’s and Mr. Matorin’s stories are being replicated throughout the state as thousands of small rental housing providers struggle to keep afloat during the Covid-19 crisis.

Federal Constitutional Claims

In the new lawsuit, we are seeking to strike down and enjoin the Moratorium, as unconstitutional. The Moratorium has shut down virtually every pending and future eviction case statewide since April 20, 2020. Massachusetts has survived the Civil War, Great Depression, two World Wars, the 1917 Influenza pandemic, and numerous recessions, and until now has never implemented a wholesale moratorium on the exercise of the most basic right underlying the entire field of rental housing, the right to evict.  

We believe that the Act violates the following four separate constitutional rights of our clients:  (1) the right to petition the judiciary; (2) the right of free speech under the First Amendment; (3) the right to just compensation for an unlawful taking of their property under the Fifth Amendment; and (4) is an unconstitutional impairment of their leases under the Contracts Clause of the U.S. Constitution. Housing providers like Marie and Mitch remain obligated to pay their mortgages, real estate taxes, insurance, and water/sewer used by non-paying tenants, and to maintain their properties in compliance with the state sanitary code, while being deprived of the revenue required to do those things. With the Governor having the unfettered right to extend the Act for unlimited 90-day periods and ongoing legislative efforts to extend the moratorium for a full year or longer, this one-sided obligation and burden will continue indefinitely. Many small rental property owners, especially those on fixed income rely on rents to afford to live in their own homes. 

The case has been assigned to Judge Mark Wolf. The court will schedule a hearing on our request for an injunction, likely in early August.  

State Court Lawsuit Remains Pending, Hearing Scheduled for July 30

Our lawsuit in Suffolk Superior Court is still pending. We have a major hearing on July 30 (with friend of the court briefs due July 24), and with this new federal case being filed, we are hopeful that two lawsuits in play will give pause to legislators and the Governor as they consider whether to extend the Moratorium and the new extension bill, H.D. 5166

Thank you all for your continued support. We would be remiss if we didn’t post the link to our fundraising Paypal https://paypal.me/pools/c/8orbLzpxbY.  We have spent many many hours and long nights on this case, as you can imagine. Our legal brief can be read below.

Memo re. Preliminary Injunc… by Richard Vetstein on Scribd

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Justice Paul Wilson, Mass. Superior Court

Superior Court Justice Paul Wilson Sets Preliminary Injunction Hearing for July 30, Asks For Amicus Curiae Briefs Filed by July 24

After the Supreme Judicial Court sent our legal challenge to the recently enacted Eviction Moratorium Act back down to the Suffolk Superior Court, the case is now moving quickly. Justice Paul Wilson, who was specially assigned to preside over the case, has issued briefing and scheduling orders, and has invited affected property owners (and tenants) to file friend-of-the-court (amicus curiae) briefs by July 24, 2020. He has scheduled a hearing on the plaintiff rental property owners’ motion for a preliminary injunction to enjoin the Act, for July 30, 2020. Judge Wilson’s order inviting amicus briefs is embedded below.

If you are a rental property owner and have an interest in submitting a friend of the court brief detailing how you have been impacted by the Moratorium (and the possibility of it being extended further), please contact me ([email protected]) or my co-counsel, Jordana Greenman ([email protected]), and we can coordinate with you.

The hearing on July 30 will most likely be on Zoom, and we are not sure yet of whether it will be open to the general public. We’ll keep you posted!

Superior Court Amicus Invitation, Matorin v. Commonwealth by Richard Vetstein on Scribd

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Rental Housing Providers Strongly Opposed to 12+ Month Proposed Eviction Moratorium Extension, Rent Freezes Without Adequate Financial Relief

State Rep. Mike Connolly (D-Cambridge) and Rep. Kevin Honan (D-Allston), the lead sponsors of the Eviction Moratorium Act, have filed a wide-ranging tenant protection bill as the COVID-19 crisis wears on into the summer months. “The COVID-19 Housing Stability Act” (H.D. 5166) would extend the Eviction Moratorium for at least 12 months, as well as freeze rents statewide for a one year period after the COVID-19 emergency lifts. The bill also provides for “just cause” tenant protections, foreclosure relief, and establishes a Housing Stability and Recovery Fund, but without any specific funding source.

As I will outline below, the bill is extremely problematic for, and one-sided against, rental property owners in a number of respects:

12+ Month Extension of Eviction Moratorium

The bill would prohibit any eviction for non-payment of rent until 12 months has expired from whenever Gov. Baker lifts the COVID-19 State of Emergency. Thus, all non-payment evictions would likely be prohibited statewide until 2022, because Gov. Baker will keep the Emergency Declaration in place for as long as possible. The measure also allows any city/town to unilaterally extend the ban on evictions *forever* by an act of the city/town council.  

The bill also prohibits recovery of unpaid rent in any pending eviction, if the non-payment was caused “in any way, directly or indirectly” by COVID-19. The bill then creates a rebuttable presumption that the tenant falls within that category, shifting the burden of proof to the property owner who must prove by “clear and convincing evidence” that failure to pay was not based “in whole or in part” on Covid-19. Running a 4 minute mile is easier than satisfying this standard, and virtually guarantees that landlords will be unable to evict based on non-payment even if tenants are simply refusing to pay, and also guarantees that owners will be unable to ever recover any unpaid rent. Combine this with a later provision which prohibits any credit reporting for non-payment of rent, there is little financial incentive pay rent.

Just Cause Eviction Provisions

The bill also provides for certain “just cause” eviction protections to tenants. Just cause (the Jim Brooks Rent Stabilization bill) has been on tenant group’s wish list for some time now, and has been rejected across the board for the last several years. Under the bill, landlords can only evict for “just cause” if:

  • The tenant has materially violated an obligation or covenant of the tenancy or occupancy, other than the obligation to surrender possession upon proper notice, and has failed to cure such violation within 30 days after having received written notice thereof from the owner;
  • The tenant is committing a nuisance in the unit, is permitting a nuisance to exist in the unit, is causing substantial damage to the unit or is creating a substantial interference with the quiet enjoyment of other occupants;
  • The tenant is using or permitting the unit to be used for any illegal purpose.
  • Non-payment of rent unrelated to financial hardship due to COVID-19

With the just cause protections in place, rental property owners would be effectively prohibited from evicting tenants on a “no-fault” basis, such as holding over past the lease term or refusing a rental increase.

Rental Increase Freeze

The bill effectively imposes an across the board rent increase freeze for the duration of the COVID-19 Emergency plus 12 months after it is lifted. So there can be no rent increase whatsoever on *any* tenant regardless of whether they are affected by COVID-19. This will effectively stop landlords from agreeing to defer rent as an accommodation to financial hardship and enter into a payment plan that recovers the deferred rent through a new lease with a higher payment. And as noted above, there is no other mechanism for a landlord to have an enforceable agreement to recover any unpaid rent. This is true even if the tenant is completely amenable to it, because any such agreement is declared to be contrary to public policy and unenforceable. So the existing Moratorium, which purportedly required continued payment of rent and encouraged payment plans, is now meaningless – any such payment plan is now null and void.

Housing Stability and Recovery Fund

The bill sets up a Housing Stability and Recovery Fund, but provides no specific funding for it whatsoever. This Fund is to provide assistance to owners who were “unable to pay housing and housing-related costs” due to COVID-19. It is unclear what “housing and housing-related costs” mean, but it clearly does not mean that the money (if any) can be used to reimburse landlords for unpaid rent. At best, it might allow some payments to landlords if they were “unable” to pay taxes, insurance, maintenance, mortgage because of COVID. 

The bill also requires an Oversight Board that comprises “members of the Legislature’s coronavirus working groups” – not clear who that is — who then select 8 people from communities hardest hit, considering race/ethnic/income impacts. I must have missed rental property owners from this list.

Foreclosure Relief

Similar to the existing Moratorium Act, the bill provides for foreclosure relief. However it does contain a poison pill of sorts. While the bill extends mortgage forbearance to non-owner-occupied if owned by a non-profit or a small landlord (15 or fewer residential “apartments”), it requires anyone who obtains mortgage forbearance, whether owner-occupied or small landlord, “must forever waive and hold harmless tenants from the obligation to pay that month’s rent for each rental unit located on the property In other words, if you need mortgage forbearance because *some* tenants are not paying and you can’t cover the mortgage, you must *waive all rent from all of the other tenants in that property* as well. Seems rather draconian.

Impact to Rental Property Owners

While we all realize that the Covid-19 crisis has caused unprecedented financial hardship for many tenants, it has also created unprecedented financial hardship for small landlords as well. The fundamental problem with the first Moratorium and this new bill is that it does not FUND what it seeks to accomplish. Without adequate funding, this bill simply shifts the economic devastation from tenants to small rental property owners who are in no better position to undertake millions of dollars in losses. Moreover, a 12+ month long Moratorium would raise significant constitutional problems, as has been raised in the recently filed legal challenge to the original Moratorium. It’s not an exaggeration to say that this bill would be a total and complete disaster to the rental housing market, and ultimately would hurt both tenants and small rental housing providers.

I will continue to update you with developments on this bill.

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HUD Director Dr. Ben Carson

Federal COVID-19 CARES Act Eviction and Foreclosure Moratorium Extended Another Two Months

HUD Secretary Ben Carson announced yesterday that federal housing agencies have extended the CARES Act eviction and foreclosure moratoriums through August 31 for tenants and homeowners with Fannie Mae, FHA, VA, USDA-insured single-family mortgages. The current moratorium was set to expire on June 30.  “While the economic recovery is already underway, many American families still need more time and assistance to regain their financial footing,” said HUD Secretary Ben Carson. “Our foreclosure and eviction extension means that these families will not have to worry about losing their home as they work to recover from the financial impacts of COVID-19.”

The CARES Act eviction moratorium applies to approximately 28% of all rental properties in the United States. It prohibits the eviction of tenants residing in any single-family or multifamily property financed by federally backed mortgages (Fannie Mae, Freddie, FHA, VA, USDA loans) and renters living in federally assisted housing (Section 8).

Overlap With Massachusetts Eviction Moratorium Act

For Massachusetts rental property owners, the state already has a statewide eviction and foreclosure moratorium in place until August 19, 2020 which covers virtually every residential rental eviction situation. The Massachusetts Moratorium does not have any distinctions between federal insured or non-insured mortgages; rather, it covers the type of eviction, i.e, “non-essential” vs. “essential” evictions. Gov. Baker may extend the state Moratorium for unlimited 90 day increments. The general consensus in the rental housing community is that Baker will extend the Moratorium through the end of 2020. However, led by yours truly, two landlords have filed a legal challenge to the Moratorium with the Supreme Judicial Court, which is pending. If the Massachusetts Eviction Moratorium is struck down, the CARES Act Moratorium will still be in place, at least through Aug. 31. That could be extended as well, however.

There are several databases and search websites to see if your rental property has a federally backed mortgage subject to the CARES Act —

NHLP has created a searchable database of multifamily projects subject to federal eviction moratoriums, https://nlihc.org/federal-moratoriums?ct=t%28update_041720%29

Foreclosure Protections Under CARES Act

The CARES Act provides foreclosure protections for borrowers with property secured by federally backed mortgage loans. Borrowers who affirm they are experiencing a COVID-19 related hardship can request a forbearance from their loan servicer of up to 180 days, which can be extended for an additional period of up to 180 days. Except with respect to a vacant or abandoned property, servicers may not initiate a foreclosure, move for judgment, or order a sale, or execute a foreclosure-related eviction or foreclosure sale until August 30, 2020.

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State Rep. Mike Connolly (D-Cambridge)

Self-Proclaimed “Socialist” State Rep. Sponsors Rent Control and Tenant Protection Bills; Measures Pass Important Committee

After passing the nation’s strongest COVID-19 Eviction Moratorium, a group of far left legislators are now using the Coronavirus public health crisis to push many more controversial measures, including Rent Control and Just Cause Evictions. The Legislature’s Joint Committee on Housing voted last week to recommend passage of two measures that would let cities and towns impose rent control and other tenant protections, effectively undoing a 1994 ballot measure that banned rent control in Massachusetts.

One bill (H.B. 3924), sponsored by self-proclaimed socialist Rep. Mike Connolly of Cambridge (pictured left), would establish a new “Tenant Protection Act,” enabling towns and cities to restore local rent control boards. However, this measure goes much further, seeking to adopt a radical wish list of tenant protection proposals previously rejected over the last several years. These include new “anti-displacement zones,” stricter condominium conversion rules with mandatory tenant relocation payments, a broad just-cause eviction statute (which the Legislature previously rejected a year ago), mandatory rent deposit installment plans, and other tenant-favorable provisions.

The other bill (H.B. 1319) would cap rent increases at the annual change in the Consumer Price Index (CPI) or 5%, whichever is less. The only exception to this would be for owner-occupied units of three-family homes or less with a Sec. 8 or other federal/state subsidized tenant.

As I’ve written here before, Rent Control is an experiment tried and failed many times before, and universally rejected by economists. The great thing about the 1994 vote banning rent control is we now have empirical data and a reliable study from prominent economists which has compared the Cambridge housing market during rent control vs. after rent control. We also have data and a similar study out of San Francisco. Both studies (and others from the past) have found that rent control did not work at all, and actually had the exact opposite effect — contributing to gentrification, displacement of tenants and income inequality.

The bills’ fate is far from clear. Lawmakers have a host of issues on the agenda before their formal session ends in July, and have been voting remotely, which has slowed the legislative process. Baker signaled his opposition to the bill when it was first filed last year, saying it would hinder construction of new housing, though he has said little about it lately.

Rental property owners should email their representatives to reject House Bill 3924 and House Bill 1319.

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Rental Property Owners File Emergency Petition with Massachusetts Supreme Judicial Court Asserting COVID-19 Eviction Moratorium Act Is Unconstitutional

Attorney Richard D. Vetstein and his colleague, Jordana Roubicek Greenman, Esq., have filed an Emergency Petition with the Supreme Judicial Court on behalf of two local rental property owners challenging the constitutionality of the recently passed, Act Providing For a Moratorium On Evictions and Foreclosures During the COVID-19 Emergency and the its regulations. A copy of the Petition can be viewed below.

One of the plaintiffs is a elderly woman on a fixed income whose tenant owes her over $6,000 in back rent and told her “The Governor says I don’t have to pay my rent anymore.” She risks bankruptcy and foreclosure if something isn’t done. The other plaintiff has a non-payment eviction in progress in Worcester Housing Court, and is owed several months of rent with no likelihood of any payment while the Act suspends his case.

As outlined in the Petition, the Eviction Moratorium Act imposes an unprecedented and indefinite shutdown of virtually every future and pending eviction case in the state, as well as prohibiting landlords from even issuing notices to quit.  The Petitioners, two local rental property owners saddled with non-paying tenants whom they cannot evict, claim irreparable harm on behalf of themselves and all other similarly situated rental property owners across the state.  The Petitioners assert the Act is an unconstitutional infringement on their constitutional right to access the courts and right to petition. They also claim the Act is an unconstitutional interference by the Legislature on the core functions of the courts.  Further, the Act operates as a “taking” without just compensation because it forces rental property owners to house non-paying tenants without any recourse.  Lastly, the Petitioners argue the Act violates the U.S. Constitution’s Contracts Clause as it unconstitutionally impairs their lease agreements.

 The operation of the Act obligates rental property owners to pay their own mortgages, real estate taxes, insurance, and water/sewer used by non-paying tenants, and to maintain their properties and comply with the state sanitary code, while being effectively deprived of the revenue required to do those things.  Given the unpredictable nature of the COVID-19 pandemic, this one-sided obligation and burden will continue indefinitely and quite possibly into 2021.  Many small rental property owners, especially those on fixed income, rely on rents to afford to live in their own homes.

The Supreme Judicial Court is expected to take up the case next week, and will hopefully schedule it for hearing. I will provide you with updates of course.

We are also still seeking donations to the cause. To contribute please click our secure Paypal link: https://paypal.me/pools/c/8orbLzpxbY.

Matorin v Chief Justice, SJ… by Richard Vetstein on Scribd

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New Mandatory Forms and Regulations Released in Wake of Eviction Moratorium ActOn April 20, 2020, Gov. Baker signed into law An Act Providing for a Moratorium on Evictions and Foreclosures During the COVID-19 Emergency (the “Act”), which puts in place a moratorium on “non-essential evictions” of residential and small business tenants during the COVID-19 state of emergency. The Executive Office of Housing and Economic Development (EOHED) has released follow up regulations to ensure compliance with the Act. Several mandatory notices and forms have also been released which will be discussed and linked to below. The Regulations expire 120 days after the effective date of the Act, or 45 days after the state of emergency has been lifted, whichever is sooner, unless further extended by the secretary of EOHED. A link to the new regulations is here: 400 Code of Mass. Regulations 5.0: COVID-19 Emergency Regulations

New Required Form: “Notice of Rent Arrearage”

Under the Moratorium and the new regulations, landlords are prohibited from issuing a notice to quit for non-payment of rent, may not impose late fees for non-payment, or notify a credit reporting agency of the non-payment of rent if the tenant provides a notice and documentation of a financial impact from COVID-19. Instead, the new regulations allow landlords to send a new type of notice for a late or missing rent payment, called a “Notice of Rent Arrearage” which must contain the following special language:

“THIS IS NOT A NOTICE TO QUIT.  YOU ARE NOT BEING EVICTED, AND YOU DO NOT HAVE TO LEAVE YOUR HOME. An emergency law temporarily protects tenants from eviction during the COVID-19 emergency. The purpose of this notice is to make sure you understand the amount of rent you owe to your landlord.”

“For information about resources that may help you pay your rent, you can contact your regional Housing Consumer Education Center. For a list of agencies, see https://www.masshousinginfo.org/regional-agencies.  Additional information about resources for tenants is available at https://www.mhp.net/news/2020/resources-for-tenants-during-covid-19-pandemic.”

“You will not be subject to late fees or a negative report to a credit bureau if you certify to your landlord in writing within 30 days from the missed payment that your non-payment of rent is due to a financial impact from COVID-19. If possible, you should use the approved form at: https://www.mass.gov/lists/moratorium-on-evictions-and-foreclosures-forms-and-other-resources. If you cannot access the form on this website, you can ask your landlord to provide the form to you. You may also send a letter or email so long as it contains a detailed explanation of your household loss in income or increase in expenses due to COVID-19.”

The notice may also include other information that will promote the prompt and non-judicial resolution of such matters, such as the total balance due, the months remaining and the total of lease payments expected to be made on a lease for a term of years, information on how to contact the landlord to work out a revised payment arrangement, and a reminder that after the state of emergency ends the tenant may face eviction if rent remains unpaid. The notice should also also have language informing the tenant of the importance of having it translated to their native language.

My friends over at MassLandlords have created a sample Notice of Missed Payment form if you desire to download it.

Late Fees and Credit Reporting; Notice of Tenant Financial Hardship

Under the Moratorium Act, tenants are allowed to provide notice and documentation of a Covid-19 related financial hardship to their landlords, in order to avoid negative credit reporting. EOHED has issued forms so residential and commercial tenants can provide notice and documentation of a COVID-19 related financial hardship. Those forms can be found here (click on link):

Notice and Certification of Financial Hardship From Residential Tenant Related to COVID-19

Form of Notice -COVID-19 Hardship – Small Business Tenant 

Documentation of Financial Hardship – Small Business Tenant 

Under the new regulations, a tenant who misses multiple rent payments due to a financial impact from COVID-19 is required to provide a separate notice to the landlord for each such missed payment. The use of an alternative written form of notice by a residential tenant shall be deemed effective and timely if it includes a statement that the tenant has experienced a financial impact from COVID-19, and states in reasonable detail the cause of such financial impact.

Landlord Use of Last Month’s Rent Deposit

Under the Moratorium, a landlord who has a last month’s rent deposit may use it to pay for mortgage payments, utility costs, maintenance costs and other operating expenses incurred by the landlord for the leased premises. The last month’s deposit, however, must be accounted for and paid back if necessary, with accrued interest, at the end of the lease or tenancy. This is one of the reasons why I do not recommend that landlords utilize this remedy. If the landlord uses a last month’s deposit it must provide the following form to the tenant:

Notice to Tenant – Use of Advance Rent Payment 

Conclusion

We will keep you updated with further development on the Eviction Moratorium and any further regulations or guidance issued by the state.

I still believe that the Act is unconstitutional on several grounds, and myself along with several other lawyers are getting ready to file a legal challenge to the Act. If you are interested in donating or participating in the case, please contact me at [email protected]. We have set up a secure Paypal funding link for any donations here:  https://paypal.me/pools/c/8orbLzpxbY.

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Unprecedented, Sweeping Prohibition on Residential and Commercial Evictions Enacted Without Corresponding Mortgage and Tax Relief to Property Owners

Updated (5/31/20): Legal Challenge Against Eviction Moratorium Filed In SJC

In an unprecedented, sweeping, and likely unconstitutional move, the Massachusetts Legislature has passed, and Governor Charlie Baker has just signed into law An Act Providing For a Moratorium On Evictions and Foreclosures During the COVID-19 Emergency (House Bill 4647), a statewide moratorium on the vast majority all evictions and foreclosures in Massachusetts during the COVID-19 Emergency — and possibly well beyond. The new law is in effect until 45 days after the Coronavirus (COVID-19) Emergency is lifted by Gov. Baker, or four (4) months, whichever is earliest, however, Gov. Baker is permitted to extend the law for 90 day increments.

Sweeping Eviction (Summary Process) Emergency Coronavirus (COVID-19) Relief

The Eviction Moratorium covers 90% of all evictions (summary process), including non-payment and no-fault evictions, both residential and commercial. The only exception is if a tenant is engaged in criminal activity or a lease violation which impacts the health and safety of other residents or first responders. Under the Act, Housing and District Courts will not even accept new eviction filings. Eviction cases which are already pending in court are effectively suspended until the law expires. (Under previous Housing Court orders, all evictions have been stayed until May 4). Eviction move-out orders are also suspended. All court deadlines and statutes of limitations are suspended.

Further, Landlords are prohibited from issuing notices to quit or terminating a lease. Late fees for unpaid rent are also banned. Landlords are also barred from reporting delinquencies to credit reporting agencies if the tenant provides documentation of financial hardship related to the COVID-19 crisis. Throwing a bone to landlords, the Act allows them to use last month deposits to pay for mortgage and property expenses, but they must account for the deposit at the end of the tenancy. (I don’t see any benefit there at all). The Act does not suspend the obligation to pay one’s rent.

Small Business Impacts

As stated above, the eviction moratorium also applies to certain “small business” commercial spaces. Small businesses are defined as any in-state for-profit and non-profit business with less than 150 full-time equivalent employees. It does not apply to chains or businesses operating multi-state, multi-nationally, or publicly traded companies. Commercial landlords may, however, issue payment default notices and notices to quit.

Foreclosure Relief

Under the Act, all residential property foreclosure proceedings are prohibited and suspended. The Act appears not to give foreclosure relief to investment or rental property owners, and that is one of the glaring inequities as discussed below. Lenders are banned from sending foreclosure notices, filing Land Court Servicemembers proceedings, conducting foreclosure auctions, or otherwise engaging in any foreclosure related action under state law. The Act also requires banks to grant up to 180 days of mortgage forbearance to homeowners who have been hurt by the coronavirus crisis. However, the forebearance will be added to the end of the term of the loan. The foreclosure relief part of the law expires 45 days after the Covid Emergency is lifted, or 4 months, whichever is sooner, but the Governor may issue 90 day extensions. The Act does not suspend the obligation to pay one’s mortgage.

Analysis: Potentially Devastating Impact to Small Property Owners, Potential Unconstitutionality of Law

Let me just say that I have compassion for everyone suffering through this pandemic. I have friends who are Covid-19 positive. My business is down, as are my colleagues and friends. I’m actually in favor of widespread financial relief for anyone who has been financially impacted by this crisis.

However, as I have pointed out from the very beginning of this debate on evictions, the flaw with this bill is that it does not provide for corresponding meaningful mortgage, foreclosure and real estate tax relief to rental property owners. It only goes one way. There’s no doubt that many tenants are in dire financial straights, but without providing similar relief to small landlords, they will be bearing the financial brunt of this crisis. And that’s simply unfair.

This Act will likely result in widespread suspension of rent payments by tenants because there is now no enforcement mechanisms for landlords and very little if any financial repercussions. Activists are already calling for rent strikes. As Gregory Vasil, CEO of the Greater Boston Real Estate Board, correctly stated to Bisnow, “the bottom line is, if you are an owner on the commercial or residential side, you likely won’t be getting rent until sometime in the third quarter or fourth quarter of 2020. If you end up in legal proceedings against a tenant, you very likely aren’t going to be getting rent until sometime in 2021.”

Aside from the financial considerations, there are also a number of constitutional and legal flaws with the law under the Massachusetts State Constitution, including violating the right to access courts, the Equal Protection Clause, usurping the exclusive role of the judiciary, violating the Takings Clause, and other major problems. We have not seen this type of sweeping restriction on property owner rights since the days of rent control. State legislators are essentially telling Housing Court judges how to do their job. Judges are already well-equipped to deal with this crisis, and have been doing so admirably. Shutting down the courthouse doors to only landlords and lenders while keeping it open to everyone else smacks of unfair and unequal treatment. I think this Act has a high chance of being struck down by the Supreme Judicial Court.

With the backing of MassLandlords, our statewide trade association, a group of talented attorneys including myself are exploring a legal challenge to the Act. If you are interested in donating or participating in the case, please contact me at [email protected]. We have set up a secure Paypal funding link for any donations here: https://paypal.me/pools/c/8orbLzpxbY.

The Act is embedded below (House Bill 4647).

Massachusetts Act Providing… by Richard Vetstein on Scribd

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Legislators Freeze Landlords Out of Rent Control Debate

by Rich Vetstein on January 21, 2020

Hearing Rigged Against Small Landlords

After voters statewide strongly rejected rent control in 1994, tenant groups have been pushing hard for its resurrection, getting far enough to have a major hearing on several bills on Beacon Hill last week. As I’ve written here before, economists have universally concluded that rent control does not work, and in many cases, it has actually resulted in higher rents overall. But that has not stopped tenant groups like City Life/Vida Urbana from pushing this failed policy and using their clout to get lawmakers to jump on the rent control bandwagon.

The best evidence of how lawmakers are kowtowing to these groups is the travesty which transpired at the State House hearing on Jan. 14. The hearing lasted for 6.5 hours at which landlords were given only 15 minutes of speaking time. That’s not even 4% of the total hearing time. While representatives from the GBREB spoke first for about 10 minutes, the remaining six plus hours was a cattle call of tenant groups, paid housing lobbyists, affordable housing advocates, and public housing reps, advocating rent control and increased transfer and property taxes to subsidized their rents.

According to Doug Quattrochi, the Executive Director of MassLandlords, the largest statewide property owner trade association, the hearing was essentially rigged in favor of tenants. He said that legislators intentionally controlled the order of speakers to freeze out small landlords and property owners. There was a small army of small landlords who showed up early at 9AM, but were not allowed to speak at all, even though the hearing went until 6PM.

The implementation of rent control would cost Massachusetts rental property owners literally billions of dollars, and the best that Legislature can do is give them 15 minutes of speaking time?

This is outrageous.

If you feel so inclined, please email the members of the Joint Committee on Housing.

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Rent Control Rears Its Ugly Head Once Again

by Rich Vetstein on March 29, 2019

Recent Studies of Cambridge and San Francisco Prove It Not Only Doesn’t Work But Results In Gentrification, Displacement and Higher Rents

Rent control. Like a diseased zombie rising again from the dead after 25 years. Banned statewide by a voter referendum in 1994 and widely proven ineffective and counter-productive by economists, the debate over rental control is back in Massachusetts. As reported in the Boston Globe, a group of liberal urban lawmakers are readying legislation which would effectively override the 1994 voter ballot question, and allow cities and towns to impose rent control as a mechanism to curb rent increases and encourage affordable housing.

I’m all for a robust, healthy debate, so allow me to weigh in. The great thing about the 1994 vote banning rent control is we now have empirical data and a reliable study from prominent economists which has compared the Cambridge housing market during rent control vs. after rent control. We also have data and a similar study out of San Francisco. Both studies (and others from the past) have found that rent control did not work at all, and actually had the exact opposite effect — contributing to gentrification, displacement of tenants and income inequality.

Are rent control advocates and politicians aware of all this economic literature? I don’t know, but I do know that human beings are emotional creatures, and the debate over rent control has become very emotional. In fact, it reminds me of the climate change debate, but this time rent control advocates are behaving like climate change deniers. Faced with overwhelming evidence that rent control doesn’t work, these advocates continue to push the idea in a knee-jerk emotional reaction to the affordable housing crisis and high rent prices.

Study of Effect of Rent Control In Cambridge Market

Economists Autor, Palmer, and Pathak (2014), studied the effect of rent control on the Cambridge market. From December 1970 through 1994, all rental units in Cambridge built prior to 1969 were regulated by a rent control ordinance that placed strict caps on rent increases and tightly restricted the removal of units from the rental stock. The legislative intent of the rent control ordinance was to provide affordable rental housing, and at the eve of rent control’s elimination in 1994, controlled units typically rented at 40-plus percent below the price of nearby non-controlled properties. 

The economists found that newly decontrolled properties’ market values increased by 45%. In addition to these direct effects of rent decontrol, the economists concluded that removing rent control had substantial beneficial indirect effects on neighboring properties, boosting their values too. Post-decontrol price appreciation was significantly greater at properties that had a larger fraction of formerly controlled neighbors: residential properties at the 75th percentile of rent control exposure gained approximately 13% more in property value following decontrol than did properties at the 25th percentile of exposure. This differential appreciation of properties in rent control–intensive locations was equally pronounced among decontrolled and never-controlled units, suggesting that the effect of rent control had been to reduce the whole neighborhood’s desirability.

The economic magnitude of the effect of rent control removal on the value of Cambridge’s housing stock was large, boosting property values by $2.0 billion between 1994 and 2004. (And of course, that huge increase in property value translated to massive real estate tax revenue for the city). Of this total effect, only $300 million is accounted for by the direct effect of decontrol on formerly controlled units, while $1.7 billion is due to the indirect effect. These estimates imply that more than half of the capitalized cost of rent control was borne by owners of never-controlled properties. The economists ultimately concluded that rent controlled properties create substantial negative externalities on the nearby housing market, lowering the amenity value of these neighborhoods and making them less desirable places to live. In short, the policy imposed $2.0 billion in costs to local property owners, but only $300 million of that cost was transferred to renters in rent-controlled apartments.

To summarize in plain English, the economists concluded that rent control is a really bad idea, both in concept and in actual practice.

San Francisco: Another Failed Experiment

Economists came to the same conclusions when studying rent control in San Francisco. Its rent control law was different than Massachusetts’. It applied to buildings with five or more apartments and regulated rent increases, linked to the CPI, within a tenancy, but no price regulation between tenants. New construction was also exempt.

Economists Diamond, McQuade, and Qian (2018), concluded that San Francisco’s rent control ordinance encouraged condo conversions resulting in more owner occupied units (and less rental units) while encouraging rent controlled owners to defer maintenance and upkeep. As the economists found “it appears rent control has actually contributed to the gentrification of San Francisco, the exact opposite of the policy’s intended goal. Indeed, by simultaneously bringing in higher income residents and preventing displacement of minorities, rent control has contributed to widening income inequality of the city.”

Rent Control Just Doesn’t Work

In addition to the Cambridge and SF studies, there are many other articles by economists critical of rent control. The Urban Institute concluded that [g]iven the current research, there seems to be little one can say in favor of rent control.” Lisa Sturtevant, Ph.D. recently surveyed 30 different peer reviewed rent control studies, concluding that rent control decreased the supply of available rental housing, does a poor job in targeting benefits and generally leads to higher rents in the uncontrolled market.

As these studies show, rent control in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood. When the government forces landlords to provide insurance to tenants against rent increases, it will ultimately be counterproductive. There are better ideas to address the affordable housing problem than rent control. We can do much better than this outdated, tired idea.

For a good summary of why rent control doesn’t work, check out the Masslandlords.net page on Rent Control.

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Rent Escrow, Security Deposit Reform, and Elderly Housing Legislation Filed By Trade Group

Historically, Massachusetts rental property owners have struggled to overcome the coordinated and organized political lobbying of tenant rights and rent control groups at the State House. I remember just a few years ago I testified on Beacon Hill for the rent escrow bill against a small army of tenant advocates. That is now changing in a big way.

Previously splintered across many small groups, property owners have consolidated their lobbying efforts through a state-wide organization, MassLandlords.net. Created by Executive Director Doug Quattrochi, MassLandlords.net has hired a full time lobbyist, and has been instrumental in filing a record number of legal reform bills during the current legislative session. This is really important given that tenant rights groups have been very active recently in pushing just cause eviction, rent control and other socialist proposals.

Here is a summary of some of the bills backed by MassLandlords filed in the current legislative session:

H.D. 1191 – Rent Escrow (sponsored by Rep. Boldyga) — Tenants must pay rent into court if they are invoking rent withholding due to code violations or necessary repairs

H.D. 1194 – Elderly Tenants (sponsored by Rep. Boldyga) — Creating rental voucher program for elderly tenants (age 75+), protections during evictions

H.D. 1205 – Equal Counsel (sponsored by Rep. Boldyga) — Allowing rental companies to represent themselves in court without an attorney

H.D. 1192 – Late Fees (sponsored by Rep. Boldyga) — Changing late fees on unpaid rent to 10 days overdue from 30 days

H.D. 1202 — Tenant Sale Disclosure (sponsored by Rep. Boldyga) — Requiring property owners to notify tenants upon advertising of property for sale

H.D. 1457 — Security and LMR Deposit Reform (sponsored by Rep. Barrows) — Eliminating triple damage penalty and streamlining payment of deposit interest

H.D. 1474 — Rent Escrow (sponsored by Rep. Barrows) — Requiring tenants to pay monthly rent into escrow during pendency of any eviction action unless it would cause undue hardship

S.D. 231 – Rent Escrow (sponsored by Sen. Tarr) — Requiring rent escrow where tenant is withholding rent due to code violations

Whether these bills will advance through committee hearings to actual vote and passage is unknown. But this is a great start for the up and coming MassLandlords group, and I’ll be monitoring the progress of the bills in the coming months.

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New Occupancy Tax, Statewide Registry, Insurance Requirements, and Inspections

At the very end of 2018 without much fanfare, Governor Baker signed into law a bill regulating and taxing short-term rentals. The new law provides for new taxes, a statewide registry, insurance requirements, and inspections varying by town/city. It becomes effective on July 1, 2019.

Overview of Requirements
The new law expands the state’s hotel and motel tax to include the short-term rental of homes (condominiums, single family, multifamily, etc.). This applies to Airbnb, VRBO, and all other short term rental platforms. The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, vacation, personal, or business use. The burden is on the owner to collect and remit the taxes to their local town/city and the Mass. Dept. of Revenue, which is expected to issue guidance later in the year.

Tax Structure
The short-term rental rate varies by locality and is the total of the following rates:

  • State: 5.7%
  • Local: up to 6% (Boston 6.5%)
  • Cape Cod & Islands: includes additional 2.75% to fund Cape Cod and Islands Water Protection Fund
  • A community impact fee of up to 3% may be assessed locally on professionally managed properties (Owners of two or more units in one town).

The law requires regulations to minimize the administrative burden on tax filings for those who only rent their unit five (5) months or less each year.

Are there any exemptions in the law?
The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year. It is important to note that these properties are still subject to the other requirements of the law, such as insurance and registration.

When will this law take effect? 
July 1, 2019

What about the 2019 rentals I already booked? 
The law exempts from tax any 2019 rental that is booked on or before December 31, 2018. Rentals booked on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax. We anticipate that the Department of Revenue will issue guidance on how to handle the tax on bookings made on or after January 1, 2019.

Does this apply to the units I rent? 
As stated above, the new law applies to all rentals for a period of 31 days or less. Ordinary rentals, such as an annual lease or a tenancy-at-will are not covered. The new law applies regardless of whether the owner rents the property themselves, hires a rental agent to rent the property, or uses an online platform to facilitate the rental.

Do I need to collect the tax? 
Most likely, yes. The law requires intermediaries (which includes rental agents who post the property for rent online) who enter into a written agreement with the owner or operator to collect rent or facilitate the collection or payment of rent on behalf of the operator to collect and remit the tax. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department. This also means that an agent who does not collect or facilitate the collection of rent on behalf of the owner or operator does not need to collect and remit the tax.

Do I need to carry insurance for the listed properties?
Yes. Owners are required to maintain $1 million dollars in liability insurance to cover each short-term rental. The coverage is required to defend and indemnify the owner or operator and any tenants in the building for bodily injury and property damage. Realtors may elect to offer insurance coverage as part of their services but are not required to.

Before offering a property for short-term rentals, a hosting platform (including Realtors) must provide notice to the owner or operator that standard homeowners or renters insurance may not cover property damage or bodily injury to a third-party arising from the short-term rental.

Do the properties need to be registered with the state or city/town? 
Each rental unit will need to be listed with the state short-term rental registry. Additionally, each city and town is permitted to create a registration requirement for short term rentals. Check with your municipal government office for details.

Are there any inspections required? 
Cities and towns may implement a health and safety inspection requirement and set the frequency of inspections. Short-term rental operators are required to cover the cost of inspections and will likely face a fee to cover registration costs as well.

What are some best practices I can apply as the new law gets implemented? 

  • Owners and rental agents should disclose to prospective renters that any booking made on or after January 1, 2019 may be subject to a tax and that the tax rate may change before the rental period.
  • Develop a policy to verify the number of units owned by each client in a municipality and that those units are properly insured.

The Mass. Association of Realtors has provided the following documents to help manage short-term rentals: an updated Short-Term Rental Lease, a Community Impact Fee Form, a 14-day Exemption Form, and a required Insurance Disclosure Form. These documents can be found at marealtor.com/ShortTermRentals

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Court Challenge Puts City of Boston Short Term Rental Ordinance In Legal Limbo

Referring to new City of Boston short term rental rules as “Orwellian,” Airbnb has sued the City of Boston in federal court, challenging the legality and constitutionality of recently enacted short term rental rules passed by the City Council. The rules, set to take effect on January 1, are among the most stringent efforts in the nation to regulate the burgeoning industry. The rules would bar investors and tenants from renting their homes by the night through popular websites such as Airbnb, while allowing homeowners and owner-occupants of two- and three-family houses to continue to do so.

Airbnb is not challenging the law on those grounds. Instead, it argues that requiring online hosts to enforce the rules violates the federal Communications Decency Act, which protects online platforms from being sued over third-party content, and also infringes on the company’s First Amendment right to free speech.

Airbnb means business, as it has hired one of the best attorneys in Boston, Howard Cooper of Todd & Weld. “This is a case about a city trying to conscript home-sharing platforms into enforcing regulations on the city’s behalf,” Mr. Cooper told the Boston Globe. “The City of Boston has enacted an ordinance limiting short-term residential rentals by hosts. But it goes much further than that. The ordinance also enlists home-sharing platforms like Airbnb into enforcing those limits under threat of draconian penalties, including $300-per-violation-per-day fines and complete banishment from doing business in Boston.”

A bill on Beacon Hill that would have created the nation’s first statewide short-term registry has been in legislative limbo since August, when Governor Charlie Baker sent it back to lawmakers, requesting several key changes, after the end of the legislative session.

Airbnb is seeking an injunction to prevent the new rules from going into effect. A hearing is expected to occur sometime in the next 30 days. Check back here for more developments as they occur. A copy of the lawsuit is embedded below.

Airbnb v. City of Boston by Richard Vetstein on Scribd

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Land Court Considers Local Ban On Airbnb Rentals in Lynnfield

Over Memorial Day in 2016, a contemporary mansion in Lynnfield was the scene of a raucous Airbnb house party where neighbors described bikini clad college women prancing around to hip-hop music reverberating through the bucolic neighborhood. At 3AM, however, the party turned into a crime scene when 33-year-old Keivan Heath was shot several times and died.

The owner of the 6 bedroom, 5,545 square foot European style residence, Alexander Styller, rented the home to a group of old college roommates at over $2,000/night through the controversial short term rental platform, Airbnb. In the aftermath of the murder, the Lynnfield building inspector and Zoning Board of Appeals issued an order prohibiting the owner from using the premises for short term rentals. The case went up to the Land Court where Judge Keith Long just issued his ruling, upholding the ZBA’s interpretation of the zoning by-law prohibiting short term rentals in a residential zoning district. The decision is one of the first to consider the legality of local prohibitions against short term rentals in a residential zoning district.

Judge Long Rules In Favor of Town

Judge Long ruled that local municipalities have the power under zoning law to regulate (or prohibit) short term rental platforms like Airbnb in a residential single family zoning district, and that the local zoning board has the authority to consider it a non-“grandfathered” use. Demonstrating a solid grasp of the burgeoning technology that is Airbnb, Judge Long ruled that AirBnB-type rental arrangements are not such grandfathered uses. Rather, he reasoned “they are ever-changing technologies that produce materially-different uses as the technology changes, and AirBnB and the other platforms have reserved the right, at their sole discretion, at any time, for any reason, to change that technology and the types of rentals they make available.” The judge further noted that “zoning was created, and is justified, by the degree of certainty it provides to its various designated districts. When that certainty no longer exists, the protections of zoning no longer exist.” Nor could Airbnb be considered an allowed “accessory use” to the home like an in-law suite. “Homes are expected to be used as residences, not for profit,” Judge Long reasoned. “Continuous rentals of a primary residence are contrary to the fundamental use of the home, as it leaves its primary residents without a place to stay. For those same reasons, Mr. Styller’s rentals have become, “in effect, a conversion of the principal use of the premises to one not permitted.”

Judge Long also had some interesting comments about the very nature of Airbnb and its effect on the surrounding neighborhood —

“From the neighbors’ perspective, however, it is all downside. The owner may not be there to experience the external effects of frequent short-term rentals — a constantly-changing cast of strangers in the building or neighborhood, unknown cars on the street, and the traffic and noise from parties (a not-infrequent purpose of AirBnB-type rentals, as evidenced by the incident that led to this case). But the neighbors are there to experience those effects, and may not be pleased. These effects are likely worse in non-owner occupied properties where the owner never lives there but instead rents it out in a continuous series of short term arrangements, calculating that the rental income will be higher than that received from longer-term tenants. This has a community-wide effect as well as effects on the immediate neighbors. Short-term AirBnB-style rentals may be good for tourists, but they decrease the number of properties available for long-term rental by residents and thus, if the practice is widespread, drive up the overall cost of rentals.”

The effect of this ruling will be that towns and cities will be on stronger legal footing if they seek to regulate or even prohibit Airbnb and other short term rental platforms under their local zoning codes. Also, the state legislature has taken up the debate, with a comprehensive bill passed this summer, only to be rejected by Gov. Baker. The Airbnb issue will be receiving plenty of legal attention in the months and years to come. This case will be appealable to the Appeals Court or SJC, so check back for more updates.

Link:  Styller v. Lynnfield Board of Appeals 

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Bill Sent to Study Committee, Effectively Killing It

After intense lobbying on both sides by property owner groups and tenant rights activities, lawmakers sent the Jim Brooks Community Stabilization Act to study effectively killing it for this legislative session. The Act, a Home Rule Petition requiring full State House approval, would require that a landlord or foreclosing owner provide a city-approved “notice of basic rights” and a list of tenant assistance organizations simultaneously with the issuance of a notice to quit/termination or notice of lease renewal/expiration. It also provided that tenants of foreclosed properties could only be evicted for certain “just cause” reasons. The Boston City Council had originally approved the measure in November 2017, but state lawmakers had to approve it as well. Property owner groups were vehemently opposed to the measure, asserting that it was actually a return to Rent Control.

The reactions by proponents and opponents of the bill were naturally mixed on social media. Boston City Councilor Ayanna Pressley, a supporter of the measure, said that the bill “was not supported by the Judiciary Committee…but where it stands now is not promising.” The bill was vehemently opposed by property owner groups, such as Masslandlords.com and the Small Property Owners Association, which mounted a strong coordinated campaign to lobby legislators.

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Property Owners Vehemently Opposed to “Right of First Refusal” Proposals Giving Tenants Up to 240 Days to Purchase Rental Properties For Sale

In an effort to stem the affordable housing problem, cities like Cambridge and Somerville are exploring giving tenants a legal right to purchase the homes and apartments they are renting when owners go to sell them on the open market. The concept is a “right of first refusal” which would be triggered when the owner lists the property for sale and gets a bona fide offer from a third party buyer. Under the Cambridge proposal embedded below, a tenant would have up to 240 days to put down a deposit, obtain financing and close on the purchase, and would also have the right to assign the contract to a non-profit housing trust for affordable housing. The proposed law would apply to all rented single family homes, condominium units, multifamily and apartment buildings except owner two-family residences fully owner occupied or with one of the units occupied by the owner’s immediate family. (These definitions are somewhat unclear).  

Somerville State Senator Denise Provost originally filed a Tenant Right to Purchase Bill with the Legislature, but it did not move past committee. Now, Cambridge and Somerville are considering Home Rule Petitions to pass their own Right of First Refusal laws. If these proposals gain traction, they could spread to other cities and towns like Boston.

Property owner groups vehemently oppose these proposals. A similar proposal was passed in Washington, D.C, and the Huffington Post has exposed how it’s been an abysmal failure and abused by tenants. As the HuffPost, writes, “some tenants are using [the Act] to extract money from landlords, should a landlord decide to sell a building. At present, TOPA is holding up or blocking real estate transactions, causing grief for developers and homeowners and victimizing low-income residents stuck living in buildings owners are unable to sell but forced to maintain at a financial loss.”

I agree that this would be a terrible idea and extremely unfair to Massachusetts property owners. No, it’s not just terrible. It’s crazy and socialist. First, any sale of rental property is always subject to an existing tenancy or lease. That’s been the law in Massachusetts for centuries. So renters are already protected from displacement. Second, the proposal would wreck havoc on the local real estate market and skew free market dynamics. The Cambridge law would give tenants with no skin in the game 8 months to purchase a property. That’s 3 real estate cycles! Knowing that any offer would be subject to a tenant right of first refusal, investors would avoid making offers for occupied properties for sale, or would reduce offering prices, thus chilling sales. Tenants would be able to “flip” their right of first refusal to local nonprofits for affordable housing, walking away with a tidy profit. There are much better ways to create affordable housing than this idea.

Update (3/6/18): After Owner Outcry, Cambridge City Council Votes Down Proposal

Cambridge MA Tenant Right of First Refusal Home Rule Petition by Richard Vetstein on Scribd

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