Rent Control

Wu Administration Misled Public On Details Of Plan: Corrupt Local Rent Control Boards Can Override Rent Increases, Lifetime Leases Allowed, Small Housing Providers Unfairly Targeted

The Boston City Council just passed Boston Mayor Michelle Wu’s controversial rent control measure by a 11-2 vote. Wu marketed her plan as some sort of reasonable compromise where rents would be capped between 6 – 10% annually. Her PR team also attempted to re-brand rent control as “rent stabilization,” which again implies something softer than traditional rent control, which Massachusetts voters rejected back in the 1990s — because it was always a disastrous failure. The problem with all this is that Michelle Wu flat out misled and lied to the public about the details of her rent control plan. The devil is always in the details, and when you actually read the bill (embedded below), it will become abundantly clear that this is the most extreme rent control policy ever proposed in Massachusetts history. That is not an exaggeration. This plan will wreak havoc in the Boston housing market. It will only take me 5 minutes to explain why below.

The Return of Local Rent Control Boards Which Can Override and Lower Rent Caps

Mayor Wu in her letter transmitting her Rent Control Proposal states, “The maximum allowable rent increase would be set at the Boston Metro Consumer Price Index (CPI) + 6 percent, but in no event could rent for a unit exceed 10% in a year.” This is false. Hidden in the proposal (Sec. 2e-g) is a provision authorizing the return of local rent control boards, filled with political appointees, who have the authority to override the 6-10% cap, and lower the rent control cap on annual increases, or veto rent increases altogether. The bill provides: “The City may provide for fair return standards for the regulation of rent, which may including but are not limited to, changes to permissible rental rates based upon certain maintenance and capital costs and rapid increases in property taxes. . . The City may establish or designate an administrator or board, to promulgate regulations pursuant to this section and govern local rent regulation.”

The 6-10% cap was always a bait-and-switch. The Wu administration and local political rent control boards can simply lower the annual cap whenever they want based on an amorphous “fair return” standard. Depending on the circumstances, a local rent control board could also veto any proposed rent increase. Do you know what happens when housing providers cannot increase the rent while inflation, real estate taxes and maintenance costs are soaring in this weak economy? Take a wild guess. We saw this in the 1970s and 1980s — before left progressives like Mayor Wu were even born. Without enough rental income, small owners cannot afford to make repairs or do renovations, and their properties fall into disrepair. They will be forced to sell to big corporate investors who treat tenants even worse. Neighborhood property values sink, and crime goes up. After rent control was lifted in the mid 1990s, we saw the single greatest housing and development boom in the history of Boston. The Seaport neighborhood was created. Southie because a place for young professionals. Roxbury, Dorchester and Mattapan saw huge public investments in housing and infrastructure. Today, we are seeing entire areas turned around — near the TG Garden, Allston-Brighton, SoWa, Mission Hill, and on and on. That’s not a coincidence.

The return of notorious rent control boards is also a huge problem. If you are old enough, you may remember the stories of out of control, corrupt rent control boards in Boston, Cambridge and Brookline doling out rent controlled units to college professors, doctors, and even state supreme court justice Ruth Abrams, who had a rent controlled apartment in Cambridge. Who will sit on these rent control boards under Wu Control? There are no standards or guidelines in place, and you can bet that ultra left activist Friends of Michelle will be sitting on these powerful boards, accountable to no one, certainly not housing providers or voters.

In all of their many press conferences, TV interviews, and “listening” sessions, which were dominated by tenant and housing activists, you never heard Michelle Wu say a word about the rent control boards or the “fair return standards.” That was intentional, and it was done to mislead the public and play down this proposal as fair and reasonable. Don’t be fooled by the smoke and mirrors. Read the fine print. This is a fugazi.

“Just Cause” Eviction Protections Enacted — Neverending Leases and Lifetime Tenancies Created

If rent control were not bad enough, the bill also includes “just cause eviction” protections for tenants which — and I’m not exaggerating — allows tenants to claim never-ending leases and lifetime tenancies. Now this is the 4th or 5th time that the City has tried to pass “just cause” eviction protections, the latest being the Jim Brooks Act, all of which failed to get enough votes. But somehow now, this incredibly one-sided measure has wound up in the Rent Control bill, and no one even blinked an eye.

The bill gives tenants an unlimited legal right to a lease renewal (even if there is no right of renewal in the lease) for an equivalent term of like duration at the rent controlled rate. Tenants at will have the same unlimited right to renew. There is no limit on the number of times a tenant can request a renewal, so this essentially creates a Never-Ending Lease with the applicable Rent Controlled Cap. Total insanity.

Furthermore, under the “Just Cause” measure, all “no-fault” evictions are prohibited in Massachusetts. These are essentially any eviction other than a non-payment situation, a serious lease violation, or some type of criminal activity. As has been the law for centuries in Massachusetts, a landlord may end a month-to-month tenancy at will with a 30 day notice to vacate. Landlords may also evict tenants who stay on after a lease has expired, or tenants who have refused a renewal request raising the rent. These situations come up all the time — owners want to sell the property; the landlord-tenant relationship has deteriorated beyond repair; a tenant is squatting after the lease expires. In all of these situations, the housing provider is stuck with the tenant. No eviction is permitted. Does that sound crazy to you? It does to me. Even in the case where an owner wants to move back into a rental unit or lease to a family member, the bill requires the payment of a relocation benefit to the tenant, set by the City. This would likely be thousands of dollars.

They call this “Just Cause”? Well, I call it illegal and unconstitutional. These provisions would essentially allow the government to force a housing provider to house a person against their will, indefinitely. Sounds like a violation of the Fifth Amendment Takings Clause and Contracts Clause of the U.S. Constitution. I can assure my readers that I, along with the legal team who challenged the Covid Eviction Moratorium, are looking very closely at the legality of this, as well as the the entire bill. Stay tuned for more developments there.

Small Housing Providers Are Unfairly Targeted

Wu Control unfairly targets smaller “mom and pop” housing providers, excluding large corporate landlords who have built projects within the last 15 years. Small housing providers account for 90% of the housing stock in Boston, according to WGBH Public Broadcasting. All stand alone rental properties built after 2008 would be rent controlled unless one of the units is owner-occupied and has six or fewer units. Units less than 15 years old are exempt. So while newer projects in the Seaport or Back Bay would be exempt from rent control, the family who rents out their condominium or owns a couple rentals in Southie or Dorchester or Roxbury would be subject to rent control. Does this sound fair to you?

Wu Misled Public About Smaller Multi-family Buildings

The Wu administration kept saying their rent control measure does not apply to smaller building with 6 or less units, so to the small landlords, nothing to worry about here. That is another lie. Read the bill. The exclusion on rent control only applies to a 6 or less unit building where the owner lives in the building. A stand alone 2, 3, or 4 family decker house, or a one or two unit condominium building and any other smaller rental property where the owner does not live there WILL BE SUBJECT TO RENT CONTROL.

Condominium Conversion Restrictions

The Wu Control Bill also allows the City to enact a condominium conversion ordinance which would impose a myriad of restrictions on your right to convert a two-three family house or other building into a condominium. Mandatory tenant relocation payments, and notification requirements (up to 1-2 year delays) would be imposed. This, in and of itself, would significantly discourage the creation of new housing units. Condominium units create new tax revenue for the City, and they also allow long time and elderly residents to tap into the equity value of their homes, but this would go by the wayside if there are too many impediments to conversion. It’s just another stupid policy decision by the Wu administration.

Rent Control Is Terrible Public Policy; Studies Show It Backfires

As I have written here, the great thing about the 1994 statewide 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 many 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. Rent controlled owners typically defer repairs and capital improvements, because they aren’t getting enough rental income to make the numbers work. With more run-down rentals, rent control also lowers property values overall in neighborhoods.

Moreover, a recent new National Apartment Association report analyzing the impact if a 3% annual cap on apartment rents in Boston concluded that:
● New apartment supply will drop by more than 700 units per year;
●  Apartment property values will drop by more than $260 million; and
●  Property tax revenue to the City of Boston will drop by more than $2 million annually.

What far left progressives like Mayor Wu fail to appreciate is the basics of micro-economics and supply vs. demand. There is far too little affordable housing in Massachusetts, due in large part to burdensome zoning, lack of available buildable land, and NIMBY neighborhood groups. Imposing an artificial government price control does nothing to address the critical supply issue. To the contrary, it will just make it worse, as studies show rent control results in deferral of landlord repairs and capital improvements and depression of nearby housing stock. If Wu is serious about tackling housing, she must have the City build its own affordable housing projects and incentivize developers to do the same. Otherwise, she’s just playing politics.

On To the State House

I have not seen one article in the media which has raised the above problems with the new rent control boards, their ability to veto rent increases, the just cause eviction measures, the lifetime leases, and the targeting of small housing providers. Not one. PSA to reporters: Do Your Job, and Do It Better. This disaster of a bill now goes to the State House and requires a majority vote and Gov. Healey’s approval. I sincerely hope that legislators take the time to truly review this proposal and get everyone’s input on it. Don’t exclude the rental property owner side like the Wu administration did. In fact, MassLandlords, the leading housing trade association, had to sue the Wu administration to get them to turn over public records and emails concerning how the Mayor’s Rent Stabilization Advisory Committee were selected. Certainly not the transparency Mayor Wu touted in her election campaign….

If you are interested in joining the fight against Rent Control, consider joining MassLandlords. The Small Property Owner’s Association (SPOA) is also engaged in this. The Greater Boston Real Estate Board issued a statement following Wu’s introduction of her plan saying, “rent control, also known as rent stabilization, is a proven failure. It increases housing costs, discourages upkeep and maintenance and disincentivizes construction. We strongly oppose Mayor Wu’s plan to bring government price controls on housing to Boston because it would make the region’s housing crisis even worse. Instead, the city – and all of Massachusetts – should focus on passing pro-housing policies that reduce red tape, encourage construction and lower overall costs.”

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