Testimony by Professor Peter Dreier to Seattle Mayor and City Council on state preemption of local rent regulation

Date: Wednesday, September 16, 2015
From: Peter Dreier
To: ed.murray@seattle.gov; council@seattle.gov
Subject: Lessons for Seattle from the Rent Control experience in California and Massachusetts

Dear Mayor Murray and Council members:

I urge you to pass the resolution, sponsored by Council members Nick Licata and Kshama Sawant, asking the state legislature to repeal the law banning localities from enacting rent regulations.

I write as both a policy practitioner and a scholar who is very familiar with the issue of rent control and housing policy in general.  For eight years I served as housing policy advisor to Boston Mayor Ray Flynn and as housing director of the city’s planning and redevelopment agency, the Boston Redevelopment Authority.  I left those positions in 1993 to teach at Occidental College in Los Angeles.  For the past 15 years I have been chair of the Urban & Environmental Policy Department at Occidental College. I have written extensively about housing policy in general and rent regulations in particular.  In 1997, in my capacity as a professor at Occidental, I did a comprehensive study of the efforts by the real estate industry in Massachusetts and California to pre-empt localities from adopting rent regulations of any kind.  The report was commissioned by the New York City local government; at the time, the state government was considering weakening  the rent regulations allowed by local governments in New York State. The effort to weaken rent regulations was successful in Massachusetts but only partially successful in California. Here is a copy of the report: http://www.nycrgb.org/downloads/research/pdf_reports/dreier.pdf.  I drew on this report to publish a number of articles on this topic in scholarly journals, but the report itself is more comprehensive and more accessible. Among other books and articles, I am coauthor of Place Matters: Metropolitics for the 21st Century, currently in its third edition. The book is used in many graduate and undergraduate courses in urban planning and urban policy.

The Massachusetts state government pre-empted local governments from adopting rent control. A number of cities which had adopted local rent regulations, including Boston, were impacted. Boston and adjacent Cambridge experience an immediate wave of rising rents which has not abated, although the scale of rent increases has fluctuated.  The cities’ demographics changed dramatically.  The proportion of low income families, and families of color, declined significantly as rents increased and widescale displacement took place. The number of homeless people increased.  The number of families who double-up and triple-up in overcrowded apartments increased.  Working families, especially those working for wages below the regional and state median, confronted higher and higher rent burdens; the proportion of families paying 50 percent of more of their household income for rent increased significantly. As a result, they had less disposable income, and thus less money to spend in the local economy (retail stores, etc) because so much of their household income was absorbed on rent, much of which went to absentee landlords who did not live in the city and many of whom did not even live in the state.  The trends have continued in the past two decades since I wrote my report.

In California, where many cities had adopted rent control, the real estate industry had sought for many years to pre-empt local rent regulations.  Finally, in 1995, they succeeded in weakening, but not eliminating, local rent regulations. The state legislature passed the Costa Hawkins act, which banned local rent controls but allowed cities to adopt “vacancy decontrol.”  This allows landlords to raise rents to market levels when a tenant leaves, after which cities can regulation rents.  Obviously, this is a way to slowly eliminate rent control. It also creates an incentive for landlords to pressure long-term tenants to leave so they can raise rents to market levels.  Landlords routinely harass long-term tenants, especially the elderly, to leave, resorting to a variety of illegal tactics as well as deferring basic maintenance of apartments.  Many of the same trends that occurred in Massachusetts also happened in California, including in Los Angeles, San Francisco, Santa Monica, and other cities, although they occurred more slowly.  Los Angeles now has more homeless people than any other city in the United States. This is not entirely due to the weakening of rent regulations, but it played a critical role. In the wake of the current severe housing crisis in California cities, there is growing discussion about repealing the Costa-Hawkins law and once again giving cities the authority to adopt full rent control.

There is much research about the impact of rent control.  Research conducted by independent scholars who are not tied to the real estate industry agree that rent control helps preserve economic and racial diversity in a city but does not have any impact on inhibiting new construction of rental housing. Nor does it create a disincentive for landlords to maintain their properties. Rent regulations protect the existing supply of affordable housing. Given the shortage of funding for affordable housing at the federal, state and local levels, it is impossible to address the shortage of affordable by creating new  housing units affordable to low- and moderate-income families.  Even raising the minimum wage to $15/hour – which you did in Seattle and which Los Angeles and a few other cities have now done in the wake of your policy – cannot, on its own, solve this problem.  The “housing wage” – the amount families need to afford a typical apartment rent – is close to $30/hour in Los Angeles.  Finally, it is not possible for cities to build their way out of shortage of affordable housing by building more market-rate housing. This assumes that there is a filtering process, or a trickle down process,  in the housing market.  Instead, there’s a trickle up process; when developers build more market-rate housing, landlords of existing apartments raise rents.

Irrespective of the impact of rent control, the broader issue is one of local control.  Rent control is only one tool that cities can adopt to address the widening gap between family incomes and the price of rental housing, but it is an important one.  The underlying question is whether local governments should have the authority to adopt policies that they consider to be useful and effective in addressing local problems.  I believe they should and I hope you agree and will thus urge the state legislature to give Seattle the authority to adopt whatever rent regulations you considered appropriate to address Seattle’s needs.

Thank you.
Peter Dreier, Ph.D.
Dr. E.P. Clapp Distinguished Professor of Politics
Chair, Urban & Environmental Policy Department
Occidental College
1600 Campus Road
Los Angeles, CA 90041
Phone: (323) 259-2913
Email: dreier@oxy.edu

[Another relevant article by Professor Dreier]
Peter Dreier. “Californians Defend Rent Control”. Montclair, NJ: Rooflines, June 5, 2008. http://www.rooflines.org/941/californians_defend_rent_control

Testimony by Professor Dennis Keating to Seattle Mayor and City Council on state preemption of local rent regulation

Date: Wednesday, September 16, 2015
From: Dennis Keating
To: Mayor and City Council, City of Seattle, Washington
Subject: State preemption of local rent regulation

I have been asked to comment on a Rent Control Resolution to the State of Washington to repeal the legislation banning localities from enacting rent regulation. From my long interest and knowledge of issues related to rent regulation, I am familiar with this issue. I have written extensively about rent regulation, including co-authoring the book entitled "Rent Control: Regulation and the Rental Housing Market" and a forthcoming article entitled "Forty Years of Rent Control' to be published in Cities: International Journal of Urban Policy and Planning (Vol. 49: 121-135).

Whatever you think about the efficacy and impact of the adoption of rent regulation, given differing local rental housing markets and the situation of renters in very tight local rental housing markets, I do not believe that it is sound public policy for state governments to deny to local governments the right to consider polices like rent regulation to address local housing needs. This is also true of other affordable housing policies like Inclusionary Housing to address the needs of low-and-moderate income households. In the case of rent regulation, I believe that the policies of the states of California and New Jersey which allow rent regulation by local option are the best approach to this issue, as opposed to requiring authority from the state before localities can consider the adoption of rent regulation (whether or not the state imposes certain restrictions on what type of rent regulation
is allowed).

Sincerely,

Dennis Keating
Professor, Department of Urban Studies
Levin College of Urban Affairs
Professor, Cleveland Marshall College of Law
Cleveland State University
2121 Euclid Ave.
Cleveland, Ohio 44115
Tel: (216) 687-2298

[A relevant article by Professor Keating]
Dennis Keating & Mitch Kahn. “Rent Control In The New Millennium”. Montclair, NJ: Shelterforce, May / June 2001. http://www.nhi.org/online/issues/117/KeatingKahn.html

Pass the Licata & Sawant Rent Control Resolution

(Testimony to a hearing of a Seattle City Council committee considering a resolution on the Washington state ban on any form of rent regulation)

To the Mayor and City Council of Seattle,

I’m writing to urge you to support the Rent Control Resolution introduced by Councilmembers Licata and Sawant. This resolution calls on the State of Washington to repeal or modify RCW 35.21.830, the state law that prohibits ordinances or other provisions that regulate the amount of rent. It also requests that the U.S. Department of Housing & Urban Development consider whether RCW 35.21.830 is an impediment the State’s obligation to affirmatively further fair housing.

I am probably one of the few citizens left standing who can speak from personal experience to how this state ban on local autonomy was enacted. I was one of the founders of the Seattle Tenants Union in 1975, and served on the executive board of the National Tenants Union in the early 1980s. I volunteered full-time on the Initiative 24 Fair Rent campaign in 1980, and briefly lobbied afterwards in Olympia against the state restrictions.

The real estate and financial industries reportedly raised over $870,000 dollars and spent nearly $500,000 to defeat I-24, a record for city initiatives that may still stand. The I-24 campaign raised and spent $40,000 in support of the initiative. With this 12 to 1 advantage, the opposition to I-24 hired a San Francisco public relations firm, Donald Solem & Associates, that specialized in defeating rent stabilization initiatives. They blanketed the city with an estimated seven mailings to each household opposing I-24. The campaign had little to do with democratic debate, and much to do with the raw power of concentrated wealth to impose its will on electoral processes.

With its remaining war chest and tremendous statewide cloud, real estate and finance went to Olympia and easily pushed the ban on local autonomy through the legislature. There was virtually no investigation or debate: it was a gimme putt for the big money and property guys. And it was a reflection of ignorant resentment, among some legislators from other areas of the state, of the big city that pays a lion’s share of the state’s bills.

As is still the case, restricting local autonomy runs counter to many conservative positions on other issues. Is this hypocritical? It certainly is wrong-headed. Ironically, there  may be no issue on which local autonomy is more sensible and necessary than affordable housing. In Washington state, as in many others, housing markets and issues in big, booming cities like Seattle are qualitatively different from those in most smaller cities and rural areas. One-size-fits-all legislation for the whole state is not a solution, but a barrier to solutions.

Incidentally, have we forgotten that those same real estate and financial industries, and their ideological co-dependents, are guilty of inflating a huge housing bubble and entangling us in a financial crisis that triggered a global Great Recession? Does anyone remember Washington Mutual and credit default swaps? Nobody has gone to jail for these economic crimes, and now the same laissez-faire hucksters are back trying to sell us very similar snake oil: shut out local democracy and accountability; blindly trust the same markets that melted down less than a decade ago.

This vote is not about rent regulations, but about the ability of cities to enact the kinds of measures they see fit to deal with the intractable problems they face of preserving and expanding affordable housing and protecting tenants from the ravages of housing market failures.

However, you should know that modern rent stabilization covers over a million units in New York City, and millions more in hundreds of cities in New Jersey, the District of Columbia, Maryland and California. It is not a rent freeze – the old NYC law dating from World War 2 that imposed a hard ceiling is now close to defunct, and nobody has proposed a similar one anywhere in the U.S. for the past 50 years. The standard model of rent stabilization adopted everywhere allows rents to increase according to a formula usually tied to inflation, and grants landlords further increases when necessary to ensure a reasonable return and to cover improvements. All such laws exclude new construction and many exempt small landlords. Modern empirical studies of their effects have nearly all found that they have no negative effects on rental housing construction or maintenance of existing units, and promote tenant stability by limiting extreme rent spikes and moderating the pace of rent increases in hot markets. They also often help to protect low-income communities, especially those of color, from displacement and gentrification.

If you give us a chance, I think we supporters of modern rent stabilization will be able to convince you that it is a useful tool to preserve existing affordable housing and protect vulnerable tenants, in conjunction with the many promising ideas being considered to stimulate new construction, such as those suggested by the HALA report and the linkage proposal. But for now, all I’m asking is that the City of Seattle show the intestinal fortitude to stand up to the power of concentrated wealth and demand that the state stop tying our hands.

Sincerely yours,

Peter Costantini

Seattle

 

An important afterthought that I would have liked to include:

 

California has demonstrated that voters with long experience with rent regulations believe they should be decided on a local, not state, level.

In 2008, California voters defeated a statewide initiative by the real-estate industry that would have eliminated all rent regulations by a landslide 61% to 39%.

Sixteen cities in California, including Los Angeles, Santa Monica, San Francisco, Oakland and San Jose, have rent stabilization ordinances in effect, many since the 70s. Voters have had three or four decades to evaluate how well they work. Their verdict was clear.

This vote came in spite of a well-funded and deceptive campaign by real-estate and big landlords, who tried to disguise the initiative as one opposing the abuse of eminent domain.

The vote said in effect that a large majority of citizens have found that rent stabilization has worked well in many cities, and should be available as a policy option to others who want to implement it.

This August, the East Bay city of Richmond passed a rent stabilization ordinance, the first new rent regulations anywhere in many years.

Washingtonians may traditionally have mixed feelings about Californians, but in this case we should thank them for demonstrating the value of implementing rent stabilization on a massive scale, and rejecting the proposed statewide ban on it.

Peter Dreier. “Californians Defend Rent Control”. Montclair, NJ: Rooflines, June 5, 2008. http://www.rooflines.org/941/californians_defend_rent_control

Jake Blumgart. "In Defense of Rent Control". Santa Barbara, CA: Pacific Standard Magazine, April 1, 2015. http://www.psmag.com/business-economics/in-defense-of-rent-control

Two related posts:

Testimony by Professor Dennis Keating to Seattle Mayor and City Council on state preemption of local rent regulation. September 18, 2015. http://petepaycheck.blogspot.com/2015/09/testimony-by-professor-dennis-keating.html

Testimony by Professor Peter Dreier to Seattle Mayor and City Council on state preemption of local rent regulation. September 18, 2015. http://petepaycheck.blogspot.com/2015/09/testimony-by-professor-peter-dreier-to.html