Friday, September 18, 2015

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
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:  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

[Another relevant article by Professor Dreier]
Peter Dreier. “Californians Defend Rent Control”. Montclair, NJ: Rooflines, June 5, 2008.

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