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The Rent Is Too High—So Help Is on the Way in Many Cities, States

06/05/2019 5:50 PM | ACTION (Administrator)

By Pamela Ferdinand | Jun 5, 2019

rent-too-high JOSH EDELSON/AFP/Getty Images

When Stasha Powell moved into her one-bedroom apartment in Redwood City, CA, about 26 miles south of San Francisco, the rent was $625 per month. That was 17 years ago.

Today, Powell, 44, faces a rent set to increase within months to $2,600—more than double her current rate of $1,040. And that’s for a 450-square-foot, unfurnished, non-air-conditioned unit in a building with an electrical system so outdated she can’t operate a microwave or even a blow dryer.

Powell says the unprecedented jump in monthly payments leaves her with only one option: to move. Five other tenants will be out by the end of the summer, too, after reaching a confidential agreement with the building’s new owners, she says. The former affordable-housing loan specialist, who lives on her own and has autoimmune health issues, is on disability.

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“The closer it gets to the day I have to get out, the more difficult it gets,” says Powell. “I never wanted to leave. It’s my home.”

As tenants across the nation find themselves in similar straits, lawmakers and activists are pushing rent control and other tenant protection measures as states and local communities struggle to address the dearth of affordable housing. This is the first time in recent years that so many states, including Oregon, California, and Illinois, have considered or taken action at once. Some proposals would overturn existing bans on rent control. Others would establish rent control, expand existing laws, or introduce other types of protections.

The national median rental price of a two-bedroom apartment is $1,185 as of April 30, according to the rental site Apartment List. That's a 1.5% annual rise. However, many cities have seen much higher increases. And those just barely making ends meet are struggling to find—and then keep—a roof over their heads.

What’s astounding about the proposed reform is the breadth of it, says Mark Willis, senior policy fellow with New York University's Furman Center for Real Estate and Urban Policy.

“Something very different is going on now, because the pressure on housing costs is so great in so many places, not just in the cities,” he says.

Stasha Powell outside her apartment in Redwood City, CA. Stasha Powell outside her apartment in Redwood City, CA.

Lisa Wong

As rents surge, more states and cities get involved

Some of the most expensive states, particularly in the high-priced West, have been leading the charge for renter protections.

In February, Oregon became the first state in the nation to impose statewide limits on how much landlords can raise rents. The move was a response to the surge in median rents in recent years.

With some tenants in southwest Portland, OR, reporting increases of 350%, “Oregon couldn’t ignore it anymore,” says Katrina Holland, executive director of the Community Alliance of Tenants. The new legislation would generally cap increases at 7% annually, plus inflation, while exempting new construction for 15 years.

Colorado passed laws in May to give renters more rights, including providing more notice before evictions.

Meanwhile, in California, where a ballot measure to expand rent control failed last November, lawmakers are weighing bills to increase protections for tenants. They include proposed legislation that would prevent all owners of residential properties statewide from raising rents more than 5% a year after inflation. In addition, a new rent control initiative is expected to be put forward as a statewide ballot in 2020.

Illinois is considering repealing its ban on rent control. And Democrats in New York, where rent regulation laws are set to expire June 15, are considering nine bills to protect rent-stabilized and other renters. One would repeal vacancy control, which allows landlords to deregulate rent-stabilized apartments and charge market rent once the cost reaches a certain limit and the occupant leaves. Another would eliminate a provision that allows owners to pass on some costs of building-wide improvements to tenants through permanent rent increases.

Tenants and activists in cities such as Chicago, Boston, Philadelphia, Providence, and Washington, DC, have also rallied for stronger tenant protections. In March, New York City extended its rent regulation laws through April 2021. And Long Beach, CA, where rents have jumped more than 25% in the past five years, now will require landlords who own four or more units to compensate tenants who move out, to help them deal with rent increases of more than 10% a year.

“More and more cities [outside New York City] are experiencing housing affordability crises, so it makes sense that this is something that is coming up as a way to address that,” says Elizabeth Ginsburg, a senior program officer in the New York office of Enterprise Community Partners, a national affordable housing and community development nonprofit.

“At stake is ensuring some level of tenant protection and affordability for particular housing stock but also being cognizant of what is required in order to operate a building, especially an older building,” she says.

From 2005 to 2015, the number of units renting for $2,000 or more per month increased by 97%, according to a 2017 study by Harvard's Joint Center for Housing Studies. Meanwhile, the share renting for less than $800 declined by 2% over the same period. The same report notes that while the overall rental stock increased by more than 6.7 million housing units, the number of units renting for less than $800 declined by more than 260,000.

The magnitude of the crisis is such that it has shifted beyond local politics to where state and national political candidates are making affordable housing policy a key part of their platforms, the Furman Center's Willis notes. Their proposals include renter tax credits, increased federal funding for housing construction, and measures to reform local zoning.

Rent regulation can hurt both big and small landlords

Landlords as well as industry organizations, including the National Association of Realtors®, argue that rent control makes the problem of housing affordability worse. They say that it overburdens and discourages landlords, and fails to address other issues limiting supply, such as zoning and high land costs.

Elaine Golden-Gealer, a Realtor in Santa Monica, CA, is one of those frustrated landlords. The number of available rentals in the area have plummeted as smaller building owners, frustrated by meager profits and burdensome regulations, have moved out of the market. That left professional investors and developers an opportunity to move in.

As a local landlord herself for more than 40 years, Golden-Gealer estimates she lost $250,000 to $300,000 in potential income from just one rent-controlled unit that was occupied for most of that time. When her tenants finally moved, she spent $30,000 remodeling the unit and was able to raise the rent from $1,100 to $2,850 a month.

It’s "almost impossible to own" a rental property," she says. “Every single month, they have a new regulation or rule that protects tenants but has nothing to do with protecting owners, and many are leaving the business.”

On the other hand, rent-control advocates say it's an easy and effective way to provide relief to people who would otherwise be priced out of their homes. Nearly half of the nation's 43 million renters are “cost-burdened,” meaning they spend at least 30% of their income on housing and may have difficulty affording other necessities, according to the Joint Center report.

In Santa Monica, for instance, where median initial rents have hit record highs, a one-bedroom unit or larger would require a household income of more than $100,000 to meet HUD affordability standards, according to the local Rent Control Board's 2018 annual report.

The tenant toll

Jessica Hoehn, 51, an insurance agent who lives in downtown Orlando, FL, knows she’s one of the more fortunate tenants in a city where rents are rising faster than anywhere else in the country. She pays less than $1,400 for a dated 1,100-square-foot townhouse with two bedrooms and one bath. She makes her own repairs so she doesn't have to ask too much of her landlord.

“If you’re making $40,000 a year, you have to have a roommate in order to be able to afford anything around here,” Hoehn says. “If I had to leave today, then I’d be paying $1,200 for a studio or one-bedroom.”

In response to the skyrocketing rents, two Orlando lawmakers tried unsuccessfully to pass legislation that would have given cities and counties more power to put local caps in place. The Redwood City Council in California, meanwhile, unanimously passed two ordinances requiring landlords with rental properties of more than three units to offer minimum one-year lease terms. In certain circumstances, they also must help pay for the relocation of eligible displaced tenants.

Those changes, which took effect at the beginning of the year, won’t help Powell or others who see the housing crunch as only getting worse. Once known as “Deadwood City,” Redwood now boasts a new Google campus; the software development company Informatica; and the Chan Zuckerberg Initiative, the charitable company of the founder of Facebook, Mark Zuckerberg, and his wife, Priscilla Chan.

Powell has shifted gears, too. She’s co-leader of Fair Rents for Redwood City and a member of the city’s Historic Resources Advisory Committee. Whether or not she can find an affordable place to live within city limits, however, remains to be seen.

“It’s my home, so I’m trying,” she says. “My whole life is here.”

Pamela Ferdinand is a freelance journalist, author, and editor based in the Chicago area.

The realtor.com® editorial team highlights a curated selection of product recommendations for your consideration; clicking a link to the retailer that sells the product may earn us a commission.

Source: https://www.realtor.com/news/trends/the-rent-is-too-high-so-help-is-on-the-way-in-many-cities-states/

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