Government Policy Response to COVID-19 Creates Conditions for Spread of Rent Regulation
The economic effects of COVID-19 have spurred policymakers at all levels of government to employ eviction moratoriums of varying lengths to protect renters, particularly those of low or moderate-income, from displacement. While these restrictions have largely achieved that aim – at the expense of the rental housing industry – the results are merely temporary and have led renters to accumulate large amounts of debt that, based on past industry experience, will never fully be repaid. Unpaid rent will eventually come due and, when it does, renters who have not received rental assistance dollars will be on the hook. In response, renters’ rights advocates have promoted various types of rent regulations as a one of a group of policies intended to protect renters from eviction and displacement.
For example, Our Homes, Our Health is a renter advocacy group that has been pushing for drastic policy changes to protect renters during COVID-19, leaning on the argument that “housing is health care.” Recently, these advocacy groups have begun using a “price-gouging” argument to push for removing rent control preemptions and passing rent cancelation legislation. They contend that COVID-19 and the economic instability it has wrought necessitates regulating rent increases to prevent widespread displacement. With additional aid from Congress looking increasingly unlikely until at least after the election, policymakers could see aggressive rent regulation policies as a low-cost option for cash strapped jurisdictions searching for ways to protect vulnerable renters.
While there are only six states that have either enacted statewide rent regulation or allow for local rent regulation, price gouging laws are much more common, with 36 states having such laws on the books. Generally, price gouging laws prohibit the sale of “necessities” for an excessive price during state and local emergency declarations. COVID-19, and the substantial job losses that have resulted, has bolstered the case for making it more explicit that housing is a necessity covered by price gouging measures or going a step further, enacting even more stringent rent regulation laws.
A specific example of housing activists and organizers deploying this price-gouging strategy is occurring now in Chicago. Alderman Byron Sigcho-Lopez, who supports the passage of rent control to help struggling families, says jobless residents are hurting. He has called on Illinois Governor J.B. Pritzker to honor his campaign promise to enact rent control, “what we’re talking about here is stability in housing…in our neighborhoods.” Pilsen Alliance Director Moises Moreno goes further, calling on the governor to cancel rent and mortgages to prevent widespread displacement of Chicago renters. “We are seven months into the pandemic, and we are still suffering as a community,” Moreno said. “The people can still not afford to pay their rent… or pay their mortgage. Where is the help coming from our governor and our elected officials? We don’t see it.”
Similar arguments are being made in California by the AIDS Healthcare Foundation in support of Proposition 21, a second attempt in less than two years to significantly amend the Costa Hawkins Act of 1995. Costa-Hawkins places necessary restrictions on California localities’ ability to implement rent control, including limiting which units can be regulated and preventing the regulation of rent increases for rent controlled units upon vacancy. In a recent article, Cynthia Davis, Chair of the Board of AIDS Healthcare Foundation, argued that Prop 21 is needed due to the economic impacts of COVID-19 on renters and the legislature’s decision not to cancel rental debt in a compromise bill on evictions passed in August. “As to the COVID-19 crisis and its impact on housing: the medical, humanitarian and economic devastation is unprecedented. As many as 5 million Californians were at risk for eviction at the beginning of September…The hastily enacted legislation [AB 3088] does not wipe out unpaid rent, and landlords can, and many no doubt will, begin to aggressively pursue that debt – and resultant eviction – in civil court starting March 1, 2021.”
The National Apartment Association (NAA) expects more legislatures to propose rent regulation on an emergency basis, opening the door for consideration of more permanent legislative changes. At the state and local level, several jurisdictions have considered or enacted temporary rent freeze or cancellation policies during COVID-19. California and New York have seen rent cancellation bills introduced and gain some support. Washington State, Los Angeles, CA, Washington, DC, as well as Baltimore, Howard County, and Salisbury in Maryland have passed temporary rent freezes through the end of their local emergencies via either executive order or city council ordinance. The Massachusetts legislature is considering similar legislation that would allow cities and towns to implement a rent freeze or rent control for the duration of the state and federal state of emergency declarations due to COVID-19.
At the federal level, Representative Ilhan Omar (D-MN-05) introduced the Rent and Mortgage Cancellation Act back in February, a bill that would have forgiven rent obligations through the end of the Federal Emergency Management Agency’s (FEMA) Declaration of Emergency due to COVID-19. Senator and vice presidential candidate Kamala Harris (D-Calif.) introduced the Rent Emergencies Leave Impacts on Evicted Families (RELIEF) Act in July, a bill that included a ban on rent increases for a full year after enactment. These bills have not gained much traction in the 116th Congress, but if Democrats achieve control of the Senate and the White House in November, it would drastically improve the chances of passage. While presidential candidate Joe Biden is on the record against the implementation of a national rent control policy, he supports the federal government cancelling rent and mortgage payments during the pandemic. In an interview with Good Luck America, Snapchat’s daily politico show, Biden stated that doing so is urgently needed. “There should be rent forgiveness and there should be mortgage forgiveness…It’s critically important to people who are in the lower-income strata.” NAA and its affiliate network have advocated diligently against these types of adverse policy measures and will continue to do so moving forward.
To help combat the ongoing push for increased rent regulation, the rental housing industry will have to use multiple tactics and messages. One example is to articulate the pivotal role apartment properties play in supporting municipal tax bases. Nationwide, apartments contribute $58 billion in taxes to the local economy each year. Cities across the country are facing massive budget shortfalls from the COVID-19 pandemic, increasing the importance of these tax contributions.
A 2019 study by NAA and Capital Policy Analytics quantifies the detrimental effects rent regulation would have, especially in a time of strained municipal budgets. The study modeled the impact of implementing a rent cap on the cities of Chicago, Denver, Seattle, and Portland. Along with significant consequences for maintenance and new construction, a rent cap of seven percent would result in hundreds of million of dollars in property value loss, translating into lower tax collections totaling between $3.5 million (Denver) and $6.1 million (Chicago) annually. This study demonstrates that even what is considered a more conservative ceiling on rent increases would have a substantial impact on property values and tax collection.
Continuing to push for the funding of rental assistance programs will also be crucial to staving off rent regulation policies. If designed appropriately, these programs support struggling renters and housing providers equally and preserve tax contributions and the 17.5 million of jobs supported by the rental housing industry, reducing the perceived need for rent regulation. Like eviction moratoria, rent control and other rent regulation policies fail to address the ongoing housing and financial instability of renters. Eviction and rent restrictions will only exacerbate the housing affordability crisis by placing increased financial pressure on housing providers, especially small mom and pop owners who operate much of the nation’s naturally occurring affordable housing. Balanced housing policy is needed to address the supply and demand imbalance that inflates rents and facilitate the construction of more housing at affordable price points.
Efforts at the Federal, state, and local level to provide financial relief to households and businesses affected by COVID-19 prevented widespread evictions and displacement of renters. However, more needs to be done. On the Federal level, while the inclusion of rental assistance in the House passed HEROES Act was a step in the right direction, the amount is insufficient to fill the gap created by the expanded and extended 12-month eviction moratorium. NAA and its affiliated apartment associations continue to work aggressively on behalf of the rental housing industry to protect our interests and emphasize that more assistance is required to aid struggling owners and operators of rental housing.
To learn more about rent regulation, please contact Alex Rossello, Manager of Public Policy or visit the Rent Regulation Policy Page on the NAA website. For more information on the newest research tools on rent regulation and eviction moratoria from NAA’s research team, please contact Leah Cuffy, Research Analyst.