Last week Seattle City Council member Kshama Sawant* and I got into a conversation about rent control via email, and she provided such a clear and straightforward explanation of her position, that I asked if I could just repost it here to HA. Instead, she got back to me with the following slightly expanded, better formatted, and presumably copy edited version of her initial off-the-cuff response.
Critics have attempted to dismiss Sawant’s affordable housing advocacy as narrow, divisive, and unrealistic—at best a distraction from the real work at hand. But as you will read from the thoughtful response below, that is a gross mischaracterization. Sawant calls for a “comprehensive” approach. She supports using bonding capacity to build publicly owned housing. She supports most of the HALA recommendations, but would go further by including a “robust linkage fee.” Still, I specifically asked about rent control, and that is the focus of her response.
To me, the most compelling policy and political argument Sawant makes is the way she compares rent control to the minimum wage: they are both minimum standards necessary to protect against the natural imbalance of of power between landlord and tenant, or employer and employee. Rent control is not about repealing the market; it’s about reining in its excesses. And according to Sawant, the alleged construction-destroying impacts of rent control are just as unsubstantiated as the alleged job-killing impacts of the minimum wage.
Makes sense. But you can read for yourself:
Which Way for Affordable Housing in Seattle?
Seattle is booming with job growth and a major influx of working people. Yes, we need increased housing supply. Yes, we need zoning changes to build more housing, and to enable a denser and more walkable and accessible city. But why is there such a severe shortage of affordable housing in Seattle? And what is the solution to the problem?
Is It Just about Supply and Demand?
We are told that we need only rely on the so-called “free market.” We are told it is simply about supply and demand. Let developers build, let the supply of market-rate units increase. And at some point, magically, prices will come down and create housing affordability.Not one of the proponents of this trickle-down theory can give a plausible idea, or even so much as a rough estimate, of how many units would have to be built for that point of affordability to be reached. We are asked to go on faith.
Amanda Burden, the director of New York City’s Department of Planning, a couple of years ago acknowledged that she had truly believed that NYC could build its way out of an affordable housing shortage. She said the city “built tremendous amount of housing” with that hope, “and the price of housing didn’t go down at all.”
Why Are We Losing Existing Affordable Units?
Supply and demand do explain why Seattle rents are going up. How much your rent increases, however, is determined by the relative balance of forces between tenants and the real estate lobby. Much the same way that wages and benefits in the workplace are a reflection of how much power workers have, including whether or not they have a union, to allow them to negotiate better working conditions.In the absence of substantial tenant protections, rents tend to not only increase in a high-demand market, but to skyrocket. Why? Because developers and landlords can get away with it.
This opportunity to jack up rents means that tenants residing in market-available affordable units experience massive rent increases, which implies economic eviction. After the tenants are driven out, the previously affordable units are renovated, sometimes even minimally, and then rented for twice or three times the original rents.
What Policies Would Make Housing Affordable?
To actually create new affordable housing, we need a comprehensive policy program. I support most of the recommendations of the HALA committee, although they don’t go far enough. We need a robust linkage fee on big developers to generate a billion dollars to build affordable housing. We must also leverage the City’s bonding capacity to build thousands of units of City-owned affordable housing.But it will take years to build the thousands of affordable housing units that Seattle desperately needs. In the meanwhile, policies that stabilize rent increases are essential in order to prevent price gouging. The citywide wave of economic evictions and displacement will not be stemmed without rent regulation.
Why Rent Control and What Does it Mean?
Price gouging is not inevitable. It happens in the absence of any real protections for tenants in the form of regulation on rent increases, just like worker exploitation happens in the absence of a minimum wage. That’s where rent control comes in.By rent control, we mean linking rent increases to inflation. Landlords could still make profits and finance maintenance, but the massive rent hikes and economic evictions that we are seeing in Seattle would be prohibited.
Contrary to the myth that rent control slows construction and hurts housing supply, the two largest building booms in New York City history occurred in periods of strict rent control, first in the 1920s and again from 1947-1965. Demonizing rent control is inconsistent with what the numbers tell us.
But Republicans Control Olympia, So We can’t Win Rent Control Anyway, So Why Even Discuss It?
Rent controls are most needed in areas with runaway prices, which is typically localized metropolitan regions such as cities or counties. So the real estate lobby has always fought rent control by pouring money into the campaigns of conservative state-level politicians running from rural districts, where constituents are not demanding rent stabilization. Nothing unique about Washington State there.And the only way metropolitan areas have won rent control despite all the real estate lobby money is by building a mass movement in their cities and counties and pushing back against the state. This is exactly what I have proposed as a political strategy here in Seattle. As a first step, Councilmember Licata and I have introduced a resolution to demand that Olympia repeal the ban on all rent regulations. I urge you to sign the petition in support of this resolution.
Rent Control is One of Many Tenant Protections Seattle Needs
We need rent control, but in the meantime we also need to urgently enact other laws to protect tenants. Developer loopholes need to be closed so relocation assistance can be expanded to tenants experiencing economic evictions. Tenants need more than 60-day notice in case of large rent increases (greater than 10 or 20%). Tenants with expiring leases need just-cause eviction protections.Additionally, late fees and move-in costs for renters need to be capped. Penalties for deposit theft need to be increased. And we need a law that will require interest accrued on deposits to be returned to tenants.
To make all this possible, the City must fully fund the enforcement of tenant rights in the same way that we are setting out to enforce labor laws with the new Office of Labor Standards.
I would view the full spectrum of tenant protections (including regulating rents) with a lens similar to workplace rights. Laws such as minimum wage, paid sick leave, anti-discrimination, occupational safety, and the right to unionize haven’t killed jobs or prevented companies from making profits.
These laws protect workers and provide for a better quality of life for working people. Even the proponents of the free market theory are themselves beneficiaries of the gains of labor struggles. The gains from successful housing affordability policies will be no different. The victory on the $15 minimum wage shows what workers can win when they organize and fight back. We need to build a similarly powerful organized movement for housing justice. Let us begin.
* Duh-uh, I’m a Kshama Sawant supporter. Only an idiot would need this disclaimer, but, well, you know….
I’m not sold. Sawant offers a head nod to market forces (e.g. supply and demand), but doesn’t discuss them in any meaningful way. Instead, she launches into advocacy for her policy prescriptions, one of which is a strong pitch for a large investment in public housing financed by fees levied on construction of private housing.
Let’s back up a bit. Rental housing is a business. For an investor, there are two components to the business: Cost and revenue. Investors won’t build or own rental housing if they lose money doing it, so rents must be high enough for investors to recover their costs and make a profit, or they will exit the business.
Providing housing involves certain inherent costs such as land acquisition and construction costs. In Seattle, you also have mandated costs, including mandated design standards (e.g., requiring parking spaces falls under this category) and development fees. Sawant is proposing to raise these fees to pay for publicly owned housing. She’s also proposing to raise other costs incurred by landlords, such as relocation assistance. On the revenue side of the ledger, she’s proposing to regulate the rents that landlords can charge, which will reduce revenue.
Thus, Sawant’s policy prescriptions increase landlords’ costs and reduce their revenue. These policies assume the existence of an extreme market imbalance that allows landlords to reap windfall profits at the expense of tenants. As long as her policies merely attack these windfall profits and allow landlords to still make a normal profit, they shouldn’t kill private investment in rental housing. But if they have the effect of leaving landlords without a return that’s competitive with the returns from other investment options, her policies WILL discourage private investment in rental housing, and that would result in less new housing being built. This loss of units wouldn’t necessarily be offset by increased publicly owned housing. If private development came to a complete halt, the amount of money the city would collect from development fees to pay for publicly owned housing would drop to zero. In that scenario, you would have no new rental housing being built by either the private sector or the public sector.
You can be sure that developers pencil out both their costs and their projection of future rental income before they commit to build. If they are presented with increased city-mandated costs and city-imposed reductions in expected rental income, fewer projects — perhaps none — will survive their risk-reward analysis. Bottom line, Sawant’s proposal can’t help but reduce the number of rental units are provided by private investors.
On paper, this might be okay if there truly is a severe market imbalance producing windfall profits for landlords. But market imbalances are temporary, and investors in rental housing must calculate a project’s profit-loss over a much longer time span than any short-term market imbalance. The market may be producing windfall profits now, but they can’t and don’t assume those conditions will persist over the financial life of their projects. On the other hand, if they see policy changes on the horizon that will squeeze their profits on both the cost and revenue side, their response may be to pack up and run.
So, this is the problem: Seattle is experiencing rapid population growth due to an influx of job seekers, and as a result, needs more housing. Sawant is proposing policies that will discourage private investment in rental housing. The question is whether those policies will merely lop off the windfall profits, which would allow normal development to still occur, or will dig into landlords’ normal profit margin, which would act as a brake on private investment. The answer to that question will determine whether Sawant’s policy prescriptions would benefit renters by making rents more affordable, or would result in a permanent shortage of rental housing in Seattle.
I don’t know how I feel about this issue. I’m conflicted between helping someone and at the same time creating a boondoggle for lack of a better word.
I just notice Roger jumped in, as I was scrolling back up to the posting.
Getting the government involved in building housing may not be the best idea. And I say that not as so much as criticism of the government, but of the people the housing would serve.
Recently moving to NYC, I pay $3000 a month in rent, for a nice place, but it’s only a studio with an alcove, maybe 400 sf.
But I love the smallness of my place, it is perfect for me and or a couple. And I think people living in a compact manner in a city center is more sustainable than the suburbs.
But not everyone needs to live in the city center of you can’t afford it, move to the outskirts.
With moving to NYC, after a year of being empty, I’ve rented my house (in another state) to a roommate for added income and to get over the feeling that the house is going to waste by being empty. I still go home on occasion so I consider this a roommate situation. But I charge him relatively low rent $700 month. And if he mowed the lawn using my tractor I take of $30 for each mowing. So if he mowes 1/week his rent could be as low as $580, including all untitled. The individual is quite, very clean, professional, and seems responsible (it’s only been two months) and he is very conservative. We agreed that in the winter of heating costs got too much that we would talk and additional contribution may be made. But it turns out the individual likes cooling more than heat. So we had a quick discussion on paying some more for current electricity bill. To make a long story short, he doesn’t think he owes me more for cooling. Anyways 3 days later he notified me that he forgot to pay the rent ant it won’t happen again and that I should have it by this Thursday. Anyways…
I thought this guy was ok but now having my doubts, I feel like I’m being taken advantage of. Where can anyone live in a quite community in a nice brand new house with central air and a garage for his car and motorcycle for $580???
Maybe I should have known conservative or liberal that he’s a cheap mother fucker.
I think the prople are part of what would go wrong with government housing. Look at low income housing.
I’m all for helping people out but people have to help themselves to be responsible too.
I walk around NYC and see too many homeless and I think to myself the city has to do more and can do more, but people have to help themselves too. I’m all for rent control, I’d love some control on my rent, but it was my choice to move here.
I share RR’s skepticism. I would also add that it may be time for regional political leadership that seeks to direct patterns of development rather than respond to them. If policy prescriptions like these were to drive down investment in residential development within the city limits of Seattle, where would that investment go?
Over the longer term, does Seattle really want to dig the transportation hole even deeper (pun entirely intended)? Already job creation within the city is outstripping residential development. The impacts are unavoidable, evident, and everywhere. Given the financial structure of ST, and Metro, is it likely that these impacts can be mitigated through additional public transportation investments?
@2,
credit checks.
Say it with me now:
credit checks.
You are a landlord. Not a social services agency. You have a tenant. Not a client. You may not immediately feel comfortable with those relationships. But right now they are yours to enjoy until you decide to sell your house.
I don’t even care if the rent is low and affordable, and money really isn’t the issue. The thing is this: turns out the kind of people who are responsible tenants, pay the rent on time, and don’t punch holes in the walls are exactly the same kind of people who don’t have troubled credit histories. No other indicator for a landlord is as reliable as a credit score. Not income. Not bank statements. Not even rental history. You can order up a credit score online for only a few dollars. The money is well spent. And if you structure your application and lease documents correctly you only buy reports for the people you end up renting to most of the time. Say farewell to hassles with your tenants.
A billion for low income housing in the City’s hands leaves so many unanswered questions. So much could go wrong with that. Perhaps the intentions are good, but I have very serious doubts about the wisdom.
Public housing a lifelong refuge?
http://www.nytimes.com/2015/08......html?_r=0
Ooooohhh, a *petition*! That’ll make Senate Republicans take notice. Pam Roach is nothing if not reasonable when it comes to the people of Seattle making requests.
I am also skeptical of some of her specific policy prescriptions, but I appreciate that she is not just thinking about the problem but offering voters concrete proposals. I may not support her but this is more than I’m hearing from a lot of other candidates. That said, she’s completely out to lunch regarding rent control because a) even if it didn’t affect near-term construction it clearly had adverse effects on the rental markets long-term with specific people locked into awesome rents and newer renters left screwed unless they could acquire a rent-controlled apartment, and b) as alluded to in my first paragraph, even if every single citizen signed that petition, it still isn’t happening.
@4 I did check his credit and it was ok to very good. I get the impression that he is a responsible person, just a tightwad that thinks he’s worth more than he is. I think he made a mistake, I’ll give him the benefit of the doubt, we will see. He just seems like a little off in the head, like little man syndrome, and thinks this if he gives up $50 to me for electricity, that’s all that I’m really asking, that he will have lost the battle, egotysticical conservativE.
@4 the dude recycles everything, and I mean everything. Even a tissue that he’s blown his nose on. Not even sure if that is recyclable. He either has a mental issue or very conscientious to the environment. It’s a month to month lease, but I’m sure that doesn’t matter, I’m sure that there are some renter laws that says he still requires months of notice to end agreement.
They only fear I have is that when j want him out, that he’ll refuse to leave.
Kshama–thank you for the straight talk. Lordy, we need you.