Mass Alliance of HUD Tenants
42 Seaverns Avenue/Jamaica Plain/MA/02130
617-522-5133/617-233-1885 [email protected]
To: Ricardo Arroyo, Chair Date: March 2, 2023
Government Operations Committee
Re: Testimony to support and amend Mayor Wu’s proposed Home Rule Petition to Stabilize Rents
From: Michael Kane, Director, Mass Alliance of HUD Tenants (MAHT)
Member, Mayor’s Rent Stabilization Advisory Committee
Thank you for today’s hearing on Mayor Wu’s proposed Home Rule Petition. MAHT is here to support Mayor Wu’s Home Rule Petition, and to propose amendments to strengthen it.
MAHT is a coalition of tenant groups in privately-owned, government assisted housing in Eastern and Central Massachusetts. Since 1983, MAHT has helped preserve more than 8,000 subsidized apartments in Boston that were at risk of conversion to high market rents, one building at a time, through tenant organizing.
At the same time, Boston has lost more than 2,100 previously affordable apartments by conversion to high market rents since 1996. Another 928 are at risk of conversion today, including the Forbes Building in Jamaica Plain and Babcock Towers in Brighton. Elderly and disabled tenants at the Forbes, who face up to $1,200 per month rent increases in 2023, urgently need rent stabilization to avoid mass displacement.
Mayor Wu is to be commended for her visionary leadership and courage in proposing a Rent Stabilization proposal in response to Boston’s rental housing crisis. Likewise, a majority of the City Council is to be commended for evident support for rent stabilization, for the first time since the 1970’s. For the 2/3 of Boston voters who affirmed our support for rent control in the 2021 election, this is an exciting and hopeful time. Together, our growing, powerful movement has begun to chip away at the anti-regulation climate at the Statehouse.
Since the repeal of Boston’s “expiring use” rent control by the legislature in 1995, the City Council and three Mayors have unanimously supported MAHT’s Home Rule Petition to restore controls to “expiring use” housing. We appreciate the Council’s vote to re-file this measure in October 2022. While Statehouse leaders have blocked passage of Boston’s “expiring use” HRP--and most attempts to regulate real estate markets--since the late 1990’s, strong leadership by Mayor Wu and the Council, and growing support statewide, offers hope that Boston’s Home Rule proposals, and/or statewide enabling legislation, can be passed in this legislative session.
MAHT offers these recommendations for amendments to strengthen the Mayor’s HRP:
1) Limit Annual Rent Increases to the CPI, with a 5% “cap”. The Mayor proposes to allow annual rent increases of 6% + inflation, to be capped at 10%/year. MAHT urges the Council to limit allowable increases to the annual CPI inflation rate for Greater Boston, with an upper limit cap of 5%. The 6% add-on is overly generous and, in the extremely tight Boston market, would result in corporate landlords raising rents by 6% each year, beyond inflation—whatever the market will bear. 6 Incomes of Boston’s working class tenants are not going up by 6%—why should wealthy landlords and corporations gain even more?
The Mayor’s proposal also allows landlords to request exceptions to the annual cap in order to achieve a “fair net operating income” and to pass along documented increases in operating costs—utilities, taxes, etc—or major capital repairs. A CPI cap should be more than adequate to allow covered landlords to recoup their actual
costs and make a fair rate of return.
Why allow a “cap” greater than the CPI? Any increase above the inflation rate, beyond what is needed to operate their buildings, constitutes unearned speculative gains, a transfer of income from renters to owners. This is the very definition of “rent gouging”. Absentee corporate owners should be reined in from further exploitation of Boston’s lowest income renters.
Boston landlords have been piling on speculative gains and windfall profits for many decades, ever since the 1976 adoption of Vacancy Control. The 1994 repeal of rent control wiped out protections for the remaining 22,000 mostly elderly renters. After the referendum, area rents more than doubled within a few years, with little comparable investment in the housing stock. This reflected an enormous transfer of income and wealth from low and middle income tenants, to the owners of property—a major driver of the racialized extremes of wealth, poverty and inequality that plague our city today.
At the time, the real estate industry promised a golden age of affordable housing production if only rent controls were abolished. This, of course, was a Big Lie, just like the lies mailed to homeowners across the city last week. We challenge the industry to name a single unit of housing affordable to low income people in Boston built by the private sector since 1995, without government mandates and/or deep subsidies.
Boston rents are already historically high—the second highest in the US, according to Zumper. Rents increased last year by 16%, more than reversing temporary reductions from the COVID year. $3,000/month 1-bedroom rents are now the norm.
Absentee landlords have been taking advantage of a severe housing shortage by forcing renters to pay ever higher amounts and overcrowd to obtain or stay in their homes. As a result, half of all renters, today pay more than 30% of their income on rent. The impact is even greater for low-income tenants, predominantly people of color: 78% of families earning less than $50,000/year pay excessive rents.
For extremely low-income tenants on fixed incomes, like the elderly or disabled tenants at the Forbes, even an increase limited to the CPI or 5%, let alone 6% plus the CPI, is a severe cost burden and assault on their quality of life. Corporate owners such as those at the Forbes, should be allowed rent increases only for actual cost increases. The CPI, “capped” at 5%, should be the maximum allowed.
Other cities “cap” rent increases at a percentage of CPI. That is because typically 1/3 of a landlord’s costs are fixed debt service costs and do not go up with inflation; general inflation, as measured by the CPI, only affects the other, variable 2/3 of building expenses (utilities, maintenance, staff salaries, insurance, etc). Cities with a percent of CPI cap, also allow an exception for documented expenses increases (extraordinary utility bills or repair needs).
Limiting annual rent increases to the rate of inflation has drawn broad support in the City’s Listening Sessions in summer 2022 and the Council hearing last week. In addition, voters in three cities overwhelmingly passed referenda in November 2022 to limit rent increases below the CPI. Portland, Maine, voted by a margin of 55% to 45%, to limit annual rent increases to 70% of CPI in the Greater Boston Metro Area. Pasadena, California voted to limit rent increases to 75% of CPI, by a margin of 54% to 46%. Voters in Richmond, California, voted 59% to 41% to limit annual rent hikes to 60% of CPI or 3%, whichever is lower. These margins indicate the rolling wave of voter sentiment nationwide that “ rents are too damn high.”
It has been suggested that making the Boston HRP “stronger” by lowering the cap to CPI, will diminish chances of passage at the Statehouse. We disagree. As Mel King famously said, “We should fight for what we really want, not settle for what we think we can get.” Massachusetts voters are overwhelmingly in support of strong measures to control rents, as reflected in a recent Mass poll by Mass Inc. Voters will be galvanized more, and mobilize in greater measure, for stronger legislation that people can plainly see would benefit them. With a new Mayor, Council and Governor, and the formation of a Housing for All Caucus at the Statehouse, the time is right to “fight for what we really want” at the Statehouse—or by initiative petition and referendum, if necessary.
2)Help Stop VD: Close the Vacancy Decontrol loophole. The Mayor’s proposal allows unlimited rent increases when a unit becomes vacant. Although the new tenant’s unit would be “recontroled” and subject to the rent cap afterwards, this policy of “Market Re-set” is still a form of Vacancy Decontrol (VD) that will drive up rents overall and provide a powerful incentive for landlords to harass tenants to move out, as happened in New York City before the legislature voted to close this loophole in 2019.
Although the Mayor’s proposal includes strong “Just Cause” provisions that would theoretically discourage landlords from attempting to push tenants out, in practice, landlords would have a powerful financial incentive to drive out tenants, “by hook or by crook”. In New York City, VD resulted in landlords filing bogus infractions or eviction threats; performing loud and intrusive “repairs” in adjacent units; utility shutoffs; foot dragging on health and safety repairs, all with the aim of driving out tenants in order to reap higher rents. Although tenants may have “just cause” eviction protections and habitability rights, in reality the imbalance of power between landlords and tenants in the buildings and in the courts, puts tenants at great risk and will encourage landlords to harass.
In California, a September 2022 study by the Tener Center at UC/Berkeley has confirmed that “turnover” rents as people move out are substantially higher than the 10% statewide rent cap adopted in 2019. 46% of rental listings statewide in 2022 increased by at least 14%. Only 8% hit that threshold in 2019. Monthly rents in these apartments are $372 higher than just a year ago. Ominously, rent increases are steepest in lower-rent communities. We can anticipate the same result in Boston if the VD provision is kept in the Mayor’s proposal.
The Council should amend the Market Reset provision to minimize or remove the “financial incentive” to encourage owners to drive out tenants. Either the annual rent cap should be applied to “turnover” units, or the Market Reset should be set no greater than 5% plus the direct cost of any necessary capital improvements.
3)Protect “Expiring Use” housing. In addition to supporting the separate “expiring use” Home Rule Petition (HD 598) to restore protections for subsidized housing developments that have lost or could lose their subsidized rent protections, we urge the Council to amend the Mayor’s proposal to add unique provisions from HD 598, to give the City additional authority to protect expiring use buildings like the Forbes.
Specifically, we urge inclusion of the section in HD 598 that would allow Boston to require owners to renew expiring subsidy contracts from the federal, state or city governments, and to seek and accept new project-based or tenant-based subsidies to maintain the same lower income profile that was in effect before the “expiring subsidy” contract date. This provision would allow Boston to save the Forbes Building as permanently affordable housing for lower income elderly and handicapped tenants, and to keep a portion of Babcock Towers affordable for low income elderly tenants in the future. Owners with expiring Project Based Section 8 contracts from the U.S. Department of HUD could be required to renew under HUD’s Mark Up to Market program, which guarantees a new HUD subsidy contract paying the full market rent.
HD 589 would also restore rent control and acceptance of subsidies for the 2,100 former governmentally involved apartments that have already been converted to full market rent. The Mayor’s proposed HRP should be amended to allow full re-control of previously subsidized and regulated “expiring use” buildings.
4) Drop 15-year retroactive exemption for new construction. While we support the 15 year exemption for future new construction, the Council should amend the HRP to include the 40,000 apartments built in the past 15 years under rent regulation. The goal of the HRP should be to stabilize rental markets by controlling the “commanding heights” of the corporate-owned rental housing system. These buildings have already been built and are generating generous returns for their investors; they should be regulated along with the rest of the City’s large, absentee corporate-owned stock.
At the same time, exempting future construction for 15 years will provide a stronger defense against the (bogus) charge that rent stabilization will discourage new production. Studies in New Jersey and elsewhere have demonstrated that strong rent controls do NOT discourage new construction; most rent control systems in the US exempt new construction, and new development has not been slowed. The four rent control systems in Massachusetts (Boston, Cambridge, Brookline and Northampton) repealed in 1994 all exempted new construction. Leaving in the new construction exemption going forward, will help insulate Boston’s HRP from the bogus charge that it would stop new development.
5) Require disclosure of beneficial ownership in real estate. The Mayor’s proposal includes a provision to strengthen Boston’s landlord registration system. We urge the Council to further amend this section, to require property owners, as part of recording deeds, to disclose the actual human being that owns the property.
In recent years, there is mounting anecdotal evidence of anonymous Limited Liability Companies (LLCs) snarfing up privately owned rental and condo buildings in residential neighborhoods for speculative purposes, jacking up rents, overcrowding the units (often with students) and stinting on maintenance. LLC’s conceal the actual identify of the owner/investors, often laundering illicit funds and helping the uber-wealthy avoid taxes or accountability. This phenomena is particularly concerning in neighborhoods like Roxbury or East Boston with a high concentration of “naturally occurring affordable housing” vulnerable to this type of speculation.
As the 2018 Institute of Policy Studies Report, Towering Excess, put it, “Getting a Boston Public Library card—a task that requires full disclosure of identify and a real address—should not be harder than creating a Delaware-based shell company and using criminally obtained funds to purchase a luxury condo in Boston.” We urge the Council to amend the HRP to require this disclosure, for both rental and ownership properties.