April 2, 2006
Opinionist: Rent Ceiling Elimination Good for Tenants?
Instead of just my coat rack greeting me last week, I had a letter from Borger Management, the company that manages my apartment building and dozens of others in the District. Usually, the only things that are slipped under my door are package pick-up notices and take-out menus, so I was suspicious. In a craftily-worded letter, the company gave a full-out endorsement of the D.C. City Council's possible elimination of the current rent ceiling regulations. In a rather slanted first sentence, the company asserts "For the first time in decades, the City Council
is improving the District's rent control laws." Improving, really? It was late at night, but I was already skeptical that my management company would be compelled to bring such good tidings to my door unless they were going to be benefiting in some way.
Theoretically, price ceilings, what the District now uses for "rent control", limit how high rent can go and aid in the amount of affordable housing available in an area. Various cities in the country have such systems in effect, but some cities, like Boston, have decided to revoke them altogether. Price floors, such as those applied to some agricultural goods in the United States, occur when supply exceeds demand and keeps prices from dipping too low. Looking past the public relations jargon of the management company, taking away limitations on how high rent can go seems like a bad idea. I've worked in press offices before and this letter was spun so tightly that I had a hard time figuring out truth from fiction; the tell-tale sign of some fine propaganda.
Management companies in large cities get away with far more than they should. Though I've been relatively pleased with my building, they have not been overly helpful or efficient with certain things. Prices in the DC area for rents are already sky-high, and many of the buildings get away with sub-par facilities and space because they can. The letter culminates in a summary, plus a statement of what the management company claims to be the obvious:
Under the new proposal, rent control will be based on what you pay in rent. The new law calls for an annual increase of no more than 6% of the current rent plus CPI, but never to exceed 100%. Low-income individuals, senior citizens, disabled persons and DCPS teachers would be subject to CPI increases only. Everyone can understand that. It is simple and straightforward. The current rent control law is incomprehensible to tenants and housing providers alike. They need to be made simpler and eliminating the rent ceilings is a good way to start.
To reiterate, the letter claims that "everyone can understand that". Condescending as such a statement may be, it fails to clarify is the difference between something being understood, and something that is actually a good idea for all parties involved. At the bottom of the letter was a plea to contact "your Council member and tell them that you support abolishing rent ceilings and the balanced rent control bill that passed the committee, and urge them to support the legislation". It was like a push-poll in letter form. It proceeded to list all the names, phone numbers and email addresses for everyone who sits on the District City Council. So, the intended outcome was for me
to be so filled with support for the rent ceiling elimination that I scurry over to my computer or phone to contact my council member, without so much as hearing the other side of the argument.
I don't see how repealing the current price ceilings is going to increase the amount of affordable housing for the area and help renters, though I can see that there are some flaws in the current system. Alas, knowing that rent control is a very complex issue and I myself not being a trained economist or a real estate consultant, I can't offer up any other solutions. But I do take issue with what is slipped under my door from my management company. I know I don't have to read it, but I shouldn't have to receive it, either.
If the management company decided to disseminate accurate information regarding both sides of the argument, fine, I'll take that. But who do they think they're fooling by acting all gung-ho about this repeal? Even Council member Jim Graham was quoted in the Washington Post as saying "The enthusiasm of landlords to abolish the rent ceilings makes me nervous". I deal with enough SPAM and junk paper mail that I don't need biased information slipped under my door in the guise of "this obviously benefits everyone involved".
It seems that for renters, the more time goes by, the more we pay and the less we get. Tenants, treat the property with respect. And management, realize that some of us aren't fans of being greeted with real estate propaganda at 10pm on weekday night. We're far more independent-thinking than you give us credit for.
|
This is sum B.S. Proof that politicians and big business should never be able to sleep in bed together. All this is a attempt to land grab and push out the poor, old, and uneducated to Maryland. How clever!!!!!
"Alas, knowing that rent control is a very complex issue and I myself not being a trained economist or a real estate consultant, I can't offer up any other solutions."
Well, maybe you can read up on the issue and offer something insightful instead of the relatively petty complaint of rent control propaganda under your door. boo hoo.
Yeah, I would have liked to see a bit more of an analysis of what effect DC's rent control has, and what are the possible outcomes from its removal. You don't really hear that much about DC having NY-style rent situations where a retired couple has a three bedroom for 750/month while those just starting out can't get a studio for less than 1800. I don't really hear about that much here.
i have a 1-bdr for $950. the rent ceiling for it is $3350---i'd like that to change. it's completely ridiculous.
JV, wouldn't your situation be an example that a ceiling is useless? There's not much of a difference between having a $3350 ceiling for a one bedroom and having no ceiling at all. So basically, in the absense of a real ceiling, the market has resulted in you getting a pretty reasonable price (at least I'm guessing it's reasonable, it all depends on the location).
In the older sections of town, a lot of (in some places, most)apartments are exempt from rent control anyways (
actually... if i'm not mistaken. under my current lease agreement my rent of $950 could possibly be increased to $3350 in a new lease. under the new proposed legislation as an existing tenant my rent could only be increase 10% ($95).. i would much prefer that to the alternative, which seems to be anywhere in between (950 and 3350).. correct me if i have my facts misunderstood. i'm hesitant to say i love the new legislation for its affects on the prices of vacan apartments in my building, but for existing tenants i think it is much preferred.
If it is the case that this legislation prefers rent increase caps (which help current tenants but hurt new tenants) over rent caps (which, if high, can hurt current tenants but help new tenants by opening up more apartments) I think I'd support it. People not already in an apartment (e.g. new residents) are in a better position to find the best deal and not be bullied into a high rent. People who are already in a lease are always going to accept a rent increase of up to (and probably more than) the cost of finding and moving, which is probably over a thousand dollars, when all said and done.
I think a reasonable cap on rent increases along with a means to let building owners capture larger returns on new tenants is a good balance. As with any robust rent control scheme, enforcement is key. If building owners pressure out rent controled tenants to open their apartment, obviously the system needs to punish them.
As I understand it, the reason that rent ceilings exist under the current system is that the rent increase for a given year can only be a certain percentage of the rent ceiling--so for JV above, the maximum increase would be 3% of $3350, or about $100. (It's been a while, so my percentages might be off). The rent ceiling itself can be raised a certain percentage each year, which maxes out at 12% of the current ceiling, I think.
I don't know that there's such a huge difference between what current tenants would get under the revised plan--it's a question of how vacant units would be presented. The current system sent rent ceilings based on an evaluation of the rental value of comparable units in the same building with increases of up to 12% (I think) for changing value of the real estate itself, which meant that the rental price for two units in the same building would remain in the same range, even if Aunt Ida had been living in one since the Great Depression and Bob the Yuppie just moved into the other (no disrespect to either Ida or Bob).
It seems as though under the current plan, Bob the Yuppie would have to pay Bob the Yuppie prices to get Aunt Ida's apartment, while Aunt Ida would still pay about 9% more each year (6% + CPI).
The current system seems horrifically complex (and I may have completely and utterly mangled it in my description, but that is the basic structure I remember from landlord battles about a year ago), and should probably be altered to be less so--but I'm not sure that the solution on the table is the best one.
It seems to me that in DC's exploding housing market, there needs to be some way of guaranteeing that vacant units don't become a way of pricing low-to-middle-income people out of so-called up-and-coming neighborhoods.
Also, there are reasons for moving that defy market logic as described above--ie, you have kids, and there's a new crackhouse next door, or a 3-hour commute to your new job just isn't feasible if you expect to spend time with your family.
That was a lot longer than I meant it to be.
The most interesting aspect of this piece for me is the idea that a management company can or would distribute political advertising to all its residents in this direct manner. I suppose there's nothing to stop them from advocating with their residents for their favorite Ward 3 candidate, for instance.
And please -- Nicole is a lovely woman! Someone un-stretch her photo! It's all wide compared to the one on the regular staff page!
It's been a while since I needed to worry about this stuff and this is a little (okay, a lot) simplified anyway, so don't count on this in landlord-tenant court, but prepare to be bored:
Under current rent control law, landlords keep track of reasons they could raise the rent by increasing the rent ceiling. Each increase is tracked separately -- that $3350 may consist of a series of $100 and $150 and $200 increases. Every six months, a landlord can select one of those increases and increase the rent by up to that amount; if they don't use the entire amount, they keep the remainder for use later. So long as JV remains in the apartment (signing a new lease for the same apartment wouldn't necessarily count as leaving, but there are some ways around that, and even if none apply some unscrupulous landlords have been known to bank on tenants not knowing their rights), the only way his or her rent could jump to the ceiling with one increase is if there's a single allowable increase making up the difference. Which is rare, but can happen.
Whenever an apartment becomes vacant, a landlord may increase the rent ceiling by either 12 percent or to the amount of the highest rent ceiling for a comparable apartment in the same bulding, and may then increase the rent by the same amount as the rent ceiling increase. So, the big deal with rent ceilings like JV's isn't that the rent ceiling will be charged; it's that the high rent ceiling enables a quick increase in the rent for other units when they come vacant. Another 1BR in JV's building might have been under rent control for an extended period and have a rent ceiling of $750; when it becomes vacant, the landlord can raise its rent ceiling to $3350 -- and has an allowable rent increase of up to $2600.
The mayor's bill, though, as I understand it, doesn't actually eliminate rent ceilings, it just phases them out. Rent increases already reflected in the rent ceiling would still be good until used.
Even once those rent ceiling increases have been moved through to rent, though, and increases are limited to one 10 percent increase per year (which is still a lot, sheesh -- via the miracle of compounding, that works out to a doubling in about seven years), I still have mixed feelings about eliminating rent ceilings. Like the example above, they often don't work, but there are plenty of people for which they do. That person with the $750 rent ceiling, for example, is never getting a rent increase above, say, 4 percent per year.
(I have to admit, though: the whole thing makes me really glad to be a homeowner. Even the interface of property assessments with property tax increase caps has got nothing on rent control for generating fear, uncertainty and doubt.)
There are pros and cons to rent control. (cminus - thanks for the excellent summary.) I think the pros generally outweigh the cons, but regardless of your opinion the cons don't basically apply in gentrifying housing markets like the District's. If you want to read about it, there's a note on the subject in Harvard Law Review, edition 101 at page 1835.
Also, don't trust anything from Borger management. They aren't brutal sort of slumlords who would turn off your heat to get you out, but they're adept at avoiding the spirit of the law by pushing the edges of the letter.
I think you're always better off dealing with a landlord that has only one or a few apartments, even though the rent control laws don't apply. They normally have no idea what the value of the apartment is and typically don't raise rents as frequently as apartment buildings. They seem to be content so long as the rent checks keep clearing.
Carmel Partners (CA based management Company), own 7 properties here and have also slipped these slanted letters under their apartment doors. They too urged for tenants to place their full support behind the D.C. Council's consideration of ending the current rent ceiling system and gave contact info for the Council members.
What about the trend in other cities for apartments to go "condo" creating an even smaller pool of rentals?
Follow the dollar.
Supply and demand.
It just boils down to how much govermental intervention a society needs/tolerates/accepts.
Reid - they know. Even worse, if you're renting a condo from the owner, they'll generally raise the rent to cover a corresponding rise in condo fees - even when the benefit to you as the renter is slim to none.
Really? I leasing a condo and he hasn't raised the rent in at least four years (he didn't even raise them for me over what the previous tenant was paying). I know the old lady that was leasing out the apartment above me was charging the couple that lived there at least 600 less than market rates.
I can understand the old lady not being hip to the market rates, but my apartment is managed by Coldwell Banker on behalf of the owner. They ought to know enough to raise the rent.
I'm not complaining obviously, I'm just saying the only times I've ever heard of people getting ridiculously cheap apartments is when they rent it directly from the owner.
"I don't see how repealing the current price ceilings is going to increase the amount of affordable housing for the area and help renters, though I can see that there are some flaws in the current system."
It is quite simple. The reason a market based rent will increase housing availability is because more people will want to build housing. That helps MOST renters since they can then find an apartment to live in, as opposed to the current system where you have either win a lottery or wait years for a vacant apartment to come up.
If you had any idea how much capital and resources (and risk) it takes to purchase/build a multi-family building, you would realize how much damage rent control can do to a housing market. When first instituted, rent control was yet another "temporary" solution to housing after the war. Of course like most goverment solutions, goverment employees find such policies to be both politically and financially lucrative. For many years, banks would not lend money on apartment buildings in rent-controlled areas, since the risks were so high. That should tell you something.
Rent control, like any price control usually accomplishes the exact opposite of it's intent... making more of a resource available to more people. People love the idea of a chance to win the lottery and getting one of those low rent apartments from those "rich" owners. They can afford it, right? Rent Control then becomes a political power tool and turns our system into the worst form of government we could possibly have. One that devastates and trounces the rights of a small minority of people (the owners) for the benefit of other groups of people (renters and politicians) who have not done any of the hard work required to obtain the resource.
for: Your concern is unwarranted. Newly constructed apartments are exempted from D.C.'s rent control. D.C. Code ยง 42-3502.05 (2001 ed.).