Amir Shahsavari
It’s time for a sober conversation about rent control.
Boston’s rent control proposal isn’t just about imposing a rental cap. It’s a government takeover of the private housing industry.
It creates a rental regulatory board – an amorphous and autocratic government agency that will dictate relationships between landlords and tenants, while attempting to control the market supply and moderate demand. It also redefines evictions into an obscure “just cause” concept, having one set of laws for Massachusetts courts and a second, far more stringent set of laws for the Boston housing court and, subsequently, any community that opts-in to rent control with a home rule petition.
This will redefine the way housing works in Massachusetts – harming the property owners who provide the housing and the tenants who depend on them for safe, maintained living spaces.
There is a housing supply crisis. There is also a housing affordability dilemma, where tenants struggle with higher rents, as owners struggle with rising operating costs, including taxes, insurance, mortgage, maintenance and repairs.
Both are exacerbated by a worsening economy. Substantial interest rate increases have lessened the funds available for developers to build and invest in housing, combined with record high inflation and surging energy prices. Meanwhile, banks need to loan money where they, too, will profit. Current market conditions are challenging – and that should preempt any discussions about new, excessive, government regulations.
The housing shortage exists because sufficient new housing hasn’t been built. This could be traced back to market fear following the 2008 recession. Massachusetts and even Boston, despite the addition of 45,000 new housing units built in the last decade, are both woefully behind. Growth must be stimulated through developer incentives, making zoning codes and permitting processes less stringent and combating NIMBYism.
Supply of New Housing Falling
There is cognitive dissonance about the housing supply numbers. In rent control hearings, officials say the new laws won’t impact production, yet numbers of new housing units approved declined 74 percent in Boston from 2021 to 2022. Looking at building permits pulled in the same time period – actual shovels in the ground – the decline is 94 percent. We can deny the existence of this data, but at some point, the numbers will speak louder than words. That is the pre-rent control reality: There currently is, and will continue to be, a greatly decreased supply of new housing built in Boston.
The investment sector is withdrawing from markets where excessive regulations are merely suggested. It may not be possible to quantify the billions of development dollars already lost, as reluctant investors fear Boston is unsuitable for present and future investment.
City officials tell us that demand to build housing in Boston is endless. However, industry voices we hear from reflect concern about the burdensome conditions of potential rent stabilization; policies like the Tenant Opportunity to Purchase Act (TOPA); increased linkage fees; the potential restructuring of the Boston Planning & Development Agency delaying an already cumbersome permitting morass; Building Emissions and Reduction Disclosure (BERDO) reporting requirements; and exorbitant energy costs.
And they are looking elsewhere – Southern New Hampshire, Rhode Island and, for now, Greater Boston’s suburbs, among other places. Whether or not these policy ideas may have been apt for pre-pandemic realities, they certainly do not work in the economy we face today.
These market conditions are not the fault of housing providers. Yet landlords and private developers are blamed for this unfortunate conflation of circumstances. SPOA hears regularly from small landlords, who provide over 60 percent of the city’s rental housing, leaving the sector. Amid current pressures, these housing providers fear a potential rent control system will deny the collection of their hard-earned rental income and the removal of difficult tenants, as their properties fall into disrepair. Restricting owners from not renewing leases, even when they expire, is also troubling, along with potential relocation fees costing owners many thousands of dollars per tenant.
Moreover, the departure of these owners will reduce the supply of existing rental housing, much of it affordably priced, as rental units are converted to condominiums.
A Question for the Legislature
The Massachusetts legislature will ultimately decide whether Boston’s rent control proposal becomes law. Its members should ask themselves where the financial health and well-being of the state ranks on their list of priorities.
Innovative, smart and hardworking people who run businesses need to be in states that are friendly to enterprise. These people pay taxes and fuel municipal budgets. The comment sections of the latest anti-business articles claim good riddance to these folks, jubilant that there will be less of us in Massachusetts.
But capital is mobile. For now, coffers are flush with COVID funds, but those won’t last forever. What happens when commercial property values fall as investors move to greener pastures?
People are mobile, too: 110,000 residents left Massachusetts since the onset of the pandemic. This trend will likely continue. The pandemic brought quality of life issues to the forefront for all of us. What’s harder? Working through it or moving on? People like to be where they are wanted.
The elected officials of Massachusetts must decide what kind of state they want to lead.
Amir Shahsavari is the vice president of the Small Property Owners Association.
