A small group of developers are trying to convince their peers that it’s a safer bet to accept less-strict rent control than to risk it all at the ballot box. iStock illustration
It was all the news last week.
Activists pushing for a statewide cap on rents and a few prominent developers took the Massachusetts political world by surprise by unveiling a so-called “compromise” agreement on a controversial rent control ballot question.
Cities and towns would get the power to enact rent control, if they chose, but the cap on rent increases would be higher, up to a maximum of 5 percent plus the rate of inflation, up to 10 percent. That’s compared to only the rate of inflation – around 2.9 percent in the Boston area per the latest data – up to 5 percent under the proposed ballot question.
In return, Keep Massachusetts Home would drop its ballot question campaign, which would put the draconian statewide rent cap before voters in the midterm elections this November.
Last Tuesday, the activist coalition behind the ballot campaign went public with news that it had reached a deal with a group that included Tom O’Brien, one of Boston’s top developers and who briefly considered a run for mayor last year.
WinnCompanies, one of the nation’s top affordable housing developers, and the Lawrence-based Lupoli Companies, which just broke ground on a mixed-use project in Littleton that includes more than 1,000 housing units, were also named on the industry-side negotiating team.
Here’s the problem: The much-touted agreement is no compromise, but rather a negotiated surrender to progressive activists by a small but influential segment of the local business and real estate industry.
Any Rent Control Is Bad
Think it’s tough getting housing built now in Massachusetts? Just wait until Boston and other cities start adopting rent control, which has been a proven killer of plans for new apartment buildings, as a 2018 Brookings Institution report noted.
And that’s not counting all the apartments that will be converted into condominiums as landlords scramble to find an escape hatch, or the apartments that will simply be pulled off the market because their owners can’t make the economics work.
Washington, D.C. offers a sense of how bad that might get. There, the number of rent-controlled apartments dropped by 14 percent between 1985, when the city passed rent control, and 2020, according to the D.C. Policy Center.
Even a 5 percent drop in the number of existing apartments – let alone three times that – would be catastrophic for an already notoriously tight and expensive rental market like Greater Boston.
The Boston region’s apartments are perennially overcrowded, with residents living with roommates at nearly twice the rate of a peer city like Austin, Texas or Philadelphia, according to Census data. And rent control will do nothing to bring down rents that are among the most expensive in America.
Then there is the well-documented decline in the value of rent-controlled apartments as landlords, fearful of being unable to recoup their costs, keep repairs and maintenance to a minimum.
One 2012 study by MIT scholars found that the value of residential property in Cambridge rose by $1.8 billion after the repeal of rent control in the 1990s. Not only were property owners fixing and upgrading their apartments, but surrounding homes and condos also gained in value as eyesore buildings were fixed and improvements made.
Trade Groups Not Leaping to Embrace Deal
The good news? With a few exceptions, leaders of the Bay State’s business and real estate industries aren’t ready to surrender just yet, even with the rent control proposal having led in the polls now for months.
Some of the state’s leading real estate groups say they weren’t consulted about the agreement and were only notified of the talks a few days before the announcement of the so-called deal.
Leaders of NAIOP Massachusetts, which represents developers across the state, and the Small Property Owners Association said they had no direct talks and, in the case of NAIOP, were only formally contacted on Sunday.
“No compromise has been reached on rent control,” NAIOP said in a statement. The new proposal by rent control activists includes “sections that remain problematic for housing creation and communities.”
Amir Shahsavari, president of SPOA, which is a member of the Housing for Massachusetts coalition, said the supposed compromise deal “came out of the blue.”
Shahsavari noted he owns five rental units, but the revised proposal put forth by activists still lumps him in “with huge corporations like BlackRock and Avalon Bay.”
And while the higher cap on rent increases is “an improvement,” he added that “it still doesn’t help small property owners who are burdened by rising operating expenses.”
Scott Van Voorhis
Legislature Unlikely to Defy Industry
At the end of the day, the only way the proposed deal can work is if they can somehow get it through the Legislature.
It would seem unlikely that Keep Massachusetts Home would drop its campaign if Beacon Hill just sits on the proposal and does nothing, as it does with just every major bill.
And if any major real estate groups representing landlords, Realtors or developers formally come out against it, don’t count on perpetually risk-averse state lawmakers sticking their necks out to pass it – regardless of how much top state senators pushed the idea of a negotiated compromise this spring.
Sure, a Suffolk University/Boston Globe poll last fall found almost 63 percent of residents supported the idea of capping rent increases at 5 percent. But a 2022 MassINC poll found only 42 percent of voters liked the idea of local governments meddling with rents in private housing.
And that’s before the anti-rent control campaign has really begun in earnest. Top real estate and business groups have pledged a $30 million campaign to defeat Keep Massachusetts Home’s proposed statewide rent cap, and have only just started to air some ads and put up some billboards.
It’s far too early to wave the white flag on an issue with such high stakes for everyone across Massachusetts.
Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
