The Most Silent Threat to Property Rights Keeps Creeping Forward on Beacon Hill by Amir Shahsavari D espite the end of another cold winter in Massachusetts, many small property owners still feel the chill of hostile housing proposals, which would violate their property rights, circulating on Beacon Hill. Among the proposals heard by the Massachusetts State Legislature and postponed for consideration until May 9, 2022 , there is one proposal, in particular, that remains more ominous due to its silent progression in the legislature since last year without sufficient alarm raised by lawmakers and the public. In fact, a version of this silent killer actually passed in the House and Senate in 2021 and would have become law had Governor Charlie Baker not vetoed it just before the end of a legislative session, thereby averting a potential override of his veto. What the governor recognized, which evaded some other officials, was that the proposal would have imposed a government mandate dictating when, how, and to whom property owners could sell their buildings. When this proposal reappeared during the current legislative session, SPOA members testified on behalf of small property owners before the Joint Committee on Housing on October 12, 2021 to oppose the enacting of a mandatory restriction of eligible buyers for their properties. This is often called a “tenant right of first refusal,” but what it amounts to is the government pre- ordaining a small set of buyers, who extend beyond tenants themselves in some cases, while artificially blocking others from purchasing rental properties on the open market. This harms those looking to buy homes and invest in property, along with existing property owners. Furthermore, while it ostensibly helps tenants merge to buy apartment buildings, similar bills passed in Washington, D.C. have not had that effect, but have lowered property values and created a cottage industry of unscrupulous lawyers inserting themselves into the transfer of rental properties. As numbered currently, Senate bill 890 and House bill 1426 would impose a tenant right of first refusal in the sale of rental properties throughout the state. House bill 4208 , meanwhile, is a home rule petition that would apply the same restrictions in the City of Somerville exclusively. If passed, these bills would negatively impact the rental housing stock in Massachusetts, while restricting rental property owners from selling their properties at market value. These bills would also prevent those owners from selling their properties when they deem prudent to do so by creating a lengthy, government-driven process for each property sale. Currently, this proposal is only for apartment buildings, but the concept could potentially expand to single-family homes, where the government would grant preferred local buyers the privilege of purchasing a property before letting an owner sell to the broader market. This violation of property rights for owners would also hurt tenants by leaving them vulnerable to predatory behavior from attorneys and speculators, who have used this situation elsewhere to create needlessly long and drawn-out processes that rarely result in tenants buying properties, while diverting their time from continued on page 3 Rent Control: A Shortsighted Approach to Housing Affordability by Chris Lehman D uring periods of rapid cost increase, price controls are often suggested as a method of keeping goods and services affordable. Unfortunately, while these policies may be intuitively appealing as political slogans, in reality they produce substantial negative side effects without addressing the root cause of the problems they seek to fix. It’s undeniable that, at this point, the Boston area faces a housing affordability crisis. Rents have more than doubled 1 over the past few decades, and the increase in prices shows no sign of abatement. This increase in the price of housing is caused by two factors: rapidly increasing demand for housing and the failure of the housing supply to keep up. The demand side of this equation is something to celebrate, as I’ve written elsewhere: 2 [Boston] has an incredible concentration of knowledge industries, especially in healthcare and biotechnology. Their output is invaluable for the world; Cambridge- based Moderna’s COVID vaccine is the most famous recent example, but countless other inventions and innovations are produced here and applied globally every year. The revenue generated by this output allows the firms that produce it to pay high salaries that attract highly skilled workers from across the world to keep the innovation going. In addition to this economic pull, Boston’s growing cultural attractions help make the city a desirable place to live. continued on page 5 1 https://fred.stlouisfed.org/series/CUURA103SEHA 2 https://www.spoa.com/stable-housing-is-a-key-tool-for- economic-stability/ 840 Summer St, Boston, MA 02127 617-354-5533 www.spoa.com April 2022 Small Property Owners News Small Property Owners Association Dear SPOA members and friends, On January 11, 2022, SPOA testified at a hearing before the Joint Committee on Housing for the State of Massachusetts. Our testimony was in response to a bill that would allow local communities to reinstate rent control. The hearing was over seven hours long! There were 136 parties testifying. 133 of them in favor of implementing Rent Control. ONLY 3 parties, including SPOA, testified against this Rent Control initiative. We got our point across that day—that reinstating rent control would be a disaster for small property owners. But the level of support building for rent control, right of first refusal, transfer taxes, and other destructive policies needs to serve as a wakeup call to every responsible landlord across Massachusetts. If there was ever a time that property owners needed to be represented, it is now! SPOA has been actively engaged in the legislative process. We have testified at hearings and met individually with legislators, including the House and Senate leadership. We have also started to build a strong network of grass roots activists to assist us in ensuring that legislators hear the other side of the story. We need your support in order to continue this important work! House and Senate Bills (H1378, H1429, H1440, H4057, H4208, H4229 and S866, S886, S889 and S894) fall broadly into three categories: Those that seek to overturn the 1994 ballot initiative prohibiting rent control, those that seek to hide vital information from property owners when they are interviewing potential renters, and a bill that would authorize the City of Somerville to create a right-to-purchase requirement. Why are rental property owners being asked to bear an outsized portion of the burden when it comes to solving the affordable housing crisis? Tenant advocates are lobbying legislators that WE, as housing providers, should endure punitive legislative measures as a resolution to this crisis. What can you do? 1) Donate to SPOA to support the important work we are doing. 2) Contact your legislators to lobby them on behalf of housing providers and our rights. If you do not know who your elected officials are, you may find them by following this link: https://malegislature.gov/search/findmylegislator Recently, a fellow landlord met with one of the major proponents for progressive, anti-landlord legislation on the Housing Committee. During this meeting, she admitted that she NEVER hears from housing providers, but exclusively from tenant advocates We are not underrepresented—but unrepresented almost entirely. SPOA has hired lobbyists Richard Tisei and Jim Eisenberg of Preti Strategies to advocate for housing providers at the State House. This has associated costs, and we ask you as professionals in our industry, which is at stake, to help us bear these expenditures so we can continue lobbying for legislative change. SPOA has recently relocated from Cambridge to Boston. We are launching a new website – please look for it at www.SPOA.com. We are seeking to hire an Executive Director. Litigation measures are getting launched in various court systems and SPOA is getting asked to participate. continued on page 3 Make Our Voices Heard by Supporting SPOA Today! by Allison Drescher and Amir Shahsavari 2 SPOA cannot be effective without adequate funding. Could you support our efforts by contributing, $50, $100, $250 or even $1,000? Any assistance you could provide would be greatly appreciated ! Please consider joining SPOA and contributing to our efforts today. We need your help advocating for the rental housing industry on behalf of our members! Yours Sincerely, Allison Drescher Amir Shahsavari President Vice President SPOA SPOA P.S. The next few months will be critical for small property owners as the legislative session ramps up. It’s all hands on deck at SPOA. PLEASE HELP OUR EFFORTS BY SENDING A CONTRIBUTION TODAY! SPOA is also looking for lead sponsors to assist us as we grow. If you are interested in this opportunity, please call 617-354-5533 or email askspoa@gmail.com. Make Our Voices Heard by Supporting SPOA Today! by Allison Drescher and Amir Shahsavari 3 The Most Silent Threat to Property Rights Keeps Creeping Forward on Beacon Hill continued from page 1 finding affordable places to live in the event of an owner’s attempt to sell. Mirroring the implementation of the Tenant Opportunity to Purchase Act (TOPA) in Washington, D.C., which will be addressed further below, a “for sale” sign there is a blinking neon ad to attorneys who have begun promising tenants large sums of money if they obstruct the owner’s rightful attempt to sell the property on the owner’s terms. The attorneys then extort money from the property owner by pushing the owner to pay off each tenant to forgo his or her TOPA “rights.” After delaying the sale of the property, often for a year or longer, the attorneys take the greater share of the property owner’s payoff, yielding little to no advantage to the tenant. Then the attorneys start this process of extortion all over again by hijacking the owner’s effort to sell, in the same way, each time the owner finds a new prospective buyer. Given that a long delay time for each sale would be multiplied for each tenant living at the property, executing a sale on terms favorable to an owner would be essentially impossible. This deliberate and artificial devaluing of property would also negatively impact the property tax revenues for the cities and towns where the properties involved are located. Following estimates about TOPA generating a multi-million dollar industry, efforts have reportedly been initiated to eliminate this policy in Washington, D.C. In her opening remarks, SPOA President Allison Drescher reminded the Committee, per previous testimony, that small rental housing providers supply over half the rental housing in Massachusetts. She added that many housing providers are small business owners who play an essential role in the Bay State’s housing infrastructure. Drescher said that these bills would create confusion, delay, and a series of unprecedented obstacles that will affect both buyers and sellers, while destabilizing the marketplace for multi-family homes at a time when this type of housing is most needed. Drescher emphasized that these bills are unworkable, given that “time is of the essence” for anyone wishing to buy or sell property in the real world. Considering that small housing providers have already been asked to shoulder the burden of providing housing to tenants without income during the pandemic — regardless of the tenants’ ability to pay or their efforts to seek readily available government assistance — Drescher said that placing arbitrary restrictions on how and when owners can sell their properties would only make a bad situation worse. SPOA Vice President Amir Shahsavari testified next. Shahsavari said that the bills would cause a burdensome process of notification and delay, lasting up to eight months or longer, during which time financing opportunities can be lost, while market values can significantly change. Shahsavari added that the bills would not work as intended if they were to pass. Tenants would rarely end up buying the properties that they rent, while those who consider renting the properties will do so in decreasing numbers for fear of continued on page 4 losing money on their investment. Shahsavari drew attention to the failure of TOPA in Washington, D.C., where only 5 percent of renters actually ended up buying their rental properties under this policy. In fact, tenants were found to be assigning their rights to speculators for large sums of money, while delaying the closing process. This resulted in the law being significantly changed and contracted. “Think of the adverse and chilling effect that this experience has on those folks in the D.C. area who consider becoming rental housing providers. We cannot import this poorly conceived and failed policy into Massachusetts— especially now when we desperately need more rental housing providers,” Shahsavari said. Then a SPOA member, who wishes to remain anonymous, concluded the panel’s testimony. He informed the Committee that, similar to many other housing providers, he is an older property owner whose rental income is his “lifeline”, as he has no retirement funds. “My rental properties are my investment. They represent all that I have worked for over the course of my life. To pass a bill that would devaluate them overnight would be devastating and wholly unfair,” he said. “Small rental housing providers like me have the responsibility to maintain their properties and provide safe, clean rental spaces for their tenants. To suggest, however, that tenant rights extend to the ultimate control and disposition of the property is simply unjustifiable in any free society.” The housing provider added that tenants share no risk if mortgages or property taxes go unpaid, and that they bear no responsibility for properties beyond the basic standards of good tenancy. “(Tenants) have no right to interfere with an owner’s right to receive a fair and full price for his or her real estate should (an owner) decide to sell,” said the housing provider, who closed his remarks by adding that these bills would allow for speculators to use tenants and tenant associations to buy properties for less than market value, with no assurance that the properties will become, or be maintained as, affordable. This proposal is no less invasive than giving restaurant patrons the ability to prevent an owner from selling the business to a new operator. Although SPOA members are dedicated to increasing rental housing stock and to promoting the supply of maintained and affordable housing, the policies defined in these bills fail to promote homeownership, while punishing rental housing providers and free market buyers, as well as tenants and the Commonwealth, by (1) causing delays and complications that extort money from property owners while devaluing their properties, (2) using tenants as pawns in a game where only lawyers and speculators emerge victorious, and (3) decreasing the availability of rental housing. Moreover, these policies will reduce property tax revenues for communities and likely trigger tax increases on the general public to compensate for those lost revenues. It sets a chilling precedent to allow the government to decide who has the right to buy properties, whether they are commercial units, single-family homes, or any other type of asset. If the goal of policy makers is to increase housing stability for tenants, there are other ways to achieve this goal, including vouchers, that do not come solely at the expense of property owners. The SPOA officers, therefore, implored the Committee to resist making permanent and arduous changes to the laws governing rental property, tenants, and property owners, in order not to discourage small housing providers from entering the business, given the important work that we do, now more than ever. Now that these bills are back under consideration at the State House in 2022, it is most essential to raise awareness about the many threats posed by this stealthy menace before it potentially sneaks through the door one more time. In addition to sending email alerts, SPOA hosted a webinar presentation regarding this issue on April 14 to educate lawmakers and citizens who were previously unaware of the legislation’s deadly impact 1 . Please join us in opposing these dangerous bills by contacting the governor and your local representatives to voice your concerns. Given that a previous version of TOPA almost became law if it were not for a last minute save, it is clear that this threat remains very real and imminent, especially if there is more time left on the clock when the bills are reconsidered on May 9 , barring another extension. Thus, we urge you to contact your representatives with heightened urgency. 1 You can view a recording of the full webinar at https://tinyurl.com/SPOA-webinar-04-14-22 The Most Silent Threat to Property Rights Keeps Creeping Forward on Beacon Hill continued from page 4 4 The supply side, on the other hand, is a problem. Zoning and other land use regulations dramatically increase the cost and complexity of building new housing, suppressing the number of available units and artificially inflating the price of the units that exist. As of 2006 3 , Boston was the second most regulated metropolitan area in the country, and it continues to lag significantly behind other large metros 4 in terms of new housing construction. Increasing demand and stagnant supply have predictably resulted in skyrocketing housing prices, as shown in the Fed data above. This has made Boston less affordable for everyone, especially low- and middle-income households, which has in turn generated political pressure to do something about the problem. Unfortunately, much of this pressure has been channeled into advocacy for policies that, while they may sound appealing, would do little to address the fundamental economic problems at play here and that would almost certainly produce substantial negative side effects for the current and future residents of Massachusetts. Housing policies that don’t increase the supply of housing can help subsets of the population, but only by imposing costs on other parts of the system. These policies don’t decrease the baseline cost of housing; they just change who’s paying for it. Foremost among these policies is rent control. At a micro level, the lower costs enjoyed by tenants in rent-controlled units come directly at the expense of property owners, many of whom are small landlords who depend on rental income to be able to afford their mortgages. On a macro level, converting market-rate units into rent-controlled units results in a smaller remaining supply of market-rate units, making those units more expensive for other tenants in the market. Rent control also suppresses long-term supply growth by deterring investment, causing market rental rates to climb even higher. Rent control keeps coming up as a solution because it can benefit a subset of current renters/voters in the short term. This makes it a powerful tool for politicians looking for votes in competitive elections, but it is not the right solution to the problem of insufficient housing supply. Even worse, it comes at the expense of future renters and everyone outside of that specific voting region, for instance by pushing people out of Boston into non-rent-controlled cities like Newton that may be less well suited to handle an influx of population. And if Boston’s suburbs in turn implement these policies, the population outflow continues outward to exurbs or different 3 https://realestate.wharton.upenn.edu/wp-content/uploads/2017/03/558.pdf 4 https://constructioncoverage.com/research/cities-investing-the-most-in-new- housing-2020 parts of the country entirely. As a side note, all of this also tends to increase the carbon footprint of the people involved, as residents of dense cities use less energy on both housing and transportation than residents of lower-density cities or non-urban areas. This shifts housing pressure out of a given voting region but does little to solve the underlying problem. It’s worth noting at this point that, unlike with many other questions in economics, there is overwhelming consensus 5 among top economists that rent control doesn’t have a positive impact on housing affordability. This isn’t only theoretical; empirical studies have shown that rent control reduces the supply of available rentals and reduces renter mobility 6 (which results in lower productivity and wages). In Berlin 7 , rent control caused rents for tenants in market-rate apartments to increase faster than in other large German cities. Just last year, St. Paul’s newly approved rent control measure began deterring large investments in the city’s housing 8 . The percentage of economists that believe rent control is the wrong policy for increasing the affordability of housing is nearly as high as the percentage of climatologists who believe climate change is man-made and epidemiologists who believe vaccines are effective at combating COVID-19. This is especially frustrating when real solutions–changing zoning laws to make more housing construction feasible–are available, if somewhat more politically complicated given their tendency to irritate neighbors. Advocates of the rent control bills that are currently in the Massachusetts legislature (H.1378 9 and S.886 10) frequently argue that, since the bills in question only give municipalities the option to implement rent control rather than imposing rent control at the state level, the bills should be unobjectionable; after all, shouldn’t individual cities and towns be able to freely set their own housing policy? This argument would be more reasonable if each municipality in the state were a standalone economic unit, economically independent from its neighbors and other polities within the state. As we know, this is not the case. Every day, hundreds of thousands of people commute into Boston and Cambridge (the two largest cities pushing for rent control) from other parts of Massachusetts for work, school, or other commercial activity. If either of them were to implement rent control, continued on page 6 5 https://www.igmchicago.org/surveys/rent-control/ 6 https://www.aeaweb.org/articles?id=10.1257/aer.20181289 7 https://www.bloomberg.com/opinion/articles/2021-03-02/berlin-s-rent-controls-are- proving-to-be-the-disaster-we-feared 8 https://www.twincities.com/2021/12/06/alatus-lexington-parkway-apartment-project- in-st-paul-has-lost-financing-is-on-hold/ 9 https://malegislature.gov/Bills/192/H1378 10 https://malegislature.gov/Bills/192/S886 5 Rent Control: A Shortsighted Approach to Housing Affordability continued from page 1 6 Rent Control: A Shortsighted Approach to Housing Affordability continued from page 2 the negative effects described above would not be limited to their residents. In effect, the proposed bills would impose a prisoner’s dilemma-like 11 coordination problem on the state’s towns and cities. Any given municipality would be incentivized to defect against the interest of the state as a whole by implementing rent control to favor its existing voters, shifting more of the burden of supplying housing to other municipalities. It’s not that we don’t understand why rent control is an appealing idea. Housing costs in Boston are outrageous as a result of high demand and restrictive zoning, and people 11 https://en.wikipedia.org/wiki/Prisoner%27s_dilemma are desperate for a policy that promises access to Boston’s economic opportunity at low cost. The problem with rent control is that, while it may deliver on this promise to a small subset of the population, it would do so only at the expense of countless other people who would be locked out of the city by the suppressing effect it would have on supply growth. Throughout its history, Boston has grown stronger and more prosperous by opening its doors to newcomers from across the country and around the world. It would be a mistake now to put a ceiling on our future growth by implementing policies like rent control that have repeatedly led to stagnation. For Immediate Release March 24, 2022 BOSTON—On March 10th, Boston Mayor Michelle Wu announced the creation of a 23-member Rent Stabilization Committee. While the group includes tenant advocates, labor unions, and community activists, it lacks any representation from organizations representing small property owners. SPOA strongly objects this omission and questions how a commission can fairly and accurately evaluate rent control, which is what is meant by “rent stabilization,” without the input of the very businesses it is seeking to control. “Most of Boston’s housing stock is provided by small rental property owners, and they aren’t being given a voice at the table. To say the deck is stacked in favor of the radical and outdated idea of rent control is putting it mildly. Small property owners want to be part of the solution, but we can’t be part of the solution if we’re shut out of the process. Just hearing from us isn’t enough; we need a seat at the table,” said SPOA President Allison Drescher. “Small property owners provide more than 60% of housing in the state and are significant contributors to the tax base. Wouldn’t their input be essential to finding real solutions for this complex problem? After all, they are small business owners too, many who have suffered while weathering the pandemic. We all look forward to a return to normalcy which will allow important conversations to take the forefront—like how to confront Boston’s housing affordability crisis.” “Small property owners are being blamed for rising rents in Boston when they are simply a factor of market conditions and rising inflationary costs. Rents go up because costs go up and housing stock is scarce. If the mayor is serious about combating rising housing costs, she needs to focus on production and funding of rental assistance programs, not artificial governmental price controls,” stated SPOA Vice President Amir Shahsavari. “Affordable housing is a very real crisis which benefits from open discussion with all stakeholders. Landlords want to be part of the solution too. Many two and three family units are owned by first generation and minority families whose life’s work is represented by their real estate. Why is there resistance to working together to solve this problem?” The City of Boston cannot enact rent control without authorization from the State Legislature. The Commission plans to meet throughout 2022 with a goal of submitting a proposal to the legislature at the beginning of the 2023-2024 legislative session. SPOA will be testifying at the Commission hearings, which will be open to the public, and will continue its advocacy on Beacon Hill to oppose policies that hurt property owners and do nothing to improve the long-term health of Boston’s housing ecosystem. PRESS RELEASE: Small Property Owners Association Questions Lack of Representation on Wu Rent Control Commission U nder pressure from tenant organizing, the Massachusetts State Legislature passed the Enabling Act of 1970 allowing cities with over 50,000 residents to limit rents in buildings that were constructed before 1969. Buildings with three or less units were exempted from the law. Those cities were Cambridge, Boston, Brookline, Somerville, and Lynn. Despite initially adopting rent control, four cities eventually moved away from strict controls: • Lynn repealed rent control in 1974 • Boston approved vacancy decontrol in 1974 • Somerville’s Board of Aldermen repealed rent control in 1979 • Brookline phased out most of its rent-controlled units in 1991 While other municipalities moved away from controls, Cambridge went in the opposite direction. Cambridge alone had the strictest form of rent control and kept adding regulations. They earned the tongue-in-cheek moniker, “People’s Republic of Cambridge.” A five-member rent control board was created. Its members were appointed by the Cambridge city manager who in turn was appointed by the nine city councillors. The rent control board was a quasi-legal body that conducted hearings about rent increases, evictions, and landlord-tenant disputes. Rules of evidence applied at hearings. Most landlords were unprepared and highly offended by the adversarial nature of interactions at hearings. They bridled at the accusation of gold plating and disallowance of reimbursement for many home improvements. They suspected the pro-tenant administrative staff was advising tenants on how to challenge their landlords. One of the most infamous examples of the tyranny of the Rent Control Board was the case of Helen and Peter Petrillo. In 1988, they were ordered by the Rent Board to jack up their Victorian three-family home in Cambridgeport to legalize a low-ceiling apartment in their basement, turning the three-family into a four-family house, and thus under rent control. On the day the order arrived, Peter Petrillo had a heart attack and later died. Robert Montcreiff was a Cambridge City Councillor who voted for rent control. He explained his thinking on an episode of a popular local CCTV show, Cambridge Inside Out , that aired in 1996. He said, “Times were very different in 1970. It was a different world—Lyndon Johnson’s Model Cities were great, landlords were wicked, and no one studied anything.” The Small Property Owners Association (SPOA) was formed in 1987 by a handful of small landlords. They asked for reform of rent control laws and presented the Cambridge City Council with a list 26 grievances. Other cities with rent control were easing their regulations, but Cambridge was becoming more restrictive. There were hours upon hours of discussion in housing committee hearings and in front of the Cambridge City Council, but not one reform resulted. By 1993, the Cambridge Rent Control handbook had swelled to 103 pages of regulations. Cambridge renters were in the majority by about five tenants to each owner. They were not going to vote to raise their rents. Politicians exploited this situation and didn’t budge an inch on reform to the system. John E. McDonough, a former Massachusetts state representative, described this in his book, Experiencing Politics, A Legislator’s Stories of Government & Health Care . He devoted a chapter to the rent control story in Cambridge, explaining why there could be no change or reform in Cambridge. He cited an old political theory called the Iron Triangle. Simply defined, it is an alliance of bureaucracy (the Rent Control Board), legislature (the Cambridge City Council) and lobby (the Cambridge Civic Association, Cambridge Tenants Union and the Eviction Free Zone). Partially in response to the criticisms leveled by SPOA, the city commissioned a study of the system by a Cambridge consulting group, Abt Associates, Inc. It was known as The Abt Report. The study showed that rent-control tenants were predominantly young, white, single adults or childless couples. Incomes were virtually identical with market rate tenants. Still, the City Council did not enact reform because they had the power of the Iron Triangle to preserve the status quo. continued on page 8 Short History and the Metrics of Rent Control in Cambridge by Linda Levine 7 At about the same time, in 1988, another Cambridge resident named Arthur Maringas, an engineer and a federal auditor by profession, began to suspect that something was amiss in the way rent controlled and unregulated property was taxed by the city. He called the Abt Report a “political masterpiece because everybody thought the report substantiated their viewpoint.” Maringas explained, in front of the City Council, that he didn’t have a viewpoint, he was just an engineer looking at data to come up with a viewpoint. The Abt Report had 545 units in its data base. The Maringas report had 12,385. Using public data, Mr. Maringas examined every single rent-controlled unit and to the extent possible, every single rent-controlled tenant. He worked pro bono and spent hours working at the Cambridge Rent Control Board. He cross-referenced rent controlled units with public data. When he presented his research to the city council, he explained somewhat ironically that doing his work was like reading a good novel as his findings were so dramatic and revealing. For instance, by cross referencing tenant addresses with the city’s auto excise tax records, he learned that many rent-controlled tenants drove luxury cars. Other more specific findings he found were: • Only 13% of the tax subsidized rent-controlled units were occupied by people 62 and older. • 32% of the doctors in the City of Cambridge lived in tax-subsidized rent-controlled units. • 39% of the lawyers in the City of Cambridge lived in tax-subsidized rent-controlled units • There were only 347 families living in a total of 12,385 rent-controlled units. • 4% of the tax-subsidized rent-controlled units were occupied by college students. • The City of Cambridge did not know the dollar amount of the rent-controlled tax subsidy. Again, because of its political power, the City Council was unmoved. The Maringas Report was never officially published. There was no Internet in 1988 so the report was not widely distributed or publicized. However, SPOA did not give up. The story of the statewide Q9 initiative referendum and the repeal of rent control in 1994 is legendary and the subject of many other articles. SPOA commissioned their own study published in 1994. They hired Rolf Goetz whose report was titled “Rent Control: Affordable Housing for the Privileged, Not the Poor, a Study on the Impact of Rent Control in Cambridge, Massachusetts.” The four key findings were: 1. Rents in controlled communities were held well below market 2. The housing market tightened under rent control 3. Rent controlled apartments became gentrified 4. Gentrified tenants achieved light rent burdens There is a persisting myth that rent control made for a more diverse citizenry. Fast forward to today and the ability to review census data. That data shows that Cambridge is now a more diverse city. In 1980, during rent control, the population of Whites in Cambridge was 82%, Blacks, 10.9% and Hispanics, 4.9%. In 2020, long after rent control was eliminated, the population of Whites decreased to 66.1%. Blacks decreased only slightly to 10.7% and Hispanics increased substantially to 9.5%. Clearly, there is more diversity today than during rent control. Perhaps an even more important metric is the property tax subsidy. Rent controlled housing was taxed at a much lower rate than uncontrolled property. Rent controlled rent saved tenants hundreds of dollars each month. During the rent control years, the city’s tax base was artificially depressed. It is safe to say that Cambridge did not publicize what that amount was or if it was ever calculated. However, MIT economists calculated that in the decade after decontrol the city gained more than 7.8 billion dollars in appreciation on rising assessments on residential property between 1988 and 2005. continued on page 10 Short History and the Metrics of Rent Control in Cambridge continued from page 5 8 9 T he 2022 spring season on Beacon Hill is consumed primarily with consideration of the state budget. Throughout the month of March, the Joint Committee on Ways and Means held hearings on the entire budget, including housing initiatives. In the second week of April, the Committee will release its budget and then debate it the last week of the month. SPOA will primarily play defense against so-called “Outside Sections,” which are policy-rider amendments tacked on to the budget bill. There are often housing and tenant related amendments filed, mostly ones we oppose, which will be our focus in late April. In May, the process will repeat itself in the Senate. Below are summaries of the bills we have been watching over the course of the session. These summaries include updated information, as well as information described in the previous newsletter. Eviction Sealing A bill that SPOA has watched and testified against appears to be gaining traction. House bill 4505 would allow for the sealing of eviction records without requiring notice to landlords and with very little chance for courts to overrule the sealing of the record once a petition has been made to seal it. The bill would apply to cases where tenants broke the terms of their lease (including in cases where they broke the law) and in so-called “no-fault” evictions as well. Evicted tenants need only wait three years after the eviction and then petition the court. Once sealed, records would be shielded from credit reporting and other information-gathering services. Despite SPOA and many others’ negative testimony, the bill received a favorable report from committee and is now before the House Committee on Bills in the Third Reading; a last stop before it could be debated on the floor of the House. As stated in testimony previously delivered by SPOA, small property owners are small business owners who need to know the business risks that they are taking when they consider potential tenants. A tenant with a history of evictions poses a financial risk, not only to the property owner, but to the other tenants in a building who could face rent increases themselves to cover the costs of a delinquent tenant. It is imperative to avoid placing blindfolds on property owners as they enter into rental agreements. This would have an unjust and negative effect on those who consider renting their properties at a time when we need to encourage more property owners to offer affordable rental housing options, rather than discouraging them from doing so, as would happen with the passage of these bills. COVID Eviction Continuances On March 24, the Senate rejected an amendment to a supplemental budget filed by Senator Jehlen of Somerville that would have taken away judicial discretion in cases of COVID-related continuances in eviction cases and made it mandatory for the courts to continue a case if the defendant had an active application for rental assistance. This change to COVID-era tenant provisions, which have already been extended twice, would have placed even more burden on landlords who already are tasked with negotiating a difficult eviction process. Rent Escrow Per the previous newsletter, SPOA supported House bill 1784, “An Act to Promote Housing Stability,” as it creates a level playing field in cases where Massachusetts law allows for the withholding of rent by a tenant alleging breach of duty or contract by a property owner. In these circumstances, rent payments are too often spent on other items by the time a final verdict is reached in each case. However, by virtue of setting the funds aside, a rent escrow requirement would guarantee that the funds will be available to whichever party the court decides should receive them based on the final outcome of each case. Moreover, a rent escrow requirement would guard against the withholding of rent payments based upon artificial pretenses or excuses that are inappropriate. This is therefore a simple fix to make the system work as intended. SPOA also supported similar House bills, including 1533, 1546, and 1677. Free Attorneys for All Tenants Finally, SPOA has opposed House bill 1911, which would establish a universal — and unreciprocated — right to legal counsel for all tenants into state law at the expense of the tax payer. We think that this bill arises from a false narrative that most, if not all, eviction cases are brought by wealthy property owners against wronged tenants, who are financially vulnerable. In reality, many small property owners face the same financial challenges as their