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Think Statewide Rent Control is a Bad Idea? Look What Ocasio-Cortez Is Proposing – By Brian Wallace, SPOSFI member

Posted on 01. Feb, 2020 by in all

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You know how we’re always having to explain San Francisco’s rent control to out-of-state visitors? Well, if New York’s Congressional Representative Alexandria Ocasio-Cortez (“AOC”) has her way, we won’t have to do that anymore, because every state in the nation will have rent control.

The Congresswoman’s ambitious, anti-poverty bill, “A Just Society,” aims, in her words, to “ensure that we are on a path towards shared prosperity for all. A just society guarantees safe, comfortable, and affordable housing. By strengthening our social and economic foundations, we are preparing ourselves to embark on the journey to save our planet by rebuilding our economy and cultivating a just society.”

Expanded Tenant’s Rights Nationwide

Besides imposing new disclosure requirements on corporate rental properties and introducing a national right to counsel for renters facing eviction, the bill’s key component, “A Place to Prosper Act,” calls for a rent cap of 3% or the Consumer Price Index (CPI) for All Urban Consumers, whichever is greater, for housing markets nationwide. The rule would apply specifically to owners with five or more residential properties or two or more manufactured housing parks.

“Rent control is perhaps the most divisive tool available to lawmakers when it comes to housing policy, one

that usually unites economists in opposition and lines up activists in support,” writes CityLab’s Kriston Capps. “AOC’s rent-control proposal goes further than almost anything on the books, including new laws in Oregon and California.” Likewise, housing professionals feel that construction of new apartment buildings, vital to the easing of the affordability crisis, will come to a grinding halt under her proposal.

Rent Control: SF vs. California vs. AOC’s Plan

San Francisco limits yearly rent increases to 60% of the percentage increase in the CPI for All Urban Consumers in the San Francisco-Oakland-San Jose region.  California’s new rent control law, which applies to some eight million renters across the state, caps rent increases at 5% plus CPI, a rate estimated at 8.3% for most of the state for 2020. In AOC’s America, the maximum yearly rent increase of 3% proposal comes closest to San Francisco’s current 2.6% limit.

“It’s absurd,” says Doug Bibby, president and CEO of the National Multifamily Housing Council, referring

to the proposal’s 3% nationwide rent cap. “Investors would move their money to other real estate sectors.

Developers would decide that there are better things to build than apartments in California.” Bibby believes that San Francisco–style rent controls applied to the apartment industry nationwide will tip the scales in a way that makes building new apartments untenable.

Important questions left unaddressed AOC’s nationwide rent control proposal leaves several important questions unanswered. It doesn’t adequately or definitively address vacancy control. “The plain text of the Place to Prosper Act appears to suggest that landlords would be prohibited from raising the price of a rental unit when it goes vacant . . . and the legislation doesn’t mention capital improvements or significant upgrades, either,” notes Capps.

The inherent danger in adopting a national rent control policy is its “one-size-fits-all” approach to America’s multitude of different housing markets. How can rental units in Seattle and New York be compared to those in Des Moines and Oklahoma City? “The proposal imagines a perpetual crisis of escalating rents for tenants and awesome financial returns for landlords, when just a decade ago, just the opposite was true across the entire country. Indeed, home values still haven’t recovered from the recession in all parts of the country,” writes Capps.

Analogies to SF’s “Temporary Emergency Law”

Longtime San Francisco property owners have to wonder if AOC’s federal proposal isn’t a repeat—on a much

grander scale—of San Francisco’s local experience with rent control. In the same way that her proposal comes

with a sense of urgency, San Francisco’s rent control law also started as a “temporary” emergency measure.

But in the 40 years since its passage, the Rent Control Ordinance has morphed into the all-encompassing mega-monster we have today, with over a hundred amendments to date—and surely more to come.  What’s really motivating Ocasio-Cortez?

And finally, one has to wonder which perceived problems AOC wants to solve with a national rent control policy that can’t be addressed locally? Numerous cities, from coast-to-coast, have rent control. This past

February, Oregon became the first state to impose a statewide rent control policy. This month, California begins

a similar measure, AB 1482. Lawmakers in New York and Washington state are considering the same. So

perhaps there’s a larger, not-so-hidden agenda being advanced that, ironically, sees private property as an

unfair taking and shelter as a human right?

Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News.  For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.

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