COVID-19 has created a host of challenges for apartment residents and the companies that house them, as many renters find them disproportionately affected by the financial aftershocks of the pandemic. These challenges around COVID-19 have taken precedence, temporarily slowing down rent control’s spread. However, we anticipate that significant momentum in this direction will build again from now into 2021.
Most notably, there is once again a critical ballot initiative in California set for November that would allow cities to cap rents forever. Moreover, we are seeing many new legislative and legal policies being put in place as COVID-19 mitigation strategies. In many cases, those policies could easily accelerate rent control expansion post-pandemic.
Much depends on how the upcoming election pans out, as shifts in political control could have a significant effect on policy direction. The apartment industry cannot wait to get involved. We need to be sure that near-term responses to the specific challenges caused by COVID-19 are not parlayed into long-term policies that would be not just damaging, but devastating to the apartment industry.
California is Still Ground Zero for Aggressive Policies
While there has been a lot of activity on the federal level and around the country, California remains the epicenter for the most aggressive and progressive policies to date.
Two years ago, the National Multifamily Housing Council (NMHC) joined a broad coalition to overwhelmingly defeat California’s Proposition 10—a ballot initiative that, if passed, would have opened the door to draconian rent control regulations across the state. Now, amid the pandemic, many of the same advocates are launching another ballot initiative called Prop 21 that would allow cities in California to set the price of vacant units, a practice known as vacancy control.
How rent control currently works in California is that, once a unit is vacant, you can raise the rent to market rate. To some degree, it’s a safety valve for the industry. However, Prop 21, which will be voted on in November, would allow cities to cap the price of rent forever—a veritable death knell for the industry.
Like in 2018, the industry will need to raise more than $70 million to win. Failure will cost the industry billions and hurt millions of renters at a time when COVID-19 has already put a strain on their financial and emotional well-being. Moreover, many other states are considering either new rent control laws or tightening existing ones. A loss in California will encourage other states to pursue similar draconian measures.
This is not simply a California problem and why all industry participants need to step up to this threat, even if they do not have units in the state. Please visit www.cfrh.org to donate.
More Pandemic-Related Policies That Pave the Way for Rent Control
While rent control in California is most urgent, there are other policy developments to which the industry needs to be paying close attention. Many rent control advocates are also pivoting to calls for expanded eviction moratoriums and rent cancellation during the crisis, all the while still pressing for more rent control.
Nationally, almost every state has had some sort of eviction limitation, enacted via executive order, state legislature, or limitations in the judicial system itself. This is in addition to the federal eviction protections put in place by the CARES Act, which covered properties with federally backed mortgages and expired July 31.
Similar to the federal eviction moratorium, many of these state and local moratoriums are close to or are expiring, which is creating a lot of noise about an impending wave of evictions. Also related to these moratoriums are some pretty tough pieces of legislation for apartment owners and operators. For example, in several California cities, residents have been given more than 12 months to pay back missed rent.
We are seeing more legislation to ban rent increases and even attempts to cancel rent. Even Democratic presidential hopeful Joe Biden has come out and said we need to cancel rent. Yet this clarion call both minimizes the financial obligations of multifamily owners and operators and fails to even begin to cover the costs.
Both the Democrats and Republicans have released discrete versions of the next stimulus package. There’s a $2 billion price differential between the two packages and a host of differing provisions that lawmakers will have to hash through to arrive at a final relief package. Up for debate are things like eviction moratoriums, mortgage forbearances, rental assistance, unemployment benefits, stimulus checks, and liability protections.
This leaves a lot hanging in the balance for our residents, our industry, and the economy at large, and how it’s settled federally will influence what other policies state and localities enact in response. At the same time, we need to stay on top of what’s happening in state and local jurisdictions—and step in when necessary, as in the case of the upcoming California ballot initiative—to be sure damaging policies are not instituted with only short-term solutions in mind.
