Vox Populis: A Recap of the Public Hearing on Rent Control
Spencer R. Clark | Marcus & Millichap
“What’s going on here today?” a passerby asked, surveying the crowd gathered outside of Public Hearing Room 3 at the Capitol. “Must be a hot one.”
On January 30, a sizeable crowd gathered to testify at the public hearing of Senate Bill 6400, a proposed repeal of the 1981 rent regulation ban. Landlords, developers, renters, real estate brokers, LGBTQ advocates, Seattle councilmen and women, government employees, in short, anyone and everyone who could have an opinion on the subject came to weigh in.
Here’s a summary of SB 6400 as described by its sponsors. Affordable housing is a human right and necessity. The current rental market, especially in the Puget Sound Region, but also elsewhere in the state, has become inhospitable to the most vulnerable members of society. This inaccessibility hurts small businesses, causing employees to live far from their workplace and spend less at local businesses. Furthermore, the rising living costs contributes to the growing homeless population in Washington. Senate Bill 6400 moves to repeal the standing ban on rent regulation and instead delegate the decision to cities and counties.
The law that SB 6400 would overturn is RCW 35.21.830, introduced on the same ballot as Ronald Reagan’s presidential candidacy in April 1981, prohibiting the rent controls for single family or multiple unit residential rental structures, besides those properties publicly owned or managed.
The arguments in favor of the repeal can be boiled down to numerous stories of Seattleites being pushed out of the city by rent hikes. Those in support of standing law reasoned thus:
1. Inevitability:
If we pass this ordinance, Seattle City Council will inevitably institute rent controls. Passing SB 6400 is not just “starting a conversation” as opponents suggest. Make no mistake; its implementation in Seattle is guaranteed.
2. Unintended Consequences,
Part A:
Rent control harms the same people it intends to help. Units will fall into disrepair, because owners will be unmotivated to spend the money to improve the property. Developers will not build new units, because they won’t be able to make a profit.
3. Unintended Consequences,
Part B:
Rent control harms small landlords who charge fair prices. As operating costs and taxes continue to rise, more small landlords are choosing to exit the rental market. If you add rent control to the mix, the costs outweigh the returns for landlords who will convert the units to condos and sell to protect their financial investments. SB 6400 aims to punish big developers, but it will also punish both renters and private owners.
4. Bad precedent:
By controlling rents, San Francisco has decreased their supply of multifamily units by approximately fifteen percent. New York has seen a decrease in workforce mobility — while it is true that tenants in rent-controlled apartments usually stay in the same place for longer, it is also the case that they can’t afford to move anywhere else. Rent control gives the illusion of stability, while limiting economic freedom.
5. Alternative Solutions:
a) Better tax incentives for developers to build affordable units and B) repealing the Growth Management Act to allow for more density would keep rents down.
If we are anywhere near the height of this economic cycle, it is likely that the demand for rent control will subside in time as it has in previous cycles.
Spencer Clark is a Vice President of Investments at Marcus & Millichap of Seattle. He provides real estate advisory services in the Seattle multifamily market. As a commercial real estate broker and owner, Spencer brings years of experience and personal care to best achieve his clients’ goals. He is available by phone at (206) 826–5709 or email at spencer.clark@marcusmillichap.com. Visit their website at marcusmillichap.com.
