Posted by Halibut on May 24, 1996 at 11:35:20:
In Reply to: Seen on the net - re: Rent Control in Boston posted by Halibut on May 24, 1996 at 11:18:06:
Also seen pertaining to Boston. Most of this sounds like garbage and doesn't
even pass the giggle test. I'd like to hear a different perspective from
someone in Boston.
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A publication of the American Association for Small Property Ownership
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Case Studies of Rent Control in Boston
October 1994
EDITOR's NOTE: On November 8, 1994, one million Massachusetts voters passed
a state-wide ballot referendum (Question 9) to put an end to rent control
and its abuses in the State. The termination date for rent control was set
in the referendum at 1/1/95. But immediately after the vote, the Boston
politicians, along with those in Brookline and Cambridge, sent "home rule"
petitions to the state legislature in an attempt to nullify the voted
effects of the referendum. At the time the referendum passed, only these
three communities maintained rent control. In the ensuing lame duck session
of the Massachusetts legislature, the property owners fought to keep their
hard-won victory and garnered support from many legislators and a
sympathetic media. However, Gov. William Weld, over the objections of small
property owners, sponsored a "compromise" extension of rent control for two
more years to certain classes of tenants.
EXECUTIVE SUMMARY:
Background: For more than twenty years, rent control operated in the City of
Boston as politicians avoided a critical examination of the devastating
effects which rent control brought on property owners, families and
neighborhoods. A report released in October 1994 by the American Association
for Small Property Ownership, a public policy and educational organization,
uncovered the unfairness and inequities of rent control in Boston. Based on
an analysis of 44 actual cases, "Case Studies of Rent Control in Boston"
traced step by step what the property owner had to go through once he or she
became entangled in the system.
Rent control in Boston is expansive and pervasive
Contrary to popular perception, rent control in Boston has not been phased
out. Over 65% of the private, unassisted rental housing market in Boston is
regulated by the Boston Rent Equity Board. More units have been added each
year as the Rent Board enlarged its regulation to include two and three
family dwellings and other properties not previously covered. Despite what
the politicians are saying, more than 7,000 additional units, and probably
more, have been added to the rent control class since "vacancy decontrol"
was established in 1976. Since small property owners are the backbone of the
private housing market in Boston, this deception by the politicians hits the
small property owners particularly hard. Housing units for two and
three-family dwellings, and 4-8 unit apartment buildings, represent 40% of
total housing units, both government and private in the city. That
percentage is higher when government housing is eliminated. Despite this
substantial impact, the politicians have chosen to remain blindly ignorant
of the real facts and have made no attempt whatsoever to gather data on the
effects of rent control. Census figures from the federal government show
that the wild claims by the politicians, that the elderly and poor are being
helped by rent control, are just not supported by the data.
The expansive and pervasive rent control strategy devised by the government
regulators and the politicians has affected all neighborhoods of the city.
The results have been devastating for many property owners and their
families. Lifelong savings have been lost as owners have collapsed under the
weight of a regulatory system which too often is seen as oppressive,
confiscatory and punitive. Entire investments, including both money and
time, have been lost. And some cases have dragged on for years, taking an
enormous emotional and financial toll on both individuals and families.
Rent control covers two and three family homes
As two and three family dwellings are brought increasingly under rent
control (through disqualification of owner-occupancy exemptions, the
combining of adjacent lots, and the recontrol of previously decontrolled
units), many unsuspecting owners, whose properties have been in their
families for many years, are faced with immediate and substantial
liabilities which these families can not absorb. The Hanson family of
Jamaica Plain lost the two family house which had been built in the early
1900's by Bud Hanson's immigrant grandfather. Bill Behan's 86 year old
mother, the widow of a retired Boston police officer, has had to file for
personal bankruptcy to save her home from the auction block. New owners fare
no better. Ann Conroy sold her house in Dorchester at a loss when the Rent
Board denied an owner-occupancy exemption because Ann's father had co-signed
on her mortgage. And, the elderly widow from Harlem, who had recently moved
into her remodeled three family home, had her exemption revoked when, for
estate planning purposes, she conveyed a remainder interest to her daughter.
Rent control affects rehabilitated properties
Those who make investments in their communities by upgrading run-down
buildings, are often penalized when they realize too late that the
"rehabilitation exemption" doesn't mean what it says. The Rent Board, if it
grants one, insists on making this exemption "prospective" (meaning that in
the interim period the rents for the spanking new apartments are set at the
old levels) and the owner is at risk for rent overcharges under threat of
treble damages. It does not take long for these dollars to add up to
hundreds of thousands of dollars. Two men who had rehabilitated the
dilapidated and abandoned shell of a South End settlement house face a
potential liability of $350,000 because of the irrational, illogical and
arguably illegal policies of the Rent Board. And, as Habib Mourad found out,
having had the bad luck of the Rent Board losing his file, meant that he and
his family faced a Sheriff's sale of his home to satisfy a $112,000
judgement, with the bonanza going to several upscale tenants and their
lawyers.
Rent control prevents owners from occupying their properties
The case studies of rent control in Boston showed many instances where the
Rent Board denied occupancy of an apartment to an owner and the owner's
children. In one case, the government regulators went to great lengths to
protect the illegal commercial use of a rent controlled apartment in the
Back Bay which was occupied by a socially prominent couple who were
operating a business out of the apartment in direct violation of the city's
building and zoning laws. The owners, who were residents of Hong Kong, had
bought the building so their young adult children would have safe and secure
housing as the children started out their careers in a foreign city. In
another case, an affluent tenant, also in the Back Bay, prevented a father
from providing housing for his son and family. The irony was that this
affluent tenant did not even live in the rent controlled apartment she was
holding onto but instead resided at a nearby waterside condominium.
Rent control is bad business in Boston
Under rent control, ownership of rental property in Boston becomes a losing
proposition. As previously exempted properties come under the jurisdiction
of the Rent Board, rental income is set so low that it can not support the
level of expenditures, including taxes and maintenance, necessary for the
operation of a building. A survey of the financial condition of case study
participants was made and the findings shed light on what rent control means
in a practical sense for an owner trying to run a business. The findings
showed that median monthly controlled rent of $350 was well below both the
median market rent of $775 and the median monthly expenses of $580 per unit.
Rent control creates a certainty of loss which too frequently must be
included on the owner's balance sheet.
Myths of rent control in Boston
The case studies of rent control in Boston also uncovered several myths
about rent control. First, Boston rent control is not exclusively a Boston
problem. There are several instances where suburban, out-of-state and even
foreign residents have been caught in its web. Then there is the infamous
state statute, chapter 93A, which has been used by plaintiffs' attorneys to
extract huge windfall settlements that are out of proportion to market
realities. Under the rules of the lawyers' game, when someone wins, someone
else loses. The windfalls, often going to middle and upper income tenants
and their attorneys, invariably come at the expense of those it had always
been assumed the system was supposed to help, particularly the older
long-term residents of the city.
Politicians promote deception in the game of winners and losers
So, who does benefit from rent control? What about the poor and those on
limited fixed incomes? Rent control does not work for the very people most
in need of housing assistance because rent controlled apartments can be
rented by people of any income, no matter how high it is. That is why TV
personalities, elected officials, the socially prominent and highly
compensated executives are often found to be living in rent controlled
properties in Boston. But the discrepancies between the facts and fiction of
rent control have been purposely ignored by certain Boston politicians with
the resulting harm falling exclusively on Boston property owners.
The voters of the Commonwealth will decide on November 8 whether to continue
a system that has failed both users and providers of rental housing.
F. Patricia Callahan, President American Assn for Small Property Ownership
10/94
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