(Image: @seattlecouncil)
Between 2010 and 2018 average rent in the Seattle area rose 69% while inflation in the same region rose just over 20%.
This is a statistic that came up time and again Monday night at City Hall as Seattle City Council member Kshama Sawant released a draft of her controversial rent control proposal that would tie increased rents to the rate of inflation.
“That’s unjust,” Rev. Angela Ying, senior pastor at Bethany United Church of Christ, said at a press conference before the hearing after citing the stat. “That is just plain unjust.”
The unveiling came at a council committee meeting her office has been planning for months as the incumbent’s bid for reelection has made rent control a rallying cry. No other committee members or city council members attended the Monday night special session.
Earlier on Monday, Sawant told CHS she was prepared for a hard fight over rent control.
“It’s going to be hard, it’s not going to be easy,” Sawant said, there will be “some vicious opposition.”
“We have to prepare ourselves for that.”
But Sawant pointed to the “wide range of support we have for rent control” that she says is especially strengthened by many “small landlords” who support more controls “because they don’t gouge their renters.”
Sawant’s universal rent control legislation would link the maximum rent increase to the inflation rate for urban wage earners and clerical workers, which was 3.4% last year in the greater Seattle area, according to the Bureau of Labor Statistics.
Sawant says the measure is free of corporate loopholes.
All residential homes would be covered under the proposal, no matter the type of unit or the date of construction, unlike some rent control laws in other places.
The bill looks to avoid vacancy decontrol, which can allow landlords to sharply increase rents when the current tenant vacates their home. Sawant argues that this “decreases the overall stock of rent-controlled and affordable housing, and creates a perverse incentive for landlords to evict tenants.”
Additionally, if a landlord demolishes rental units to build newer homes, they must replace the homes at the previous rent at a one-to-one ratio. Extra units, beyond the one-to-one requirement, may start at any rent but would then be subject to rent control going forward. Devin Silvernail of the Seattle Renters’ Commission called this aspect of the bill Mandatory Housing Affordability “on steroids.”
Others were not as happy with what Sawant introduced Monday at an evening hearing of the council’s Human Services, Equitable Development, and Renter Rights Committee, which the Socialist Alternative council member chairs.
“I’m a renter and this law scares the s*** out of me,” Logan Bowers, a pot entrepreneur who failed in his bid to challenge Sawant in this year’s election, said on Twitter. “If it ever got beyond a publicly funded campaign event, it’d basically guarantee the duplex unit I rent would be sold as owner-occupied housing before the law took effect and I’d be homeless.”
What her colleagues on the current council might have to say about the legislation unveiled Monday night is yet to be seen. Sawant was the only member of the committee in attendance Monday.
Prior to the unveiling, CHS reported on Sawant’s long march to forming this rent control legislation and what both critics and proponents of rent control can argue about its potential impact on Seattle.
Egan Orion told CHS he thinks Oregon’s rent control (though he calls it “stabilization”), which limits rent increases to 7% annually plus inflation and exempts new construction for 15 years, would be a “more balanced remedy” than Sawant’s plan.
UPDATE 9/26/19: Hours before a debate slated for Thursday night at Town Hall, Orion’s campaign released a statement on Sawant’s proposal:
“Councilmember Sawant’s proposed rent control plan – released six weeks before the election after six years of talking about it – is unworkable. Not only is it illegal under state law, but it’s also not a solution to the issues at hand. At a time where we need thousands of new housing units, this plan would effectively reduce private development to zero.
“I’ve proposed immediate and long term solutions to address our affordable housing crisis, including bold and evidence-backed rent stabilization measures as well as an emergency fund and robust legal resources to keep people in the housing they already have. And, not only are my proposals ambitious, but they’re also realistic – we could actually get them done without punishing renters, small landlords, and private developers. On the City Council, I’ll build coalitions across government and with nonprofits, renters, and developers to fight for real, meaningful efforts to address housing affordability.”
Others point at California’s attempts at solving soaring rents in which yearly rent increases over the next decade will be limited to 5% plus inflation.
Monday night, Sawant expressed interest in working with “small landlords” to improve the bill and stressed that this was only draft legislation.
The bill would also create a rent control board empowered to decide on exemptions to rent control limits in the case of emergencies like natural disasters that cause financial hardship for the building owner. There would be a board made up of five renters and one landlord in each council district appointed by that district’s council member and then elected by the voters starting four years after the bill’s final passage
In the case of rent control avoidance, landlords would have to return triple what they overcharged tenants plus 12% interest as well as cover the cost of any damages like eviction fees.
Sawant staff member Ted Virdone said Monday that these enforcement provisions should be developed over time.
Sawant announced her rent control ordinance in mid-April and her office held a raucous rally in support of the proposal on Capitol Hill in July that the council member did not attend due to ethical concerns about participating in a political rally after ballots had dropped for the August primary. Sawant said Monday that her rent control petition has over 12,000 signatures.
In an early April letter to the council, the Seattle Renters’ Commission urged the body to implement rent control legislation that would be effective pending a lift on the state’s ban on the practice passed in 1981.
The council passed a resolution in 2015 pushing Olympia to allow local governments to implement their own rent control policies.
Rep. Nicole Macri, a Democrat representing Capitol Hill who works for the homelessness services nonprofit Downtown Emergency Service Center, told CHS in April that she isn’t sure there is a path in the Legislature for lifting the statewide ban.
“Maybe those corporate politicians in Olympia didn’t do anything for us the last 40 years, maybe sometime in the next 40 years they will do something,” Sawant said Monday. “We refuse to wait because we don’t believe that they will act, certainly not without the pressure of a movement.”
A bill to repeal the ban in 2018 received a public hearing in the state House, but failed to make it out of committee. Meanwhile, other states, like Oregon, California, and New York, have passed state-wide rent control measures recently.
“Thankfully, we don’t have to be the first ones this time,” Sawant said, referring to the $15 minimum wage effort she spearheaded in the city. “We have a powerful example from multiple states to follow and I have no doubt in my mind that we will be able to win a historic victory in Seattle, as well.”
Sawant tells CHS she expects rent control’s opposition will follow a similar path to past causes like the $15 minimum wage.
“When we first start building the fight, pundits will tell us it is impossible,” she said Monday afternoon. “Try and pull out every trick out of their pocket. Then forced to concede, then, they will say we are doing this voluntarily, out of the goodness of our hearts.”
From here, Sawant’s sights are turning to the crafting of the city’s 2020 budget and the November election. Staffers for Sawant handed out flyers promoting an October 3rd hearing at City Hall to “speak out for affordable housing” and a People’s Budget town hall five days later.
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I assume Kshama has a plan to tie property taxes and other costs of being a landlord in Seattle to inflation too, right?
I’d be open to the idea of brackets. 1500sqft homes pay a different rate than 4000sqft homes, and so. Happy to set a max cap that increases with inflation.
Landlords of controlled rent units could also pay a smaller property tax (to make up for the loss of revenue vs market rate).
Thanks Jay for the blatant xenophobia!
“Additionally, if a landlord demolishes rental units to build newer homes, they must replace the homes at the previous rent at a one-to-one ratio. Extra units, beyond the one-to-one requirement, may start at any rent but would then be subject to rent control going forward. Devin Silvernail of the Seattle Renters’ Commission called this aspect of the bill Mandatory Housing Affordability ‘on steroids.'”
I hadn’t noticed this part last night. If you’re worried about the ‘character’ of Seattle and the destruction of old buildings, then you should be opposed to Sawant’s rent control bill.
Ha – I figured the opposite. This would so dis-incentivize apartment construction that we’d probably see far fewer buildings being torn down… so if you dislike old Seattle being razed, support this.
At very least if this were to improbably pass, a great majority the new construction would be condos. New apartments would become rare indeed.
You can’t put a sign in your front yard saying all races and religions are welcome here, and then fight people moving next door because of “neighborhood character”.
They would be astronomically expensive condos, like the prices we see in NY. In the long term, equally bad as insane rents hikes.
Duh…. of course they’d be expensive. That was my point.
BTW – even if I think that it would (ironically) actually lead to less destruction of neighborhoods, I’m still not in favor of rent control.
I would much prefer to see my district 3 representative work on something that can actually be affected by City of Seattle legislation. If Sawant wants to change state law, she should run for the state legislature, although that didn’t work out for her last time.
Ms. Sawant doesn’t have the support to run for any position outside of D3. She’d get smoked if she ran for a state position or even if Seattle went back to a citywide vote. Our council elections are similar to the House of Representatives and just like how the House has extremely unelectable members outside their district like Louie Gohmert we get the same in Ms. Sawant.
I think that DD was making a joke about exactly what you’re saying, Brian.
Thanks Aaron. I should have prefaced that with “DD, I totally agree…” 😀
Now she wants to hear from small landlords? She has been kicking the crap out of them since she got into office. Why the sudden change of heart?
Because it’s a rational approach Glenn. Why do you froth at the mouth every time an article about Sawant is published?
Just spit-balling here, but maybe it’s because she is a self aggrandizing blowhard, who doesn’t actually represent the interests of the district she supposedly represents?
Mmmm. Not so sure about saying “rational approach” and “Sawant” in the same sentence. She quite famously doesn’t respond to her constituents, and this most recent statement about wanting to hear from small landlords is the first I’ve heard that she wanted to hear from anyone. She of course said that those “good landlords who only raise rent a few percentage points agree with her.” Since as far as I can tell she doesn’t listen to anyone, I wonder if these people actually exist. It seems a bit like Mr. Trump making statements like, “I’m hearing these things from people, it’s what they are saying.”
Keep frothing.
This proposal isn’t intended to work. It’s intended to get her re-elected.
Que the triggered boomers, greedy corporate landlords and slimy developers to piss and moan about their profit margins. Sorry but you’re all outnumbered by renters in D3. After a 69% rise in rent over the past 8 years we need to balance this out in favor of majority and put an end to corporate greed.
But not all renters are stupid, Sasha, so not sure what your point is here.
Because only a “stupid” renter would want a reprieve from non-stop rent increases? If you can believe that, I can believe you’re actually a renter. Btw I am not a renter and support this ordinance 100%. There’s other people in this city besides yourself and most of them rent.
Challenges me to reply…and disables reply function. That’s all I need to know :) FWIW, I rent here, I own a home in another state which I rent out as a landlord. So I’m well-qualified to discuss several points of view/experience.
Keep frothing, Sasha.
Supply and demand. Landlords raise rents for two reasons: their expenses go up, and the demand for what they are renting goes up. If you want to control costs you can work on influencing those two reasons by 1) somehow controlling the cost increases that landords are subjected to (ahem, property tax increases resulting from — among other things property value increases and levvys) and by increasing the supply of what they are renting by incentivizing and clearing the way for the construction of more rental units through streamlining design review, increasing density/height limits, etc…
Or you can do all manner of things that make being a landlord less attractive and see condo conversions, and new construction of condos or other owner occupied units.
I don’t know what happened to the property taxes of apartment buildings around seattle, but i saw mine increase by 80% since 2010, basically an additional $500 per month! how are landlords supposed to pay their taxes if they can’t pass along the increases in taxes?
In NYC in the 1960s and 70s landords who couldn’t afford to absorb the tax increases first started by stopping the maintenance on their buildings, and then ultimately by defaulting on their taxes and abandoning the buildings to the city in foreclosure proceedings. We will not likely see the later but we may see the former if we cap and control rents and don’t provide a mechanism for landlords to cover their expenses and, yes, make some profit. If i were a landlord staring these controls down, i’d sell my property and buy some amazon stock instead.
I am sympathetic to the cause of housing affordability, but I 100% believe we need to BUILD our way out of the problem.
Amen. I would add that the city should build affordable social housing as part of “build our way out.” The private market is not going to do it at the pace and scale we need. Time for the city to do what it needs to do to make that happen.
Water seeks its level. If a landlord can’t raise rents, they may just pass on the responsibility and cost to renters for repairs and maintenance (NYC landlords did just that). Or charge an exorbitant fee to get the key to move in (Tokyo did that). Alternately, construction tapers off and competition for apartments goes crazy (like Oakland) preventing people from even finding a home, regardless of whether or not they can afford it. This should not be news to Sawant, who is apparently an former economics professor, but keeps forgetting the laws of supply and demand.
Hi everyone, I work in the real estate business and I’m adding to what @gregoryh noted. If costs go up, rent has to go up. Cost of construction has increased almost 100% since 2012 (mostly due to labor costs) and property taxes have also increased in a big way. So when costs go up, rent goes up. Very simple. Rent Control will only increase rent for the majority of people. I know it makes people feel good because you think you’re sticking it to the man but you are only sticking it to the average citizen. I’m doubtful Council Member Sawant and her people would be interested in a Cost Control legislation. Just sayin’.
Agree with RE pro
As far as the cost of construction going up… Yes I agree. The workers that construct buildings are going to want more. So the city should be incentivizing property owners to build quality (set standards) rent control units.
If we can’t afford to build them then there is a responsibly where local businesses that benefit from a healthy recruiting base to pick from in Seattle should contribute to keep that recruiting base healthy. The City of Seattle should be taxing businesses to build the rent controlled units.
That investment by Amazon via taxes would bring in talented candidates that although might not be the right fit immediately when they move into a rent controlled unit, will be eventually as they make connections, education and experience.
If we don’t invest into the least amongst us we hurt everyone.
Property owners DO NOT want rent control or anyway devalue their investments. I know investment is debatable term when it comes to housing being that housing should be a basic human right and every human should be allowed to flourish in a community.
What I’ll argue is that although there are negative side effects to property owners and landlords, it helps out the small guy/gal in a way that is very integral to their survival in living in a successful city.
That cashier, grocery store clerk, barista, bartender, server, hair cutter…. Basically anyone that services you while you spend your money may end up benefiting from rent controls. People are happier when their commutes are short. And there are lots of service entry workers that are passionate about Seattle and the greatness of the city. But when rent was $200 a month just out of college for me is now at $1200 + that is not negligible.
We need rent controls to offset the explosion of wealth to a precious few that drove up these prices because we’re land locked and only have a certain amount of properties left.
If you want to help, tear down single family homes and start building up more multifamily units. It’s more environmentally friendly to house more people on less land and it promotes growth in Seattle.
Ideal senario:
Person moves to Seattle, lives in the city and starts off at an expresso shop at 15 an hour
Person meets patrons and makes connections that help that person get another job (which opens up their old job) that pays more and they get a better unit in Seattle that is a bit more
Person saves up and commits to Seattle and buys a condo unit as they make their progress in their career. OR they get in a relationship that helps them buy more.
The cycle repeats and repeats
But if we lock Seattle down to a specific few and don’t have the goal of having a flourishing city that you can live and work hard to grow in we hurt ourselves and others that live here.
We should not be making a buck off our city where we can reinvest into housing that is affordable and helps create the American dream for each individual.
Of course greed and “pull yourself up by your boot straps” mentality will be some. But others realize that you need boots to pull yourself up with. Seattle is planning that by helping people find affordable housing that will continue to skyrocket if nothing is done.
Jer: If you remove the profit incentive to build housing, who is going to provide this “basic human right” as you describe it? If it’s the City, Country and State, are you prepared for the massive increase in taxes to pay for it all? Just to house Amazon’s recent hiring of 53,000 people would cost the government over $2 billion at current, private construction costs. With their overruns at more than 50% (Lightrail, etc), you’re looking at $3 billion in new taxes to pay for this right just for Amazon employees!
That sounds like a lovely ideal scenario. But when that person is living in rent controlled apartments, the prices of condos will continue to rise and rise beyond reach.
The real estate market isn’t controlled and home prices in Seattle have nearly doubled in the last 10 years. So there will be more demand for rental units because only the wealthy will be able to afford to buy homes. Unless Sawant will be campaigning for home-price-control next?
Jen,
Just curious. When you were busy taking out those loans to get the masters degree in political science, did you ever think about the economics behind your decision? I mean, you were taking out loans for education. They have to be paid back, obviously. Did you consider whether your likely salary might allow you to pay back your loans and move forward with life in other ways? Because it sure sounds like you didn’t and now your seeking to reorder whole aspects of our society to accomodate your life choices.
And as an aside, I just calculated the property tax percentage increase on my properties from 2010 to 2018. The overall percentage increase is 69%, which is the same percentage increase of average Seattle rents over the same time period, and noted above as “unjust.”
This is an important discussion. Can we please refrain from personal attacks and cruel sarcasm? I’d like to know what the pro-rent control side have to say about the economics and other issues brought up around this proposal from Sawant. Thanks!
This.
Taking out a loan for $45,000 to get a masters in polisci is very bad life planning. Instead of rent control I propose a mandatory class in high school that teaches kids the value of postgraduate education and if it is even worth it at all.
Behind the supply and demand problem, the issue with inflation adjusted rents is how housing costs are included in the CPI inflation figure. Total inflation rate was 2.3% per year over the 2010-18 period (1.023^8 – 1 = 20% for the 8 years) because the 6.8% housing inflation rate (69% for 8 years) was offset by decreases in other goods and services. By fixing rent increases to CPI, you essentially take housing costs out of the CPI calculation and insulate renters from the inflationary pressures on housing that is borne by landlords.
Housing will always exceed the overall rate of inflation since inflation is driven by the increased costs of services while goods generally become relatively cheaper. This is the “string quartet” effect as technology drives down the cost of goods, but not services. In 1840, it took 4 people to put on a string quartet and 70 farmers to feed 100 people. Today, it takes 4 people to put on a string quartet and only a couple farmers to feed 100 people (and a lot less land). So, at one time, string quartets were cheap and food expensive. Now there’s plenty of food, but string quartets are expensive. Housing costs experience this effect in multiples: land is limited, taxes are service-sector driven, construction and maintenance costs are labor-driven, etc. We can afford the increase in housing (6.8% per year) and other services because everything else is becoming cheaper and a smaller potion of overall costs, yielding 2.3% per year total inflation (*including* housing costs). So the 20% vs 70% inflation compounded over 8 years is actually not that surprising on basic economics, and make sense given the limited housing supply.
https://www.bls.gov/cpi/questions-and-answers.htm#Question_10
https://en.wikipedia.org/wiki/Baumol%27s_cost_disease
Real estate prices, taxes, and construction/repair costs are primary drivers of inflation, and enter CPI thru rental costs. But these costs are diluted by the low inflation of food and manufactured goods. In fact, Seattle home prices increased nearly 100% (see Zillow) in the time rents went up by 69%, so the rental market is lagging the real estate market. Tying rent increases to the CPI, rather than the economic drivers of the true costs to provide housing fundamentally distorts the market.
So, this plan is bad economics if you depend on a functional market to provide housing. However, I guess its good politics if your intent is to force a non-market mechanism to provide housing, such as in the Soviet Union. Look how that turned out.