Conor here:The argument is that the FHFA, Fannie and Freddie can restrict rent increases as a condition to their loan financing. While it’s good news that some more economists have started to incorporate “real world dynamics,” we’ll have to see what “Bidenomics’” models say. That’s not looking promising. The administration just recently its latest efforts to help renters. They are:
- Ensuring all renters have an opportunity to address incorrect tenant screening reports;
- Providing new funding to support tenant organizing efforts; and
- Ensuring that renters are given fair notice in advance of eviction.
By Jake Johnson, a staff writer for Common Dreams. Originally published there.
More than 30 U.S. economists have signed a letter expressing support for strong federal tenant protections and rent control as housing costs remain sky-high, even amid broadly cooling inflation.
The economists note in their letter, released Thursday, that the median rent in the U.S. “has surpassed $2,000 for the first time, and there is not a single state where a worker earning a full-time minimum wage salary can afford a modest two-bedroom apartment.”
“We have seen corporate landlords—who own a larger share of the rental market than ever before—use inflation as an excuse to hike rents and reap excess profits beyond what should be considered fair and reasonable,” the letter continues. “Renters are struggling as a result.”
The letter’s signatories—including Mark Paul of Rutgers University, James K. Galbraith of the University of Texas at Austin, and Isabella Weber of the University of Massachusetts Amherst—call on the Federal Housing Finance Agency (FHFA) to require rent regulations as a condition for federally-backed mortgages and reject the “economics 101 model that predicts rent regulations will have negative effects on the housing sector,” likening it to typical arguments against raising the minimum wage.
“Empirical research on local rent control policies in San Francisco, CA and New York, NY found that rent regulations lower housing costs for households living in regulated units,” the economists wrote. “In Cambridge, MA, empirical research showed that the repeal of rent stabilization laws resulted in an average rent increase of $131 for tenants.”
Given that “Fannie Mae and Freddie Mac mortgages on the secondary market support nearly half of rental units in the U.S.,” they argued, “Government Sponsored Entities (GSEs) have the influence needed to meaningfully change the trajectory of the housing crisis.”
Rent regulations keep tenants housed and rebalance unfair power dynamics between tenants and landlords. That’s why I joined 30+ economists to call for federal tenant protections and rent regulations as a condition on federally-backed mortgage financing. https://t.co/mQwNPh0gaL
— Mark Paul (@MarkVinPaul) August 3, 2023
The economists’ letter is part of a broader push by tenant rights groups and housing justice organizations to secure federal protections against egregious rent hikes and wrongful evictions.
Earlier this week, 17 U.S. senators wrote in a letter to the FHFA that “renters also have too few protections, making them vulnerable to steep rent increases and deteriorating housing conditions—factors that are out of their control.”
“Tenant protections vary drastically from state to state and even sometimes from county to county, often leaving renters without recourse,” the senators added. “There have been repeated reports of investors using low-cost financing from Enterprise-backed loans to buy properties and then sharply raising rents, mistreating tenants, and allowing buildings to fall into disrepair.”
More than 140 academics, over 70 climate researchers, and dozens of local elected officials have also joined the call for nationwide rent regulations.
Tara Raghuveer, director of the Homes Guarantee campaign at People’s Action, said in a statement Thursday that “tenants are coming for rent regulations, and everyone from senators to economists agree: tenant protections are common sense.”
“Due to lack of regulation, affordable housing is lost quicker than it can be built,” said Raghuveer. “Corporate landlords call the shots with federal financing through Fannie Mae and Freddie Mac. That’s why tenants spent this summer organizing to win what we need: federal tenant protections like caps on annual rent increases.”
In late May, the FHFA issued a request for public input on tenant protections at multifamily properties with mortgages backed by GSEs.
Tenants with the Homes Guarantee campaign responded by knocking on more than 4,000 doors at GSE-backed properties and organizing more than 2,000 comments in support of tenant protections and rent regulations.
“The system as we know it today has failed everyday people, many of whom make impossible choices between rent and food, their homes or their medications,” said Raghuveer. “The status quo is not working for the people, it is only working for the profiteers, and it is time for change. It is time for the federal government to make changes to that system, to correct the imbalance of power between landlords and tenants, to protect tenants, and to stabilize the American economy.”
37 comments
Comments are closed.
Raghuveer: “The status quo is not working for the people, it is only working for the profiteers, and it is time for change. …”
Biden, speaking for the Democrat party: “No one’s standard of living will change, nothing would fundamentally change.”
All this talk about using the FHFA program to implement rent control.. and yet no one asking why we’re subsidizing corporate rentiers in the first place. Let’s get rid of the FHFA program first and stop giving handouts to corporate landlords.
If you want to have a seperate conversation about tenant protections and rent controls I’m listening. Although, rent controls will be a pretty tough sell as there is a history of these things having poor/unfair outcomes for all involved
The problem is the whole idea of a large private housing rent sector to begin with. The notion that a significant percentage of a population will not own or at least be secure in their own homes seem to be to be inherently unstable. The commercial sector is one thing, but most countries should see anything other than a minimal rental sector as a socio-economic-political time bomb. Why bother with it?
>The notion that a significant percentage of a population will not own or at least *be secure* in their own homes seem to be to be inherently unstable
That seems better suited to address outside the housing market. (Especially since “owning” a home often entails a bank owning the underlying deed.) Welfare reforms, protection for workers and unions, minimum wage increases, etc
IMO regarding “the rent’s too damn high” one place to start would be recognizing PE’s roll in artificially inflating real estate value. Air B’nB is another suspect. The secondary market for residential real estate should be off limits for institutional investing.
Property Tax ever enter into the discussion? 100% write-off for corporate rentiers; homeowners not so much. Likewise with interest deductions. Depreciation. Corp overhead. Government writes the laws for such favorable treatment.
Homeowners get a write-off if they itemize property tax, but you’re right property tax needs to be part of the conversation..
One culprit responsible for high real estate prices, says Michael Hudson, is low property taxes. Banks are able to lend more, inflating prices, if people have low property taxes, never mind the way low property taxes subsidize speculation–landowners can hold onto agricultural land much longer to wait for price spikes or long approval-to-develop processes. Meanwhile, in California, the loophole for commercial properties in prop 13 costs the state $12 billion in lost tax revenue.
Finally, a British study says 80% of price increases in the UK are attributable to inflated land prices. The U.S. has lots more land, but not building compactly (lower land cost per unit) means every significant trip must be in an automobile. (Gee, I wonder why we have global warming) Infrastructure in low density development is also roughly twice as expensive to maintain as compact development, so government is impoverished. Add the egregious amount of incarceration to that (my local county’s budget is 70% “justice” – related) and there’s precious little local governments can afford to do for their constituents.
Could we perhaps truly delineate between income properties and residences? I would prefer if we broke this up into reasonable problems. I’m OK with the current SALT limits federally, but it’s awful to see local governments and state governments continue to do things like raise property taxes so that fixed income retirees are affected. We shouldn’t make it so expensive to live in the US. If you want to be a property baron, that’s one thing. If you’re a big corp like AirBNB or Blackstone, that’s an entirely different thing. People shouldn’t be taxed out of their primary residences.
“People shouldn’t be taxed out of their primary residences.”
For all of California’s warts they did fix that issue a long time ago in their state. Property tax increases are limited to I believe a maximum of 1.5% increase per year.
The only reason we are here is that we have the ownership class inflating purchase prices based on their perception of the value of property. Not the rent their tenants can afford.
They buy property from their perspective of inflation of assets, with no acknowledgment of lack of wage growth for tenants. Also the run up in prices can be attributed to Airbnb dollar signs for many, based on unrealistic price and occupancy amounts.
They overpaid if they plan to rent. They are welcome to live there if they want. But it will be quite some time before a tenant can afford. Maybe a generation or two. Never?
Maybe a solution that looks at short term vacation rental taxes to subsidize standard rents. Or do to owners what has been done to renters: make it impossible to afford, not via price but via the price to be a rentier. Tax the owners. Don’t let the state have to subsidize from another method.
>Tax the owners. Don’t let the state have to subsidize from another method.
Most locations already do this*. They offer homestead exemptions or just outright tax non occupancy owners a higher rate. The problem is the federal government more then offsets this via subsidies like artificially low rates, and generous tax codes
*there can be the issue of how assessments are done. But that’s more of a poor vs wealthy issue as both affluent primary occupancy and investment owners can afford to legally challenge assessments.
if my area, primary home owners can get a homestead exemption, which for the median house = around $400 off the property tax.
Sounds not bad….. until you compare what a home landlord can itemize as a business expense: home maintenance expenses, taxes, professional service fees, etc.
Makes the homestead exemption look like a joke.
I lived in DC for almost ten years during the aughts. DC has a great rent control ordinance. By federal government employee standards rents were affordable. Yet another instance of our fearless leaders taking good care of their staff and y-o-y-o for everybody else. Same with employee health care.
It’s tough for me to see how DCs rent control can be considered a success. I guess if you’ve lived there for 2 decades your probably in a great situation, but it’s 3k to rent a 1 bedroom apartment there if you were to try to move there now. Popville.com is full of complaints about unresponsive management companies and buildings that aren’t maintained
I’m not saying rent control is the source of all of DCs issues, but I don’t really see the argument that it’s somehow been successful (aside from getting progressive politicians elected)
It keeps long time residents of varied means in the city, who would otherwise be forced out by more affluent and transient tenants. That is a social good, and to be defended especially when policy elsewhere is a legalized effort to strip people bare and then throw them to the dogs.
>The economists note in their letter, released Thursday, that the median rent in the U.S. “has surpassed $2,000 for the first time, and there is not a single state where a worker earning a full-time minimum wage salary can afford a modest two-bedroom apartment.”
The PMC often unintentionally tips off the rubes how out of touch it really is. A two-bedroom apartment? LOL! How about a modest (or worse) one-bedroom apartment? Average rent for one in my Canadian city as of August 4 was $2000 a month. Studios/bachelors (~400 sq. ft.) go for $1700.
We have rent controls here but the Tenancy Act has at least one glaring loophole: Landlords can evict without cause if they say a family member is moving in. And in some cases, that’s exactly what they do.
Strangely though, something goes wrong with the family’s plan, relative doesn’t move in, and the apartment is now available for rent. With the prior tenant gone, the landlord is allowed by law to charge the new one whatever the market will bear.
NYC has similar issues, stemming from the fact that landlords are incentivized to evict or otherwise conpel tenants from leaving so that the apartment is no longer rent-controlled. Affordable and rent-controlled units must be continuously occupied, or the protections are voided. Often, these units are left to (literally) rot and molder, and tenants’ concerns are completely ignored, because the landlord wants the tenant to leave so that they can shellack a fresh coat of paint and some newer appliances on the walls and charge the new tenants an arm and a leg for the unit.
I’m an attorney that has represented tenants when employed by legal aid, and represented landlords and tenant when in private practice. My experience is that small landlords (usually first generation immigrants) get hosed and big firms like Black Rock ignore the rules with impunity. I’d be surprised if this worked out any differently.
Rent controls – yet another failed policy of the extremist alt-lleft, aka neo-corporatist “liberals”.
Can’t they just get a (second or third) job? If you have 3 jobs, you don’t need an apartment, you can just go from workplace to workplace to fill in the days. Why waste money on housing? /s
I live in an jurisdiction that has “rent control” which seems be only controlling the supply, by making it so hard to build new rental housing no one will do it, resulting in rents so high few can afford unless they don’t buy frills like food. Working perfectly, if you are a neo-liberal, I guess.
A cynic might say this is all just another part of The Plan – “You will eat the bug, and you will like the bug.” Because you will be happy they are giving you the bug at all – until bugflation makes the price of bug unaffordable too.
A big problem with housing in the United States is the deliberate concentration of the poor into dense public housing away from everyone else. This is followed by the cutting of service and maintenance from buildings meaning things like the elevators fail and are never repaired. The poorest have the least amount of political influence and the failures of the housing can be blamed either on the residents or “big government.” It is never on the lack of funding and the use of whatever funding is available as a political or personal slush fund by politicians.
Social housing, which is different than public housing, is the creation of affordable housing for almost everyone, poor, working, middle, and upper middle classes. Building such mixed means building housing that is attractive to everyone and the political influence of the wealthier classes prevents the gross corruption as well as a lack of funding.
Currently, both American government and housing construction industry, including the developers and construction companies, are so corrupt that even building and maintaining attractive, well constructed, housing that almost anyone would want to live almost impossible. Like with healthcare, their are multiple examples of other countries having such social housing using different means, but the immense corruption, incompetence, and sheer dysfunctionality of the United States probably we can’t have nice things.
RE: “We have seen corporate landlords—who own a larger share of the rental market than ever before—use inflation as an excuse to hike rents and reap excess profits beyond what should be considered fair and reasonable,” the letter continues. “Renters are struggling as a result.”
How does the usurping-billionaire class (earn?) their wealth to “own a larger share of the rental market than ever before?” They steal their expropriated wealth from the poor and disadvantaged to maintain their inequitable privilege.
Who decides when: “excess profits beyond what should be considered fair and reasonable?” The savage-billionaire-class bribe their accomplices in Congress to write bills that advantage the Rentier class.
“economics 101 model that predicts rent regulations will have negative effects on the housing sector,” likening it to typical arguments against raising the minimum wage. Yes, these arguments are erroneous and are designed to dissuade the American public from fighting for just-social-rights, etc. Everyone is tired of Corporate American getting all the money. The U.S. billionaire-class strongly prefer not to negotiate with the working class. They (parasite-class) are simply selfish, irrational, and malicious in their reasoning. Consider the recent attack on the working-class at Yellow Freight. For fear of emboldening UPS workers in their recent strike preparations, Wall Street moved to profit from mass-layoffs and bankruptcy (Investors made it clear that no new money would be made available until Yellow could prove that it could force workers to pay for its debts and Wall Street’s profits).
Capitalism is irrational, unstable, and devoid of empathy. Is this the kind of world we want to live in?
Every renter I know is paying their landlord’s mortgage plus – a rentier who is getting tax relief in some form or another on top of the paydown.
The simplest solution?
Mortgage providers MUST include rent payment history as a metric of future renter reliability to meet mortgage payments (and hold mortgage providers feet to the fire as they will inevitably figure out some novel way to game the system)
Bada bing bada boom.
One of the comments above said it best, the tax code is stacked in favor of institutional residential landlords.
Then throw in nearly two decades of near continuous negative after-inflation Fed interest rates (2001 – 2022).
Rent control is meaningless if the Fed throttles interest rates back to 0% in the next recession. As one of the comments above note, rent control is a form of “I gone mine, and too bad if you don’t got yours”
The Fed was literally engaging in financial repression which hurts conservative (short-term interest rate) savers and renters. Yet the Fed is rarely talked about on the Left.
Feature, not a bug. (as so much of the “Leftist” zeitgeist is driven by the NY Times and innumeracy-filled pundit airheads on the cable news channels)
I have been a renter and now own apartment buildings.
The issue is that we don’t have honest money.
It started becoming obvious in 2008 and it’s been going exponential since.
The proper way to define inflation is cpi + asset prices.
Then people will see that the culprit is too much money in the system. RE prices and rents will never reach those astronomical levels but for the sponsored artificial low interest rates and mortgages.
Landlords don’t raise rents because they are greedy (who isn’t) but because the market can support them.
The biggest nightmare for a landlord after a deadbeat tenant is an empty unit.
The idea of rent control is testimony that we never learn. It is the quickest way to turn neighborhoods into dumps. One have to only look at incentives to understand why such ideas while sounding good to buy votes are the road to total failure.
Nevermore:
“The idea of rent control is testimony that we never learn. It is the quickest way to turn neighborhoods into dumps. One have to only look at incentives to understand why such ideas while sounding good to buy votes are the road to total failure.”
It seems that landlords are acting in bad faith. Rent control is meant to stabilize the system and yet the landlords are not happy that they can’t charge whatever they want for rent, so they game the incentives by not making necessary repairs and not maintaining the properties. Those tenants move and the landlords get to charge as much as they want.
In addition to all the crapification going on around us, there are too many peoplel acting in bad faith. The most prominent example is the Republican party.
It is not just the Republicans. They just the worst, but the Democrats in California and other blue states have been taking profitable advantage of situation as well. It is the old lesser of two evils situation.
How do you determine who is acting in bad faith and who isnt?
Sartre would say we all are, like “le garcon de cafe” trying to avoid our inherent freedom.
If price controls are such a stabilizing factor for the RE why not extend to retail, grocery shopping, after all grocery prices are way more out of touch than rents.
Imagine you are a landlord and have to manage a 20units complex.
Its like any other business.
Your duty is to get the most money out of it not do charity.
And if the landlords are making too much money, you can be sure builders will come in with more units to compete. Its how a free market is supposed to self-stabilize. I dont know anything that has been stabilized by decree by the government, its like second marriages, the triumph of hope over experience.
The “free market” could have stabilized in ’08 but instead banksters were made whole, then made whole again, and when someone suggested taking away the punchbowl, had taper tantrums like the babies that they are, so that they got made whole a third time at a minimum. Dow went from low single digits to 35,000 thanks entirely to uncle sugar.. Stabilizing today certainly must have a significant hit to those particular useless eaters, and they should be paying a fairer share of social security as well. We don’t live in a free market.
I don’t disagree. They were made whole by printing money which through cantillon effects made them rich while devaluing the rest of the plebs. Dishonest money is at the origin of the major catastrophic events like French Revolution and rise of hitler. It is at the heart of our polarized society. The sense of shared sacrifice disappears when governments print and distribute money because inevitably some win and some lose arbitrarily and through corruption, witness the $1 trillion PPP to the rich and others. Now the plebs pay the price as higher prices for everything.
Plus since the subject is landlords the small ones were decimated by the government policies during covid and they didn’t get any help or if they did it was with lots of strings attached. I know many who stopped renting their properties as soon as they managed to evict their non paying tenants.
So tensions will keep rising until honest money is restored. One has to hope that our elite comes to their senses before things reach irreversible levels.
Printing money is a massive oversimplification of what was done on the behalf of the banksters. They changed the rules whereby securities which were mark to market were allowed to be purchased by the fed at mark to model. Thank you very much in a collapsing market. Do you recall the fed discount window where useless dreck was cashed in at face value? Some free market. Goldman went from uncovered to covered by another gratuitous rule change. Thats just a couple off the top of my head. A disgusting and shameless display. I can’t wait to see what they have planned for the CRE collapse, I’m sure there are garbage barges being larded up right now. The rich get richer not through a law of nature, but by control fraud.
The rent is too high.
Printing money[tm] views shows the person or group uttering it are beholden to ridged ideological perspectives and not much more. Most would be better served by understanding the dynamics of decades of FIRE sector econ in the context of the GFC. Ultimately driving the choices made to preserve that agenda, again the ***money*** is not driving anything as it has no agency.
Its the time old failed deductive reasoning approach to find a A political solution via money = too a Political problem.
The rules created and how they are enforced are what matters. Believing that the free market, or what is being defined as the that, is what is deciding things is a mistake.
California, on paper, is an extremely wealthy state with a “good” economy. However, the cost of housing, education, and medical care has been increasing faster than inflation, productivity, and wages for at least two generations. This means that aside from the top ten percent, maybe higher, it keeps getting harder to survive each year, and most of the people becoming homeless are native Californians.
And yet, across the entire state there are communities blocking the creation of more housing. When housing becomes available, be it old or new construction, it is bought out by investors paying cash at above market rates, who then may, or may not, rent their new investments.
If not for the law, where do the solutions come from?
Its the money creation at the root of all evil. No investor can afford to pay cash above market rates and leave the house empty if interest rates were 8% or similar.
I can never wrap my head around this concept of “honest money”. Isn’t the issue here just the lack of honesty all around? If everyone is honest, is money even necessary? Someone will jump in here saying that money is necessary to avoid the double coincidence of wants, but not really since you can record the transaction in a ledger so it can be settled later. IMO, money is not the root of all evil, rather evil is probably the root of all money, so …
By all means regulate corporations. Corporations are not human beings and therefore have no human rights. No human rights means no property rights except those given to them by the State which has granted them their very existence – unlike human beings whose rights are endowed by their creator (God).
While we are at it. one way to take pressure off housing demand is to regulate where corporations are allowed to build new operations. Because, I suspect, senior management (who are not owners, since most corporations are not owned, but only controlled), want to live rich urban life styles so they all move their companies to the same handful of urban locations where housing and other resources are already in short supply.
With the increasing focus in the media regarding homelessness – often, as in the recent NYT piece about Portland, suffused with the language of law and order – it should be asserted by commentators and pundits with an understanding of economics that a serious effort to end the obscenity of hundreds of thousands of people sleeping rough in the richest (or second richest, in PPP) country in the world would involve smashing the power of landlords. Inflation, especially in food prices, should be addressed, but the largest burden on poor and working people is the cost of staying indoors, which, we might emphasize, ought to be considered a human right; a landlord treating other humans as piggy banks would not be a consideration if meeting the human need for shelter were actually a priority. Landlords, in my opinion, ought to be ashamed for heir role in homelessness, and, if not, should be shamed by the rest of us. No more acceptance of the ‘passive income’ stance. Other commenters have brought up social housing. An idea which might be explored by nonprofits or activist organizations: in the name of ending homelessness, fundraising or applying for grants to buy apartment buildings, turning ownership over to elected tenants councils, and creating a trust fund owned by said council which could be invested in local municipal bonds to provide political leverage for the council.
Most other prosperous countries have rent control and high proportions of subsidized housing. Some also regulate hotel and other prices. Strict regulations strongly discourage speculation in housing, which is a social good that needs to be available to all. Vienna still has the very successful system pioneered by its early 20th c socialist reformers:
https://housing4.us/how-vienna-ensures-affordable-housing-for-all-with-an-extremely-complicated-housing-system/