Rent issue doesn’t have easy fix

By Joe Murchison

It’s complicated.

That is a safe statement about an issue currently confronting Laurel’s mayor and City Council: They are being asked to figure out how to offer low- and moderate-income renters relief as they face rising apartment rents. 

A group called the Laurel Housing Justice Coalition is pressuring the city to pass a rent stabilization law that would cap the amount that landlords could raise their rents each year.

Here is a look at some of the issues involved.

The city of Laurel has a lot of residents who rent, and many of them  are likely struggling with local rent levels. The U.S. Census Bureau estimates the city has 12,885 households, 56% of which are  in an apartment or other rental home. That’s a higher percentage of renters than is the case in most municipalities around the state, and almost double the 32% state average.  

City rents are higher than many of these households can easily afford. The average rent here is $2,034, according to the RentCafe website. That average adds up to $24,408 a year.

The U.S. Department of Housing and Urban Development cites 30% of income as the highest reasonable amount that a household should pay in rent. 

Census data shows that 33% of the city’s households have annual income of less than $60,000. These households would have to pay more than 30% of their income to  rent an average city apartment and would likely end up– being squeezed paying for other necessities, including food and, depending on the circumstances, essential utilities.

Lack of affordable housing is a nationwide problem. Researchers estimate that the U. S. needs as many as 3.8 million additional homes to meet demand, according to Fannie Mae, the government-sponsored mortgage financier. In the decade since the Great Recession that impacted markets between 2007 and 2009, fewer homes have been constructed nationally than in any decade since the 1960s. The shortage of homes in the Washington D.C., area is estimated at 151,463, according to Up for Growth, a national housing-affordability research and advocacy group based in the District.

Basic economic principles apply here. Low supply and high demand result in rising prices. 

A report by the Harvard Joint Center for Housing Studies summarized that “The United States is in a housing affordability crisis, with nearly half of all renter households spending more than 30 percent of their income on rent and utilities each month.”

Despite this crisis, few jurisdictions have adopted rent-stabilization measures. The only jurisdiction in Maryland with a law capping annual rent increases is the City of Takoma Park. Such measures are mostly seen in a small group of major cities, including Washington D.C., New York, San Francisco, Los Angeles and St. Paul, Minn. 

In fact, 37 states have laws on the books prohibiting local jurisdictions from enacting rent-stabilization measures. Seven other states do allow such measures, but no jurisdictions in those states have adopted them. 

There is a critical reason to pass a rent-stabilization measure, in Laurel and everywhere else: Shelter is a basic human need. Here and elsewhere, the insufficient supply of affordable homes is threatening many individuals with lives of grinding subsistence or even homelessness. Passing a rent-increase cap is one of the fastest ways to address this. 

And then there are counter-arguments. 

• A cap on rents could thwart a long-term solution, which is the construction of more homes to meet demand. A report by the National Multifamily Housing Council, an association of landlords, notes that new apartment construction fell in St. Paul after it passed a rent-stabilization law, while construction increased, at the same time, in neighboring Minneapolis.
• Such a measure might not only slow new construction, but also lower the number of existing rentals. A Stanford University study of rent restrictions in San Francisco found that the city’s supply of apartments decreased by 15% as landlords decided to cash out by converting rental units to condominiums.
• Rent-increase caps don’t necessarily do a good job of targeting benefits. Higher-income renters can get just as much or more benefit than those in the most need, such as lower-income families and the fixed-income elderly. 

Other factors can be seen as deterrents as well.

• A rent stabilization measure could hit the city of Laurel in its pocketbook. Property taxes are the city’s single biggest source of revenue. Landlords, and especially those that own apartment complexes, are some of the city’s top property-tax payers. Limiting the landlords’ income would threaten to slow  appreciation of their property values and therefore reduce the city’s future property-tax revenue.
• Rent-stabilization programs require degrees of bureaucracy. For instance, Takoma Park has one dedicated staff person to oversee its program and also pays a consultant. It also has a commission on landlord-tenant affairs that serves a number of functions, including hearing petitions from landlords seeking special relief on account of improvement costs or other factors. (The potential added costs to Laurel, should the city establish a rent-stabilization program, could possibly be offset by new fees assessed to landlords.)
• The city might need to increase inspections of apartments to make sure landlords are not reducing normal, regular maintenance because of lower profit margins.

As was stated in the beginning, it’s complicated.

Percent of Residents Who Rent

U.S. Census Bureau

Average Apartment Rents

* Laurel and environs (city alone $2,034)

RentCafe.com