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Somerville could join Boston in seeking rent stabilization

The Somerville Media Fund reports the Somerville City Council voted to begin drafting a home-rule petition asking the state Legislature to let it take steps to rein in rent increases in the city. The Boston City Council last week approved its own home-rule petition for the power to set limits on how fast rents could be increased in older, larger buildings in the city.

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For all the new housing Somerville is building, they've been loosing residents along with other desirable cities like Cambridge. In the "slumerville" days it was more common for families and younger people with roommates to live in the city. (I was one of them.)

As it became more desirable, the rentals turned into condos. They got renovated and where there was once 3-4 people living in a rental unit, now there is 1-2 upper income people who own.

Putting more rental restrictions is just going to continue that trend. The more restrictions on landlords, the more they'll just cash out and sell the unit as a condo. It also puts pressure on renters to not move if they're locked into a good rate. (You want people to move into nicer units as their income increases to open up the cheaper units for lower income people.)

That isn't to say the proposed law is entirely bad, but it's going to reduce the number of rental units and that puts even further pressure on people who don't have the means or desire to buy.

Bottom line: Price controls never have the desired outcome in the long term.

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The vast majority of salaries in Boston cannot afford the rent. Something has to be done. My rent took well over 50% of my salary and that was cheap. I won't be able to live in the city at that rate.

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If you already live in a larger, older building this law will prevent your rent from increasing quickly. If you meet that criteria, this law would be a relief.

If you don't already live in such a unit, the law will do nothing to help you. If anything, it's just going to reduce the number of rentals available which just makes it harder to find another place which you can afford.

There's only two things that will help you:
1. Huge and sustained increase in every type of housing in the Boston area.
2. Lotta people leave the Boston area.

Restrictive regulations can change who is a winner and looser but they don't increase supply.

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Additional fast, reliable, and affordable public transportation options for commuters would also help de-stress the greater Boston rental market.

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If a

Huge and sustained increase in every type of housing in the Boston area.

is the only thing that will bring down prices why are prices in Somerville rising so much while they are also engaging in a huge and sustained increase in various housing types.

We need rent control not market fantasies that protect business as usual for developers and landlords.

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...except for bombing them. Pretty much the one thing economists universally agree on.

This will do what it does every time:

1. Deter new construction
2. Encourage wholesale conversion to condos
3. Deter ongoing maintenance
4. Trap people in places when they'd be better served relocating (whether for school, work, sizing, etc) when their needs change
5. Disproportionately punish people who do have to relocate or change location who will face higher rents than otherwise as that is the window to change things

So obviously the activists in GBA will pursue it, because outcomes are secondary to performative solutions.

We need to continue deregulating construction, and fix the supply problem. Accelerate approvals, this is not rocket science.

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We need to continue deregulating construction, and fix the supply problem. Accelerate approvals, this is not rocket science.

There is no reason why this approach cannot work in tandem with rent stabilization. We have a housing crisis now – you could deregulate housing entirely and it would still likely take decades to normalize the market.

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But the problem is rent control doesn't fix the problem anyway, it helps some people and utterly punishes others. SF and NY markets are totally broken by rent control.

It's not a good solution, a lesson each generation seems to need to re-learn given that the fallout effects are further worse for the overall health of the housing stock.

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How many working-class people do you think would still live in NYC and SF without rent control? The housing markets in both cities are broken by gross undersupply of housing. Controlling rent growth rather than fixing prices forever and exempting new construction for as long as developers think ahead for ROI (seven-ish years) can fix a lot of the problems that NYC, SF, Philly, and other cities have, but without drastically more housing built prices aren't going to come down.

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Rent control made things worse every single time but that’s because it wasn’t true rent control. we’re smarter than every single economist it there, we’ll make it work this time!

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Generally agree with the critique, but the proposed law in Boston isn't really going to have the same impact, or to be honest, any impact at all. Let's look at this point by point:

  1. Deter new construction
    Reality: this proposal specifically exempts new construction for 20 years; if anything, it will encourage it, as rent seeking in older buildings becomes less profitable for investors.
  2. Encourage wholesale conversion to condos
    Reality: this proposal allows between 6% and 10% annual increases. The ROI on condo conversion doesn't necessarily beat that, when all risks and other externalities are considered. Most owners inclined to go that route will already have done so, or will do so in the future for other reasons, and not because of a luke warm rent control law.
  3. Deter ongoing maintenance
    Reality: this might be true, but landlords, if so inclined, are pretty good at deferring maintenance.
  4. Trap people in places when they'd be better served relocating (whether for school, work, sizing, etc) when their needs change
    Reality: this is often claimed, but it's difficult to evaluate, as people consider multiple factors in their relocation decisions.
  5. Disproportionately punish people who do have to relocate or change location who will face higher rents than otherwise as that is the window to change things
    Reality: see the first point about stimulating new construction. The current situation already significantly punishes people who have to relocate. Stabilizing existing rents to a small degree will likely have a limited impact.

Overall, this proposal is not true rent control. It won't have the outsized impact economists talk about when it comes to price controls. A better comparison might be other regulated industries, such as utilities or insurance. I'm not a fan or pure rent control. This is not pure rent control.

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Rent control advocates say "its not _really_ rent control" every time, and then it goes off the rails, see recently in Minnesota https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4061315

We use the price effects caused by the passage of rent control in St. Paul, Minnesota in 2021, to study the transfer of wealth across income groups. First, we find that rent control caused property values to fall sharply. A calibrated model of rent control attributes a third of these losses to indirect, negative externalities. Second, leveraging administrative parcel-level data, we find that tenants who gained more from rent control had higher incomes. Thus, to the extent that rent control is intended to benefit low-income households, the realized impact of the law was not consistent with its intention.

The fact of the matter is, you can't predict what the spillover is going to be.

or: https://web.stanford.edu/~diamondr/DMQ.pdf

Using a 1994 law change, we exploit quasi-experimental variation in the assign- ment of rent control in San Francisco to study its impacts on tenants and landlords. Leveraging new data tracking individuals' migration, we find rent control limits renters' mobility by 20% and lowers displacement from San Francisco.

Landlords treated by rent control reduce rental housing supplies by 15% by selling to owner-occupants and redeveloping buildings. Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.

"stabilizing" current renters just shifts who is going to be the big loser next, and incurs all the problems outlined which can be worse than prices changing

recently in Portland, claiming the same thing with "but you can raise prices a little!": https://assets.noviams.com/novi-file-uploads/mfnw/Files/article/Portland...

The number of single family detached rental units in the City of Portland declined from 27,656 units in 2017 to 23,669 in 2020, a loss of 3,987 units.
• A 14% reduction in the stock of detached rental housing

The rest of the Metro region’s (excluding the City of Portland) stock of single family detached rental housing decreased by 7%, half the rate of the City of Portland

the law currently also getting punched in the face by unforeseen inflation: https://www.kgw.com/article/money/oregon-rent-hike-control-2023-prices-i...

Until further notice, the onus is on advocates to show an example of it actually going right.

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That presentation about Portland mourns the loss of detached single-family rental housing; how many of those lost single-family rentals were replaced by multi-family rental buildings?

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Hey Jorf - my cousin could use your services when the cherries ripen!

Within SW, North Portland, and inner NE and SE a lot of single family houses have been replaced by multi-unit buildings. This upzoning has been strongly encouraged as a way to generate more housing. I have seen a lot of this on double lots in the neighborhood where I own a condo and surrounding neighborhoods. This isn't even ADUs - a double lot can get you six units if you tear down a single family home.

I sold my parents' single family home and the new owner eventually expanded it to two units.

Portland has urban growth boundaries to limit sprawl (can't build outside them unless you have 10 to 30 acres) and upzoning. Oregon has had comprehensive land use planning for more than half a century. Very difficult to draw a comparison to places without those constraints and affordances.

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I'm against exclusive single family zoning, and more multi-families replacing single family should be good, but however they are counting "family sized" it sounded unclear if it is getting made up.

Single family detached rentals make up a large share of the family sized rental units. Since 2017 there are 6,400 fewer detached rental units in the Metro area, while 1,100 multifamily units with 3+ bedrooms were built. That represents a net loss of 5,300 family sized units in the Portland Metro.

In the City of Portland, there are 3,987 fewer detached rental units since 2017, while 450 multifamily units with 3+ bedrooms were built, a loss of 3,537 family sized units.

But even if you toss those and you look at other sources:

https://oregoneconomicanalysis.com/2023/01/26/new-housing-under-construc...

Second, multifamily initially slowed in the pandemic but once the vacancies dropped and rents rose, there has been a rebound in activity. The timing of these increases have mostly offset the declines in single family starts, leaving total new construction activity in Oregon relatively flat. It’s down, about 12 percent peak to trough on a quarterly basis, but fundamentally it’s kind of flat relative to the years leading up to the pandemic. The real question at the moment is what happens with multifamily starts this year and next.

It sounds like you are mostly washing out at the moment, which is surprising giving the zoning changes.

But if you're just treading water or matching or only slightly beating national trend lines while population is rising, you are still losing ground. It's not clear that rent control is helping the people it is intended to, but its definitely a barrier to further construction (thus as I said, needing much more deregulation instead particularly around approvals)

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The problem isn't a lack of "family sized" housing in Boston or Portland.

The problem is a lack of units in the studio-2 bedroom range.

There are too many single family homes and 3-4 bedroom units for the demand. Demand is for younger to mid-age people and seniors. Building more smaller units also frees up larger ones from roommate situations that drive up their prices and single family units from empty nesters .

Americans generally have a distorted view of ""family sized" space needs as it is. I raised my kids in 1350 sqft of house - about equal to the spaces that housed my 4 person family and my husband's 5 person family as children put together. The condo I own in PDX (family member living there) is 550 square feet and is just fine for 1-2 people. It was built in 1947, when there was a prior housing crunch addressed by building reasonably sized and priced units for singles and couples.

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A better comparison might be other regulated industries, such as utilities or insurance.

Massachusetts has some of the highest insurance and utility rates! By law the coverage and services provided by these companies is better than in other states, so there's a good argument that the regulations are worth it. But by no means are they cheaper.

If the goal is to lower housing costs, you don't want to compare it to insurance.

Taxis are another example of a price limited industry. Until Uber came along, people hated cabs. Uber's trick was that they found a way to bypass the regulators.

All this said, I don't think the rent control proposals are all that bad as written. But they will be bad when people quickly start expanding the policies which is the end goal of many advocates.

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You can set the rent of a new building where ever you want to- probably really high, like they do now. You would prefer to do that than worry about some old building with rent controls on it.

It just doesn't make sense to me. You can also profit on your building within 15 years with 5-10% rent increases, that's a virtual guarantee.

So that just makes no sense. Even if it DID.

I LOVE THIS. They'll go look in non-rent controlled communities and maybe we'd finally get the regional assistance to this housing crisis we need. Like If all these developments start going to Newton or Watertown or Winchester or Dedham as a result? That's a win-win in my book.

#3 That's an issue now. A huge one. Because they can charge whatever and make no improvements at all.

#4 is not really your place to say if someone is "trapped" into modestly affordable rent. Many people are "trapped" now, but that won't change. I don't think it would change things at all for that individual.

#5 This is already the case again. Getting rid of broker fees on the state level would help, but then it would weaken their (dated) argument against rent control.

#2 Is really the only one I know will happen and we have evidence of happening in Boston under rent control. Kind of tough... but it could be an opportunity for more homeownership which is a good thing ultimately.

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Somerville just instituted really strict limits in terms of condo conversions. AirBnBs are also limited. We'll see how landlords try and cash-out in these cases; I could see a lot of selling of units to bigger real estate groups who centralize maintenance and prey on college kids ala Alpha management in Boston.

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Your argument is contradictory. So the solution to housing prices is just build build build to bring up the supply and decrease prices but in reality Somerville has been building like crazy and the prices are going up like crazy too. Almost like that whole framing, like most of Econ 101 type policy proposals, is based on BS assumptions that don’t actually hold up to reality.

We need rent control because any strategy relying on the good will of developers and landlords or market mechanisms to bring prices down is incredibly naive when they have every incentive to raise prices at any opportunity.

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My wife and I live in a not-so-great 1 bedroom in Somerville, rent just went up another $150/month. We'd welcome rent control but probably won't go into effect before we are forced to leave the area.

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It's an unavoidable fact: if the city regulates rents, it will make it harder for someone without an apartment to find one. If you think it's a scramble now, it would only get worse.

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This is not a fact. It’s propaganda effectively pushed by developers and landlords. Meanwhile NYC has had rent control for decades and they added the entire population of Boston in the last ten years and are building like crazy.

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