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The War on Landlords Continues

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eye on the news

The War on Landlords Continues

A proposed New York State evictions bill would lead to bad consequences for rental-property owners and tenants alike. January 17, 2022
New York
Economy, finance, and budgets
Politics and law

New York governor Kathy Hochul has sensibly indicated that she will not extend the state’s long-running ban on evictions. Instead, she’ll make a different attempt to distribute aid to tenants harmed by the pandemic—helping them pay their back rent. The move reflects a commonsense understanding that property owners need rental income, which they would much prefer to undertaking an eviction. Unfortunately, Hochul’s temperate action does not mean that New York’s liberal war on private residential property owners—aka “landlords”—is ending. Case in point: the so-called Good Cause Eviction legislation sponsored by Brooklyn Democratic Socialist state senator Julia Salazar.

The bill is deftly titled. No one wants evictions for other than “good cause.” But if signed into law, the legislation would cause ill effects on housing markets, which are already struggling to recover from the pandemic. It would effectively extend statewide the rent regulation that has for so long distorted New York City’s housing market and deny property owners the revenue they count on to maintain their buildings.

Central to the bill’s language is the idea that eviction for nonpayment shouldn’t be permitted when “a rent increase is unreasonable.” The devil, of course, is in the details. The bill defines “unreasonable” as an increase of either 3 percent or 1.5 times the Consumer Price Index in the region, as established each August. In a time of high inflation, the flaw here is obvious. Prices—along with ownership costs—have skyrocketed compared to last August and are expected to keep rising. In other words, the key metric in this bill is a moving target. Indeed, the annualized U.S. inflation rate was 4.9 percent this past August but rose to 6.8 percent for November. An increase that looks reasonable one moment may become “unreasonable” the next. And inflation can hit residential property owners in relevant ways: they can’t decline to pay increased heating bills for their units, for example.

Based on an arbitrary and easily outdated benchmark, property owners would face a choice between limiting rent increases—notwithstanding their rising costs—or forfeiting the crucial recourse of eviction. Expect legions of owners to hold increases to 2.99 percent, or to bring more court cases asserting that tenants have become a nuisance upsetting quality of life in their buildings (for which eviction is still permitted). And keep in mind that the vast majority of eviction procedures don’t lead to the physical removal of tenants; in effect, they begin an arbitration process that ends in a settlement.

According to the Eviction Lab (the most comprehensive tracker of eviction data), evictions in most places in the United States are 40 percent below the historical average. Yet August 2020 analyses of the Census Bureau’s Household Pulse Survey predicted that “30 to 40 million renters (in 12.6 million to 17.3 million households) could be at risk of eviction.” These fatalistic estimates contributed to the extension of federal and state eviction moratoriums around the country while rental-property owners were left in the dark. Why didn’t we see a wave of evictions when moratoriums expired?

It’s important to track measures of tenant need, but not all property owners have a large financial cushion. An Urban Institute survey of landlords and tenants in August 2020 found that the Covid-19 crisis and the statewide eviction moratorium were disproportionately affecting the ability of black and Hispanic rental property owners to meet their mortgages—even as 48 percent of Hispanic and 42 percent of black rental-property owners still offer their tenants rent-payment plans.

In effect, Salazar’s bill would extend price regulation on residential property statewide, bringing savings for some but wider costs as well. It would put property maintenance at risk, as well as new capital investment, already discouraged by 2019 rent regulation “reform.” The 3 percent rule would also serve as a backdoor way to make statewide rent regulation permanent.

Americans believe in providing a safety net to those in need. That’s why we provide SNAP assistance, the earned-income tax credit, Medicaid, and other programs. But none of these programs demand by law that businesses provide discounts to customers. The Good Cause Eviction bill would ask one class of persons—property owners—to put themselves at risk of not receiving the revenue on which they rely in exchange for dubious social benefits.

Photo by ED JONES/AFP via Getty Images

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