Perverse Sentimentalism Part 3: How We Might Get Rent Control

You’ll hear a lot of people hand wave the notion that Seattle will get rent control anytime soon. Even the legislative proponent, Representative Nicole Macri, says she thinks it will be a struggle. But here’s how it might play out. My job is to worry about the worst case scenario. Here’s the worst scenario I can think of. The timeline is rough but you’ll get the point. I think this is unlikely but possible, especially some kind of “compromise” which allows pay outs to tenants, something that could be rationalized as generating more money for “affordable housing.”

January 2018 

The legislative session opens in Olympia and Representative Macri’s bill eliminating the State preemption on rent control is drafted and slated for a hearing. When asked at a press conference whether he supports the legislation, Governor Jay Inslee says, “I think that giving this to local governments as a tool to help address rising prices is important.” When quizzed on her views, Seattle Mayor Jenny Durkan echoes the Governor: “During my campaign I said that rent stabilization could be a useful tool to address affordable housing.”

For his part, Speaker Frank Chopp a seat mate of Macri and whose 43rd legislative district overlaps City Councilmember Kshama Sawant’s 3rd council district says, “We ought to give the bill a hearing and let the house vote on this issue.”

February 2018 

In a series of hearings on rent control in legislative committee, raucous protestors shut down meetings of committees listening to testimony on rent control. Senator Rebecca Saldana comments, “While protestors should be respectful of the process, their emotion reflects how bad this crisis is.” Saldana says she’ll champion a companion bill in the State Senate.

Meanwhile, hearing proceed with Republican’s outvoted on several amendments that would redirect the repeal of preemption. The session is a short one, and not many bills get passed, but the rent control legislation passes out of committee on party lines.  Speaker Chopp in private meetings acknowledges that there is lots of evidence showing that rent control doesn’t work, but he says he will put the bill before a vote of the house and let his caucus members vote their conscience.

Meanwhile, in the Senate, partisan wrangling leads to a compromise to give the rent control bill a hearing with no commitments to pass it or put it on the floor. The hearings are boisterous but the bill passes with minor amendments out of committee.

March 2018

Wrangling over education funding and other issues overshadows the debate on rent control, but Senator Saldana continues to push the issue, and her bill becomes part of a larger compromised on the capital budget. It’s agreed that the bill will get a debate and vote on the floor. Most opponents are confident it won’t pass. They check their votes. One key player is Senator Guy Palumbo who has said he is a no vote. But the rent control forces lay siege to Palumbo’s office and a few other more conservative Senators.

The Seattle Times runs a front page story featuring the stories of a dozen people displaced in Palumbo’s district and other suburban areas. The calls are pushing the more conservative Senators. Finally, Palumbo gives in. “I can’t fight this,” he says, “people in my district are calling in about this 3 to 1 in favor.” Besides, he says, it doesn’t enact rent control, only local governments could to that.

One of the last bills to pass both houses of the legislature is a phased in repeal of rent control that starts in larger cities, specifically Seattle. The bill is more complicated and not an outright repeal, but the way is cleared for Seattle to impose a limited form of rent control that is no longer inconsistent with State law. The legislation would allow pay outs to tenants and other limits on rent increases not previously allowed.

The Governor signs the legislation which takes effect almost immediately. “This is a great step forward to help local governments help communities suffering from displacement and housing cost burdens,” Governor Inslee says as he signs legislation.

July 2018 

The Seattle City Council begins the process of considering a slate of rent control proposals they call, “Tenant Rights and Protection Program.” As usual, the Council Chambers are flooded with red shirted proponents of the measure. Debate includes various comments and efforts to slow the measure. There is some debate about whether Councilmember O’Brien, who supports the measure, should vote since he is a land lord. Other Councilmembers express concerns and doubt.

August 2018 

With some amendments the Tenant Rights and Protection Program passes exposing rental units in the city to enhanced inspections, a fee, and strict limits on rental increases. The Council passes a Rental Property Increase Schedule that mandates specific limits to rental increase without penalty. Increases in excess of the limits are allowed but only with a fee or a penalty payable the tenant, or in some cases, to an affordable housing fund. One local industry insider says off the record to the Seattle Times, “Based on the buy out here, we’ll have to plan for increases and simply buy out the tenants.”

Non-profit housing agencies pushed hard for the changes. “The fees generated from this measure will both help many tenants, but the ones paid into the fund will help us build more affordable housing,” said Paul Lambros, Mayor Durkan’s new director of the the Office of Housing. Thanks to his intervention with non-profit housing agencies, most fees end up in the fund. The money collected for the fines and fees paid by landlords and apartment buildings to allow increases in rent will be collected then granted out. When asked how long before the money would be available Lambros said, “It will take a few years for us to get a sense of how much we’ll collect and be able to distribute.”

Most middle and large rental companies, especially corporately and nationally owned buildings say that they will just factor the buy out provision in future rent increases, meaning that paying the fees and fines will be folded into overall rent increases. “What is happening here is that lots of money will be paid out when rents have to go up, but the rents will still go up, and they’ll go up more to offset the fees,” says an national representative for a large corporate building owner. “We’re going to sell our three single-family homes we rent up in Licton Springs,” said a smaller operator. “We can make a pretty good return on these since there is a hot market in single-family homes,” she said. “It’s just not worth it to rent them out anymore.”

September 2018 

Supporters are jubilant. The Stranger puts Macri, Saldana, and Sawant on the cover of their first September edition. It’s a cover in the style of socialist realism depicting the three in relief in front various figures dressed as workers and students and transit riders. The bold headline reads, “The Three That Saved Seattle Renters!”

The image above is by Kuzma Petrov-Vodkin, “The death of the Political Commissar” (1928)

Perverse Sentimentalism Part 2: Rent Control Effort On the Move

I wrote about how the Seattle Weekly reported the story of a candidate for the City Council of Issaquah being “priced out” of his own community; a candidate and a city council that believes that building more housing makes it more expensive. The story of rent control is essentially the same, a movement that supports a policy that will result in greater housing scarcity in the face of rising demand. Proponents of rent control argue, in the face of overwhelming evidence, that rent control will somehow help poor people. Like the Issaquah Councilman it sort of makes sense since, for him, since new housing units on the market weren’t priced for him, therefore new housing just makes all housing more expensive. For angry rent control advocates, rent control does two things: punishes land lords and ends price increases by fiat. But just like Issaquah’s moratorium will make things worse for housing prices, rent control might feel good, but it will hurt the very people it intends to help.

The Stranger has given up any pretense of reporting about the issue of rent control. It’s recent post on a weird protest at what it calls a “landlord convention” reads matter a factly. There wasn’t any response or comment by anyone in the housing world except a reference to Carl Haglund being at the convention where there was a protest. Even my debate with Councilmember is airbrushed (I’m referred to as a “developer lobbyist”) cited parenthetically as if the debate was had and won.

What’s weird is that The Stranger doesn’t even bother to name the actual event, the TRENDS Rental Housing Management Conference and Trade Show, hardly a “landlord convention.” The event is more like a trade show with people marketing to building managers and others in the property management business. Attendees at the conference are from all over the state and might own a property or work for a company that sells shower curtains, not exactly a diabolical group.

Instead, the post just makes the political case for rent control.

Outside, advocates and elected officials spoke in support of repealing the statewide ban on rent control and increasing protections for renters.

“This is a racial justice issue. This is a gender justice issue,” said newly elected Seattle City Council member Teresa Mosqueda. “The majority of us who are renters are women and people of color.”

What’s interesting about this is that The Stranger is and will likely be the drumbeat in the months ahead, “reporting” the discussion in Olympia and at City Hall about rent control like a party organ, giving a blow by blow of how the effort to get rent control is going. The debate about the merits of rent control is over, the question now is whether the legislature will pass something to allow the City Council to act.

This matters because those most likely aggrieved about their monthly rent in Seattle live in the most densely apartmented area in Seattle, Capitol Hill. It’s this audience that would benefit the most from a discussion about what would ensue if rent control was passed: continued higher prices, less housing production, people being stuck in rent controlled apartments, black markets in housing, and deferred maintenance. Just last month, Stanford University published just the latest of hundreds of studies attributing price increases and “gentrification” to the rent control policy. Here’s part of the study’s conclusion:

In sum, we find that impacted landlords reduced the supply the available rental housing by 15 percent. Consistent with this evidence, we find that there was a 20 percent decline in the number of renters living in impacted buildings, relative to 1990-1994 levels, and a 30 percent decline in the number of renters living in units protected by rent control.

As I’ve said before, Councilmember Sawant and rent control advocates cheer this conclusion. Why? Because it yet again proves to them the problem is greed and that capitalism doesn’t work. When property owners act in ways to protect themselves economically because of bad policy, those rational actions are considered evidence that the controls aren’t strong enough. “Of course rent control isn’t working in San Francisco,” they’ll say, “because the controls aren’t strong enough.” The goal: state control of all housing.

The economic chaos created by rent control oddly serves the advocates claims because all housing issues are attributable not to economics or policy but greed, period. And the only way to eliminate greed is through government control. Like the Issaquah City Council banning housing to make prices go down, rent control ensures that the intended outcome of the intervention — lower prices — won’t happen. And because of the stubborn conceptual framework around the housing discussion, the only answer is more of the same medicine. It will be up to everyone who really cares about solving housing challenges to push back on all this.

Issaquah Councilman: Twisted Irony or Perverse Sentimentalism?

When I was a young philosophy student we spent many hours debating ethics and morality and learning the difference. One element of the pedagogy was the hypothetical scenario as a way to explore whether human beings can behave in ways that are moral and what that even means. One key discussion was always around altruism, that is, can people behave in ways that are not self interested? A recent story in the Seattle Weekly about an Issaquah Councilmember having to leave town because it had become unaffordable sounded like something right out of the text book, especially because the Councilmember in question was against building more housing in the city. The Weekly called it “twisted irony,” but I call the story an example of perverse sentimentalism and the story explains the lengths to which people will go holding on to views that are just wrong and hurt their own self interest.

The Seattle Weekly describes Justin Walsh as having run for the Issaquah City Council largely on his frustration over housing prices.

“We need to create affordable housing in a way that maintains the community we love,” he told Issaquah Daily in June. “If our teachers and small business owners cannot afford to be community members, they will move elsewhere and we will lose their stewardship over the community.”

In yet another case of journalistic malpractice typical in the region, the Weekly doesn’t focus on the fact that Wash was in the process of buying a house in North Bend while he was running for the Issaquah City Council. Yes, that’s right. It’s right there in the story.

However, during the campaign Walsh moved outside of Issaquah city limits to North Bend, rendering him ineligible to hold a city government position.

Walsh called the decision to move “heart-wrenching.

What?

The guy is running for office then moves out of town durning the campaign. And what’s the news flash?

Walsh ended up winning the November election. But in a twisted bit of irony, he will not be taking his seat come January. The reason? A lack of affordable housing.

So the story becomes another validating story for those bent on squashing housing supply. Also right there in the story, is an example of one of those bizarre things that is truly the headline and lead of the story: Walsh was in favor of a moratorium on new housing! And the Issaquah City Council passed a moratorium until next summer.

What?

Housing is so expensive in Issaquah we’ve got to stop building it! 

The story ought to be an object lesson in the role of sentimentalism in the way people make decisions. Walsh was so concerned about housing prices in Issaquah he moved away after running a campaign that supported building no more housing in Issaquah, housing that would have ameliorated the very thing that practically meant moving out of town. Walsh acted in a way exactly opposite to his own self-interest and that of his community, yet the outcome of the things he supported act as validation for doing more of the same. It’s like watching someone trying to put out a fire with gasoline.

There’s a satisfyingly comprehensive article on altruism in the Stanford Encyclopedia of Philosophy that might put most people to sleep. I read through it trying to find Walsh’s case but I couldn’t. But his story is not uncommon and the real news and urgent warning is that we have thousands of Justin Walshes in the Puget Sound in positions of influence who continue to believe that making more housing means prices just get higher and higher. And perhaps the most disturbing part of the article is the last paragraph.

Walsh still plans to maintain his law firm in Issaquah and “stay active in the region.”

 

Betting We’re Going to Lose: Wading Into the Housing Market

I’ve never owned a home and the last time I lived in a single-family house was growing up years ago in New Mexico. But I’ve decided it’s time to take a look at the housing market. Part of it is my age. Having an asset later on in my life that could be turned into cash might be important. Will I want to be renting a microhousing unit when I’m 75 years old? Maybe. But it might also be wise to be paying a mortgage rather than rent for all the obvious reasons. And here’s another thing: if the City Council keeps doing what they’re doing to housing, buying now means I’m sure to make a tidy profit down the road. Owning a house in Seattle or even nearby will be sure to pay off. We’ve said it over and over, the more rules and restrictions and barriers and costs added to the creation of new housing in the face of rising demand means the value of existing housing will, as the Seattle Times loves to say, sky rocket. So from time to time I’ll give updates on the search.

My first foray into the market took me to the unincorporated outskirts of Seattle, places like White Center, Shorewood, Boulevard Park, and Top Hat. I saw small houses from about 800 to 100 square feet, a couple fire damaged houses, and a weird 1970s townhouse in Glenacres a gated community right under the flight path of Sea Tac. It was a very first trip around going from listing to listing with no expectations. But what I realized is with what I can afford I won’t be able to be very picky. I’m ok with small. I’m ok being under the flight path. I’m still trying to decide whether I want a detached single-family or a condo. I’m not even sure yet how to make that decision. The good news is that I am the only one making the decision and I’m not in a big hurry.

What I do know is that if I’m successful, and things keep going the way they are, I may end up losing the lonely fight to save the Seattle housing economy, but I might do a financial favor for myself. More later. And any advice is welcome.

Costs, Permitting, and Uncertainty: Outreach to Our New Mayor

Last week Jenny Durkan was sworn in as Seattle’s new Mayor. It is a historic moment since Durkan is the first woman to have the job in almost a century. She’s also got a big job managing expectations about growth and change in the city in the next decade. We’ve already been reaching out to her transition team. I’ve dusted off the letter we sent to Mayor Murray and the Council asking to work on reducing costs and uncertainty in the permitting process. We may not agree on the bigger issues associated with Mandatory Inclusionary Zoning (MIZ), but market rate and non-profits producers of housing face serious problems with how we permit housing. Here’s a quick email I sent to Mayor Durkan’s Deputy Mayor. Let’s hope we can work together in the year ahead.  

Hello Mike,

And welcome back to the City! Congratulations!
I wanted to share the attached letter we sent to Mayor Murray and the Council earlier this year and that I also shared with Jordan Royer and David Della. I’ve also talked with members of the transition about our interest in working with the Mayor on how we create more certainty in the permitting process and reduce costs associated with uncertainty and additional mandates and adverse interpretations of the code.
I have personally found departmental staff helpful and very much interested in customer service and trying to do the right thing. But they need more leadership and direction which lends clarity to the challenging job they do.

When the time is right, we would like to meet with your team to figure out how we can work together on these small items that add up to big costs. We also think non-profit developers should be part of this discussion. The state is moving on an audit we requested of housing costs (also attached). We think this is the time to come together as a broader housing provider community to tackle these issues.
I look forward to hearing your thoughts.
Roger–