By Mike Glasser, RPBG President
The State Legislature under Governor Pritzker is in session and, as expected, members of the General Assembly have introduced problematic and short-sighted bills regarding rent control.
I urge you to take the time and read these bills – or at least their synopsis.
House Bill 255, reintroduced by State Representative Will Guzzardi (39th District) looks the same as the same bill introduced in the last session. It seeks to overturn Rent Control Preemption Act, adopted in 1997 and lift the statewide ban on rent control.
House Bill 2192, introduced by State Representative Mary Flowers (31st District), similar to SB 3512 introduced last year by Senator Mattie Hunter, seeks to carve the state into six regions, each with an elected seven-member rent control board. Among each board’s duties would be to set maximum allowable rent increases (with no increase allowed to exceed the Consumer Price Index), and it would stipulate the terms under which landlords could terminate leases in order to upgrade the properties.
The proposed legislation is wrong on numerous levels – as an example, consider the requirements for the composition of each regional board:
Each board shall consist of the following members:
- Three members, each of whom is a tenant … whose income earns less that 120% of the area median income;
- Two members, each of whom is a landlord …
- Two members who are representatives of an organization that advocates for low-income tenants …
Or, consider the benchmark that constitutes the maximum allowable annual rent increase:
“Consumer benchmark” means the index selected by a board to determine the rate by which consumer prices and purchasing power have changed and in reference to which the rent stabilization is set.
How do we feel having a state law limit the increase that its pro-tenant board can assess when we face the prospect of daunting property tax increases? Under this scenario, how could we be motivated to upgrade windows, sand and stain floors, renovate a porch system or replace a furnace? How can we even secure a loan or refinance when expenses would be sure to increase at a faster rate than allowable rent increases?
The Flowers bill also includes a provision requiring property owners to create and maintain a reserve account for repairs and capital improvements where we must deposit 10% of our monthly rent proceeds, after monthly expenses are paid. On top of that, the bill requires us to contribute to a repair fund to assist other property owners – specifically, those owning owner occupied buildings of twelve units or less.
As reprehensible and naive as Flowers’ bill is, it is imperative that we oppose both bills currently up for consideration with equal strength. Any form of rent control will only further damage the already weak economies of Chicago and Illinois. I urge everyone in the real estate industry to advocate in opposition to both bills. We cannot simply sit back and trust that our state lawmakers will get this right. So far, they have shown every indication of doing just the reverse.
Our research proves that the imposition of rent control only worsens the affordable housing problem – reducing the supply of affordable housing, diminishing property owners’ incentives to properly maintain their properties, diverting property tax burdens onto home owners, adding layers of inefficient government bureaucracy, and chasing quality investors and property managers out of the industry or to neighboring states.
Affordable housing is a complicated issue and there are no easy solutions. But all the evidence leads to one certain conclusion – rent control is NOT the answer. We all need to work with elected officials to arrive at alternative approaches that can provide greater access to affordable housing. (As an example, consider one proposal advocated by one of our members, which could create tens of thousands of affordable and accessible apartments with one simple zoning change.) The best solution to the housing affordability problem is to remove obstacles to the constructing of new housing. Rent control would accomplish the opposite result.
For the second and final time, I shamelessly plug my WTTW Chicago Tonight appearance
Consider this a “Call to Action.” Reach out to your elected officials at every level of government and feel free to use ShapeIllinois.com. Beyond that, discuss this issue with your friends, neighbors and colleagues – especially those who are not in the industry, as a little explanation to most non real estate folks can go a long way.
Our elected officials need to know that the general public is becoming increasingly aware of the unintended consequences of both bills. We need to make sure homeowners understand that their tax bills will increase as our apartment building values decline. Rent control will lower apartment property values. Lower apartment values will lead to lower assessments and reduced real estate tax revenues. Governments – who will always get their tax revenues from someone – will have to shift the tax burden from apartment buildings to homeowners and the owners of commercial properties. This has been the pattern in other jurisdictions where rent control was adopted – it will happen here too if rent control becomes law. Homeowners should understand this relationship, and register their displeasure with their elected officials.
Finally, let’s not lose sight that many good people struggle with increased housing costs and fears of displacement. We should remain attuned to this reality, and the real pain caused by rising housing costs on low and moderate-income households. Let’s work with our industry partners to find thoughtful and effective solutions to this problem, yet remain steadfastly opposed to all forms of rent control and the damage it would cause.
6 MYTHS about Rent Control in Illinois
Advocates for Rent Control would have you believe the policy will magically fix a lack of affordable housing in Illinois. Here’s why they are wrong