Lessons from Massachusetts
Of the mere 6% of rent-controlled tenants who were needy, only one out of six came to the cities for public assistance, and they all got it. The rest — five out of six — took care of themselves.
The predictions were grim — mass evictions, homelessness, hardship for the elderly, families of “diversity” moving out in droves — anticipating rent control’s end in Massachusetts after the 1994 statewide referendum.
But it did not happen. Rent control ended quietly. The predicted mass displacement of tenants failed to materialize.
“Frankly, we’re a little surprised at how smoothly everything has gone,” says Pat Canavan, the Boston mayor’s special adviser on housing.
A big non-event
Decontrol was certainly large-scale, affecting 25% of residential units in Boston, 33% in Brookline, and 40% in Cambridge, the three affected cities. But there have been no post-decontrol headlines, no public reports documenting that any of the dire predictions came true.
But maybe needy tenants just went quietly to the streets and homeless shelters. To check this out, we made dozens of phone calls in recent weeks and talked to 27 people in all arenas public and private. Nothing showed up.
Nothing out of the ordinary
The “hard” evidence we found says just that: no big shift of tenants out of their homes, out of their school districts or beyond city limits in search of more affordable rents.
Evictions in the Cambridge District Court stayed level. After decontrol, the rent board stopped handling evictions. So, when you add the rent board’s average of 26 evictions a month to the court’s monthly average of 55, you get 81. In fact, evictions in 1995 and 1996 averaged 71 a month, somewhat down.
School transfers stayed level. The Boston School Department, which records transfers by address, noticed “nothing worth investigating,” one official said. In Cambridge, the Community Development Department checked the addresses of students transferring out of schools. They never reported the results since the study didn’t turn out the way they wanted it to. It “did not point to rent control as a factor causing kids to leave the system,” according to three different officials.
New voter registrations in Cambridge stayed level in 1995 and went down 16% in 1996. No sign here of any big outward migration opening up units for new residents.
One owner of 350 rent-controlled units reported 80 to 90% of his tenants stayed in their units during the first two years of decontrol. His normal turnover rate is 10 to 15%, he said. That equates with stability.
Did decontrol cause emotions to explode? The police, who respond routinely to occasional landlord-tenant disputes that get out of hand, were “not aware of a noticeable increase since January or for any period of time,” according to a spokesperson at Boston headquarters. Several officers polled in the sensitive Fenway area said they “didn’t see any increase in calls or trouble.”
Key factor: few needy
No doubt the biggest factor that made decontrol so quiet was the very few number of truly needy tenants — revealed by the two-year phase-out for income-eligible tenants passed by the state legislature. Before the number of needy tenants became known, property owners thought 40% might qualify. Tenant advocates claimed double that. It turned out that only 6% of all rent-controlled tenants were income-eligible for the phase-out.
So when the first big wave of decontrol happened two years ago, 94% of rent-controlled households — some 41,500 — were deregulated with no blip, no increase in normal mobility, because they could all afford market rents and didn’t need rent control.
How do we know? Just compare incomes to rents. The lowest income that did not qualify for the two-year extension was $21,551 for a 1-person household – the most common household under rent control. This person’s “affordable rent” is $534 (30% of income, the federal guideline), and it’s right in line with the current cost of shared living, about $500 to $550 per person according to the managers of two roommate placement services in the Boston area.
Certainly the vast majority of tenants who came off rent control on January 1, 1995, could afford their old apartment at a new market rent, or if they had to move because they were “over-housed,” they could afford an apartment nearby. No moving out of town
Rent control had just delivered cheap rent to people who could stay and pay the market rent.
Crunch on needy?
What about when the remaining 6% of truly needy tenants came off rent control this past January? That’s when the real crunch should have hit.
Was there a sudden surge in homelessness? “Not really, not here, I don’t see it myself,” said the director of the Salvation Army’s 55-bed shelter in Cambridge. Their needs assessment counselor interviewed “at most two persons displaced by rent control” since January.
The director of the CASPAR homeless shelter in Cambridge, which ordinarily sees 1,000 persons a year lose their housing, thought maybe a handful came to his shelter on account of rent decontrol. “They haven’t stayed too long,” he said. “Most reconnected with a family member or friend and stayed less than a month.”
What about the elderly? The director of the largest elder services agency serving Cambridge and Somerville guessed “about 50 to 75” elders out of his agency’s 10,000 cases in the past two years may have been affected by decontrol. All found housing within three or four months. The director’s rough guess of numbers still amounted to less than a 1% of their cases.
Boston’s old rent board converted into a “rental housing resource center,” downsized from 50 to 15 staff, and got $1 million of city funds for a “safety net” program. The center has seen just 250 decontrolled tenants come through its doors looking for help since last summer — exactly 1% of all its former rent-controlled tenants. Virtually all qualified for and got federal section 8 subsidies. And what about the $l million? Only two people so far have applied for rental help under it.
Similarly, Cambridge has placed 170 decontrolled tenants in public housing or with section 8 subsidies in private housing — also 1% of its former rent-controlled population. The city appropriated temporary funds equaling less than 3% of its total human services budget (not counting state or federal aid).
As it turns out, only one out of every six of these last, needy tenants came to the cities for public assistance, and they all got it. Interestingly enough, the rest — five out of six — took care of themselves, finding private solutions in private housing.
A Boston-area roommate placement service offered free help to the last Brookline tenants coming off rent control. They expected to see people in their 60s and 70s who had lived 30 years in their apartments. About 10 to 15 tenants took advantage of the offer.
“I put an end to it,” the owner said, because the tenants coming in for free service were no different than his regular clients. The “clincher” was a 35-year-old attorney working for the state who expected free service. That’s when the owner ended his free offer.
The free market works
Housing specialist Rolf Goetze, senior policy analyst for the Boston Redevelopment Authority, concludes: “The fact that the pot didn’t boil over is remarkable considering that rents were deregulated in a ’post-Newt-Gingrich’ environment.”
“Before Newt,” Goetze said, “we had a safety valve in the fact that Massachusetts, like every state, got additional new federal subsidies every year. Emergency housing cases could be shoe-horned into those extra subsidies.”
But rent control ended “after Newt,” when housing subsidies were “level-funded” – kept at the same level each year without adding more. That no serious dislocation occurred under “post-Newt” conditions, says Goetze, means that “we have a much more stable system than we thought.” The housing market controlled itself very well.
And the benefits . . .
Decontrol is pumping money into the local economies and the cities’ treasuries.
Owners of former rent-controlled buildings are investing again, making up for 25 years when their housing starved for improvements. Building permits were up 31% in 1996 in Cambridge compared to the preceding three years, and trending even higher in the first months of 1997. New paint jobs and facelifts on former “rent control wrecks” are obvious to all walking through the streets.
Just months after complete decontrol, six new apartment construction projects are under way in Boston and Cambridge (Copley Square, Park Square and the Prudential Center in Boston; Harvard Square, Putnam Square and near the Museum of Science in Cambridge).
With property taxes rising by as much as 200% on decontrolled buildings, decontrol is giving the cities enough increased revenues to pay for transitional tenant assistance — with a surplus left over. Banker and Tradesman estimated that Boston would see a permanent $12 million revenue increase annually — 5% of Boston’s total property tax. Cambridge’s assessor estimates a permanent revenue increase of $4.5 million, undoubtedly an underestimate given Cambridge politics. When you add in the $1.6 million the city no longer spends on the rent control bureaucracy, decontrol will add at least $6 million a year to Cambridge’s $244 million annual budget — a 2.5% permanent budget windfall.