Massachusetts Leaders Must Confront Attitude Towards Housing Providers for Existing Rental Supply to Survive

As we head into another legislative session in Massachusetts, we face the same landslide of anti-property owner ideas up on Beacon Hill. It becomes the definition of insanity – doing the same thing over and over, yet hoping for a different result.

It remains death by 1,000 cuts for property owners – the same ideas: Tenant Opportunity to Purchase (TOPA), Rent Control, Eviction Sealing. There are also other impossible ideas, as evidenced by last year’s near miss on having no credit checks for tenants. All regurgitated, once again, for owners to have to plead to our elected officials for our salvation.

“Well-intentioned,” old ideas. Proven repeatedly, not to work.

Now, the vise turns for brokerage fees. Yet another added cost for property owners.

Housing providers have been the villains of the story since the pandemic. It’s the “greedy" property owner’s fault. That’s not the reality of the story. 

As evidenced by a recent survey sent to SPOA’s constituency, all our costs are rising across the board. Unprecedented insurance hikes (25-40%). On the materials supply side, an inflationary climate not seen in decades. Unfriendly interest rates are preventing debt restructuring and the unlocking of equity. 

Massachusetts’ utility costs are slated for 35% increases. Many older units include heat and hot water in their rents. Many water bills are rising and now include drainage fees. Property taxes are rising. There’s also the higher cost of wages.

So it isn’t the property owners. It’s the simple mathematical equation that everything costs more. However, the property owners cannot absorb all these costs themselves. They must be shared by the tenants.

One of SPOA’s board members points out – why are we the only industry where we are to blame for cost escalations? It’s the equivalent of blaming the grocery store for the price of eggs.

Two other economic issues are at play in Massachusetts - very limited to no new housing supply is being created and municipal budgets continue to grow. The trifecta becomes more restrictive with bad legislative policy.

At some point people begin to make choices. 

Is it economically viable to continue to own rental property in Massachusetts? Are the legislative headwinds supportive of the preservation of existing housing, which stands at more than 60% of the rental stock which small property owners provide in the state?

Boston has made regulatory choices that impede new construction of housing units. The increased affordability requirement, now coupled with net-zero requirements on buildings over 15 units. This at least doubles construction costs and into the realm only well-financed institutions like Harvard University can afford. 33,000 units are permitted, without shovels in the ground. New production is at a virtual standstill.

Budgets in Massachusetts have not constricted in decades. There was growth pre-pandemic, followed by unprecedented ARPA, or pandemic relief funding. As these funds have been spent, the only new sources of revenue now come only from the taxpayer.

This will take time to find some equilibrium.

Meanwhile, the legislature should ask itself the following question: Are we going to support and protect existing affordable housing and understand the tenuous collaboration that is an economic reality between those who provide housing and those who need it? This especially true when government can’t set the stage to provide more housing itself.

Or, are we going to continue to do the same thing over and over again, and hope for a different result?

by Allison Drescher