House for Rent

At tomorrow’s council work session, the Mayor and the Council will discuss whether to renew the  rent control ordinances within the city.

Unless the Council renews the rent stabilization ordinance again, will sunset on September 1, 2012.

For the past seven years, the City has had a rent stabilization ordinance that applies to single-family home rental properties throughout the City. It limits the total rent that may be charged to live in a single-family home to the greater of 0.6% of the assessed value of the home or the fair market value rent of a four-bedroom house in the D.C. metropolitan area as established by the Department of Housing and Urban Development.

The ordinance includes provisions that allow landlords to increase rent above the ceiling when they make significant improvements on their homes or to avoid a hardship, as is determined by the City’s Rent Stabilization Board.

The purpose of the ordinance when it passed was to limit the purchase of single-family homes in the residential neighborhoods around the City for the purpose of conversion into rentals or as investment properties, and to stabilize the number of owner-occupied properties in the City.

The Council retained Dr. Anirban Basu of the Sage Policy Group to review the proposed policy in 2005. Dr. Basu has recently published a report and found that there are still valid rational basis to renew rent control ordinance in the City.

You can see the entire report here Sage Report, March 2012.

  • Dr. Basu found that there was a reasonable basis for initiating the policy, based on the purpose of limiting the conversion of owner-occupied homes into rental properties and preventing the code violations that would occur as a result, and based on the general fact that owner-occupants have a greater civic engagement in the community than do renters.
  • Dr. Basu also found that a similar purpose was served by the City working with developers to construct new student housing along the US 1 corridor outside of the residential neighborhoods, to give students other options for places to live outside of single-family home rentals. Dr. Basu conducted a similar study before the ordinance was renewed in 2009, with a similar result.   Dr. Basu recently conducted another study based on updated economic information, and considered a number of changed factors – specifically, the fact that a number of developers have completed student housing projects in the US 1 corridor, and the intervening housing crisis that has led to numerous foreclosures and vacancies.
  • Dr. Basu has found that, based on the interest in encouraging homeownership and limiting conversions to rental properties, and to encourage demand for the multifamily student rentals, a rational basis for rent stabilization still exists. However, Dr. Basu states in his report that there may be a time over the next several years that the arguments for rent stabilization become weaker, due to the increasing number of students who are living in multifamily rental properties nearby and the resulting decreased demand for rental properties in the single-family neighborhoods. Despite the existence of the City’s rent stabilization ordinance over the past several years (which, during much of that time, was not being enforced due to pending litigation), the rate of owner-occupancy in the City’s residential neighborhoods has unfortunately decreased.
  • Although Dr. Basu has found that a rational basis for rent stabilization still exists, this is different from the question of whether the rent stabilization ordinance is the best policy for the City, which is up to the Council to determine.

There are many valid arguments both before and against the policy – it may help discourage people from purchasing properties as investments and renting them to students, and it does keep rents down to offer an affordable alternative to the high rises along US 1.

On the other hand, with the high number of vacancies, there is a legitimate question as to whether the City should be discouraging landlords from purchasing homes to rent to students.

Also, the expense to the City of enforcing rent stabilization may not be justified, especially given the fact that rental rates have been kept low due to the current market and for the most part may not have been impacted by rent stabilization.

Also, rent control in residential houses and not in the high rise apartments will keep attracting more students to live in the neighborhood and discourage them to move to students apartments.

On a related note, I personally think some provisions of the  PGPOA’s recent petition is harmful to the long term interest of the City. I will write a separate post on that subject.

Please let me know with your ideas and thoughts about rent stabilization and other ideas about how to encourage homeownership in our community.