Sen. Cindy Friedman heard enough of the arguments over what will really help the state’s housing affordability crisis Tuesday and pressed the opposing sides to get to the bottom of it themselves.
After hearing testimony for and against a ballot initiative (H 5008) capping annual rent increases, she urged proponents and opponents to get together and find a middle ground. That scenario could yield the kind of compromise that could take the ballot question off the table for November.
“I am just so frustrated by the extremes,” Friedman, the Senate chair of the Special Joint Committee on Initiative Petitions, said during a hearing Tuesday.
The proposed ballot question would limit annual rent increases to the Consumer Price Index or 5%, whichever is lower.
Opponents have said it would stymie housing production in the state while proponents say the reform is crucial to keep residents housed comfortably and from fleeing for less expensive states.
“Somewhere in the middle is the truth. What would be really wonderful for the Legislature is if you all got together and figured out what a middle ground is,” Friedman said. She added, “This is why it is so hard to figure out how to solve these problems. It would be incredibly helpful if these two groups got together and said, 'You know what, let’s find a way to do some of both,' and I urge you to do that.”
Friedman’s comments reflect lawmakers’ hesitation to adopt the controversial measure.
Sen. Paul Feeney said the issue of housing affordability is nuanced and there are “a lot of questions” that need to be addressed.
“It is evident to all of us in the Legislature that we need to act boldly, but we need to do it and vet these issues so that we don’t affect housing growth downstream,” Feeney told the News Service after the hearing. “That is kind of that sweet spot: How do we make the commonwealth affordable for people, but at the same time increase production. And that is something that I think a lot of us are grappling with. Today’s hearing showed that for everyone to see.”
During the hearing, Feeney noted he was not passing judgement on the measure when he asked proponents how to make sense of the fact that investors have said they will no longer fund projects in Massachusetts while it’s widely agreed the state needs more supply.
Mark Paul, an associate professor of economics at Rutgers University, responded by saying there is no peer-reviewed study published in the U.S. that shows rent control leads to a drop in housing supply and new construction. He related the issue to debates from decades ago over whether establishing a minimum wage would cause employers to layoff workers.
“The same thing is happening with rent control,” Paul said. “When we see states considering it, developers are saying ‘we’re going to leave’ but that really hasn’t played out.”
Whitney Airgood-Obrycki, senior researcher at the Harvard Joint Center for Housing Studies who testified as a neutral expert, said studies have found regulations on rental prices are associated with a drop in rental supply. She also said evidence suggests the policy has little effect on new construction and, in Massachusetts, the end of rent control in 1994 didn’t have a significant impact on building trends. However, the concept has been shown to deter new construction when newer buildings are not exempt from rent caps.
The ballot measure this year includes an exception for units built within the last decade and is somewhat stricter compared to those recently passed in other states like Washington, California and Oregon. In those states, rents are capped at the lower of 10% or the CPI plus 5% to 7%, and there are exceptions for units built within the last 12 to 15 years, according to Airgood-Obrycki.
While they agree boosting the housing supply is important, proponents say residents facing steep rent hikes can’t afford to wait years for new homes to be built.
“This is a fair policy that will create stability for residents, protect communities from displacement, and ensure that Massachusetts remains a place where working families can afford to live, while allowing landlords to operate and profit and preventing the worst corporate actors in the housing market,” said Carolyn Chu, executive director of Homes For All Massachusetts, the campaign backing the proposed ballot question.
Sen. Barry Finegold said Denver and Raleigh, N.C., have seen a drop in rents and asked supporters: “Shouldn’t those be the models that we follow to have rents actually fall and make it more affordable for people?”
Tram Hoang, a senior associate at PolicyLink, said it’s important to look at rental price changes by sub-market because rents are dropping for high-income earners, as opposed to lower-income residents, because vacancy rates for higher-end rental units are rising. Also, it’s rare for someone’s rent to drop and it’s more likely a resident may move to a different unit with a cheaper rent, she said.
“Building at the top is very great because it adds housing supply. But if we want immediate benefits to those who are in most dire conditions, then building at all levels in every sub-market is critical,” Hoang said.
Along with concerns about diminishing housing supply, opponents said the measure would shift costs onto small property owners.
Tony Lopes, a small property owner and vice president of the Small Property Owners Association, said more than 60% of housing providers in the state are small property owners, many of whom own two- or three-family homes and have another full-time job.
“We are not corporations. We are your neighbors,” Lopes told lawmakers while testifying against the measure.
Feeney asked opponents “what is the answer then” to the state’s housing crisis if it’s not rent control. The panel of opponents said building more units is crucial as well as reducing red tape and making it easier to rezone properties.
Finegold also asked opponents what they believe would happen to housing production in communities that border other states if Massachusetts passed the measure.
“It’s already happening, senator, with the rumors of rent control, [developers] are already crossing over to New Hampshire,” responded Neily Soto, chair of Methuen City Council and board member of Massachusetts Housing Coalition.
Soto’s testimony aligns with observations from the Federal Reserve Banks’s Beige Book and top Beacon Hill leaders.
During an event held by the Greater Boston Chamber of Commerce last week, Gov. Maura Healey – who is staunchly opposed to the initiative petition – said that when the idea of rent control going on the ballot came out she got calls from six developers who had lost investment funds.
“Investors are afraid,” the governor said. “It’s totally at odds and counteractive to what we’re trying to do.”
Katie Castellani is a reporter for State House News Service and State Affairs Pro Massachusetts. Reach her at kcastellani@stateaffairs.com.
