🔒Central Mass. business and political leaders oppose rent control, but will voters listen?

Mayor Joseph Petty said Worcester can’t afford the impact of rent control on housing production. Gov. Maura Healey said the mere talk of rent control has scared away developers and would halt housing production.

The Worcester Regional Chamber of Commerce has come out against the rent control initiative likely headed for November’s ballot, saying its one-size-fits-all approach doesn’t account for local circumstances. The chamber’s April 2 event in opposition to rent control attracted dozens of developers, landlords, and elected officials. Elected officials like Petty and Healey have been joined by over three dozen Massachusetts elected officials in opposing the rent control ballot initiative, including Gardner Mayor Michael Nicholson, Leominster Mayor Dean Mazzarella, State Sen. Michael Moore (D-Worcester), Rep. Joseph McKenna (R-Webster), and Worcester City Council members Kathleen Toomey, Morris Bergman, Tony Economou, and Jose Rivera.

“I studied economics and finance at Bentley University before getting elected, and it does not take an economics major to understand that if you put artificial price controls on the revenues that rentals have, you're going to disincentivize investment in property,” McKenna said at the chamber event. Despite their objections, business and political leaders have their work cut out for them. Early polls show the majority of voters favor rent control as housing costs continue to rise. However, all the debate might be moot, as legislators have the ability to overrule the ballot initiative. “Being in the trenches doing what I do each and every single day, what I'm worried about is primarily the message that we're sending to the private sector,” Jackson Restrepo, Worcester property developer and founding partner of Restrepo Properties, said at the chamber event. “It’s already very difficult as it is to build anything, or even to be a property manager.”

The appeal of rent control

If passed, the ballot initiative would cap statewide rent increases to either 5% or that year’s Consumer Price Index increase, whichever is lower. Rent control would apply for lease renewals and new tenants, with a 10-year exemption for newly constructed housing. Carve outs exist for owner-occupied properties with fewer than five units. A November poll from Suffolk University and Boston Globe found 62.6% support for the initiative among 500 registered voters, while a University of New Hampshire poll from February found 56% support among 699 Massachusetts residents. About 38% of state residents live in rental units, according to the U.S. Census data. The initiative will need to overcome an increasingly organized full-court press against it. The Massachusetts Association of Realtors, the Small Property Owners Association, and MassLandlords all oppose the measure. Opponents say rent control will leave property managers without enough income for building maintenance, slow new housing development, and lower values for multifamily properties. Municipalities’ residential tax base could shrink up to 9%, according to a report from Tufts University and Greater Boston Real Estate Board. Supporters of rent control cite a 2018 University of Southern California report saying rent stabilization policies increase housing stability and have minimal impact on new construction. “We need to both build more housing and stop corporate landlords from raising the rent astronomically on working people,” said Carolyn Chou, executive director of Homes for All Massachusetts, one of the groups behind the rent control campaign. “That's why we have a 10-year construction exemption in the ballot question, to support new construction, while also stabilizing communities now by limiting the amount rents can increase year over year.”

Impact of development

Healey’s multifaceted approach to solve the Massachusetts housing shortage and rising cost of living has focused on new housing production. Massachusetts needs to build 222,000 housing units by 2035 to meet demand, according to the Executive Office of Housing and Livable Communities. The rent control initiative has caused at least six developers to pull out of planned housing projects, Healey told an audience at a Greater Boston Chamber of Commerce event in March. Not every developer is overly concerned about the potential impact. Radson Development, a New York-based developer planning to build apartments in an empty Downtown Worcester lot at 56 Pleasant St., is used to working with rent restrictions. The firm operates affordable housing buildings in New York City, with the city’s Rent Guidelines Board establishing yearly rules for rent increases. “Here in New York, we're pretty accustomed to rent control,” said Jonathan Beuttler, senior vice president of Radson Development. “We have the rent guidelines for as long as I've been doing business.” Beuttler is more focused on what funding the Worcester project can obtain through MassHousing and other sources. The Massachusetts rent control proposal didn’t really raise concerns for Radson, although he said the fluctuating cap based on CPI may have an impact. “Capping rents works in terms of affordability, but from a developer operating standpoint, it only works so far as we can pay back our banks,” he said.

Overruled?

Keep Massachusetts Home, the pro-rent control campaign, reported a total of $747,702 in contributions and in-kind donations in its January filing with the state’s Office of Campaign and Political Finance, much of that coming from labor and faith-based groups. Housing for Massachusetts, the opposition campaign, reported $458,234. Its coffers are expected to grow; the National Association of Realtors has committed $3 million to oppose the initiative. Rent control proponents are simultaneously advancing the ballot initiative while pushing for a legislative compromise, where municipalities would have the option to impose rent control. Even if the ballot initiative passes, Massachusetts law allows for the Legislature to modify voter-approved statutes, or to even repeal them entirely.

Sen. Moore said he doesn’t want to overrule voters, but he and McKenna kept the door open to potential legislative tweaks if the rent control ballot initiative passes. “It will be an interesting, to-be-determined course if this initiative gets adopted,” McKenna said. Eric Casey is the managing editor at Worcester Business Journal, who primarily covers the real estate and banking & finance industries.