Tenant protections must avoid many unintended consequences

By David M. Dworkin, President and CEO

This week, NHC submitted comments on the Federal Housing Finance Agency’s (FHFA) Request for Input (RFI) on tenant protections at multifamily properties with mortgages backed by Fannie Mae and Freddie Mac (the Enterprises). The policy is one of the most controversial currently being considered in Washington, DC. Arguments on the side of tenants focus on huge increases in rents in many markets over the past three years. The apartment industry argues the housing supply shortage would be worsened by disincentives to invest capital in new production. Neither premise is wrong. We need to do everything we can to make rental housing more affordable and help tenants avoid eviction. But we can easily go too far, and good intentions can easily result in worse outcomes.

How serious is this problem? Different cities vary widely, but the worst is Phoenix, Arizona, where the cost to rent a 1-bedroom apartment increased 34% in one year! Not surprisingly, Phoenix also leads the nation’s growth in homelessness. One reason for this is that Phoenix is one of the hottest job markets in the country. That should be a good thing, but not when housing production fails to keep pace with job creation. We simply are not building nearly enough affordable housing, and the overwhelming cause of that is a lack of political will at the Federal and local level.

As rents have soared, more people have been squeezed out of an affordable apartment and onto the street. Of course, it’s not just Phoenix. Dozens of cities have seen double digit rent increases in just one year, including Tampa, Fla (24%), Seattle, Wash. (21%) and Boise, Idaho (18%). You can see how these cities and hundreds of others are doing in NHC’s Paycheck to Paycheck Database. You can also compare how costs impact over 100 job occupations in each of them, for every kind of apartment from a studio to a 4-bedroom unit.

NHC has consulted broadly with our diverse membership, from for-profit developers to tenant rights advocates. Nonprofit housing developers were particularly helpful, balancing strong views on both sides. We need to identify reasonable tenant protections, but not at the expense of housing production. While it’s true the benefits of government sponsorship require a responsibility to serve those who struggle the most with housing affordability, discouraging use of optional channels risks pushing companies into using other, much less regulated options.

When all of the facts are considered, I believe we must focus on increasing housing production, while embracing common sense protections of basic fairness for tenants. If an applicant is denied, they should know why. If a lease is not going to be extended, a renter should be told in time to find a new place. But we also need to be sure we are protecting all the tenants in the building. Bad behavior, including nonpayment of rent that will ultimately lead to higher rents for everyone in the building, cannot be tolerated. Demonizing responsible landlords while making some tenants pay for the misdeeds of others is not fair.

Housing affordability objectives must be met primarily through increasing housing supply. NHC is supportive of enacting policies that offer additional education and resources for renters. But these should be appropriately funded by the government, through direct appropriations or tax incentives. Otherwise, they risk reducing overall supply and creating additional confusion in an already uncertain and difficult market. At their worst, they trap tenants further into debt and only delay the inevitability of eviction. more...