CR Magazine - Summer 2018

Government Affairs
Legislative Update
It’s been a busy 2018, and it’s only going to get more interesting
from here as we gear up for election season.
Some quick briefs:
ILLINOIS RENT CONTROL ON HOLD
FOR NOW
Hearings were held in the executive committee in the Illinois
Senate on rent control this past month. CAR senior director of
government affairs Brian Bernardoni testified in opposition. We
presented a lengthy list of alternatives to rent control.
Statewide hearings may be held this summer. The Chicago
Association of REALTORS ® has coordinated efforts with Illinois
REALTORS ® to secure funding for a research proposal on the
impact of rent control.
LESSONS FROM SEATTLE: RENT CONTROL
In April, CommercialForum teamed up with our Government
Affairs Directors for a special Breakfast with the GADs, focusing
on rent control. We welcomed Roger Valdez, director of Seattle
for Growth, a nonprofit group that advocates for more housing of
all types in every neighborhood in Seattle, for people of all levels
of income. Valdez has opposed efforts to charge fees on every
square foot of new development in Seattle and resisted proposals
to impose statewide rent control.
Here’s what we learned from Roger’s presentation:
Seattle isn’t dissimilar to Chicago — an influx of jobs and people
means the demand for housing goes up — and as anyone familiar
with the economics of supply and demand knows, that means
prices are going up, too. Development is starting to catch up, just
in time for the government to turn on regulation. The regulations
are now slowing production and squeezing opportunity, and thus
raising rents.
Allow the market to react to the forces at play — Valdez is a
strict advocate for this, and he points out that that idea that
Amazon is raising rent is a fallacy; it’s the city council that’s at fault.
For example, Seattle has implemented a fee on every square foot
of new construction, causing projects not to pencil and rents to
increase to pay off the fees.
Rent control is a price control, and often discussed as a means
of controlling inflation, caused by a lack of supply in the face
of increased demand. The underlying assumption behind price
control is that prices are set by individuals acting out of greed
and self-interest. But as history has proven (everywhere from
Diocletian rent controls and North Korean grasshopper markets),
rent control doesn’t work, and in fact creates the very inflation
it seeks to contain, in addition to black markets and perverse
incentives.
Instead, Valdez offered several solutions to combat the urge to
implement rent control:
• Ensure adequate housing supply and diversity of housing,
in all neighborhoods. Landlords, investors and developers
are (by a vast majority) good people doing good work and
providing a critical service for the communities. By
inventorying older housing that has deferred maintenance,
we can identify down-market housing and, in the case of
a sale, figure out a plan to transition tenants before negative
headlines happen. No one wants buildings falling down
around tenants, nor do we want to exacerbate displacement.
A positive solution could also be low interest loans to stop
deferred maintenance, so less capital is needed when
buildings sell.
• Avoid subsidized capital construction. The market does just
about everything better than the government, so if you’re
looking to produce more housing, be efficient in how you do
that. And, keep in mind that downzoning doesn’t solve a
problem — it exacerbates the issue by restricting supply.
• Create a risk pool for tenants who are hard to rent to. Ask
the community to help you mitigate your risk. If it’s that
important to them that you rent to a higher risk individual,
how can they help you mitigate that?
• Stay engaged and support each other. There is a narrative
problem when you come out in opposition of rent control
— after all, data doesn’t win elections. It’s critical to
support each other and to offer positive alternatives. Valdez
suggested looking into various tax credit and incentive
programs, including direct cash subsidies for rent.
HOW WE’RE COMBATTING THE CALL
FOR RENT CONTROL
Anti-development forces are taking on private property rights
in wards across the city, and rent control proposals that will
fundamentally change property management and land values
have been debated for months in Springfield and in Chicago, with
no end in sight. We will continue to challenge the notion with
research and practical economic arguments. We ask you to follow
the Association’s social media as updates are frequent.
40 Chicago REALTOR ® Magazine