National Rental Rehaul
Since the United States has never really had a national rental policy, landlord-tenant issues and rent regulation have mostly been state and local matters. It's unclear whether the federal government even has the power to create a national rent regulatory scheme. Besides, national rent regulation might not prove popular with either the American public or -- more importantly, from the perspective of Democrats -- with the AFSCME (American Federation of State, County and Municipal Employees), which is a leading contributor to the party and whose members might lose jobs if a national rent regulation scheme were created.
The answers are found, I believe, by looking at PETRA (the Preservation, Enhancement, and Transformation of Rental Assistance Act of 2010) and the related HUD initiative, TRA (Transforming Rental Assistance). There are lots and lots of details here, but the essentials are:
- Expand private financing of public housing.
- Expand public payments to private landlords (the basic feature of property-based contracts of Section 8 housing).
- Finance the building of new multifamily units as a mixed public-private development.
There are a fair number of people and organizations upset at point No. 1: They call it "privatizing" the public housing stock, and expect that the new landlords, greedy capitalists all, would soon be driving tenants out of their homes to rent them to wealthy stockbrokers and bankers. That led to HUD Secretary Donovan publicly denying that PETRA would privatize public housing. More interestingly for our purposes, Donovan also pointed out during his Congressional hearing that HUD has significant experience in programs that provide affordable housing through private developers:
Of course, he's talking about property-based Section 8 housing, that will all be transformed, streamlined and strengthened if PETRA becomes law.First of all, we currently have new affordable housing that is developed in this way. We have long experience on how to protect properties in foreclosure from losing that housing. TRA would enhance our ability to do that in a number of ways.
Section 8 housing comes in two basic flavors:
- project-based, in which the government and the property owner enter into a contractual arrangement, with the subsidy staying with the property.
- tenant-based, in which the subsidy goes with the renter, who can rent in any building where a landlord is willing to take him.
In both cases, the basic premise is that the landlord will get to charge "fair market rent" (as approved by the government administrator, either the local Housing Authority or the people at HUD). But the subsidized tenant only has to pay a maximum of 30 percent of income; the government will pick up the rest.
Section 8 for the rest of us?
If the goal of housing policy is to make homeownership more difficult (and therefore, more sustainable), then the big question is: What do you do about the millions of people who would have been first-time homebuyers? The obvious answer is to make rentals more attractive to those who will be priced out of buying a home.
waiting lists can be long. Furthermore, the income requirements, while not as severe as one might think, are not high enough to cover most of those who would have been homebuyers. The chart at the Housing Authority Waiting List website shows that for the St. Paul/Minneapolis region, a family of four may have a maximum income of $64,400 to qualify for Section 8 housing. That's well above the median household income for Minneapolis of $53,315.
Plus, as support for homeownership declines, the demand for rentals would naturally rise, while salaries are not likely to keep pace -- which makes government rental subsidies that much more expensive (remember that the government pays the difference between market rent and actual rent).
In fact, after a few years, it's difficult to imagine that there would be any non-Section 8 rental housing at all in the United States. Perhaps there would be a few luxury rentals in places like New York City and San Francisco for the twentysomething and thirtysomething urban professionals who make far too much money to qualify for Section 8. Otherwise, all other rentals would be covered.
A League of Ordinary Renters
What would the outcome look like? Renters would get to pay a maximum of 30 percent of their income toward housing, and developers and banks would get a brand-new, low-risk market. The public housing stock is not only preserved but vastly expanded, and the state and local government employees get federal subcontracts to administer the whole thing.
It isn't national rent control, or national rent regulation, since any regulation is tied to a subsidy. A state or municipality is absolutely free to refuse the regulation along with the federal subsidy -- just like they are free to refuse federal highway funds and set their drinking age or speed limit at whatever they like. Except, of course, very few do. What governor wants to lay off 40 percent of the politically active and highly vocal government employees at the state housing authority, because she refuses to take federal HUD money?
Along with the goodies, of course, come some strings. There are many, but I'd like to highlight just one.
Basically, every landlord and public housing authority will be required by law to recognize legitimate tenant organizations. This is a statutory provision that does not exist under current law. So, for example, a greater Los Angeles area tenant association might negotiate with every landlord who has any Section 8 units in his building. Whether such a giant tenant union could take into account the particularities of a specific building or not is left up to the reader to decide.
In the last part of this series, we will examine how all of this might get paid for, and assess the political likelihood of it happening.
Still trying to decide which is right for you? Here are some AOL Real Estate guides to help you no matter whether you choose to buy or rent:
More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
Get property tax help from our experts.