In September of 2019, during the heat of a fierce re-election campaign, Seattle City Councilmember Kshama Sawant rolled out a proposal for residential rent control in Seattle — despite the fact that it’s clearly prohibited under state law. Today, facing the prospect of a recall election, Sawant trotted it out again. Given the variations in rent being charged, thanks to the pandemic, is this a good time or a bad time for this perennial issue?
In fact the bill Sawant promoted at a press conference/rally this past week and promised to introduce shortly into the Council’s legislative process, is nearly identical to the 2019 version with only minor edits. Here’s my review of the original bill; the 2021 version has all the same major components, including:
- annual rent increases are capped at the CPI-W inflation rate for the Seattle-Tacoma-Bremerton area for the previous 12 months;
- if an apartment building is demolished and a new one is built in its place, an equivalent number of of the new units must be rented at the same price as the old units, CPI-adjusted and proportionately adjusted for square footage;
- a 43-person Rent Control Board, initially appointed but then elected starting in 2023, would rule on landlords’ emergency petitions for exemptions to the rent-control restrictions;
- the Rent Control Board would be prohibited from granting exemptions for foreseeable major expenses; only unforeseeable ones may be granted an exemption. It also would not grant an exemption if the rent increase might force an existing tenant to move out of the city.
- submitting a petition for an exemption would cost a landlord $500, which would be refunded if the petition is granted.
- fines and penalties for violating the rent control ordinance are set.
- tenants have a private right of action against landlords for violations.
The new proposed bill still has all of the major issues that the original draft did (see my 2019 article for the full list). On top of that, it’s rent control, and there is broad consensus among economists that rent control doesn’t work as advertised and is poor policy.
Sawant also said at her press conference that she is working on three additional bills to be introduced soon:
- An ordinance similarly enacting rent control on commercial properties. Commercial rent control is not prohibited by state law. There are also few studies on it, so there is no general consensus as to its value or its issues.
- An ordinance requiring landlords to provide 180-day advance notice to tenants before imposing a rent increase.
- An ordinance requiring a landlord to pay for a tenant’s relocation expenses if an increase in rent forces the tenant to find new housing because they could not afford to pay it.
Sawant once again took aim at capitalism and “big banks and corporate landlords.” She noted that according to ApartmentList.com rents in Seattle increased by 9% from January to April this year — calculating that this represents an annualized rate of 40%. Technically that’s true, but it also proves once again the need to fact-check everything Sawant says (and Mayor Durkan, and every other elected official) as she is carefully cherry-picking the time-frame to prop up her argument. Rents did rise 9% in the first three months of 2021; but they dropped 21.8% between March 2020 and January 2021. Sawant wants you to see this:
I could equally try to skew your perception by showing you this graph:
Now let’s look at the whole picture. All of ApartmentList.com’s data go back to the beginning of 2017. (Yes, I know there is interesting rent data going back earlier from other sources, but this is Sawant’s chosen data source, sent to me by her communications staff person, so we’re going with them so that there is no debate over whether the source is biased or untrustworthy). Here’s the picture for the past three years.
For three years, up until prices crashed in early 2020, rents were flat. Currently they are almost 15% below that level, and Councilmember Sawant believes that now is the time to impose rent control. To be clear, the point of this analysis is not to deny that rents increased for several years after the Great Recession; they did — a lot. But what changed in Seattle starting in 2017 is that a lot of new rental housing started coming online. This data strongly support the viewpoint of rent control’s critics: the best way to control housing prices is to build more housing. That’s what we’ve been doing here in Seattle for the past few years, and SDCI’s permit data suggests that the pattern will likely continue.
Sawant is also being disingenuous in suggesting that the 9% increase in rents so far this year will continue at that pace. She’s a PhD economist; she knows better. She knows that sharp declines are usually followed by sharp initial recoveries that tail off at or before the original starting point before the decline. That is certainly the “V” shaped recovery that we’re seeing in the United States so far:
And in the Seattle Metropolitan District:
And with consumer spending.
Even crude oil prices:
And it works in reverse: sharp spikes often see initial sharp drops, usually at or short of the initial range. For example, Washington’s unemployment rate, which saw a slow recovery from the Great Recession but a quick recovery after a very quick spike last year. It now seems to be leveling off where it started.
Sawant’s rent control bill, if passed by the City Council, would become effective on the day that the state law prohibiting residential rent control is effectively repealed — or never, if that doesn’t come to pass. She knows that efforts to repeal rent control in Olympia have gone nowhere for several years, and this week she spoke of her new effort to change that. “Our movement will challenge the political establishment to overturn the current state ban and enact rent control to make Seattle affordable for all.”
What remains to be seen is whether Sawant’s efforts to drape herself in a collection of pie-in-the-sky renters’ rights bills will improve her chances to beat back the recall campaign. There are, after all, lots of renters in her 3rd District (Central Seattle).