Rent Control Measures Move Forward In Uncertain Political Environment
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The rise of populism has shaken the politics of many states, including Illinois, and landlords here may begin to feel the effects. The new governor, J.B. Pritzker, hails from one of Chicago’s richest families, but the billionaire businessman was lifted into office by a liberal wave in one of the nation’s bluest states, and in the era of Bernie Sanders and Alexandria Ocasio-Cortez, the 1990s-style centrism that once dominated the Democratic Party is out of step.
If Pritzker needs a way to prove his liberal bona fides, he could sign a legislative measure that would dump Illinois’ 20-year ban on rent control, an action he said during campaigning that he supported. The question would then be his attitude toward a new, and far more sweeping, proposal that would not only establish rent control, but transform the relationship between tenants and property owners.
Property owners, developers and Realtors are ready to do battle.
The first bill, sponsored by state Rep. Will Guzzardi, a Chicago Democrat, is just one line of text that repeals the 1997 Rent Control Preemption Act, a law that bans municipalities from imposing restrictions on rental rates. It was first introduced a year ago and sent back to the rules committee, but he just reintroduced the measure, now known as House Bill 255, and is seeking co-sponsors.
"The economic situation of renters has become a lot harder, and the families I represent are facing real crises as they try to make the rent each month," Guzzardi said.
The Logan Square neighborhood is part of his district, and it is now considered one of the hottest rental markets in the city. Construction crews are at work all over the neighborhood, often building new luxury housing too costly for most residents, he said.
"If a landlord has a three-bedroom apartment, and wants to nearly double it to $2K, there are currently no checks to stop this. It's happening every day in Logan Square."
The second proposed law was introduced last February by state Sen. Mattie Hunter, another Chicago Democrat. In response, Senate President John Cullerton authorized a series of public forums around the state hosted by a bipartisan Senate committee on housing, which listened to hours of testimony from hundreds of advocates, landlords, tenants and business owners.
The original proposal was reworked over the past year. The plan to administer rent control through boards in each of the state’s counties was scrapped and replaced with six regional organizations, each with seven elected members who would implement, monitor and enforce rent control. The new bill will also include a rule that landlords can only evict someone for good cause, such as nonpayment of rent, other breaches of a lease, or if an owner wants to take a unit off the market, among other reasons.
A version of this bill will soon be introduced in the House by state Rep. Mary Flowers, according to Rod Wilson, executive director of the Lugenia Burns Hope Center on the South Side, a nonprofit and part of the activist groups Lift the Ban Coalition and Campaign for Rent Stabilization in Illinois.
A Senate bill will also be introduced that mirrors Guzzardi's effort, he said, and after a final report is produced by Hunter's special committee, the more comprehensive bill will be reintroduced.
Whether any of this can actually pass the legislature and reach the governor’s desk is difficult to judge. Affordable housing advocates can remind the new governor about what he said last year on the campaign trail when asked about the various rent control proposals kicking around the legislature.
“Gov. Pritzker, while campaigning in both the primary and the general election, said in public forums that he supported repealing the Rent Control Preemption Act,” the Lawyers Committee for Better Housing Senior Attorney Frank Avellone said.
He is less sure about securing approval for the far-reaching proposal that emerged from last year’s public forums, and said that vision may be a multi-year effort.
Only California, Maryland, New Jersey, New York and the District of Columbia have rent control laws, according to the National Multifamily Housing Council. Massachusetts voters discarded rent control in 1994, but a similar effort in California failed in 2008.
Pritzker’s office did not return messages seeking comment on the rent control proposals.
"He's got a lot on his plate right now, such as trying to get a new budget together, but if it gets to his desk, I believe he'll sign it," Guzzardi said.
Bernardoni wouldn't offer an opinion on the legislation's chances, but he refuses to be complacent. There are dozens of rookie lawmakers this year, he pointed out, and the federal investigations that recently engulfed powerful politicians like 14th Ward Alderman Edward Burke and 25th Ward Alderman Danny Solis, and perhaps touched Illinois House Speaker Michael Madigan, have further unsettled the political world, making it difficult to offer confident predictions.
“Two years ago, who would have thought Rahm Emanuel would just walk away from the mayor’s office, or that Ed Burke would disappear from the political scene?”
Avellone also finds the recent political change surprising, but exhilarating as well.
“Two years ago, there was no discussion of rent control at all, and now it’s on everyone’s radar screen,” he said.
Housing advocates have complained for years about rising costs, especially in urban neighborhoods seeing an influx of high-income renters.
Chicago officials also recognize that the city has a problem. They asked DePaul University’s Institute for Housing Studies to examine the state of the city’s rental housing market to help inform officials developing Chicago’s 2019-2023 Five Year Housing Plan.
The institute’s data shows more people now rent rather than own homes. In 2006, the roughly 1 million households in Chicago were evenly split between renters and owners, but by 2016, the last year with available data, a gap opened up. Nearly 600,000 households were renting, versus 460,000 homeowners.
And affording those rental units has been a hefty problem. According to the institute, in 2016, 76% of Chicago households earning less than 30% of the area median income were extremely burdened by housing costs, meaning they spent more than 50% of their income on housing. Of those earning between 30% and 50% of AMI, more than one-third were extremely burdened.
Those numbers were largely unchanged since 2012, but the researchers did find a growing gap between the supply and demand of affordable units. In 2012, the city had 255,000 affordable units, compared to a demand for 366,000, or a gap of 111,000. By 2016, the number of affordable units sank to 228,000, and the demand was 348,000, leaving a gap of 119,000.
Bernardoni said developers, landlords and Realtors all understand the affordable housing crisis, and want solutions. They strongly disagree rent control is the way to tackle it. He suggests municipalities like Chicago make changes to their building codes to make building homes more affordable, and offer more tax credits that allow developers to create affordable units.
“I’ve been fighting for an affordable building code my entire career,” he said.
The West and South Sides of the city have thousands of empty lots, and he said the focus should be using tools such as tax credits and revamped building codes to fill up these areas, rather than placing restrictions on existing homes.
Bernardoni also worries about the impact of rent control on landlords’ bottom lines. If owners can’t raise rents, their property values may not increase, forcing revenue-hungry municipalities to increase property tax rates, an issue of special concern to smaller landlords, he said.
“They’re going to get creamed. This is a math problem.”
The extra burdens that would come with rent control could force landlords to take thousands of rental units offline in Chicago alone, he said.
Avellone wants to make clear that the new proposal would not freeze or cap rents. Instead, it would regulate how much rent can increase over a 12-month period. Landlords could not boost rental rates more than the rise in inflation. In the Chicago region, the annual increase in the consumer price index for the past two years was 1.8%.
To sweeten the bill, it creates a 3% property tax credit for small owners— those with 12 or fewer rental units, he said. All owners of rental properties would also qualify for a property tax credit of up to 25% to fund repairs and capital improvements.
Some affordable housing providers agree with Bernardoni that the focus on rent control is misplaced.
As president and CEO of the Community Investment Corp., Jack Markowski heads the largest affordable housing lender in Chicago, and although he has not taken an official position on any of the rent control proposals, he said rents are already low in most low-income neighborhoods, so imposing limits will be ineffective.
“Controlling the rents landlords charge could seem like the solution for those in hot neighborhoods, but in most of the city, the problem is not that the rents are too high, it’s that incomes are so low,” he said.
He also advocates growing the inventory of affordable housing. In 2018, his firm loaned out $76M, which helped create nearly 2,000 affordable units, many in the city’s poorest communities. It has a set a similar goal for 2019.
The activists’ motive in pushing for these reforms is not all about money and affordability. Avellone said it is about stabilizing neighborhoods, and through the elected rent control boards, giving more power to regular citizens on day-to-day concerns.
“We’re saying the people should decide, not simply the monied interests.”
Talk like that gets a passionate response from Bernardoni, who feels landlords are hamstrung by existing laws.
“Evicting someone in the city of Chicago can take six months to a year,” he said.
If Guzzardi gets his measure through, but the more comprehensive plan fails, the battleground over rent control would shift to post-Rahm Emanuel Chicago, Avellone said.
The wide-open primary campaign now taking place offers little clarity. The Chicago Association of Realtors and the Chicago Housing Initiative, an activist group pushing the rent control measures, recently held dueling forums for the many mayoral candidates, and both focused on the fight to overturn the rent control ban.
Cook County Board President Toni Preckwinkle, who many polls show having a narrow lead over the crowded field, told the crowd at CHI’s December event that she supports overturning the ban, but Lori Lightfoot, the former head of the Chicago Police Board, was not in favor. Other major candidates, like Illinois Comptroller Susana Mendoza, William Daley and Gery Chico, were not present.
At the Realtors’ forum earlier this month, all of the candidates present supported expanding housing tax credits and the association’s call for a more affordable building code, Bernardoni said. He was also encouraged that most candidates, including Chico, Mendoza and former Chicago Public Schools CEO Paul Vallas, who suggested capping property taxes, were against rent control.
The association has not endorsed a candidate, but Bernardoni said Realtors’ associations statewide did stand ready to mobilize their thousands of members and inundate legislators with calls if any of the proposed legislation moves forward.
Guzzardi said legislators will be listening.
"The influence of the Realtors' lobby is a real thing."