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D.C. Council Votes To Extend Rent Control, Increase Affordable Housing Funds

D.C.'s rent control law is set to be extended for 10 years, one of several additions to the District's budget that the council debated in a lengthy virtual hearing Tuesday. 

The D.C. Council at a March 2018 hearing.

After making a series of changes related to taxes, housing and economic development in the final hours, the D.C. Council gave the first of two approvals Tuesday to the District's $16.7B budget for the coming fiscal year. 

The bill still needs a final vote and a signature from Mayor Muriel Bowser before becoming law. Tuesday's first vote came after Bowser released her proposed budget in May. The coronavirus is projected to cause a $744M loss in D.C.'s revenue for FY2021, which begins Oct. 1. 

D.C. Council Chairman Phil Mendelson released his draft budget bill Monday night ahead of Tuesday's hearing. His additions included a 10-year extension of D.C.'s rent control program, a move that surprised advocates on both sides of the issue, who had expected the rent control extension to come up later this year with its own hearing.

Multiple council members, including Housing Committee Chair Anita Bonds, also said during the hearing that they were surprised to see the rent control extension included in the budget. But several lawmakers came out in support of the extension after council member Brianne Nadeau proposed an amendment to scrap it from the bill. She ultimately withdrew the amendment, keeping the rent control extension in the bill that was later approved. 

The D.C. Council's virtual Committee of the Whole meeting Tuesday.

Tenant advocates opposed Mendelson's addition of the rent control extension because it kept the program as it currently stands rather than expanding it with the additional restrictions they have advocated for, DCist reported. States including New York, California and Oregon passed expanded rent control laws last year, a movement that multifamily owners say represents the biggest risk to the industry. 

D.C.'s Reclaim Rent Control coalition, which has pushed for the expansion of rent control regulations, tweeted its opposition to the 10-year extension after discovering Mendelson had added it to the budget Monday. D.C. Fiscal Policy Institute Executive Director Ed Lazere, an at-large candidate for D.C. Council, also voiced his opposition. 

"The budget should NOT be used to move unrelated legislation, [especially] when it's put in last-minute with no warning," Lazere wrote in a tweet. "It's unethical and undemocratic. Rent control, with an impact on hundreds of thousands of households, deserves its own day."

Mendelson said even after including the 10-year extension in the budget, the council could still hold hearings in the fall to debate an expansion of the rent control regulations. 

"It's my view that we get rent control extension taken care of while the committee deals with the other bills," Mendelson said during Tuesday's hearing. "This [bill] does not preclude the debate or work in the committee on those other proposals. It is important that we extend rent control."

Dean Hunter, a multifamily broker who last month launched the Small Multifamily Owners Association, said he thinks rent control disproportionally hurts small landlords and wants to see the policy reformed, but he was glad to see the council extend it without including the Reclaim Rent Control proposals. 

"Cities across the country are dealing with reactionary, activist-driven measures to expand rent control, and what the council just did was exercise a great deal of maturity and provide a great deal of stability for landlords in the District," Hunter said. "It's a big deal."

Even if the existing rent control regulations may not be ideal for apartment owners, he said having consistent rules on the books gives landlords certainty for their long-term planning. He said his group will oppose any future bills to expand rent control, and it plans to release its own agenda to reform D.C.'s rent control policy to help small landlords. 

Beyond the surprise rent control extension, the council also made several changes to the budget involving the funding of affordable housing and economic development tax incentives. 

D.C. Council Chairman Phil Mendelson at Bisnow's Economic and Political Forecast event.

Mendelson added $9M for D.C.'s primary affordable housing vehicle, the Housing Production Trust Fund, for the upcoming fiscal year. Bowser had proposed reducing the fund's FY2021 budget from $116M to $100M because of the revenue shortfall. But Mendelson said he used a federal program to unlock $88M in new funds, including a $9M addition to the HPTF for FY2021.

The council chairman also added $50M for repairs to the D.C. Housing Authority's public housing stock, $11M for eviction prevention and homeless assistance, and $6M for the Local Rent Supplement Program. 

A workforce housing pilot program proposed by the mayor and supported by developers also survived the council's budget debate. The program would use $4M in funding from real estate tax abatements to fund projects, largely in wealthy neighborhoods, that would set aside one-third of their units for those making less than 80% of area median income. 

Stonebridge Founding Principal Doug Firstenberg, who advocated for the policy as chair of the Developer Roundtable, said the pilot will create 1,000 units of housing, including over 300 workforce-level units. He said if it is successful, he hopes the District would expand it in future years. 

"We met with the mayor and said, 'It's a great time to create a middle-income housing program because the pressure is going to grow,'" Firstenberg said. "You're going to have people who used to rent market rate who can no longer afford market rate, so the pressure on middle-income housing is going to be exacerbated. Construction starts are going to go way down, so if you can create this middle-income housing program, you're not only filling a need in the market, you're creating jobs."

The D.C. Council also cut the funding for an economic development program that has given tax incentives to technology companies. Mendelson proposed a reduction to the program, which was deepened when the council passed an amendment Tuesday introduced by Nadeau. Her proposal further reduced the funding for the incentives, generating $28M in revenue for the city, but didn't fully scrap the program. 

"The tax incentives I would characterize as having been very rich, so we're toning them down," Mendelson said in a press conference Monday, referring to his initial cut. "It still provides an incentive, it still makes us more attractive than the suburbs, but we're not giving up as much in revenue."

The council took several other measures to increase revenue, such as hiking taxes on advertisement sales, raising the gas tax and delaying a tax break for corporations. Bowser sent a letter to the council Tuesday ahead of the vote saying she opposed its tax increase proposals. 

"Despite the significant drop in revenues, I was intentional in avoiding increasing costs for District residents and businesses when formulating my FY 2021 budget and urge the Council to avoid tax increases," Bowser wrote in the letter. 

After approving the budget Tuesday, the D.C. Council passed Council Member Kenyan McDuffie's bill to use $100M from the CARES Act to create a grant program to support businesses.

Bowser's administration will have the power to choose the grant recipients, but the bill sets priorities for the businesses that will receive funds. McDuffie said the funds will go to those that have been hardest hit by the pandemic, including restaurants, retail and hotels, and businesses that have not yet been able to operate under Phase 2 of the reopening process.

"This legislation gets cash directly into the hands of owners right away rather than some sort of tax cut that leaves businesses owners hoping to realize savings at a later date," McDuffie said in a release. "In no uncertain terms, they’ve told us they need direct support now to help them get through this difficult time." 

UPDATE, JULY 8, 2:10 P.M. ET: This story has been updated with information on the passage of McDuffie's bill to create a $100M grant program.