Mark Harmsworth of the Washington Policy Center discusses the issues with tenants and property owners created by the government mandates imposed during COVID
Washington Policy Center
Bloomberg is reporting that more than 8 million Americans are feeling the economic squeeze of increasing rents, caused in part, by government mandates imposed during COVID and inflationary pressure caused Federal and State government spending policy.
According to Census Bureau data, about 15% of US renters are behind on their payments. When leases come due, there will be an increase in tenant eviction and tenants leaving more expensive rentals for cheaper options.
The Washington State Legislature has made the problem worse by passing Senate Bill 5162 (SB 5162) which will make it more difficult for property owners to recover lost rent from those renters who have not been playing by the rules. While SB 5162 is attempting to protect renters from opportunistic property owners, it doesn’t protect a property owner from those renters who are misusing the system.
Already struggling with eviction moratoriums, many property owners have been hit hard by state and local regulations making owning a rental property as an investment less attractive and increasing costs. The majority of renters, during the pandemic, have continued to pay rent on time, but there are horror stories of renters moving into properties and using the eviction moratoriums as an excuse to spend money that would have been used for rent, for other purchases. Bad renters have taken advantage of the pandemic to get free housing at the expense of the property owners.
For property owners that are unable to recover lost rental income, much of which is used to pay for the mortgage and maintenance on the rental property, the solutions are limited. Many property owners will take money out of savings to recoup the loss of rental income, some owners will be forced to sell the rental property and others will increase rent on the next tenant.
All three options will decrease rental property availability and affordability, exasperating the upward price pressure on rental rates.
State legislators also attempted to add additional rental regulation with the introduction of House Bill 1904 (HB 1904), which would increase rents and reduce available rental properties. The bill would have placed a 3% cap on rent increases annually unless the property owner gives at least 6 months’ notice to the renter of the increase. HB 1904, thankfully, failed to pass.
The solution to high rents is to increase the availability of housing, both rental property and privately owned property. Removal of restrictive rules on rental properties will increase market confidence for property owners, who are hesitant to rent properties due to government mandates and the threat of losing considerable amounts of money.
Additional home construction will ease supply and stabilize the recent meteoric home price increases to allow first time buys to get onto the property ladder.
Legislation, such as HB 1904 and SB 5162 and other similar legislation, have had exactly the opposite effect on rental rates than they are intended to have. Instead of protecting renters and reducing costs, both laws have increased rents and increase costs for the renter and the property owner.
Mark Harmsworth is the director of the Small Business Center at the Washington Policy Center.
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