Do DFL lawmakers just hate landlords?
To protect tenants, Minnesota DFL lawmakers — joined by one republican lawmaker — have introduced a bunch of bills seemingly intended to extend rights to renters.
Upon closer inspection, however, most of these bills propose rules that will make it harder or riskier for landlords to operate their businesses. Instead of taking landlords as what they are — business people trying to provide a service — these rules paint a picture that landlords possess some massive power in the market that enables them to exploit the little guy, tenants.
Whether these bills will help tenants is a whole other question. But it’s not hard to imagine that trying to help tenants by crushing landlords will not end well for anyone involved — especially not for the tenants who rely on these landlords to provide services.
Looking at the myriad proposals, it’s safe to wonder whether legislators realize that making it hard for landlords to operate will ultimately make it hard for renters to find housing. Unless, of course, legislators just hate landlords for “exploiting” renters — then it would make sense to rein them in, even if doing so hurts renters in return.
Here is a look at some of the proposed rules:
Termination of lease upon loss of income
Senate Bill SF 2031 and its house companion HF 2273, as well as SF 2234, make it possible for tenants to terminate a lease when they have no source of income. That is, if by some chance a tenant loses their job, they can get their lease contract terminated as long as they give a two weeks notice, regardless of the lease contract requirements.
The proposal also requires landlords to try to rent abandoned apartments at “fair” rental prices — whatever that entails. Failure to do so voids the tenant’s lease.
Why this proposal is problematic: Certainly, loss of income presents a tough situation for renters trying to make rental payments. But this bill provides perverse incentives that will potentially hurt renters more than it will help.
Why is such the case? If you rent, you might have noticed that when you try to renew a lease, shorter or more flexible lease options usually come with higher rents. This is because tenant turnover costs landlords money. When a renter moves out, the landlord has to spend money and time cleaning the unit and getting it ready for the next renter. Not to mention that there is also a chance the unit could stay vacant for a long time, losing the landlord money.
Long leases insure landlords from high turnover rates and reduce the risk of higher and longer vacancies, which in turn leads to lower rents. This bill, however, makes it risky for landlords to provide long leases to tenants by making it easier for tenants to void leases at any particular time or abandon units leaving the landlord with the responsibility to rectify the situation.
Landlords would then have to find ways to compensate for that risk, which most times would mean raising rents or better yet, discriminating against risky renters like those with low-income or less stable jobs.
Rent control for trailer parks
House bill HF 1976 prohibits trailer park landlords from raising rents more than once a year. Currently, the law allows trailer park landlords to raise rents by no more than twice a year.
Additionally, landlords may only raise rents by more than the average inflation rate of the last three years if such a hike reflects a rise in operating costs or comparable market rent.
Why this is problematic: The bill makes it costly to operate trailer parks, which could reduce investments in such a service reducing its supply and thereby raising prices.
Rent control for low-income rental projects
Under Minnesota statute, housing units are classified as low-income rental projects if at least 20 percent of the units meet the following conditions:
1) the units are subject to a housing assistance payments contract under Section 8 of
the United States Housing Act of 1937, as amended;
(2) the units are rent-restricted and income-restricted units of a qualified low-income
housing project receiving tax credits under section 42(g) of the Internal Revenue Code;
(3) the units are financed by the Rural Housing Service of the United States Department
of Agriculture and receive payments under the rental assistance program pursuant to section
521(a) of the Housing Act of 1949, as amended; or
(4) the units are subject to rent and income restrictions under the terms of financial
assistance provided to the rental housing property by the federal government or the state of
Minnesota, or a local unit of government, as evidenced by a document recorded against the
House Bill HF 2676 and its Senate Companion SF 2590 prohibit landlords from raising rents by more than 5 percent for low-income rental projects during a 12-month period.
Why this is concerning: rent control has been found to decrease the supply of housing thereby worsening the housing affordability problem.
HF 758 / SF 556: Discourages landlords from forcing or nudging tenants to declaw or devocalize their animals. Landlords who violate this rule are liable for civil penalties.
Problem: It’s not clear whether this solves an actual problem that tenants face, but it certainly restricts freedom for landlords.
HF 685 / SF 365: prohibits corporate entities, developers, and contractors
from converting single-family homes into a rental property unit. Entities can apply for an exemption granted that their action would not diminish the availability of affordable housing.
Problem: While the proposal would not do much to improve home ownership since it does not deal with rising housing costs, it will make it more costly or harder for landlords to provide rental housing, which will then raise prices for renters.
HF 743 / SF 1093: Among other things, the bill imposes an excise tax when the buyer in the sale of a residential property is a corporate entity.
Problem: By raising costs for corporate landlords, the bill would raise the cost of providing housing for corporate landlords, and those costs might be passed on to renters — and that is assuming that corporate landlords will still choose to enter the housing market to begin with.
SF 1091 / HF 2279: After signing a lease which is at least 10 months, landlords must wait until after at least 4 months have passed before requiring tenants to renew the lease. Landlords must also provide tenants with a notice of the option to inspect the unit at the beginning and end of the tenancy.
Problem: Much like HF 758, it’s not clear that this proposal solves an actual problem, but it does increase the bureaucracy that landlords have to adhere to.
HF 2704: Prohibits a landlord from retaliating against tenant organizing and provides civil penalties for landlords if they do so.
Problem: It’s unclear whether this proposal solves any existing problem. However, the proposal does state that if an alleged retaliation happens within 90 days of a tenant engaging in any organizing activity, the landlord has the responsibility to disprove the alleged retaliation. To an extent that their tenants organize, this provision would effectively limit what landlords can or cannot do in regard to their tenants, even if the landlords are acting in good faith.
SF 1737 / SF 1665 / HF 445 / SF 430: Prohibits landlords from discriminating against renters who receive public assistance.
Problem: To the extent that this bill prevents landlords from discriminating against individuals receiving assistance — who usually happen to have low incomes — it will likely come at the expense of landlords, who will have to take greater risks to accommodate disadvantaged renters. In the likely event that the law doesn’t solve any existing problem, it will just increase the bureaucracy that landlords must adhere to.
HF 319: requires a higher burden of proof for landlords before terminating a tenancy at will. Currently, the law allows landlords to terminate an at-will tenancy if the tenant refuses to pay rent. Landlords can give two weeks’ notice to terminate the lease. Bill HF 319, however, requires landlords to take some extra steps before offering an eviction notice. This includes going as far as getting tenants to apply for housing assistance if they do not pay rent before giving them notice of eviction.
Problem: By definition, tenancy at-will contracts can be terminated at any time by either the landlord or renter. For that reason, they are riskier but also more flexible to both parties. Increasing the burden of proof for landlords before eviction increases risk without any offsetting benefit. Landlords are thereby unlikely to offer more flexible lease agreements, or hike rents, even more, to compensate for the high risk.
HF 315: Prohibits landlords from imposing any type of non-refundable fee.
Problem: Restricts landlord activity.
All in all
DFL lawmakers appear to be under the impression that housing should be treated differently from other goods and services.
The fact of the matter, however, is that like other business owners, landlords are in it for profit. Regardless of how much lawmakers consider housing a “right”, making it harder or more costly for landlords to operate will only result in less housing or more expensive housing for renters.
Either DFL lawmakers lack basic economic knowledge or they just hate landlords so much that it does not matter who gets hurt so long as landlords are brought under control.