Power point for 09142016

The Emperor, The King, and The
Councilwoman
The Story of Rent Control in Seattle
and Washington State

Diocletian
Roman Emperor
284 -305 AD
Because of
those that “seek
private gain and
are bent upon
ruinous
percentages of
profit to their
avarice, ye men
of our provinces,
regard for
common
humanity impels
us to set a
limit…if anyone
have acted with
boldness against
the letter of this
statute, he shall
be subjected to
capital
punishment. “

Cnut the Great
King of England 1016–1035 AD
“Let all men know how empty and worthless is the power of kings.”

Kshama Sawant
Seattle City
Councilmember
2014 – Present
“Rent control is merely a
way of outlawing price
gouging and preventing
landlords from profiting off
the increase in property
values driven by real estate
speculation and lack of
supply. It’s essential to
address the existing power
imbalance in which
landlords and developers
have all the control”

Why rent control doesn’t work?
The problems with rent control are, “among the best-understood issues in all
of economics, and – among economists, anyway – one of the least
controversial” – Paul Krugman
• A restrictive price ceiling reduces the supply of property to the market.
• When prices are capped, people have less incentive to fix up and rent out,
or to build rental property.
• Slower supply growth exacerbates the price crunch.
• Those landlords who do rent out their properties might not bother to
maintain them, because when supply and turnover in the market are
limited by rent caps, landlords have little incentive to compete to attract
tenants.
• Tenants may stay in properties longer than makes sense.
• Evidence shows that those living in rent-controlled flats in New York tend
to have higher median incomes than those who rent market-rate
apartments. Wealthier households are better at tracking down and secure
rent-controlled properties.
From the Economist (2015)

Rent control in Washington State?
It depends on whether the Senate remains in the hands of a conservative caucus that has been
a backstop for rent control. A big Trump loss in Washington could take out key Republican seats.

Rent control in Washington State?
Current State law, RCW 35.21.830, prohibits local government from imposing, ”Controls on rent
for residential structures.’ In order for local governments to pass rent control ordinances, the
State Legislature would have to repeal or rewrite the law.

How we get rent control in a year
1. Donald Trump motivates lots of people to vote against him,
and they vote for Democrats all the way down the ballot
2. The previously conservative Senate is now under the control
of the Democrats
3. Seattle Councilmembers Herbold and Sawant push Speaker
Chop to pass a repeal of preemption
4. The Senate goes along with the repeal
5. By this time next year, the Seattle City Council is debating
what kind of rent control ordinance it will pass by the end of
2017
6. With 2017 being an election year for Mayor and some
Councilmembers there is little debate about why rent
control is a bad idea, instead everyone pushes for their
favorite version
7. Rent control passes in the fall of 2017 and is law by 2018

Commercial rent control in Washington State is not clearly pre-empted by State law.
Councilmember Sawant has proposed commercial rent control in Seattle in the name of
protecting small business. There is no indication that there is any opposition by the Mayor or
Council to this idea. High rents for commercial spaces are a function of supply and demand, and
the Council acted several years ago to prohibit small commercial spaces in low-rise zones. Their
actions made the situation worse and this proposal would make it worse still

Could it get any worse? Meet Mandatory Inclusionary Zoning (MIZ).
The Mayor and City Council in Seattle are in the process of implementing a policy that would
mandate a fee on all new residential development by the square foot or the inclusion of a
percentage of set aside, rent restricted units.
• Infeasible – The policy will render some projects infeasible because of additional costs
• Illegal – Is a clear violation of the plain language in RCW 82.02.020 prohibiting fees
• Inflationary – The only way this policy will work is when rising rents absorb additional costs

Ludwig Erhard
Minister of Economics under Chancellor Konrad
Adenauer from 1949 to 1963
General Lucius Clay: What have you done?
You’ve changed the allied price controls.
Ludwig Erhard: Herr General, I haven’t changed
them, I’ve abolished them!
Clay: My advisors tell me it’s a big mistake.
Erhard: Herr General, my advisors tell me the
same thing!
“It started the markets working. With free
prices instead of nothing being in the windows
of the shops everything started to come up.
And that began the German economic
miracle.”
--Milton Freidman
From the PBS series “The Commanding
Heights.”

What’s the (right) thing to do?
• Stay principled – More housing of all types, all
over the city, and for all levels of income are
what we need to lower prices;
• Stay engaged – the Mayor and Council aren’t
listening, but being on the record matters;
• Support each other – your associations and
organizations matter; and
• Support Smart Growth Seattle in 2017

Power point for 09142016

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