An Act Establishing a Pilot Program for A Fair and Equal Housing Guarantee via Surety Bonds and Decreasing the Prevalence of Single Family Zoning
Summary of Surety Bonds
This bill would establish a new kind of rental assistance available at any participating insurance broker. The rental assistance would be administered in two steps. First, a landlord buys a bond to cover a unit. This takes time. Then, if there's a claim afterwards, the payout would be instant.
Since this pilot requires additional public funding for rental assistance, the bill would increase the excise tax on land restricted to single family use. Why specifically single families? Because single family land use is the primary reason we have a scarcity of rental housing in Massachusetts. Land rezoned to duplex or land that is already multifamily would be exempt from the new excise tax.
This would be a pilot program only.
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MassLandlords staff drafted or participated materially in the creation of bill text below. Members will be polled at the next update of the policy priorities survey.Bill Text May Change
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To be posted.
Explanation of the Surety Bond and Zoning Bill
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An Act Establishing a Pilot Program for A Fair and Equal Housing Guarantee via Surety Bonds and Decreasing the Prevalence of Single Family Zoning.
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Whereas the deferred operation of this act would tend to defeat its purpose, which is to stabilize rental housing by guaranteeing rent-payment surety bonds, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.
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This law would take effect upon passage. |
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Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1. |
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The General Laws are hereby amended by inserting after chapter 121G the following chapter:-
CHAPTER 121H FAIR AND EQUAL HOUSING GUARANTEE FUND Section 1. |
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Definitions.
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As used in this chapter, the following words shall, unless the context clearly requires otherwise, have the following meanings.
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The term “lessor” means the owner of land or tenements used for residential purposes, including landlords.
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The term “lessee” means the lessee of land or tenements used for residential purposes, including tenants.
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The term “rent-payment surety bond” means a bond conditioned on the payment of rent or use-and-occupancy payments by a lessee to a lessor.
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Section 2.
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The secretary of housing and economic development shall establish a pilot program to test the viability and efficacy of enabling lessors to purchase rent payment surety bonds from companies authorized to transact business by the division of insurance, which pilot program shall reflect the geographic, racial, and ethnic diversity of the commonwealth.
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A pilot program is not a permanent commitment. We'll try this and see how it goes. |
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Section 3.
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For the purposes of this pilot program, there is hereby established a fund to be known as the Fair and Equal Housing Guarantee Fund, to which shall be credited the proceeds of any bonds or notes of the commonwealth issued for this purpose, and any appropriations authorized by the general court specifically designated to be credited to the fund.
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This bill requires money. We're going to try a new type of rental assistance. |
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Section 4.
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The secretary shall instruct the department of housing and community development to administer the fund in order to enable lessors to purchase rent-payment surety bonds from companies authorized to transact business by the division of insurance.
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The Department of Housing and Community Development (DHCD) will make rules, but licensed insurance companies will administer the bonds. This is different from today, where regional administering agencies (RAAs) administer rental assistance. |
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The department shall, up to the amount of $10,000,000, guarantee all surety companies against all losses that result from a breach of the terms of any rent-payment surety bonds issued pursuant to this chapter, and provide to lessors upon satisfactory application the full amount of all premiums and other amounts paid for such bonds, subject to the following conditions:
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The surety company will charge an admin fee. Since the state underwrites the bond itself, the admin fee will be subject to market forces and presumably small. |
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(a) Each applicant for a surety bond shall provide satisfactory evidence of ownership of the premises, that the applicant is not subject to sanctions administered by the federal Office of Foreign Asset Control, that the use of the premises as a residential dwelling is lawful, that the dwelling unit is real and preexisting, and that the lease or rental agreement pertaining to the premises existed prior to the effective date of this act.
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Unlike current rental assistance, this bond is more about whether the address is real than whether the tenant is eligible. |
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Satisfactory evidence of a written lease or rental agreement shall include any written lease or tenancy-at-will dated prior to the declaration of surety.
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This pilot will apply to rental agreements made before the law is passed, to prevent people signing unsustainable rental agreements after the fact. |
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Satisfactory evidence of an unwritten agreement shall include copies of voided checks or other proof of repeat payment prior to the declaration, or shall consist of affidavits executed by the parties averring no such proof despite the true existence and terms of their agreement.
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If you cannot document a tenancy, you can state under oath that it is nonetheless a real rental agreement. |
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(b) Each bond issued by a surety company guaranteed under this Chapter shall indemnify the lessor from nonpayment fully but only to the extent that the cause of the lessee’s nonpayment of rent or use and occupancy is outside the lessee’s control.
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The bond covers a lessee's inability to pay. The lessee cannot simply choose not to pay. |
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Valid evidence shall consist of a documented increase in expenses, including increased rent not in excess of the fair market rent, a documented decrease in income, or both.
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A lessee has to show their expenses increased or their income went down. A rent increase is a valid expense increase, as long as it's not above market rent. |
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(c) A lessor or their successor or assign shall make claim for payment within 60 days of the first total or partial nonpayment event subsequent to issuance of a bond on that tenancy or forfeit their bond.
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You have to notify the state soon after there's a nonpayment event. This limits public liability. |
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No claim shall exceed the total arrears resulting from the net change in the lessee’s ability to pay plus the next month’s shortfall.
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The renter still has to pay what they can afford. You can ask for next month's rent. |
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Every two months thereafter, not to exceed 12 months subsequent to the first claim, a lessor may seek payment for subsequent rental period arrears and next month’s shortfall, provided however that each additional claim shall be accompanied with documentation that the lessee is attempting to correct the shortfall or else, through documented disability, cannot.
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You can go back and ask for unpaid rent over the course of a year. The lessee has to prove they're doing something to try to afford rent, or that through disability they cannot. |
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(d) Each lessor shall demonstrate to the satisfaction of the department that the lessor has not previously sought payment from the surety in connection with the same lessee or premises for the same rental period.
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You cannot double dip. |
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(e) The department shall promulgate emergency regulations establishing the procedure, and provide the necessary forms, by which applicants may apply for surety from authorized surety companies, obtain from the department and convey to surety companies the premium payments, and make claims in the event of nonpayment by lessees.
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There will be paperwork. Most of the paperwork burden will be with the insurance companies. |
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(f) The department shall review the results and outcomes of the pilot program and shall provide annual reports of the pilot program to the chairpersons of the joint committee on housing.
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We want to see if this works. |
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(g) For the purposes of ensuring the just administration of government and the prevention of fraud and abuse, the addresses including unit numbers of bonds issued pursuant to this chapter, as well as the manner and amount of payments issued pursuant to this chapter, shall constitute a public record.
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We need to inspect where these bonds are used, especially to make sure they help us all equally. |
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The department shall provide a lookup service by which the courts or the public may verify the presence of a bond by address and the status of that bond whether in effect, paying, or exhausted.
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Rather than asking an RAA to tell us whether an application for rental assistance is pending, anyone can enter the address of an apartment to see if it has been bonded. |
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Section 5. |
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No court having jurisdiction of an action for summary process pursuant to chapter 239 or other form of eviction action, except for cause, shall accept for filing a writ, summons or complaint for possession of a residential dwelling arising out of a lease or rental agreement subject to a surety bond guaranteed pursuant to this chapter, unless the surety company has exhausted payments available under this chapter or denied the lessor’s claim.
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You cannot evict a renter for nonpayment if you buy a bond, because the bond guarantees your rent. You cannot evict no-cause-stated, either, because some landlords unfairly use that as a work-around. You can still evict for cause. |
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The department and the department of the trial court shall establish a procedure by which it will be apparent on the face of documents presented for filing whether the dwelling was subject to such bond.
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To file, you will have to say whether or not you have a bond. The court can check this. |
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SECTION 2 |
We need money to make this work. |
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For the Department of Housing and Economic Development to operate and administer the Fair and Equal Housing Guarantee Fund $1,000,000
Fair and Equal Housing Guarantee Fund $10,000,000 |
DHCD will receive $1 million for administration. There will be $10 million of rent paid. |
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SECTION 3 |
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Notwithstanding the rate specified in Section 1, where the interest or property conveyed consists of a single family dwelling, except where the property is located in a zoning district in which multi-family dwellings are allowed as of right, and when the consideration of the interest or property conveyed, exclusive of the value of any lien or encumbrance remaining thereon at the time of the sale, exceeds one hundred dollars, the excise tax shall be ten dollars for each one-thousand dollars or fractional part of said consideration, excluding a consideration of between zero and one hundred dollars.
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The excise tax at sale of any land or property zoned single family will be $10 per $1,000, approximately three times higher than currently. The higher excise will not apply if, at time of sale, the land or property is zoned or has been recently rezoned to duplex or higher. |
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Such excise taxes shall be deposited in the Fair and Equal Housing Guarantee Fund if possible, or the General Fund.
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This excise tax earns the public back the $11 million spent on this bill. |
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