Eviction Reform: ‘Just Cause Eviction’ Bad for Landlords, Worse for Tenants

Image of Boston City Hall "Die In" Sep 22, 2016 likely due to Eli Gerzon, Twitter, http://34.gs/ext_tw_eligerzondiein. Editorial use.

Image of Boston City Hall “Die In” Sep 22, 2016 likely due to Eli Gerzon, Twitter, http://34.gs/ext_tw_eligerzondiein. Editorial use.

By: Sherri Way, Landlord and MassLandlords Member

If we want to help low-income or bad credit tenants find housing, we must create an environment where they are not considered an unsurmountable risk to landlords.

There has been much talk over the past year about Eviction Reform in Massachusetts.  Most landlords laugh when they hear this since Massachusetts is known as a very pro-tenant state.  How much more are landlords supposed to endure?

The current Eviction Reform consists of:

  1. Requiring a tenant to be habitually late before they can be evicted for nonpayment;
  2. Requiring landlords to limit the rent increases to 5%/year even though rents are going up faster;
  3. Requiring landlords to only evict for “just cause,” meaning that if a landlord wants to have the apartment vacated because a relative is moving in or for renovations, that would not be allowed.

This was started in Boston where there have been many hearings by the Mayor and City Council on this issue.  There’s also talk of new legislation being proposed on this matter at the state level with the new session starting. Landlord organizations have protested the new legislation as being a form of rent control.  While this is true, the government, in most cases, doesn’t care how this impacts the landlord. The argument that landlord organizations need to voice is how “just cause eviction” will impact tenants.  By showing that there is an adverse impact on tenants with the new laws, the tenant groups and the government may not be so quick to pass new laws that would be detrimental to landlords.

The central problem all parties are trying to solve is the housing deficit. It is not typically the high-end tenants that will be affected.  In fact, it is the lower-end tenants and first time renters that are most impacted by the current housing crisis.

There are three groups of tenants looking for housing.
1.         Good risk – these tenants are welcome to most landlords. Typically they have high credit scores and good paying jobs.
2.         Bad risk – these are tenants that no landlord will take due to their level of risk (no income, bad credit etc.).
3.         Moderate risk – this is the majority of tenants.  Depending on the landlord’s risk aversion, these tenants may or may not be approved for an apartment.

Rents have increased significantly over the past few years which have made it difficult for some tenants to qualify for housing.  These are not the tenants with the 700+ credit scores and good paying jobs, they’re the tenants that are risky – lower credit scores, lower incomes and bad or no rental history. If we want to help these tenants find housing, we must create an environment where they are not considered an unsurmountable risk to landlords.  This means making it easier to evict bad tenants while still providing housing for risky tenants that are actually good tenants.

If new laws are passed which make it more difficult to remove tenants from a rental, the ‘bad risk’ group will increase in size, the ‘good risk’ group will decrease in size and those who fall under ‘moderate risk’ will either stay the same or decrease with more tenants moving into the ‘bad risk’ category. It should also be noted that, while some of the laws may keep tenants in a rental, when it comes time for them to move again it will be increasingly difficult for them to find a rental. Thus, they may end up in undesirable or unsafe rental units or worse, they might become homeless.

Therefore, to help tenants find housing, the government should work with landlords to make the laws more equitable. While public defenders and others will say that an eviction takes 12-14 days, all landlords know that this is far from the truth. If you’re lucky and everything goes smoothly, it takes 6 weeks*; I know this is from my own personal experience.  If you’re unlucky, it could take even longer and become very costly. With this potential cost hanging over our heads, why would any landlord rent to someone that is a possible risk?

MassLandlords members probably all know some multi-unit home owners that have vacant units that they choose not to rent because they are very risk averse. If legislators worked with landlord groups, as well as tenant groups, to decrease the risk then maybe some of these units would open up and help with the current housing crisis. Both landlords and tenants should be contacting their legislators to explain this to them. Educate them on why new stricter eviction laws are detrimental to tenants. This is what the legislators in Massachusetts will respond to.

*Editor’s Note: the MassLandlords eviction study for Massachusetts demonstrated that in 2014, the average eviction exceeded 55 days in duration under existing laws. The longest eviction in the study period was 1 year, 3 months, 2 weeks, 2 days.

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5 Responses to Eviction Reform: ‘Just Cause Eviction’ Bad for Landlords, Worse for Tenants

  1. Kevin K says:

    I found this article very helpful and accurate. Being a landlord in Southbridge can be challenging, as you are usually choosing from the best of of the worst. If I was looking for the perfect tenants and holding my standards to high, I would have a lot of vacancies. It’s tough enough as it is now, never mind adding salt to our wounds with new laws making it even more different for landlords. These tenants can walk away owing thousands with no easy way for us to collect. Where are we being protected? Are we just suppose to shut up and suck it up. Let’s stick together and fight for what we think is right.

    Kevin Keith

  2. Shawn P says:

    Below is the text of an email I have sent to the mayor and all of the Boston City Council members. I think it adds some other dimensions to what you’ve written. If we want this stopped I think we need to act now and get ahead of it. I’m interested in any feedback folks here have on my thoughts below.

    =================================================================================

    I am writing again to layout a more considered foundation for my current opposition to “Just Cause Eviction” and propose a series of questions we should answer as we deliberate on this matter.

    Basic facts:
    • Boston has long been recognized as a prosperous and desirable city to live in or near.
    • Boston has a long, rich, varied, and deep history and culture.
    • As more people look to move into or near Boston, the quantity of available high-quality real estate and rental units not kept up with demand – inventory has fallen and the cost of real estate and rent has gone up. These are natural free-market forces (supply and demand).
    o Note 1: As the value of real estate increases the average rent in those properties naturally increases.
    o Note 2: Basic investment principles dictate a very strong connection between the value of a piece of real estate and the income that can be derived from that real estate. In fact, a primary value appraisal process used around the world for revenue producing real estate is to divide the expected revenue that will be produced by a property by the percentage return on investment required to make the property profitable. A property that produces $1,000,000 in annual income where the required “return on investment (ROI)” is 6% would be worth approximately $1,000,000/.06 = $16,700,000.
    o Note 3: All investors evaluate the risk associated with their investments. Investors understand they can put their money in the bank at almost no risk but they will only earn 1% or 2% on their money. If they want higher returns they will need to take higher risks. In the real estate investment business, an ROI of 6% or more is required to justify the added cost and risk associated with market downturns etc.
    o Note 4: No investor will spend money to purchase a new property or upgrade an existing property if they cannot achieve a return on their investment that justifies the associated risk.
    • As real estate companies and small private investors have put their money into upgrading properties in Boston, the quality, safety, livability, and comfort of rental units has gone up significantly – and so has the rent.
    o Note 1: Rent and Investment are inextricably linked. If investments are made, it is an absolute necessity that rents will go up. If rents are held constant, then no investments will be made. If no investment are made then properties will deteriorate and rents will go down as the desirability of the area goes down.
    • Social and Cultural impacts aside, the investments that are made by real-estate companies and small private investors have a positive impact on both the quality and quantity of rental units in Boston and the surrounding areas.
    • Some unfortunate side effects of corporate and private investment in Boston rental properties include:
    o Higher rents in areas experiencing the highest levels of investment
    o Dilution of “community” culture in those areas
    o Financial and emotional hardships experienced by those impacted. Some of those impacted have a very difficult time finding housing they can afford after they are displaced.

    A case can be made that the impact the above mentioned investment activities have in the Boston area is generally positive, as they provide safer, more comfortable living conditions for hundreds of thousands of residents. But these benefits come at a price. Rents have gone up, people who cannot afford these higher rents are displaced, and the unique culture in some neighborhoods has been diluted or has started to evaporate. There is also heart wrenching financial and emotional hardship experienced by those that are displaced as these changes occur.

    It is natural and right to look for ways to mitigate the pain of others and maintain the unique and varied cultures within our Boston neighborhoods. But as we evaluate the various alternatives, we must look for balance and we must be careful not to do things that will have harmful long-term side effects:
    • We do not want create conditions that will stifle proper maintenance of existing buildings and infrastructure.
    • We do not want create conditions that will stifle continued investments and improvements in older buildings and infrastructure.
    • We do not want to hurt small investors who rely on rental income for their day-to-day living and retirement savings.
    • And we need to be careful to stay true to the spirit of American property ownership. In America, if you own a property, generally speaking:
    o you own it forever and you can leave it to whomever you please when you die, and
     Clearly there are exceptions to this such as eminent domain and other defeasible deeds
    o you can do with it as you please as long as you are not harming others
     State and local governments have the right to place constraints on usage that might impact public safety or quality of life of the citizens.
    But the more constraints state and town governments place on property usage, the less the owner “really” owns. When you get to the point that you tell someone that they must let others reside on their property indefinitely, then you have taken away some very critical ownership rights. Rights that could be argued are fundamental to the meaning and spirit of American property ownership.

    I do not have any answers to this dilemma. But I am attempting to frame some of the key components of what needs to be considered as the assessment of the impact of this law progresses.

    There are a number of things I would recommend before we take any action:
    1. We properly calculate and assess the nature and magnitude of the real benefits that have been realized by the investments that have been made in rental-focused real estate (both corporate and small business) in the last 5 years (or more if possible)
    2. We calculate the number of renters impacted and assess the nature and magnitude of that impact.
    3. We compare and assess the amount of good done with the harm done and evaluate the “net” impact.
    4. We carefully enumerate the possible actions that can be taken to mitigate future harm from these activities.
    5. We carefully assess the possible positive and negative impacts each alternative will have and we project that impact into the future to present an “expected future outcome” picture.

    Once we have performed these activities, we can determine which of the available options will deliver the proper balance.

    I urge that we do not act hastily. There is a very real possibility that if we do, the unassessed and unintended consequences will far outweigh any desired benefit.

    Shawn Persels
    spersels@gmail.com

  3. TF says:

    Bottom line , is when ever Liberals think they are doing good, they are always hurting the poor. As it stands now, after dealing with my first eviction and how long it took. I will never rent to someone with bad credit again. I will not listen to your BS sob story. I will only go by numbers. If you have anything during my background check, SORRY no place for you. If you have a credit score lower than 630. SORRY no place for you. Go blame your Liberal Legislatures. Oh , and I am raising the prices on my rentals to cover the loss I had during the eviction. Thanks Massachusetts, your a real peach of a state.

  4. Alex says:

    Can you suggest whom to reach out to in order to inquire about a change in laws and share some of these eviction cases from a landlord perspective? I just spent several thousand dollars evicting an entitled tenant, who not only told me she’s not moving repeatedly, but ran up my water bill in retaliation to the tune of several thousand dollars more while the court was dragging their feet. She has also flooded the two downstairs tenants twice, ruining a brand new bathroom remodel I did last year. It’s never the good tenants that get hurt in eviction cases, it’s the same people over and over (and most of them subsidized tenants). Check the public records, they often have 2-3 evictions before they end up in homeless shelters once no landlord wants to rent to them again. Which one is more likely, them stumbling upon evil landlords over and over or them abusing everyone they come in contact with? They tell their sob story but are oblivious to the fact that they’re ruining lives of other tenants and a landlord who is often set back over a year worth of rents in damages. Which politician decided that landlords have it easy? Why do I have to work 2 jobs to cover the damages created by a jackass who doesn’t value other people’s property?

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