Owners Contemplate Statewide Ballot Initiative at April Policy Forum

By Peter Vickery, MassLandlords Legislative Affairs Counsel

Let the people decide?

On April 14, 2018, at the MassLandlords policy forum in Southbridge, participants considered the question of what to do if the Legislature does not pass our rent-escrow bill, H.980.

If enacted, H.980 would allow judges to order tenants who are withholding rent to set the money aside in an escrow account until the end of the case. The bill was designed to help solve the problem of the so-called “free rent trick:” an unscrupulous tenant can withhold rent on the spurious pretext of uninhabitable conditions and then – after trial, when the judge finds in favor of the landlord and orders the tenant to pay the months of accumulated rent – can plead penury and move on to the next hapless victim, having paid nothing. This is a real problem that hurts not just landlords but society as a whole.

The rent-escrow proposal consistently ranks at the top of our rolling survey of members’ policy priorities. MassLandlords has been lobbying for H.980 because it was the product of negotiation and compromise with tenants’ advocates. Legislators of both parties agree that it is eminently reasonable. Opposition has been muted, and the hearings went well. But what if it dies in committee? Should we just try again next session (one more heave) or go another route?

An Alternative to Filing Bills

The other route available to us is the ballot initiative. In Massachusetts, the voters can bypass the Legislature and enact laws directly. The process involves gathering approximately 80,000 certified signatures in two stages from registered voters across the Commonwealth the year before the statewide election and then, on election day, winning a majority of the votes. Many of the signatures will turn out to be un-certifiable, i.e. invalid, so experienced ballot-initiative campaigners prefer to obtain a cushion of at least 20,000 additional signatures.

Persuading 100,000 people to sign a petition is a tall order A seasoned signature-gatherer can collect one signature every 10 minutes, i.e. about 50 signatures over the course of a full eight-hour working day. A dedicated team of 200 people working flat-out over three months would get the job done. More people working fewer hours would spread the load.

Of course, the task of recruiting, training, and coordinating a large team of committed volunteers requires considerable resources in itself. But various interest groups manage to meet the challenge, which is why the statewide ballot always has questions on it. This year, for example, voters will decide whether to impose a surtax on incomes over $1 million, create a paid family-and-medical-leave fund, and raise the minimum wage. To achieve the formidable goal of obtaining more than 100,000 signatures in a matter of months, the groups backing these measures marshalled the necessary resources.

Rent Escrow Ought to have Broad Appeal

One of the most important resources in any campaign is the message. On the face of it, the message at the heart of the rent-escrow bill should have broad appeal: Rent escrow will close a legal loophole, encourage rental property-owners to provide homes for low-income tenants, and keep rents down. This is not spin. It is simple economics.

The basic economic principle of supply and demand militates in favor of rent escrow. As things stand, the lack of a rent-escrow law hurts tenants. How? By forcing landlords to insure against the risk of the free-rent trick by raising rents. No reasonable person could claim that rent hikes make life better for tenants. And the existing rent-withholding law that allows (encourages, even) a few tenants to play the free-rent trick ultimately makes matters worse for the majority. When rents become unaffordable, people become homeless. The demand for housing stays the same, but the supply of affordable housing shrinks. Again, not spin, just the economic facts of life.

But, as any lawyer will tell you, having the facts on your side does not guarantee success in front of a judge and jury. Facts matter even less in election campaigns, where the decision rests with the court of public opinion. After all, the most important thing to remember about the court of public opinion is that it is not, in fact, a court. There are no rules of evidence to keep out irrelevant information, no rules of professional conduct to constrain the advocates on either side, no voir dire process for challenging and disqualifying jurors who harbor irrational biases, and no requirement that the jurors deliberate before reaching a verdict. All too often in ballot-question campaigns, facts take a back-seat to feelings.

Minimum Wage and the Court of Public Opinion

As an example of how facts can take a back-seat to feelings, let’s consider the minimum wage.

Public policy professionals have long been aware of the counter-productive impact of minimum wage laws, which tend to hurt the very people they are supposed to help. Apart from certain labor unions whose contracts link their pay to the minimum wage, not many workers realize any tangible benefits when the legally-mandated minimum wage goes up. Quite the contrary.

In 2006, the economists William Neumark and David Wascher published “Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research,” which (as the title suggests) looked at the results of scores of studies conducted by other researchers over the course of 15 years. Their three main conclusions? Minimum wage laws (1) reduce opportunities for low-skilled workers; (2) do not raise families out of poverty; and (3) inhibit skill acquisition, thereby suppressing earnings. In other words, the actual effect of the minimum-wage laws is the exact opposite of the intended effect.

Nevertheless, in the face of all evidence to the contrary, politicians and activists persist in arguing that raising the minimum wage will improve the lot of ordinary working people. Here in Massachusetts, this year’s ballot question on the subject proposes raising the minimum wage to $15 per hour by the year 2022, and if the last few statewide ballot questions on similar subjects are anything to go by, it will pass handily. Why? Because the people who bear the cost – poor families in low-income neighborhoods – are not united or organized. The relatively few activists and politicians who put themselves at the forefront of the minimum wage campaign benefit from the appearance of helping. Ironically, the economic injury they cause to the many goes unnoticed by the court of public opinion.

Diffuse Costs, Concentrated Benefits

In the realm of minimum-wage laws, the few reap rewards at the cost of the many. Landlords, too, have to reckon with this phenomenon of diffuse costs and concentrated benefits.

The costs of higher rents and increasing homelessness are diffuse in that society as a whole suffers. Who picks up the tab? Taxpayers. But because there is no line-item or check-box on the income-tax return marked “homelessness” we do not notice the costs.

In contrast to the diffuse costs, the benefits of the status quo are concentrated. Just as raising the minimum wage tends to benefit a relatively small group (unions with contracts pegged to the minimum wage) leaving the rent-withholding law as it is tends to benefit a small but influential minority in the legal profession, i.e. the lawyers who make a living representing tenants.

At the policy forum, attendees saw the dramatic dollar-and-power imbalance between landlords and the various taxpayer-and-foundation-funded entities that represent tenants.  But we also learned that sometimes – just sometimes – victory goes to the shoestring campaign that relies on dedicated volunteers and small-dollar contributions. A canny, strategic, well-planned campaign can prevail even against deep-pocketed special interests. It all comes down to commitment and organization.

Would You Support Rent Escrow Ballot Question?

If our reasonable rent escrow bill does not pass this time, and landlords want to take the fight to the next level by waging and winning a ballot-initiative campaign, the organizing will have to start soon. Very soon.

Would you volunteer to collect signatures or perhaps help in another way? Email hello@masslandlords.net with your name and level of interest. We may not reply to each response, but we record everything. We are getting ready to act soon, perhaps very soon, indeed.

For updated information on H.980, visit masslandlords.net/policy/rent-escrow.