‘Renters rights’ legislation is about optics, not solutions
Renters may acquire new rights, but will they have affordable quality housing?
“The nine most terrifying words in the English language are, ‘I’m from the government, and I’m here to help,’” President Ronald Reagan said on this date 37 years ago.
Keep the Gipper’s maxim in mind as Democrats in the Michigan Legislature pursue what they call “renters rights.” Despite their stated intentions, their intervention in the housing business is most likely to make things worse.
Government rules during the COVID-19 pandemic forbade landlords to evict renters who did not pay. This and other restrictions hurt more than the wealthy. One-third of individual investors in the rental property industry are households with a low-to-moderate income. Rental properties make up to 20% of their income, according to Brookings Institution research.
Landlords also have expenses such as mortgages, utilities, and taxes, which they pay with income generated by renting out their properties. Yet during the eviction moratorium, they were left with little assistance.
Various members of the Michigan Legislature have introduced housing-related bills this term. You can find those on the Legislature’s website. Some of the bills, advertised as helping tenants, could reduce the quantity and quality of available housing.
House Bill 4062 would forbid landlords from considering a prospective renter's source of income, such as public subsidies, in deciding whether to extend a lease. House Bill 4063 would embed that restriction in Michigan civil rights law. Senate bills 408 and 409 would make it harder for landlords to recoup money owed by renters who do not pay.
Another measure, House Bill 4878 would make it illegal in most circumstances to consider a person’s criminal record when renting property. (There are some exceptions, such as for sex offenders.)
House Bill 4891 would require landlords who reject a prospective tenant’s rental application to refund the application fee.
Several of these bills create new penalties and open landlords up for lawsuits.
The likely outcome, if these bills become law, will be a financial burden on landlords. The increased costs and effects of the legislation will be passed on to renters, making the housing crisis worse. Landlords may also put off improvements or skimp on maintenance as a way to control their costs. Existing landlords, as well as prospective ones, may decide to forgo building new units.
Renters do face financial challenges. Year-over-year rent increases averaged 14.65% nationally between October 2021 and August 2022, according to rent.com. Rents in Michigan went up 6.4% on a year-over-year basis, according to the website’s latest numbers.
State government could help renters by making it easier for developers to create new units and by refraining from imposing new laws that raise costs. When a soaring cost of doing business and the headaches of consistently losing income due to new laws become the norm, property owners will not be the only ones to suffer.
What good are “renters rights” laws if the number of rental units shrinks?
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.