The nation’s growing wealth disparity has become a major issue in the campaign for U.S. president. While working class salaries have been stagnant or have actually declined, the country’s increase in wealth has been owned by those in the top 1 percent. Prudent public officials would recognize the problem and avoid new policies that complicate entrepreneurship or helpful strategies for the working class to build wealth. But it seems that the Boston City Council failed to get the memo. They are considering a proposal to hog-tie small landlords. They have already voted unanimously to burden Boston’s taxpayers with a 29 percent raise for police detectives over six years.
The council has under consideration a home rule petition that would severely damage one of the usual ways for those with modest income to become more affluent. Some members of the Boston City Council want to establish an ordinance requiring landlords to demonstrate just cause for evicting a tenant who has no lease and is not delinquent in rent.
A usual route to affluence for a member of the working class was to buy a three-story walk-up as a family residence. The owner’s family would occupy one flat and would rent the other two. The rent would pay for the mortgage, insurance and normal maintenance on the building, so the owner would essentially be able to save the 30 percent of family income that would normally go for rent before he became the landlord. This strategy works well only when the homeowner has good tenants.
In recognition of this common form of homeownership, the city council would exclude from its ordinance those buildings with up to four units as long as the owner or family member occupied one unit. Otherwise a landlord cannot evict a legitimate tenant without just cause. Such an eviction would have to be approved by a Boston city mediator. The purpose of the proposed ordinance, as set forth in the introductory clauses, is to impose on small landlords the responsibility for helping to alleviate the rental housing crisis in Boston. That is grossly unfair.
A common practice is for families to outgrow their flats in their three-unit houses. When they move, they continue to own the house as an investment. Now they become absentee landlords. If the rent revenue does not warrant hiring a management company, then the absentee landlord becomes an active small property owner. This is a status often victimized in the courts by tenants who know how to game the system.
Real estate ownership has always been a major source of wealth. If approved, this ordinance will deprive property owners of their rights and diminish the attractiveness of homeownership as a sound investment. Now the City Council has also burdened homeowners with the cost of paying for the detectives’ pay raise. The tax rate will undoubtedly have to rise. High real estate tax rates tend to depress property values. The cost of the detectives’ raise is estimated to be $23 million per year. Their average salary will be about $100,000, which is more than twice the average pay for Boston residents. And future generations will be stuck with substantial pension payments.
The small property owners are a significant element of the economy, but it seems that public policy decisions fail to enhance their prospects for profit.
