Home, Security and Freedom
THIS fall, Harvard students studying government or economics need venture no further than out the library door and onto the streets of Cambridge for an interesting and unique case study.
On November 7, the Cambridge electorate will vote up or down a binding affordable homeownership initiative petition I have written, called 'Proposition 1-2-3.' This will appear on the ballot through the support of 15,000 people (30 percent of the registered Cambridge voters) who have cared enough about the issues it involves to sign in public the petition papers.
Nationwide, almost four out of every five households own their own house or apartment. But here in Cambridge, less than one out of five own their own home.
Surprisingly, that low rate of homeownership is required by local law. The vast majority of tenants are forbidden by city ordinance from buying their own apartment, even if they wish to buy it and their landlord wishes to sell it to them. (The only current exceptions are owner-occupied one-, two- and three family homes, new construction, and tenants who were lucky enough to have moved into their apartment before August 10, 1979.)
Even owners of single-family houses find their lives regulated. If a faculty family goes, say, to Washington or Berkeley for three years and rents their Cambridge house, the city (not they and their tenants) determines the monthly rent. The city even controls the length of the rental. Long after a lease has expired, a tenant may still be entitled to stay in your family's home indefinitely, which makes selling it very difficult, if not impossible.
Scarce rent-controlled apartments are often distributed based not at all on need or merit, but via "Reward for Rent-Controlled Apartment" posters on our streets. One current sign, for example, stuck in front of the Coop bookstore building, offers (on professionally printed, slick, self-stick paper) $1500 cash for information leading to a rentcontrolled apartment. This money is customarily paid to a tenant moving out, for introducing the reward payer to the landlord.
IMAGINE that Harvard scholarships had no application forms at all, but that tuition reductions were instead handed out, occasionally and randomly, to the person showing up at the right time at Holyoke Center, and that one could pay money to find out when and where one of those bursary times and places would be. That will give you a glimpse into how Cambridge customarily awards to a few winners a coveted rent-reduced apartment.
My Proposition 1-2-3 offers the city of Cambridge the chance and the choice, without repealing rent control at all, to enact three modest reforms in our current housing policy.
Proposition 1 says that if you have been a tenant in a rent-controlled apartment for two years, and if you wish to buy your home (and if your landlord wishes to sell it to you), you can do so. Under Proposition 1, you will not be required to buy. If you prefer, you can continue to rent forever at a low, rentcontrolled rent, just as you can now. But under Proposition 1, you will be given your choice.
Since you, the tenant, will be the only person in the world who can buy that rent-controlled apartment (your own home), you have unique bargaining power. Many landlords have indicated to me they would be happy to sell for about half-price (half of what the market price would be, were there no city restrictions).
This is still a good deal for landlords, since their buildings are now so depressed in value by the effects of rent control, they now receive, in selling a whole building, only 15-25 percent of what the normal market value would be. Proposition I will offer some tenants affordable homeownership, from $40,000 to $80,000, way below the market price of other Cambridge condominiums.
PROPOSITION 1 unthaws the values that forebidding homeownership has kept frozen, providing immediate and substantial benefits to both current tenants and landlords. The tenants who do not wish to buy may still see a better-run building because their landlord, after having sold a few units, will no longer be as financially strapped as before, and because other units, now owner-occupied, will begin to reflect pride of ownership.
And landlords may feel less trapped, no longer forced by law to pay all expenses of maintaining a building by themselves. Homeowners within the building can share the load.
Proposition 2 exempts your own home from rent control, if you rent it out after you buy it. Rent control will continue to apply, just as before, to large buildings and landlords. But after you owner-occupy your single-family home or condominium for two years, you will be exempted from restrictions. This may actually increase the supply of rental housing, because owners who now sometimes keep their house vacant (rather than risk tying up their own home with complicated regulations) will now be able to rent without fear.
After tenants buy their own apartment, and its market value triples or quadruples, so will the tax revenue that can be collected from that apartment. (The city's paramount source of revenue is real estate taxes, which are proportional to market value.)
Proposition 3 assigns part of the higher taxes Proposition 1 provides to help people who need help paying their rent. Unlike current policy for rentcontrolled apartments, which a Rockefeller could find and rent, the benefits allocated under this section will go to applicants based on demonstrated financial need, with preference given to long-time-resident, elderly or homeless citizens of the city.
When a tenant buys his or her own apartment, that does reduce the number of rental units in the city by one. That, quite understandably, upsets my opponents. But the purchase also increases the number of owner-occupied homes, by one. Is that really bad?
OWNING one's own home gives people financial security through saving (paying off the mortage), possible appreciation, income-tax reductions, a better-kept building...and a good old fashioned feeling, called The American Dream.
Is it fair to belittle homeownership by labelling it greed? After all, most existing homeowners in Cambridge do not sell their homes primarily to make money. They sell when they have to, for personal reasons, like moving to a new job. There is no reason to insult tenants who may buy under Proposition 1 by suggesting they will behave any differently from other homeowners. All should be treated equally.
City and state laws already in existence severely punish landlords for harassing tenants out of a rentcontrolled apartment or for demanding anything at all besides the legal rent. It will remain illegal for any landlord even to ask a tenant to buy an apartment before renting it.
My opponents might try to use fear as a weapon against homeownership. But tenants will find they have nothing to fear from the empowerment my proposal will give them. On November 7, what tenants can gain with Proposition 1-2-3 is no less than their home, their security and their freedom.
Fred Meyer, a Cambridge realtor, is one of the authors of Proposition 1-2-3.