National REIA Legislative Update

Increased Refrigerant Standards
We can go through a lot of technical data, but to sum it up ASHRAE (The American Society of Heating, Refrigerating and Air-Conditioning Engineers) standards are being tightened by the current administration and that means that refrigerant will become even more difficult to obtain, and more expensive by 2025. If you are thinking about replacing parts or equipment in 2024, you may not be alone, and there may be a tighter supply as larger companies seek to upgrade as well. If budgeting allows, start planning on upgrades, especially for older systems. It is highly unlikely that non-A1 refrigerants will be available for many more years, and even then, they will become prohibitively costly.

Bill Tracking
There are nine key types of legislation that National REIA tracks for our members. While the issues are typically focused on housing, finance and small business, it also includes everyone’s favorite subject, Rent Control! In 2023 alone there were over 4800 bills brought in all 50 states, the District of Columbia and of course in Congress. Of those, many are still in line to pass: 

Abandoned Housing 20 Bills
Business Licensing 3,766 Bills
House Rehabbing 203 Bills
Housing Preservation 49 Bills
Landlord Issues/Property Management 225 Bills
Property Maintenance Code 23 Bills
Real Estate Inspections 131 Bills
Rent Control 465 Bills

Aside from all the Bills above, just the Department of Energy, the EPA, and HUD have generated another 8,648 regulations and modifications to existing regulations at the Federal level. At National REIA we focused on the 63 from the DOE, 34 from the EPA and 453 from HUD. The new EPA rules alone lowering the amount of lead dust tested for in dust wipe samples sent for lab tests in 2024 will raise the cost of tests from $3-$5/test to $180+/test for an ever-shrinking universe of lead poisoning…and those cases are not typically from the low threshold situations. The new rule lowers the threshold such that testing has reached a point that laboratories have false positives on blood lead levels and many labs will not be able to perform the basic wipe test due to the new
sensitivity requirements.

Rent Control
Rent control hasn’t worked anywhere. At least not for the reasons it is initially justified. Even in Minnesota last year, with a 4,000-unit development planned and only 400 constructed, once there was no exclusion for ‘new builds’ the developer pulled the plug on the remaining 3,600 units. Those who understand basic economics, recognize that the loss of 3,600 new units will have a definite impact on the supply and demand facets of housing in the Minneapolis / St. Paul region.

While 4k housing units may not have been the silver bullet solution to price growth, the absorption of those units over a couple year period would have signaled to other developers to build as well, and the overall market – and residents – would have benefited from a strong but healthy housing market. Government interference in the market always has unintended consequences. Some time the results are minor. History has shown, New York City for example, that with Rent Control the consequences result in a skewing in the market, a redistribution of benefits and desertion of capital – both in the form of maintenance and long-term development.

Sadly, the affordability that is initially sought on behalf of working families does not manifest, with the well-to-do holding and even sub-leasing units for years, while the owner suffers. In New York for example, many of the smaller rental buildings were purchased by legal immigrants working to build a new life in the US. Those properties have become the focus of recent changes in rent increase approval processes. The resulting market distortions are furthering the demise of buildings and holding back what could have been a redevelopment boom when interest rates were low.

The results however are often discounted by proponents who much like socialists, admit there were problems in the other areas, but they can do it right and this is the best fix for the moment. The moment. That is really the key argument. If municipalities have a longer perspective on their housing and zoning plans, they can help guide development and incentivize balanced growth. Many communities though, refuse to allow housing or “that kind” of housing at some point and as the housing scarcity grows, housing demand, and therefore prices increase. The long-term solution to the housing supply problem must be considered year by year and steadily grown. Houses are not built over-night, at least not ones people would want to live in for very long!

As stakeholders in a community, it is incumbent upon us to be involved with the zoning, and development plans at the local and county level – doing so early on and not just at the point of crisis can help the region avoid the last minute, 'we have to do something now' reaction.

Court Action?
Legally speaking, rent control is entirely different than a mere intrusion in to the business processes via a regulation. In fact, there are cases trying to overturn previous case law about rent control being an actual taking. Yes, that kind of Unconstitutional Taking.

As with most of these larger issues, it will take years to wind its way through the courts, but maybe, just maybe, the Supreme Court will consider the true impact of a governmental restriction on a citizen’s ability to charge an amount in the market place for a product that a willing buyer would contractually pay. The inability to engage in
market-based sales, and thereby retain the benefit of combined work and risk, leads to little more than the loss of property rights on a path similar to that of socialist and communist countries.

Evictions and Avoidance
With inflation a central topic and billions paid out to cover rent during and after the COVID-19 panic, there has been an ebb and flow to the debate. Some regions are focused on the need for money to help people pay rent and do so in a timely manner to avoid the entanglements of court proceedings and the legacy of problems they create for tenants.

Mediation solutions can help when there are non-financial issues involved. Right to Counsel on the other hand tends to add delays to the process, increase court fees and reflects very little assistance to the family involved, other than providing a little more time to find another place to live.

Money provided to families helps solve one of the big three issues that are financial stumbling blocks for families living pay-check to pay-check: 1) Auto problems; 2) Medical problems; 3) Short-term work displacement. These three situations cause the majority of rent problems. With over 50% of Americans unable to put their hands on $1,000 in the event of an emergency, these issues can cause a stumble that can be resolved for typically less than a grand.

However, with attorney fees ranging from high to astronomical(!) the only benefit from going through the eviction process, and a delayed one at that, is the attorney. It doesn’t help the family. They still have to move, and it will be more difficult with an eviction process on their record, and the housing provider is typically out 2-3 months of rent plus turn-over and re-marketing fees. It’s no wonder attorneys always present Right-to-Counsel as a solution -- because they benefit.

Junk Fees
With the White House focused on junk fees, a potential consumer protection item that most of us would concur could help, the definitions come in to play. The breadth of terms that include junk fees ranges from application fees to late fees and any other fee that is separate from rent.

For the rental industry the message is clear, and potentially helpful in that transparency is a good thing. The lease should clearly define every fee that may be included depending on specific actions or inactions, and even getting them initialed could save you heartburn later.

Now if only we could get that level of transparency at the pharmacy or the hospital!