- Samuel A. Love / Flickr Creative Commons
On a drizzly day in early February, state representative Will Guzzardi stood in front of a group of housing activists and community organizers in Bronzeville to announce his new bill, which is just seven words long: "The Rent Control Preemption Act is repealed." The act, he said, was passed in 1997 by state legislators in fear of "the bogeyman of rent control." Days after the announcement, it became clear that the bogeyman is alive and well, as Guzzardi was inundated with a flood of protest e-mails and calls ominously predicting that his bill would spell the end of development and rehab of the state's housing stock.
To be clear, Guzzardi's bill would merely repeal the prohibition on rent control in the state, and wouldn't establish any new rent control laws. Nevertheless, the Illinois Association of Realtors has called the bill "a threat to private property rights," and shortly after its introduction mobilized members to contact Guzzardi and their own state reps to urge them not to pass the measure. The realtors' lobby claimed that if the prohibition were repealed, property values would drop, investors would turn their backs on the state, tax revenue would dwindle, slum conditions would proliferate, and government bureaucracy would mushroom out of control.
Rent control in the United States has typically taken the form of municipal regulations that govern how quickly and how much rent on residential or commercial property can be raised. Contrary to the Illinois realtors' description of rent control, these regulations haven't taken the form of "caps" or rent ceilings since the 1940s. Rather, they typically peg rent prices to inflation and limit year-over-year increases on apartment rents to 2 or 3 percent while granting landlords the ability to pass on some of the costs of large rehab projects or maintenance expenses to their tenants when necessary.
Variations on this type of rent regulation exist in New York, California, New Jersey, Maryland, and in Washington, D.C. Most other states, including Illinois, not only lack such rent control laws but have legislation explicitly prohibiting their passage. Illinois's 1997 Rent Control Preemption Act states that no unit of local government can "enact, maintain, or enforce an ordinance or resolution that would have the effect of controlling the amount of rent charged for leasing private residential or commercial property."
Curiously, identical language can be found in the rent control prohibition laws of Michigan, passed in 1988, South Dakota, passed in 1990, Arkansas, passed in 1993, Tennessee, passed in 1996, and others. And if you google that bit of text, one of the top results will be a link to a model law from the American Legislative Exchange Council—ALEC. Illinois's Rent Control Preemption Act is a verbatim copy of this model law, which appeared in ALEC's handbook for state legislators until 1995.
As the affordable housing crisis deepens in Chicago, any movement to protect the city's growing and increasingly cost-burdened renter population from unreasonable and/or unexpected rent spikes will have to contend with the roadblock of the Rent Control Preemption Act, as it has the power to put even the city's modest rental affordability protections in jeopardy. And strikingly, its history is a study of how corporations and special-interest groups combined forces to quietly win an ideological and policy battle two decades before the public was ready to have it.
In the 1990s, rent control was a nonissue in Illinois. No city in the state had any type of rent regulation, and housing activists weren't lobbying for any such measures, not even in Chicago. There were brief debates about rent control in the City Council during the late 1970s and '80s, but they never went anywhere. The city's only experiences with rent control were under federal mandates during World War II and for two years in the early 1970s, when Richard Nixon imposed wage and price controls on the entire country to stymie runaway inflation.
While these experiences with federally imposed rent control didn't generate any meaningful grassroots movement for local rent regulation, they deeply troubled conservatives. To them, Nixon's move to control rents was a new betrayal by a Republican president who had unexpectedly created a variety of regulatory agencies including the Occupational Safety and Health Administration and the Environmental Protection Agency. All these forms of federal regulation represented government interference in the ability of the private sector to turn a profit and an unwelcome intervention into free markets that could hurt America's economy.
And so in 1973, a conservative Illinois state senate staffer named Mark Rhoads created the Conservative Caucus of State Legislators to bring together like-minded lawmakers and ponder ways to push back against the growth of big government. If there was no hope of advancing a truly conservative agenda in Washington, perhaps they could have better luck with the states. The group's name was soon changed to the American Legislative Exchange Council. In the following decades ALEC never lost sight of rent control, and while housing activists slept, ALEC was making sure the right people in government didn't forget about it either.
—Greg St. Aubin, former chief Springfield lobbyist for Illinois Realtors
Though ALEC's founders and initial members were conservative idealogues and midwestern state legislators, it became a powerful player in state lawmaking nationwide when it recruited corporations and special-interest groups to join and the likes of the ultraconservative political megadonor Koch brothers to bankroll their operations. ALEC isn't a lobbying group for any particular company or association; rather, it hosts glitzy gatherings where its thousands of members from state governments (whose memberships run about $50 and are sometimes paid for with taxpayers' money) and hundreds of members from the private sector (who pay up to $25,000 for memberships) can meet and create model legislation. In this way, an array of conservative causes ranging from abortion restriction to rolling back environmental regulations to fighting labor unions to rent control get pitched to state legislators or find sympathetic allies among moneyed special-interest leaders. Legislators leave ALEC gatherings with ideas for new laws to propose (and often draft texts of such laws) and also a thickened Rolodex of very wealthy potential donors. In recent years ALEC has been likened to a "dating service" for politicians.
It's hard to say whether every state that has a rent control preemption law got it from ALEC, but many of these laws were passed in the late 1980s and early to mid-1990s at a time when ALEC members such as the National Multifamily Housing Council and the National Association of Realtors (the second-highest spender on lobbying in the country) saw several threats to the unfettered freedom of their members to turn a profit from their property: in 1985, Washington, D.C., passed its rent control law; in 1986 the U.S. Supreme Court ruled that California's rent regulations weren't a violation of antitrust law and could therefore stand.
Conservative lawmakers and real estate interests networking through ALEC thus acted to prevent the spread of rent control laws elsewhere. And the climate in many state legislatures was ripe for easy passage of antiregulation laws. In Illinois's General Assembly, both houses were under Republican control.
"If we were ever going to do something on rent control, that was the time to do it," says Greg St. Aubin, who was the chief Springfield lobbyist for Illinois realtors at the time. "It was like: You should really consider preempting the possibility of local governments doing this before it's a big issue, because otherwise it's going to be harder to fight."
St. Aubin doesn't recall the language of the Illinois bill coming from ALEC, and claims it was his group that drafted the legislation. But the senate president in 1995, when the bill was first introduced, was James "Pate" Philip, and the speaker of the house was Lee Daniels—both Republican ALEC members.
- AP Photo/Seth Perlman
- Senate president James "Pate" Philip, center, confers with house minority leader Lee Daniels, left, and another lawmaker during a special session in Springfield in 1997.
The realtors recruited downstate and suburban sponsors in the senate and house, but they weren't nearly as important in the passage of the legislation as Philip and Daniels. "It never would have passed with Chicago Democrats in charge of the process," St. Aubin says.
The bill passed the senate without debate, but was voted down in the house after outspoken opposition from Democratic representatives Jan Schakowsky and Louis Lang.
"There is not a single group lobbying in favor of rent control," Schakowsky argued on the house floor, "and yet at the behest of all those in the business of building housing, [sponsor Ron Stephens] has decided to bring before us a bill that has no relationship to any real-life situation." In conclusion, she called the "silly bill" a "completely useless piece of legislation."
Lang argued against the bill because it would take power away from local governments. He pointed out Republicans' inconsistency in pushing for local control on some issues but not others. "Are we going to pick and choose issues to have local control?" he asked. "Why should we, in Springfield, tell my village or yours . . . what to do about housing in their local community? It's silliness. This is a bad bill, a bad idea."
The bill "certainly smelled like something being done at the behest of conservatives," Schakowsky told the Reader recently, recalling the debate. "I guess ALEC was looking ahead. . . . They wanted to prevent the spread of a progressive idea."
In 1997, Illinois senate sponsor Tom Walsh reintroduced the bill, which sailed through the vote a second time. This time there was no debate in the house. Sponsor Chuck Hartke, a Democrat from rural Effingham County, told his colleagues that "the state of Illinois should keep its hands off of private business and allow them to place whatever rent they would like on their commercial apartments and properties." Though the house was by then back under Michael Madigan's control, the bill passed and was signed into law by Governor Jim Edgar in August 1997.
Hartke, who's now a lobbyist, has no recollection of backing the proposal."I can't imagine why I would have introduced the bill," he said in a recent phone conversation. "Maybe I was doing a favor to someone."
Though the Reader reached out to every member of ALEC's public relations team, no one responded to e-mails or voice mails.
Resistance to rent regulation is largely ideological, though it's often presented by conservatives in practical and "common sense" terms. Real estate special-interest groups are ultimately against rent control because it presents a roadblock to their members' ability to freely profit from property ownership. But usually representatives of these groups justify their arguments by referring to a consensus among economists that rent control is a bad idea: an oft-cited 1990 poll by the American Economic Review found that 93 percent of economists opposed rent control.
For most economists rent control amounts to an interference in a market's supply of housing. Because profit is seen as the leading incentive for people to create and maintain rental housing, and rent control limits profit, the imposition of rent control will logically lead to a diminished supply of housing, the argument goes, and more people will wind up without the housing they need. Studies have also suggested that in places with rent control, the overall quality and supply of affordable rental housing has diminished, though these studies often don't account for other factors that could contribute to these conditions.
Despite the apparent consensus among economists, this perspective isn't universal.
"It's become almost a textbook cliche: in any intro econ class you learn about why rent control is a bad idea," says J.W. Mason, an economics professor at the John Jay College of Criminal Justice in New York. "I don't think that's justified and legitimate."
Providing affordable housing is just one aspect of rent control, Mason says, but that's not its only function. The other is providing an opportunity for a neighborhood's long-term residents to remain in place. "Not all rights are property rights," as Mason puts it, and a tenant's interests in remaining in a neighborhood are no less legitimate than the landlord's interests in reaping maximum profits from his or her property.
"That's an ethical point that most normal people, though perhaps not most economists, would agree with," Mason says.
Long-term neighborhood residents often contribute to the rise of property values, he adds, by investing in a neighborhood's businesses and institutions, so it makes sense that they would also have the right to reap the benefits. "There's an actual economic argument that says when the value of housing in a neighborhood goes up, a major reason is because of the people who are already living there," Mason says. "They should get some benefit from that and not be displaced."
Furthermore, landlords often cash in on rising market rents through no effort of their own, especially if they weren't the ones who built the building. This is why property in gentrifying neighborhoods tends to be a great investment.
Guzzardi sees repeal of the Rent Control Preemption Act as not only the return of control over this issue to local governments but as a first step toward a potential discussion on how to protect long-term, low-income residents in his Logan Square district who are "being kicked out of their homes because of what's happening with rent prices in the neighborhood," he says.
- Tim Boyle/For Sun-Times Media
- State representative Will Guzzardi at a press conference in March
Indeed, at least one study suggests that rent control in New York has actually protected low-income communities in gentrifying neighborhoods. Another study conducted after the end of rent control in Massachusetts found that evictions, which severely destabilize communities, became much more common as deregulated apartment rents rose precipitously and once-diverse communities became wealthier and whiter.
Mason points out that for very low-income neighborhoods that aren't gentrifying, rent regulation could be a way to protect renters from predatory landlords who know their tenant base doesn't have a lot of options. These neighborhoods already tend to be a far cry from the idealistic economics textbook vision of housing markets running smoothly on supply and demand.
"Poor tenants who don't have a lot of ability to go to court and defend themselves [against evictions] and on whom the stress of moving is very disruptive are very vulnerable to predatory landlords," Mason says. "The abstract models that economists like to use completely ignore these realities."
One of the most vocal supporters of Guzzardi's bill is the Kenwood Oakland Community Organization, precisely due to these realities in south-side neighborhoods.
"Rental costs have continued to increase while household incomes have stagnated," says KOCO's executive director, Jawanza Malone. Many of the people he works with are seniors on fixed incomes or working families who make too much to qualify for housing subsidies, yet have too little in savings to protect against unexpected expenses and spikes in rent.
"When half your income is going to housing expenses, that leaves very little money for education or health-care costs," Malone adds. "We have to recognize the huge burden that rent places on families who already aren't owning a lot of money."
And while the Rent Control Preemption Act prevents any meaningful local conversations about rent control, it's now also proving to be a threat to Chicago's modest affordable housing protections.
In a recent Cook County circuit court case, the law was used to challenge a provision of the Keep Chicago Renting Ordinance , which states that when a property goes through foreclosure and there are renters living inside, the new owner has to either pay $10,600 for the tenants' moving costs or offer them an extension of the lease with an increase in rent of no more than 2 percent, if any. The defendants' attorneys in Rivera v. The Bank of New York Mellon and Bayview Loan Servicing argued that the 2 percent rent-increase limit was a form of rent control—and judge Raymond Mitchell agreed.
The plaintiff's attorneys haven't decided whether to appeal the case to a higher court, so this interpretation isn't yet legal precedent in Illinois. But the circuit court judge's decision sets an example for other judges considering similar claims in Cook County.
"The courts are always trying to be consistent, and so some of the other judges that have KCRO cases in front of them are very curious what Judge Mitchell is doing with his case out of a sense of wanting to be consistent," says Frank Avellone of the Lawyers' Committee for Better Housing, who helped represent the plaintiff. "It could influence the decisions of other judges in other cases. There are a handful of other cases in the circuit court right now with the exact same issues."
—Economist J.W. Mason
And though it appears that no one in Chicago has yet ventured an argument in court that the city's Affordable Requirements Ordinance—which stipulates that developers must reserve 25 percent of newly constructed housing units in certain types of developments as affordable housing or pay a fine—is a form of rent control, such arguments have successfully been made in Tennessee.
Repealing the Rent Control Preemption Act wouldn't be tantamount to instituting rent control. Rather, Guzzardi says, it would return power to local governments to consider the possibility of some form of rent regulation. For now, his bill is stuck in the house's Rules Committee, and no companion bill has yet been introduced in the senate. He thinks it will take time to convince legislators to give the repeal serious consideration, as real estate interests hold powerful sway over many elected officials in Springfield. But since 1995, the share of Illinois's legislators who belong to ALEC has fallen, and that could perhaps present an opportunity.
"When I introduced this bill, I told the advocates that this is not gonna happen this year, that this will be a multiyear fight and we need to use this bill as an organizing tool to educate voters and legislators," Guzzardi says. "It will be an uphill battle, but I believe it's a battle we need to fight." v