Good Times, Bad Times: Eviction Edition

Happy Tuesday and welcome to another edition of Rent Free. Despite the ink still wet on many state-level YIMBY reforms prodding local governments to allow housing, we're already witnessing a concerted counter-revolution from the forces of local control. This week's stories include:

• Slow-growth activists in the Boston-adjacent suburb of Milton, Massachusetts, have successfully overturned state-required zoning reforms that allowed apartments near the town's train stations.
• Local governments in Florida are trying to defang a new state law allowing residential high-rises in commercial zones with lawsuits and regulatory obstructions.
• A lawsuit against Arlington, Virginia's exceedingly modest "missing middle" reforms that were passed last year trundles on.

But first, our lead item is a short take on how America's overregulated, undersupplied housing market turns good things, like economic growth, into bad things, like more evictions.

Why Evictions Go Up in a Good Economy (and Why It Doesn't Have to Be This Way)

In an article from last week, L.A. Times columnist LZ Granderson asks "If the economy is so great, why are evictions soaring?" Despite low unemployment and better-than-expected economic growth "evictions have spiked and homelessness has reached a record high," he notes.

Granderson's explanation for this incongruity is that it's all just the latest ill effects of Reaganite low taxes, slim government benefits, and underregulated corporations.

The more compelling answer is that evictions are up because the economy is so great (or at least better than it used to be).

Landlord Incentives

As Granderson notes, unemployment is low. The unemployment rate has been under four percent for the past two years. Real wages have also been growing.

For landlords, that means that there are a lot of workers with steady incomes out there who would likely make for steadily paying tenants. If their current tenant isn't paying rent or is behind on rent, a low unemployment rate boosts their confidence that they'll be able to find another one who will pay their bills on time. That makes it less risky to take on the costs of evicting a tenant and turning over a unit.

That's a counterintuitive answer. The intuitive assumption is that since evictions are a bad personal economic event, they'll happen more often when economic times are bad generally.

This was the assumption that prompted both Republican and Democratic presidential administrations, and almost every state government, to adopt eviction moratoriums during the pandemic. The fear was that sudden, mass unemployment would result in millions of delinquent renters being kicked out of their homes.

Lessons from the pandemic 

This turned out to be wrong. Even after most state moratoriums had lapsed, the federal moratorium had been struck down by the U.S. Supreme Court, and rental assistance programs expired, evictions stayed well below pre-pandemic averages.

Evictions did rise slowly over time, but there was never the sudden "avalanche" or "tsunami" of people getting kicked out of their homes that some housing activists predicted. Today, according to Princeton University's Eviction Lab data, evictions nationwide are slightly below pre-pandemic averages.

The fact that evictions fall during bad economic times and rise during good times might seem to validate the left-wing view that economic growth under capitalism just means more hardship for poor and marginalized renters. Therefore, the thinking goes, we need more legal restrictions on evictions, rent control, and/or direct government provision of housing to keep a roof over people's heads. That too is a mistaken view.

More homes, fewer evictions

All else being equal, economic growth and low unemployment will give landlords a greater incentive to evict a delinquent tenant. But economic growth and low unemployment should also raise the demand for housing, and therefore lead to new housing construction.

More housing supply will in turn make the housing market more competitive for suppliers. A landlord with a delinquent tenant can't be so sure they'll be able to find a replacement so easily, as the pool of potential tenants will have a lot more housing options. More housing supply will also lower housing prices, which in turn should result in fewer tenants risking eviction by falling behind on their rent in the first place.

Thanks to zoning, restrictions on mortgage financing, needless environmental reviews, and more, we're not seeing as much new supply as we would under a free market. That means we're also not seeing the eviction-suppressing effects of new supply.

The result of restricted housing supply in a time of economic growth and low unemployment is higher prices and higher evictions.

As Kevin Erdmann explained in his Substack last June, when there's not enough housing to go around, "somebody has to be displaced, and the displacement is achieved through rising housing costs, which tend to pile up the most on the poorest residents."

The good news in the short term is that in the places where evictions are going up the most (mostly booming sunbelt metros), there is a rash of new supply coming onto the market. This glut of new homes and apartments should cool price increases and evictions.

The better news in the long term is that many states are passing YIMBY zoning reforms that will make housing supply even more elastic. That is unless NIMBY forces manage to handicap these laws right out of the gate…

In Massachusetts, A Popular Rebellion Against New Housing

This past Wednesday, 54 percent of voters in Milton, Massachusetts, an inner suburb of Boston, approved a ballot initiative repealing recently passed local zoning amendments that allowed apartments near local rail stations.

In doing so, the town has made itself non-compliant with Massachusetts' signature YIMBY reform—the 2021 MBTA Communities Law—which requires towns with rail transit service to allow apartments near rail stations.

The vote sets up a crucial test for the state law: can it prod reluctant local governments to zone for infill housing in a way that actually gets units built? Or will it be another state YIMBY reform that's bested by clever NIMBY intransigence?

The backstory

Prior to Wednesday's vote, it appeared most localities were complying with the letter of the MBTA Communities Law. All twelve of the towns required by the law to pass upzoning legislation by the end of 2023 had done so.

That includes Milton. In December 2023, the town passed the state-required zoning changes. But shortly thereafter, local activists gathered enough signatures to put the zoning changes up to a popular vote.

State officials, including Gov. Maura Healey and Attorney General Andrea Campbell, had warned the town that a vote for repeal would make Milton ineligible for numerous state grants and a lawsuit from the state.

Consequences

Having voted for repeal anyway, Milton is now ineligible for three grant programs, including the state's largest capital grant program for localities. It's uncompetitive for another dozen grants.

The attorney general's office has made clear that "communities cannot avoid their obligations under the Law by foregoing this funding." Campbell said in a sharply worded, pre-vote letter to Milton that her office would bring legal action to enforce the MBTA Communities Law "without hesitation."

Jesse Kanson-Benanav, executive director of Abundant Housing Massachusetts, tells Reason that there's speculation that developers could also sue non-compliant town governments should projects they propose that meet the state law standards are rejected.

The combined weight of all these potential enforcement actions is seemingly encouraging most communities to come into line. Milton is thus far the exception, and even there, the margin on its referendum was a little under 800 votes.

An uncertain road ahead

The longer-term risk is that communities will find ways to comply with the MBTA Communities Law on paper while thwarting it in practice. The zoning amendments Milton had approved, for instance, required that newly legal apartments come with parking spaces and below-market-rate units—both of which are a tax on new housing.

Kanson-Benanav suggests some towns might come into paper compliance by upzoning commercial parcels that wouldn't likely be redeveloped into housing or upzone near environmentally protected areas where development is infeasible.

"It's hard to know what's written on paper, what its impact will be in practice," he says.

In Florida, the Backlash to the Law That Allowed Too Much Housing 

Was it too good to last? That's the question that YIMBYs in Florida might be asking themselves as local governments rebel against, and state lawmakers mull reforms of, the state's year-old Live Local Act.

The law allows developers to build apartments in commercial and industrial areas, local zoning be damned, provided the new housing includes affordable units.

Because the law's affordability requirements are turning out to be pretty modest, and its density allowances are turning out to be mouth-wateringly generous, developers have made ready use of the law to build massive new high-rises that would have otherwise been prohibited by local zoning.

Now the backlash. The Tampa Bay Times reports that Pasco County threatened to sue developers trying to use the law to build apartments. Another city adopted a six-month building moratorium to block a Live Local Project.

At the state level, the Florida Senate approved a bill that weakens the Live Local Act's zoning preemptions in one respect while strengthening them in another.

S.B. 328 would allow local governments to say no to Live Local projects that are more than 150 percent taller than adjacent buildings if its near a single-family neighborhood. In applicable areas, that's a significant reduction in the law's height allowances.

On the other hand, S.B. 328 would prohibit local governments from imposing floor-area-ratio regulations on Live Local projects. That would significantly pare back localities' ability to thwart Live Local projects they don't like.

All things considered, S.B. 328 doesn't appear to be a bad trade. It's now being considered by the Florida House of Representatives.

In Virginia, Lawsuits Challenge Modest 'Missing Middle' Reform

Early last year, Arlington County, Virginia, approved a series of zoning changes that allowed up to at least four units of housing to be built in neighborhoods formerly zoned for only single-family housing.

The architects of the reforms described them as intentionally "small 'c' conservative" by only allowing a modest amount of new housing. A yearly cap on how many new duplexes, triplexes, and the like could be built made sure of that.

The cap's done nothing to mollify opponents of the missing middle reforms, who expressed heated opposition during the local legislative process and are now suing to undo the already passed reforms.

Last month, an Arlington Circuit Court Judge rejected a motion from Arlington County seeking to stop the lawsuit from going to trial later this summer. Also last month, residents in neighboring Alexandria, Virginia, sued to overturn that city's also-quite-modest ending of single-family-only zoning.

Zoning reformers might consider these lawsuits good news in a way. Middle-housing opponents lost in the democratic process, so now they have to resort to the courts.

On the other hand, local courts have recently issued some truly bizarre rulings overturning other state and city laws abolishing single-family zoning. The Arlington and Alexandria lawsuits will be an important test of whether even modest missing middle reforms can stick.

Quick Links

• California's zoomer socialist lawmaker, Assemblymember Alex Lee (D–Milpitas), has introduced a bill that would ban corporations from purchasing and renting out single-family homes. Studies suggest such bans mostly work to exclude renters from living in more expensive single-family neighborhoods where they could afford to rent but can't afford to buy.
• Earlier this year, Rent Free covered the case of Vanie Mangal, who was stuck with an abusive, non-paying tenant for close to four years because of eviction moratoriums and New York's dysfunctional housing court system. Real Deal reports that Mangal is at last rid of her tenant (who trashed the place before she left).
• A Washington bill capping annual rent increases at seven percent statewide has passed the state House of Representatives. It will now be considered by the state Senate.
• A proposed Illinois bill would lift the state's preemption on local governments adopting rent control policies.
• "The most magical place on Earth's" plan to build a 1,400-unit affordable housing project is failing to enchant neighboring residents.
• The "year of the granny flat" is picking up steam. The Rhode Island House of Representatives passed a bill last week that will allow homeowners to build accessory dwelling units within the footprint of their existing home and on large lot single-family properties. It's a pretty modest ADU reform, all things considered.
• Is exclusionary zoning unconstitutional? Yes, say George Mason University law professor Ilya Somin and University of Wisconsin Law School professor Joshua Braver in a new article.
• The Federation of American Scientists argues the federal government should require localities to liberalize their zoning codes in order to receive federal highway funds.
• The Boston Globe has a new article on the perilous politics of zoning reform in Boston.