In late August 2022, lawmakers introduced two new bills to prevent landlords from asking prospective tenants for background checks, causing a massive outcry that the government was looking to overtake landlords and create socialized housing.
The worry is that in this post-COVID-19 world, the real estate world might be at risk for free-market meddling. In fact, some real estate investors even floated the idea that the new rent policies were violating the Fifth Amendment's clause against “taking.” The Fifth Amendment specifically outlaws government seizure of private property for public use without providing compensation to the owners of the property.
Changes to the Rental Laws Means More Government Involvement
In the last three years, the government has put forth several laws that seem to, little by little, leach the property owner's power. For instance, in 2019, the government enacted a rent stabilization law, which forbids some landlords from increasing their prices by a higher percentage than the annual increase of the Consumer Price Index.
Additionally, during COVID-19, the government authorized a rent relief program for landlords that promised to provide them with rental assistance after tenants could not pay for months on end. Unfortunately, this program was doomed from the start and ended up keeping landlords in perpetual limbo, waiting for their tenant's applications to be approved.
Now, they are trying to do away with background checks, including criminal background checks, and prevent them from making lease decisions based on credit history, two things that ensure landlords and investors are more likely to be paid rent.
What This Means for Landlords and Real Estate Investors
Based on the outcry heard worldwide after these bills were put forth, landlords and real estate investors believe this could be the end of privatized housing. But, even with all this commentary, some believe that in the worst-case scenario, the bills would probably shift control of the buildings to institutional rather than private owners. While that's better than governmental control, it's still not great for small investors and landlords.
If you are an investor or landlord, you must be prepared for how these laws might affect your holdings. Attorney Melvin Monachan is an experienced real estate attorney who can help answer any of your questions and guide you through the issues if these bills pass. Contact our office online or call us today at (347) 389-1682.