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Flat broke
Property owners say they just want to protect themselves from rent cheats — and increase the housing supply in the bargain. Problem is, their solution might push rents even higher — and violate the Constitution.


What IS the cause of the ever-intensifying housing crisis in Massachusetts? a) The lack of available units; b) the lack of affordable units; c) the skyrocketing rents; or d) the landlords who keep their apartments off the market for fear of getting ripped off by tenants.

If you believe the real-estate lobby, the answer is d). That’s why landlord and real-estate groups are now pushing for legislation that would, they say, end the ability of " unscrupulous " tenants to remain in units without paying rent. But opponents of the measure, called " mandatory rent escrow, " argue that it will only hurt tenants and worsen the housing crisis.

Here’s how it works: tenants who face eviction proceedings would be required to set aside rent in an escrow account before defending themselves on the grounds of code violations or other complaints that often lead people to withhold rent. Otherwise, the landlord would be automatically favored at trial. A measure mandating this policy was tacked onto an omnibus, or umbrella, affordable-housing bill passed by the House of Representatives in July. As the Phoenix goes to press, the Senate Ways and Means Committee is expected to unveil its own omnibus bill, including a similar provision. That bill could come up for debate as early as today, September 13. As Senator Steven Panagiotakos (D-Lowell), who has sponsored one of the eight rent-escrow bills filed this legislative session, explains: " We are in a major housing crisis. Anything we can do to encourage landlords to rent and bring their units back online is worth it. "

But some housing attorneys believe mandatory rent escrow would violate the Constitution by imposing what amounts to an admissions fee for the legal process. Says Jeff Purcell, an attorney at Greater Boston Legal Services (GBLS), " It’s called paying to have your day in court. " On September 7, Purcell and Paul Collier of the Jamaica Plain Legal Services Center sent a 10-page memo to Senate counsel David Sullivan outlining the legislation’s constitutional violations. " No legislature or court has sanctioned the extraordinary — and extreme — rent escrow proposed " in the House bill, the memo states. " The lack of a hearing, and absence of judicial discretion to order a tenant to escrow rent is unconstitutional. "

On top of that, mandatory rent escrow would devastate low-income tenants — the very people already suffering most from the housing crunch. The legislation probably wouldn’t hurt the average middle-income renter — say, a single person who earns $40,000 a year. Such tenants could probably afford to set aside rent, and most of them rent apartments that are kept in good repair. But for many lower-income people, affordable rent can mean substandard living conditions. It can mean renting from a landlord who fails to fix things. If they spend their own money on repairs instead, they can’t necessarily cover the rent — and legally, they’re entitled to withhold it. Yet if they can’t scrape together rent, they can’t put it in escrow. Under this measure, that would cost them the right to assert a defense against eviction. Housing attorney Ellen Shachter, who works at Cambridge/Somerville Legal Services, knows these scenarios well. Last year, she represented a single mother who lives in Somerville and speaks little English — already an obstacle to getting heard in court. The woman had no heat in the winter. She spent hundreds of dollars using her stove to warm her apartment. When she complained to her landlord, she got an eviction notice and began withholding rent. But because of the extra money on her gas bill, she might have had trouble putting her rent in escrow up front, so she would have lost the chance to defend herself. Says Shachter, " This bill sets up huge obstacles for tenants getting their feet in the court door. "

Under the proposed law, even extreme cases couldn’t be handled in court without escrowing rent first. In 1999, Purcell represented John Whelan, a 74-year-old man who had lived in his Boston apartment for 38 years. When a new owner bought the building, Whelan got an eviction notice. He declined compensation to move, offering to pay rent instead. So the owner barricaded the doors and tossed Whelan’s belongings in a dumpster. This is illegal, and a court order allowed Whelan to return. Yet days later, he received another notice. Under this bill, Whelan would have had to put rent in escrow in order to wage another defense — after his belongings were destroyed. " It’s unreasonable to require somebody like him to put money aside, " Purcell says. " This legislation assumes the tenant has no side. It wipes the tenant out of the picture. "

THE RENT-ESCROW battle on Beacon Hill is nothing new. Similar legislation appeared on the roster as far back as 1994. Yet the issue didn’t capture public attention until 1999, when Lenore and Skip Schloming of the Cambridge-based Small Property Owners Association (SPOA) championed mandatory rent escrow as " a weapon against housing loss " in a 31-page proposal, " The Road Home: Working with Small Property Owners to Preserve and Create Affordable Rental Housing. " In November 1999, the Pioneer Institute, a conservative think tank in Boston, gave the paper a " Better Government " award. In June 2000, former governor Paul Cellucci announced his support at an SPOA event, where he pledged to file legislation. (He and his successor, Governor Jane Swift, submitted a rent-escrow bill to the legislature last February.)

" The Road Home " made a case that abandoned buildings are " the real housing crisis. " Across Massachusetts, the Schlomings asserted, housing remains run-down and boarded up because " mom and pop " landlords have been caught in a Catch-22. " Small owners cannot possibly improve their property without a steady and reliable rent stream, " they wrote. " Yet legally, owners are often helpless to evict non-paying, damaging, or uncontrollable tenants.... All too frequently, owners go bankrupt or just give up and walk away. " Changing this, they argued, " would improve the housing supply ... and could ease pressures pushing rents upward. "

This argument raises an obvious question: why would landlords be willing to carry empty units — which they know won’t bring in money — rather than simply run the risk of unpaid rent? Ed Shanahan, the director of the Greater Boston Real Estate Board (GBREB), which has long pushed for a rent-escrow law, explains that the landlords who leave units empty tend to be elderly homeowners who live in two- or three-family buildings. Their mortgages are often paid off, and they’re not as concerned about profit-making as they are about avoiding a hassle. " I’m not talking about a situation where you live in a single-family home and own a triple-decker. Those landlords derive no benefit from keeping units empty, " Shanahan adds. " But for the owner of a two-family ... the risks of leaving the second floor vacant are minimal compared to the downside of getting [a tenant] who will take them for a ride, legally speaking. "


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Issue Date: September 13 - 20, 2001