5 housing regulations for 2020: What property managers need to know

Now that New Year’s Eve has come and gone, we find ourselves in a whole new decade that presents property managers with an ever-growing amount of complex regulations to grasp and navigate. In 2020, we’ll surely see a continuation of housing regulatory trends that have already changed the property management industry for good. Many focus on creating more housing to keep up with a steadily increasing demand, others seek to establish a buffer for renters in an increasingly less-affordable rental market, while still others help owners protect their investments. 

Regardless of whether these new regulations directly or indirectly impact property managers, the national focus on issues related to housing means that having an expert understanding of what each could mean for their businesses—and their clients’ profitability—will be invaluable. It’s a lot to take in, but here are what we think are the top five to pay attention to in 2020.

And while they won’t affect property managers in every state right now, they are worth keeping an eye on as other states push similar initiatives.

#1: Upzoning: The Cure for More Housing?

Upzoning is a response to the skyrocketing housing demand and resulting high rents in places like San Francisco and New York City. Essentially, upzoning regulation does away with old zoning laws and allows for multifamily and mixed-use development.

Now, instead of a single family home on a single plot of land, developers can take that same plot and build several, smaller units, along with commercial space for shops and businesses. 

That type of building has become very popular in areas where corporations like Google, Microsoft and Amazon have attracted more workers than current housing can handle. It also allows for more low-income and middle-income housing.

In October 2019, Minneapolis adopted new upzoning laws as part of a plan called Minneapolis 2040. Effective January 1, 2020, the new regulations address a number of city planning issues, including allowing the building of multifamily and multi-purpose properties within the city and along primary transit routes.

Adopted in 2019, Seattle’s Mandatory Housing Affordability Act allows for high-density residential and commercial areas that will address both affordable housing and climate change issues.

Cities like New York and Washington DC have also dabbled with new zoning laws with varied success. Meanwhile, major cities in California are beginning to look at upzoning as a way to solve their own housing crunches.

Why It Matters to Property Managers

The effect of upzoning on property managers is something of a mixed bag, but all in all it creates opportunity for skilled property managers. Relaxed zoning laws and the potential for a large number of units could stimulate development and increase the demand for property managers, especially in the multifamily space.

#2: Rent Regulations Revisited

As property managers well know, the last decade was unprecedented one for real estate. Americans saw both property and rent prices rise to record levels nationwide. Places like San Francisco and New York were frequently in the news for the steep rise in cost of living. 

And so, after years of falling by the wayside, several states are bringing rent regulations back to  the table, raising new questions for residents, owners, and property managers.

For example:

• In February 2019, Oregon was the first to pass statewide rent control, barring landlords from raising rent more than 7 percent each year. 
• In June 2019, New York City passed Housing Stability And Tenant Protections Act of 2019, which not only addresses high rent increases, but also evictions for filing complaints against landlords, excessive late fees, and other resident protections.
• In California, the Tenant Protection Act of 2019 created a rent cap, restricting rent increases for cities that didn’t have one previously. 

This is a complicated, and intricate topic to untangle. Moreover, the issue of housing has become increasingly politicized, as government leaders seek to intercede at a national level.

Why It Matters to Property Managers

Places like California and New York are often a bellwether for national legislative change, whether it be at the state or federal level. With those primary rental markets making policy changes, you can expect to see other cities and states at least looking at the idea. 

Rent controls only solve one part of the affordability equation, though, as it doesn’t take into account all of the other high (and rising) costs of owning and maintaining a property. Inevitably, for property owners, rent regulation could affect profit margins. 

For property managers, it could mean adapting the services and amenities provided to residents and owners. The opportunity for property managers here really lies with optimization, and a thorough knowledge of the local rental market in order to best advise their clients on how to model their rents and fees. Here property managers can benefit from leaning on technology to keep their business operations running tightly, while creating a preferred experience for renters, who increasingly show preference for online payments and communications.

#3: Short-Term Rental Laws: Recalibrating AirBnB’s Impact

Since AirBnB began in 2008, short-term rentals have become a popular alternative to hotels in large cities and small towns alike. But they’ve also come with challenges for property managers and their long-term residents.

In response, cities across the nation have passed short-term rental laws. As far back as 2011, New York passed a law banning the rental of an entire apartment and the advertisement of that rental. It also restricts the number of paying guests to two.

In 2019, Washington DC, Los Angeles, Boston, and Seattle all passed their own laws. In all of these cities, owners must obtain a license to rent on sites like AirBnB, and in Seattle, owners have to register as a business. There are also restrictions on the number of guests and the number of days in a year a property can be rented out.

Why It Matters to Property Managers

The pros and cons of short term rentals is a heated debate from all sides, and the fees and penalties city-by-city are incredibly varied. How short-term rentals impact a property manager’s community can likewise be both positive and negative, whether the community benefits from the increased tourism or deals with disruption by a steady churn of visitors. 

Whether or not property managers currently care for short-term rentals as part of their portfolio, it’s worth keeping an expert eye on these ongoing debates so as to better advise and consult their clients. Property managers are the on-the-ground resource that property owners seek to make sure they are in compliance with state and national regulations, but the source of truth about how those regulation actually play out and affect their owners’ investments. 

#4: California Assembly Bill: A New Definition of ‘Employee’

Passed in September 2019, the California Assembly Bill changes the legal definition of an employee in the state. Effective January 1, 2020, a person cannot be classified as an independent contractor if:

• The employer controls or directs the person’s course of work
• The work done is not outside of the employer’s main business
• The worker does not normally or independently perform that work for others

This law is the second of its kind in the nation. Massachusetts passed a similar bill in 1990 and amended it in 2004.

The California law was passed to protect workers in the growing gig economy by requiring companies like Uber and Grubhub to recategorize workers who are currently not protected by salary and benefit laws.

Why It Matters to Property Managers

For most property managers, this law is something of an outlier, but it’s worth being aware of, especially in Massachusetts and California. While this law doesn’t affect housing directly, it does have an effect on the types of workers and vendors property managers hire to maintain their properties. Landscapers, maintenance workers, housekeepers and other independent workers who are not incorporated as a business could be considered employees under the new law.

#5: Tenant Bill of Rights: New Military Regulation at Home

Just days before the New Year, the National Defense Authorization Act passed, which, in addition to defining the full budget of the Department of Defense, outlined a tenant bill of rights for military personnel and their families living in privately managed housing.

Among other items for those in the armed forces, the act sets standards for units and gives residents a system for resolving disputes. It also creates a Chief Housing Officer position to oversee those standards and ensure private management companies are adhering to them.

Why It Matters to Property Managers

This Act addresses a highly-specific segment of the renter population that in many cases has unique needs and issues compared to the rest of the rental market. The circumstances that caused the need for this regulation are worth exploring, but suffice it to say, it gives  property managers a clear outline of standards to follow for military housing, and they provide guidelines for settling disputes with residents before they lead to arbitration or even litigation. Property managers in big military towns like Virginia Beach, San Diego, and Charleston should take note. 

Looking Ahead

Keeping on top of all state and local regulations, not just the ones that directly affect housing, can help property managers stay one step ahead in the full ecosystem of their business.

More importantly, property managers will want to think about how the laws might impact their residents and property owners since they are the bridge between the two. Having a good understanding of new laws and regulations will keep both parties happy and build strong relationships that are a win for everyone involved.