Montclair’s new rent control ordinance was granted its final approval on Tuesday, April 19, but it could be challenged by some two- and three-family property owners who want to be left out of any rent regulation.
The law can’t take effect for 20 days after the Township Council’s unanimous vote — which gives residents time to put together a petition to have the issue instead brought to voters through a special election. That’s what happened after the council passed an earlier rent control ordinance in April 2020, and a group of landlords petitioned to have it sent to voters, starting a years-long court battle.
“If the council does not amend the ordinance to exempt two- and three-family properties, I believe the only possibilities are to take legal action and/or raise a petition to get a rent control referendum on the ballot,” Carmel Loughman, one of the owners of a smaller rental property as well as a candidate for the council in 2020, said. “But hope springs eternal and the equities of the situation argue for a revision to the ordinance. We are homeowners who live in town and don’t really want to be adversaries against our council. Our preference would be for the council to commit to revising the rent control ordinance to exempt all two- and three-family homes (whether owner-occupied or not) from the ordinance.”
The 2020 ordinance — which would have been sent to voters in a referendum May 10 if landlords and tenant advocates hadn’t struck a deal for a replacement last month — limited annual rent increases to 4.25%, and at 2.5% for seniors, at multifamily properties with four or more units. It limited rent increases on vacancies to 10%, a sticking point for landlords.
That ordinance was repealed on April 18, and the landlords who’d opposed it pulled their petition for a referendum in late March.
The new ordinance allows landlords to raise rents 6% immediately upon adoption of the ordinance, but only if no increase has occurred since May 2020. After that, landlords will be able to apply 4% increases (or 2.5% for seniors) annually. The new ordinance allows increases after vacancies with no percentage limits, but no more often than once every five years.
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The new ordinance’s inclusion of rent control for two- and and three-family, non-owner-occupied homes has drawn objections from some small landlords who say it was added at the last minute, without input from their group.
The township and the landlords who’d opposed the 2020 ordinance also agreed to a settlement, in which the landlords would drop a lawsuit over separate, temporary rent control freezes the council has reauthorized every three months since the early days of the coronavirus pandemic. The settlement includes a negotiated agreement on about $300,000 in court fees the landlords were seeking in court. The landlords agreed to take 40% of that amount — $120,000 — and split it between covering their legal costs and creating a fund for tenants who have experienced temporary setbacks and can’t pay the rent.
Under that agreement, signed with the landlords on March 28, the negotiated ordinance had to be voted on as-is.
“We can’t amend the law because of the settlement,” Councilman Peter Yacobellis said, but added that ordinances are never set in stone and could always be amended in the future.
Yacobellis said he doubted that a “large constituency” would sign a petition against rent control, but said he supports the small landlords’ right to petition. “It’s a democracy,” he said.
Councilman Bob Russo said that after three failed referendums in the past, Montclair could have wound up with no rent control if parties hadn’t come to the table and negotiated the new ordinance.
Although the rent increase freeze is still in place until May 31, Landlord-Tenant Committee Chairwoman Deirdre Malloy said she has received several recent complaints from tenants whose landlords are “imposing unconscionable increases.”
She cited rent increases imposed by landlords of $200 to $511, with some including parking increases of $150 to $256.
Six small property owners called into the council meeting asking for an amendment removing two- and three-family properties, with one landlord asking the council to let the original 2020 law go to referendum.
Tim Brey said he feels he should be able to raise rents on his two-family building to recoup the money he has spent in restoring the building.
Loughman — who lives in her multi-family home, exempting her property from the new rent control rules so long as she does so — said that two- and three-family property values will drop with rent control. She said she’s concerned small landlords will begin selling their properties to landlords who will charge even higher rents.
“Study after study confirms that rent control reduces the value of properties. … The value of multifamily properties is a function of the rents they produce: the greater the rent, the higher the selling price,” Loughman said.
AhavaFelicidad, president of the Tenants Organization of Montclair, challenged the contention small landlords were selling due to rent control. She attributes any increase in sales of two- and three-family homes to landlords aging out and the extreme rise in sale prices during the pandemic.
“They weren’t selling because of rent control, because we didn’t have rent control,” she said.
The ordinance allows landlords to exceed the normal rent control rates due to certain hardships — when their expenses for a building exceed 65% of the gross income, when they conduct major capital improvements or when they add major additional services. Applications from landlords seeking those exceptions would be heard by a rent control board.
Loughman said she believes “rules and regulations” will take over “personal discretion” in the management of apartments in small buildings.
“I must register my apartment and detail my rents. My privacy is impinged on. The relationship between landlord and tenant has become adversarial since we must be guided by the rules of the rent control board,” Loughman said.
Eric Broms said the new ordinance puts an “undue burden” on small landlords in respect to a required registration process, and in the case of challenges to increase rent above the limits.
“It’s going to affect values across the board, owner-occupied or not,” Broms said.
The ordinance creates a rent control officer position. The rent control board would meet three times a year, to issue rent control rules compatible with the law, to provide information to tenants and landlords on compliance, to hold hearings on hardship exceptions and to hear appeals of the rent control officer’s decisions. The board’s decisions could be appealed to the Essex County Superior Court.
Yacobellis said that importance should now be placed on how rent control processes are executed through the board and the rent control officer.
“How this is executed matters. The process should be clear with the user in mind and not creating a bureaucratic headache for everyone in town,” he said.
In neighboring towns with rent stabilization — Belleville, West Orange, Bloomfield, Clifton, Little Falls and Verona — the rules do not apply to two- and three-family properties.
With the addition of about 1,400 two- and three-family homes, rent control will now cover 60% of all renters in Montclair, small landlord and Housing Commissioner William Scott, who helped negotiate the new ordinance, said. There are an estimated 5,501 renter-occupied units in the township, according to the Census Bureau’s American Community Survey for 2020.
Rent control won’t apply to units in more recently constructed buildings — about 820 in total at Montclair Residences, Valley & Bloom, Montclairian II, Vestry, Westly, 2 South Willow and the Siena, according to Scott. New Jersey since 2008 has prohibited rent control on new buildings for 30 years after the date construction is completed or until after an initial mortgage is amortized, whichever comes first.
Rent control limits will also not apply to the approximate 750 affordable units in Montclair, which fall under state guidelines, Scott said.
When the rent control ordinance goes into effect, the temporary rent increase freeze will end, interim Township Attorney Paul Burr said.
Yacobellis called Montclair’s rent ordinance a “model policy.”
“We got the biggest landlord and tenant negotiators in the state — [tenants advocate] Mitch Kahn and [landlord] Ron Simoncini, both [of whom] have fought for and against rent control across the state — to agree on a rent control ordinance in Montclair after two decades. That’s amazing,” he said.