Yesterday, the Seattle City Council passed commercial rent control. In a unanimous vote, and using COVID-19 as an excuse, the Council froze rent increases during the declared emergency and required that housing providers that rent to small businesses (50 employees or less) be given a year to pay any unpaid rent from the period of the emergency. Surprisingly, NAIOP Washington the organization that represents many commercial property owners went along with this after offering an amendment exempting chains and requiring a demonstrated 30 percent drop in receipts. 

The amendment doesn’t really help all that much unless a property owner rents to large chains, but even some of them aren’t making payments these days. As for the loss of receipts, that might exempt some businesses that are doing well, but aren’t those businesses paying rent? And the amendment does nothing about the requirement to let back rent be paid back in a year. As for the legislation you can read a one pager that we created before NAIOP’s amendment was added to the proposal, their amendment, and the text of the legislation here. 

And here’s NAIOP’s amendment: 

If you’re wondering, “Is this really rent control?” here’s a quote from City Councilmember Tammy Morales from the City’s press release patting itself on the back for passing this legislation:

Commercial rent control was necessary before this crisis and it is especially crucial now. Coupled with the ability to set up payment plans with landlords, this is a small lifeboat for local businesses to weather this storm.

City Council Press Release

That isn’t true, of course, if your small local business happens to be providing space for retail business. In effect, what the Council is doing is creating a forced loan from one business to another without assessing the risk or providing any assurance of recovery. There is probably good basis for a legal challenge, but the City knows it has endless legal resources and any resolution would be years away. 

And none of this mess is helped by NAIOP lending its support to this effort, something that the Council can now point to and say, “real estate people agreed with this. Presumably, NAIOPs member base has larger businesses and chains, so they just wanted to protect themselves from having to deal with the problems created here. It is yet another example of how parts of the real estate community can’t see the bigger picture.