Rent Regulations Leading to Less Investment: Report

A survey commissioned by NMHC finds that multifamily investors and developers are pulling back in the face of rent control laws.

A survey by the National Multifamily Housing Council (NMHC) has found that a large percentage of multifamily owners, operators and investors are cutting back on investing and developing in the sector, as a result of rent regulation laws being implemented around the U.S.

READ ALSO: The Ripple Effect of California’s Rent Control Laws

In NMHC’s Quarterly Survey of Apartment Market Conditions conducted this month, 58 percent of respondents said they operate in jurisdictions which have recently imposed rent control or are seriously considering imposing rent control. Of those respondents, 34 percent said they have already cut back on either investing or developing, a 20 percent increase from last quarter. Additionally, 49 percent of respondents said that going forward, they are considering cutting back.

Despite industry concerns over rent control, market conditions on a national level have remained solid. Index numbers from NMHC, which are calculated based on data from quarterly surveys, found that market tightness, equity financing and debt financing all came in above the break-even level, while sales volume continued to experience softness in property sales.

More than 100 CEOs and other senior executives of multifamily-related firms across the U.S. contributed to the survey.

The rise of rent control

Ever since rent regulation laws were passed in Oregon and New York earlier this year, rent control been in the national spotlight. In September, California’s State Assembly passed rent control measures aimed at curbing the housing crisis in the state. The news was followed by an announcement from presidential candidate Bernie Sanders, who said if elected president, he would institute a national rent control standard.

Meanwhile, some housing advocates are warning that 2020 may bring a housing bubble, as the gap between price increases and wage growth continues to grow, while affordable housing options continue to shrink. According to a national multifamily report for the month of September from Yardi Matrix, after months of increases, multifamily rent growth stalled. However, despite year-over-year growth falling 20 basis points to 3.2 percent, the multifamily market has remained healthy in 2019, with another year of above-average rents.

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