While rent control appears to help housing providers in the short run, in the long run it affects their investment and development plans, according to new research by the National Apartment Association (NAA). Potential actions include reducing investments, shifting plans to other markets and canceling plans altogether. Furthermore, a full two-thirds of housing providers would not consider investing in markets with strict rent control policies.
NAA’s analysis highlights the unintended and detrimental consequences of rent control. From December 2022 to February 2023, NAA commissioned ndp | analytics to conduct interviews with housing providers and developers from three markets affected by rent control policies and proposals: St. Paul, Minnesota; Santa Ana/Santa Barbara; California; and Portland/Eugene, Oregon. The respondents ranged from large firms operating thousands of units and having properties across the country to mom-and-pop businesses with a handful of units and, often, invested in real estate as part of a retirement plan or second source of income.
The housing provider research was supplemented with an online public opinion poll across the country in February 2023. The poll questions focused on housing availability, residential construction and policy perspectives. Here are the key findings from the interviews and public opinion poll.
The unintended consequences of rent control
With rent control in effect, housing providers say they are faced with the difficult financial strain of absorbing essential maintenance costs and are forced to reduce investments in improvements and nonessential maintenance. As a result, 54% said they expect to or would consider selling some assets. This is particularly alarming for the apartment industry, as the nation faces housing supply challenges and must build 4.3 million new apartments by 2035 to meet current shortages and address future demand. Furthermore, the apartment industry and its residents contribute $3.4 trillion to the national economy and support 17.5 million jobs.
“NAA’s latest research aligns with decades of data and real-life case studies that all lead to the same conclusion: rent control is a failed policy that brings more harm than relief to local communities,” said Bob Pinnegar, NAA president and CEO. “It’s not surprising that policies that make it harder for housing providers to do their jobs lead to less housing options. It is past time for our elected officials at all levels of government to shift their focus to policies that address housing supply issues and are targeted to the households most in need of support.”
A multifamily residential building under construction in Palo Alto, California. The entire Silicon … [+]
Struggling to meet demand for more apartments by 2035
“This latest data reinforces what we already know – the U.S. can not afford to pursue housing policies like rent control if we are to meet demand for 4.3 million new apartments by 2035,” said Leah Cuffy, NAA’s director of advocacy research. She added, “More than half of housing providers today are small business owners, and our data shows that rent control deters providers from investing and developing in those markets. Squeezing housing providers with these strict regulations risks lowering current supply and limiting future growth, creating a volatile environment for affordable housing across the U.S. and ultimately doing more harm than good for renters.”
Extensive interviews with housing providers and developers helped ndp | analytics to better understand the implications of rent control and encompassed three markets affected by state or local policies: St. Paul, Minnesota; Santa Ana/Santa Barbara, California; and Portland/Eugene, Oregon.
The research was also supplemented with an online opinion poll that gauged public perceptions of rent control. A whopping 75% of respondents indicated a desire for policies that increase funding for local programs by attracting more residential and commercial development. Nearly half of respondents incorrectly believe that rent control is targeted to only help low- and moderate-income renters.