RE: National Rent Control Effect on the Economy & Multifamily Investors
One of my favorite morning commercial real estate reads is Trepp News, or listening to one of their podcasts. Last week, they had good information on loan spreads. Episode 179, Bumpy Year Ahead, Loan Spreads in Volatile Times, Renters’ Bill of Rights, and Multifamily Impact, had good insight into the economy, CMBS, and loan metrics. However, something else stood out to me from this podcast as more important to multifamily investors...
Democrats are Pressing the President to impose nationwide rent control. The podcast dove into the Biden Administration initiative focused on putting together a task force for Renters' Bill of Rights that puts limits on rent increases and offers renter protection. Wall Street Journal editorial provides a high-level overview of ideas Democrats are pressing Biden to consider.
This is important not only for the future of multifamily investing but also for our economy. Diamond, McQuade, and Qian posted their economic review for 2019 on the American Economic Association website. The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco. Quick Summary of the review:
"Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law." Rent control is an ineffective and often counterproductive housing policy. The government getting involved in rent control is discussed on the National Multifamily Housing Council and states that the basic laws of economics are being ignored if this continues to move forward. Economists generally point to six principal objections to rent control:
New Construction declines
Deterioration of Existing Housing
Substantial Administrative Costs
Reduced Property Tax Revenues
Reduced Consumer Mobility
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