Rent Control - Enacted in New York, California and Oregon in 2019, Will Impact The Multifamily Marke

Rent control, enacted in New York, California and Oregon in 2019, will impact the multifamily market in 2020, the report said. Other states might join the list, the report said, citing possible regulations in Illinois and Washington, as well as more restrictive legislation in California. “New rent regulations have been instituted in a few key markets and many more are being considered to alleviate rising rental housing costs.” “Housing economists concur that building more housing is a better response to the problem than rent control, but 2020 will bring more debate, possibly more regulation and more unease for the industry.” The U.S. economy in 2020 likely will grow at a 2.1% rate, slowing from a 2.3% pace in 2019, Fannie Mae said in a forecast Dec. 18. The unemployment rate, currently near 50-year lows, will stay under 4% through the end of 2020, the forecast said. That’s supporting the consumer spending that accounts for about 70% of GDP.

There are some who believe the California rent control bill will have minimal impact for owners and investors since rents don’t normally increase above the level of the new law’s cap. Another reason is that experienced apartment investors typically closely monitor improving market fundamentals and increase rents accordingly at their assets. A fear for owners who haven’t been keeping pace with regular rent increases at their properties as the market improved is they will own an asset locked-in at below-market rates.

Tighter rent controls don’t encourage property owners to invest in asset improvements. They may cause investors to steer clear of properties under strict rent controls, especially if other investment options are available to them. That is likely to cause investors to pause until they figure out the new rules, especially on value-add plays. New supply won’t arrive soon either since rent control measures do little to encourage developers to build.

Experts believe the housing affordability crisis can’t be solved via rent control either. Many think the path to producing more housing stock can be paved with a combination of eased restrictions, lower impact fees, and a more expedited permitting process.