Rent control sweeping the nation ?
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesRent control sweeping the nation ?
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesThis month's Unit Magazine (published by NAA) had a great in-depth article on the topic.
There was one data point that surprised. Economists never agree on anything. But, a survey they quoted showed that something like 93% of economists agreed that rent control limits housing development and in the long-run makes housing affordability worse, not better. They even had some quotes from socialist economists arguing against rent control. So, it would seem like most of the best minds agree that it is bad idea.
Of course, many politicians don't care about facts, whether or not what they are doing is effectiveness, or even whether or not it helps or hurts their constituents They just want to get elected.
106 Replies
- 7yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
I can see rent control coming to some areas because of the general social movement towards the idea of more social benefits with no thought about what the impact/cost is. I do see one of the reasons for higher rents is supply not equaling demand, sometimes that is because what is being built at least in RI/MA is high end apartments but rent control will make that kind of building more attractive.
Most areas new builds in MA have the option of Chapter 40B housing which allows them to override zoning in some areas if they build 20-25% affordable units but the builder absorbs that cost and I am not sure it works that well. I watched a 12 unit development go up in the middle of an industrial zone, long term is that compatible use. Most of these 40 b units serve middle income, jury isn't in on how well this program works long term but the idea is at least better then rent control.
There has been rent control here forever.
The earth still turns, the sky has not fallen, landlords still make good money.
If the max increase allowed by rent control is above the inflation rate locally, what problem? You can increase rent to market when a tenant leaves.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Lee Bell:
There has been rent control here forever.
The earth still turns, the sky has not fallen, landlords still make good money.
If the max increase allowed by rent control is above the inflation rate locally, what problem? You can increase rent to market when a tenant leaves.
from my view in the cheap seats since I own no rentals anymore.. what I see the biggest danger to landlords is forcing them to accept what heretofore would be applicants they would turn down.. and now being forced to rent to those with questionable character or criminal records.. income not enough to support rent etc. and then the penalty for needing to move a tenant out.. which in the bay area some cities that can run 20 to 50k.. and now in Oregon no cause evictions cost you 4 k
- Real Estate Agent · Commerce CIty, CO · Member since 2018 · 127 posts · 78 votes7y
I'm not too concerned, I'm gonna make money regardless. I can vote on various issues or people that I believe may have my best interest at heart but that's about all I can do.
- Member since 2018 · 17 posts · 8 votes7y
As an investor who follows politics it certainly is a popular trend and I'd be very concerned. I have a rent stabilized building in Brooklyn. The new Laws are severely anti-landlord. No more condo conversions or reasonable rent increases. We're essentially admin assistants and property managers for the cities public housing. I hope to hear about a work around but I cant see any now. @Michael G. have you heard anything about challenging the new law or ways around it to make a decent return?
- Investor · USA · Member since 2015 · 325 posts · 447 votes7y
@Jay Hinrichs
I am glad rent control is illegal in Washington State. The city of Seattle, city council,has tried many times to put in rent controls. Each time they have voted them in, a judge strikes them down.
There are so many unintended consequences that come from short-sited legislation. The market is efficient. Right now rents are going up. When they decrease in the future will the government be handing out subsidies to the “now victim” landlords, lol.
- Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes7y
@Jim K. Love this. In the industry we are in and the changes we are seeing, we better all be on the ready to pivot or adapt.
Thanks and good luck picking up those C/D props.
- 7yBjorn AhlbladPro MemberInvestor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
@Jay Hinrichs even with inspections and rent control most of us can operate a reasonably sound business. Effective June 18 this year Berlin Germany, has implemented a rent freeze for 5 years.
Let's enjoy our business while we still can.
Rent Control in Los Angeles is no fun for landlords of multi-units.... especially for New investors getting into the game in Los Angeles. Initial cash flow will be difficult because most multiunits will have existing tenants that are protected from no-cause evictions. . Therefore, its extremely rare to find and purchase MF properties that are delivered vacant at end of sale. Of course, you can always offer to buy out existing tenants for $20k or more each to vacate property... but thats easier said than done.
On top of that, there’s a cap of 4% annual rent increases in L.A. ( which by the way just passed and is effective in July 1st). This means inherited tenants are more than likely paying under market rents. This is primarily the reason why most of my buy and holds are SFRs... because SFRs are not under rent control.
- Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes7y
Originally posted by @Lee Bell:
If the max increase allowed by rent control is above the inflation rate locally, what problem? You can increase rent to market when a tenant leaves.
Our increase was directly tied to the yearly CPI, so there were years of 0 rent increase. Now they have made a floor of 1.5%. I have a 2 bedroom that rents for $500 less then a new 1 bedroom.
There is great concern for increasing the rents too much UNLESS they increase taxes- then they have no problem if you have to Jack the rent to cover a revaluation.
Give me 4% any day!
- Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes7y
It’s just my *opinion* that implementation of any legislation that attempts to restrict free market operations on a broad level is a bad, bad thing. There also is a difference between gouging and allowing a/the market to regulate and stabilize pricing on its own.
- Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes7y
It reminds me of a chapter in THE ART OF THE DEAL where Trump tells of how people has trouble making any money on buildings that should have been premium price. Rent control had taken place long before and units whose comps were paying thousands (I don’t remember the exact number) were only paying a few hundred a month.
There’s no way rent control will be a good thing for anyone.
I’m more interested in whether or not there are ways for people to ensure this does not happen in their state? Bigger Pockets Investors for Free Market Rents, where’s Braveheart when you need him.
- Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes7y
My rentals are in one of the most affordable spots in the nation, so I don't see the city or state seeing a need for rent control anytime in the foreseeable future...but politicians do love to fix things that aren't broke and ignore things that are broke. In cities where rent control is making housing unaffordable and assets impossible to sell, are they realizing the issues they've caused by implementing rent control? Have any areas removed rent control after realizing it was a stupid idea?
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Nicole Heasley Beitenman:
My rentals are in one of the most affordable spots in the nation, so I don't see the city or state seeing a need for rent control anytime in the foreseeable future...but politicians do love to fix things that aren't broke and ignore things that are broke. In cities where rent control is making housing unaffordable and assets impossible to sell, are they realizing the issues they've caused by implementing rent control? Have any areas removed rent control after realizing it was a stupid idea?
rules/laws come and go.. rent control in Oregon some how got through with little fan fare and the governor signed it effective pretty much on that day.. its not the control of rent which is allowed to go up 7% plus cpi which is 10% a year.. which rents basically in this state don't quite go that high.. its the existing value add situations were we see investors snagging buildings for under market because rents are far under market.. so those situations may not be as lucrative.. the bigger issues I see is paying to have no cause evictions.. and how those can be argued.. and other criteria for accepting a tenants.. the city of Portland just signed a doozy .. there is another thread on BP from a Portlandia landlord talking about that one. its hard to compare west coast to mid west rust belt economies are different we have a shortage of living units.. in Cleveland you have no shortage you have flight to the suburbs leaving existing SFRs with very small values since the only ones buying them by and large are investors and the income of the work force renter will dictate rent. Plus we have VERY little section 8 housing or voucher systems out here.. in parts of the deep south that is 50% or more of the renter pool.. so SEction 8 sets the rental rates not free market.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Joshua Howaniec:
It reminds me of a chapter in THE ART OF THE DEAL where Trump tells of how people has trouble making any money on buildings that should have been premium price. Rent control had taken place long before and units whose comps were paying thousands (I don’t remember the exact number) were only paying a few hundred a month.
There’s no way rent control will be a good thing for anyone.
I’m more interested in whether or not there are ways for people to ensure this does not happen in their state? Bigger Pockets Investors for Free Market Rents, where’s Braveheart when you need him.
one of my business partners grew up in a rent controlled apartment on I think 56th in manhatton.. 2500 a month for a 2 bd.. he told me when he came to work with me back in 2005 ish.. that that apartment free market would be 12 to 14k a month.. but they did not want to give it up .. although they may have had to at some point.. Mom lived over on Park ave.. and he was in Oregon.. so not sure how long they kept it.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Nicole Heasley Beitenman:
My rentals are in one of the most affordable spots in the nation, so I don't see the city or state seeing a need for rent control anytime in the foreseeable future...but politicians do love to fix things that aren't broke and ignore things that are broke. In cities where rent control is making housing unaffordable and assets impossible to sell, are they realizing the issues they've caused by implementing rent control? Have any areas removed rent control after realizing it was a stupid idea?
read this article this is whats happening in the bay area.. private enterprise is trying to help.
https://www.msn.com/en-us/money/realestate/stanfor...
when you have median home price at 1.2 million for a house U could buy in Cleveland for 100k.. you can see the issues.
Originally posted by @Jay Hinrichs:
Originally posted by @Joshua Howaniec:
It reminds me of a chapter in THE ART OF THE DEAL where Trump tells of how people has trouble making any money on buildings that should have been premium price. Rent control had taken place long before and units whose comps were paying thousands (I don’t remember the exact number) were only paying a few hundred a month.
There’s no way rent control will be a good thing for anyone.
I’m more interested in whether or not there are ways for people to ensure this does not happen in their state? Bigger Pockets Investors for Free Market Rents, where’s Braveheart when you need him.
one of my business partners grew up in a rent controlled apartment on I think 56th in manhatton.. 2500 a month for a 2 bd.. he told me when he came to work with me back in 2005 ish.. that that apartment free market would be 12 to 14k a month.. but they did not want to give it up .. although they may have had to at some point.. Mom lived over on Park ave.. and he was in Oregon.. so not sure how long they kept it.
My aunt lived for 40 years in a rent controlled apt on W68th in Manhattan. 1BR needing serious upgrade, 5th floor walk-up. But insanely low, three-digit rent. It's being gutted now, we'll see what it goes for after all is said and done.
She turned 80 and moved out earlier this year to another affordable place in Manhattan, this time a co-op. With an elevator. She lives on the 18th floor now.
- Rental Property Investor · Brooklyn, NY · Member since 2013 · 272 posts · 165 votes7y
My only answer is to stay away - far away - from any building that isnt a 100% free, market-rate parcel, as we've always done. We've never felt comfortable with these types of buildings, and all the convoluted regs, and the types of (sometimes) entitled, unappreciative tenants one tends to find inside these properties makes it hornet's nest of problems that simply aren't worth the trouble.
I know that some are prepping a lawsuit, but I don't know much else.
https://nypost.com/2019/06/24/landlord-groups-planning-lawsuit-over-new-ny-rent-law/
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes7y
I don't believe rent control laws is about "Politics" but more about democracy and that the majority dictates what really gets passed by politicians that follow the will of their constituents.
Ever since the financial crisis, there is an ever increasing population of renters.
It is inevitable that the Renters will vote for candidates who will pass laws in their interest.
I see the current trend continuing as the amount of Renters increasing over the years.
We as Landlords understand that the surest way to destroy a city is to enact Rent Control laws. I think there are too many examples to name, but some European Cities, Stockholm comes to mind, have waiting lists that are 30 years long for a rent controlled apt.
The other problem is that eventually, the apts will become underutilized and cause the market to become inefficient.
To root of inefficiency stems from a large family that moves into a very large rent controlled apt. Over time, the kids moves out, a spouse passes away, and there may be just one person in that very large apt paying very little rent and using the rooms to store items of sentimental value to them.
This then denies another large family the use of that apt because in general, no one wants to move from their home they have been living in for 30 years or more.
This problem is addressed in NYC Rent Control Laws since it was in place. We actually have laws that state that you must move to a small apt should your family members leave. HOWEVER, the tenants tend to rally around such cases to protect the person who needs to move to a more balanced apt.
This causes more than a 15% to 20% inefficiency in the housing Market here in NYC.
Either case, if Rent Control had ANY way to make life better for the tenants in general, all parts of the law, especially those that forces a tenant to downsize, would have to be enforced. BUT, it is NOT enforced because of questions on cruelty to the tenant who lived there all their life.
The way I look at it, until we take out the human factor, Housing will continue to become more inefficient. However, the industry that has the most impact to humans IS housing. So it is inevitable to play out badly.
The only way rent control can have a chance is if the tenants themselves understand that enacting these laws will only benefit the small amount of tenants that win the "Lottery" to say in their apt for a long period of time reaping the benefit and denying a more efficient usage of it to a more appropriate family.
Human greed comes in and the tenant will eventually want to have their interest first before the interest of another tenant.
The real problem is that the tenants are MUCH more numerous than the Landlord and this trend will be continuing. At the same time, if a tenant is asked "Would you like your rent to be the same or raised in a very reasonable way for the rest of your life?" There is no doubt that tenant is going to say YES and will not think about the future of other tenants.
It's a short term immediate gratification thing that all tenants believe they will get, but don't really understand enough economics to know that they will hurt all the non-regulated tenants in the future.
I play on this is that I have been buying UNREGULATED Buildings in one of the most regulated Cities in the Country, NYC. Knowing that it is inevitable that rents MUST rise over the long term under rent regulation, then I can reap the market inefficiency. For instance, my unregulated 4 Family is worth more than a 10 or 20 unit building that is under regulation.
IF the laws begin to affect my own properties, for instance, they now start looking to regulate 4 Unit buildings and under, then I will immediately convert to condos.
To the point of your topic, "Rent Control Sweeping the nation"..... makes a lot of sense as the Renter's Pool continues to increase more and more.
This is not about politics, it's about democracy where the majority of the voters do not understand the underlying issues and are shortsighted, causing long term problems. Therefore, the politicians will enact laws as according to the majority EVEN AGAINST THEIR OWN SELF-INTEREST!
- 7yDarren SagerPro MemberInvestor · Tampa, FL · Member since 2013 · 2k+ posts · 1k+ votes
It's funny, the politicians on the far left vote for these laws because they say it's all those in the neighborhoods needing to make sure they don't get priced out of the market. However when it comes to them selling their own homes they want to make sure they'd get the most amount of money from it. How about capping how much they can sell their homes for so that others can more affordably get into the market? Never. It's always do as I say, not as I do.
@Jay Hinrichs, great topic.
We don't have any rent control here in SW Missouri, but we've started to see a little more Govt intrusion with rental property registration and licensing requirements. It's all been a half-hearted effort so far, though. Licensing only applies to mult-family property between 2-17 units. When I asked why, the city said that's who they get the most complaints about. My thought, "So why not fine the guys who are getting complaints against them vs. making everyone get a license?"
When I first licensed my units back in 2008, the city sent out an inspector to look them over. It was really high-level stuff and they made a few recommendations on some minor repairs, which we did promptly. The inspector never returned and "took our word for it" that they were done. The costs for the program are so low it's laughable. $10 flat fee per parcel and $1 per unit. So a duplex is $12, a tri-plex $13, etc. Probably why they can't afford to hire enough inspectors.
Since 2008, I haven't been reinspected once. I send in my yearly renewal fee & paperwork and they send me my license. What a joke. That's why no one makes a stink about it. Not worth out time fighting it.
As of 2019, we also have to register every property (even SFHs) if they are rentals. The logic behind it is so they can find out who the owner is when there are code violations reported. Huh? That info is on the tax assessor's site and I can find it out in a few clicks. Apparently, this got passed by City Council due to the misbehavior of 3-4 notorious LLs with 100s of units that are in poor condition. Again, why bother everyone if there are just a few folks getting nailed for code violations? Kick the big offenders in the teeth and be done with it.
This same lack of logic applies to rent control. Others have listed the various reasons why it benefits a selected minority in the short-term and makes housing more expensive for everyone else in the long-terms. It goes against every common sense rule of economics and fairness, but people are rarely rational when they see Govt handing them freebies. My market is relatively cheap compared to most, so hopefully we won't see rent control for many years, if ever.
- Member since 2018 · 1k+ posts · 1k+ votes7y
"Have any areas removed rent control after realizing it was a stupid idea?"
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Massachusetts
- Investor · Providence, RI · Member since 2016 · 77 posts · 65 votes7y
The focus should be on increasing the supply of rentals by decreasing the barrier to entry for builders/developers. If there was a larger supply of rentals the cost to rent would go down. If there are 1000 people who want to rent and only 500 rentals, rent control is not going to help.
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