Commercial Magazine

Does the rent-control movement pose a danger to investors?

By Jeff Bond

It should come as no surprise to anyone in the multifamily housing sector that rent control has gained a lot of followers in recent years. While rent-control and rent-stabilization programs have been around for more than a century, the movement is finding renewed life as tenants deal with skyrocketing prices.

The recent groundswell for help to control rents has been building for the past few years across the country. According to a 2021 report by the Urban Institute, more than 200 U.S. municipalities have enacted some form of rent regulations, but rent control remains illegal in most states. In 2019, Oregon became the first state to implement a statewide rent-control program.

“If these buildings are regulated to the point of economic ruin, who is going to lend property owners money to keep up the buildings?”

– Michael Tobman, director of membership and communications, Rent Stabilization Association

Some municipalities that have recently joined the movement include Minneapolis and neighboring St. Paul, where voters passed rent-stabilization measures in November 2021. While St. Paul moved forward this year with a modified plan, the Minneapolis City Council has been unable to develop a consensus around its own policies. In March 2023, the Boston City Council passed a rent-stabilization plan that has reportedly run into roadblocks in the Massachusetts Legislature. Seattle officials recently voted down a rent-control proposal but are discussing other options.

Even the Biden administration is getting involved. This past January, federal officials released “The White House Blueprint for a Renters Bill of Rights,” a white paper that lays out a statement of principles that includes renters having access to safe, quality, accessible and affordable housing.

The paper notes that the Federal Housing Finance Agency (FHFA) will increase affordability by classifying certain multifamily loans as “mission driven” if they include covenants that restrict rents at levels affordable to households earning between 80% and 120% of the area median income. This year, the FHFA is requiring at least half of all Freddie Mac and Fannie Mae multifamily loan purchases to be tied to mission-driven properties. If these loans are granted at last year’s rate, this would equate to an investment in 700,000 affordable housing units.

Even if cities continue to fight over the details, it’s easy to see why the recent rent-control push has been so popular. The U.S. has recently seen dizzying increases in rents that far outpace inflation. According to the federal white paper, more than 44 million households — or about 35% of the U.S. population — live in rental housing. These families are facing rents that are rising much faster than incomes. The national median rent jumped by 17.4% during the year ending in January 2022, according to And renters are demanding relief.

How to get this relief, however, is the subject of much debate. The commercial real estate industry has long held that rent controls don’t work, claiming that they stall new development, reduce supply, lower property values and, over time, harm the local economy. The National Association of Realtors says that while rent control may help some tenants for a short time, these programs increase rents for units outside the controlled area. Developers may be forced to leave an area that has rent controls or turn apartments into condominiums, which exacerbates the shortage of rental units.

Michael Tobman is experiencing the rent-control issue up close. Tobman is the director of membership and communications for the Rent Stabilization Association, an advocacy organization that represents more than 25,000 landlords who own more than 1 million apartments in New York City that are subject to rent-control measures.

Tobman says that rent increases aren’t keeping up with the rising costs of insurance, utilities and property taxes. He maintains that the city’s rent-stabilization program suffers from being politicized and is not means-tested. New York has many examples of wealthy people, even celebrities, living in rent-controlled apartments. One of his main frustrations is that the state’s Supreme Court has determined that rent stabilization is a public benefit. But this public benefit is being provided by private owners.

“Providing affordable housing should be a function of the government,” Tobman says. “And yet the government in New York state has shirked their responsibilities and moved it onto the shoulders of private owners.”

The FHFA recently sent out a request for information concerning the agency’s proposed actions to promote renter protections and limit “egregious rent increases for future investments,” according to the White House. Some 18 real estate trade associations joined together to provide feedback. As expected, the agency got an earful. In a press release, the industry coalition warned that rent-control mandates disincentivize multifamily investments across markets and will exacerbate housing affordability issues, including the fact that supply has not kept pace with the nation’s population growth. Whether coalition efforts can blunt the growing power of the rent-control movement is unclear.

“What we are seeing in certain cities and states is that press-savvy activists have turned this issue into a sort of political organizing cry,” Tobman says. “They are doing this without really discussing the broader economic impact of the policies they are trying to enact. Rent is income from buildings. If these buildings are regulated to the point of economic ruin, who is going to lend property owners money to keep up the buildings?” ●


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