Posted on 04/24/2019 5:53:18 AM PDT by reaganaut1
Big apartment owners are forecast to post strong earnings when they start reporting this week, but a number of state-sponsored rent-control measures are starting to raise longer-term concerns.
While most of the dozen or so proposals aimed at curbing rent increases are in their early stages, some states have already taken action.
Oregon passed a law in February that capped rent increases to 7% plus the local inflation rate. Democrats in the Colorado legislature introduced a bill this month to repeal a longstanding ban on rent control, which would allow local governments to set their own rent limits. New York lawmakers are also weighing a cap on rent increases.
Equity Residential , AvalonBay Communities Inc. and Essex Property Trust are among the apartment real-estate investment trusts that could be hit by these measures, which have gained momentum after Democrats took control or increased their numbers in several state legislatures last year.
The prospect of tougher rent control laws hangs over the industry at a time when the apartment business has been strong otherwise, and analysts have a positive near-term outlook.
A recent Barclays PLC report forecast apartment REIT earnings to be strong for the first quarter of 2019, citing high occupancy rates and low apartment turnover. “The tone we’re expecting from the multifamily guys should be fairly positive,” said Ross Smotrich, a Barclays analyst.
But Mr. Smotrich said speculation over the spread of rent control laws is difficult to account for in longer-term forecasts.
John Pawlowksi, an analyst for the real-estate research firm Green Street Advisors, said the new bills could cause apartment stocks to underperform, despite positive market fundamentals. Green Street downgraded California-focused Essex Property Trust shares to “sell,” in part because of political possibilities, he said.
(Excerpt) Read more at wsj.com ...
That is true but the Oregon law allows rent increases of 7% plus the local rate of inflation. Say the local inflation rate is 3% so the allowable rent increase is 10%. An annual increase of 10% would be manna from Heaven for multi-family property owners.
Rent control raises rents in the long run, because less housing is built and maintained.
Exactly, rent control is bad news for renters, because rent control reduces the incentive to increase the number of new units available on the market.
Communities have also imposed stricter and stricter zoning requirements for new construction of multi-family dwellings, further reducing the inventory of rental units and artificially driving up the costs.
Rent control raises rents in the long run, because less housing is built and maintained. Democrats who say they want lower rents should make it easier to build.
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You’re applying basic economic common sense to a situation where the only thing that matters is good intentions and an IQ of 70, but that’s only at the information consumption level. Way behind the curtains I suspect plans within plans. First you get the rent control, then when there is a scarcity of rentals, you get government subsidies for landlords, which opens to the door to more regulation and control, and eventually lovely new nepotic construction contracts for public housing. Oh, and more voters in the tent.
Or lower taxes on rental property. Or lower taxes on profits generated from rental property.
If owning and operating rental property becomes more profitable there will be more rental units to be had. More units mean more competition for renters. More competition means lower rents.
Anyone proposing rent control laws should be challenged to identify a place where the stated goals of rent control have been successful and why.
However, the renter is going to increase his rents 10 percent a year, even when he doesn’t have to, to accommodate sudden increases in costs in future years.
Rent control is also bad news for renters.
The property owner will increase rents as much as he can but the market sets the upper limit on increases. I have been appraising income properties for a couple of decades and in the market where I work have never seen rental rates for any type of property approach ten per cent per year. The Oregon limits would only be harmful to landlords in the event of extreme inflation which would be catastrophic to the overall economy or in the event of local disasters— natural or man- made- that would take a significant number of units out of inventory. Both scenarios are unlikely.
Landlord goes broke since they couldn’t pay maintenance and increasing property taxes; people get displaced because the building is shut down.
The rent increase rate is the sugar coating on the poison pill. As part of rent control is the new redefined non discrimination laws that sat you have to rent to the first person that asks without background checks or they can sue you for discrimination with the help of the state.
Meth labs rejoice!
I for one have had to reverse my plan to rent out a house. I cannot survive the loss financially to be forced to rent to an obvious looser.
These “rent control laws” are the Nationalization of private property. An obvious disaster.
If it was about rent availability like they claim the would not have included such rent increase provisions.
It’s about destroying private property.
You really want to solve the rent crisis, deport thirty million illegal migrants. Instant housing availability and instant wage increases for the remaining Americans.
But, that would not make a New World Order dictatorship, guess Congress will have to make a choice.
Notice, this totalitarianism is occurring in DEMONRAT-controled states.
Facts be damned, the rising Socialist Millenial electorate seems hell-bent on doing this.
Plank #1 of the Communist Manifesto: Abolition of private property rights.
The States will become the Slumlords and the taxpayers will pay for it
You are correct. Need to also mention NYC did this and the apartments went condo.
Rent control is their way of taking away our rights to private property. They aren’t ready to seize our property, just yet, so they prevent us from using it.
Their end goal is the elimination of private property, except for the ruling elite. They can’t do it yet. But give them time. And when they do it they will call it something other than communism.
This assumes that the overall inflation rate is a good measure of rise in landlord costs. At a deeper level, it assumes that government is better equipped to assess landlord costs than are landlords ... they call that central planning, such as was practiced in the Soviet Union.
Sounds like a way to make more property available for government confiscation....
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