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 ...
“More States Are Pursuing Rent Control. That’s Bad News for Landlords.”
even worse news for renters, since it’s a financially losing preposition to keep properties in good condition as well as to build and own additional properties ...
This is very true. Rents rise because of rent control. In San Francisco there are anywhere from 15,000-30,000 vacant apartments at any one time. Hard to believe in a city the size of a postage stamp but true.
Socialism eliminates incentive to excellence. The first casualty is the profitability of rental properties, but the second casualty is any plans by landlords to upgrade their facilities. And the third casualty is maintenance.
How do they intend to measue the "local " inflation rate? 7% might seem ok now but should the national inflation rate quickly shoot thru the roof like it did in the 70's, well not so much. I've seen condo maintenance fees double in 3 short years at a few places, so no, keep the gov out of that stuff.
Free markets work. They allocate resources, promote investment and require no state bureaucracies. I sure wish someone would do a study of the cost of policing these regulations. I bet it is more than the added cost of free market rent. Rents could even get lower.
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