Will Angry Voices Ensure Rent Controls for 2019?
While housing affordability for many renters is a big issue, are proponents of rent controls right about keeping or implementing more rent control? Is rent control a symbol of what is wrong with economies today and a dismissal of free markets?
Property investors and property managers might want to put forward their voice in protecting the profitability of rental property investment. Controls on rents impact everyone, put immense pressure on landlords/property managers, and don’t resolve the real issues behind the housing crisis.
Instead of looking guilty or remaining silent, here’s why communicating the dangers of rent controls can help everyone.
Assar Lindbeck, a Swedish economist who chaired the Nobel prize committee for many years, once reportedly declared that rent control is “the best way to destroy a city, other than bombing.”– excerpt from Bloomberg report.
Rent Controls Discourage New Housing
The obvious argument against rent controls is that it discourages investment in new construction developments and repair of old buildings. Repair costs are never mentioned in these debates. Rent controls also discourages high quality property management and tenant satisfaction which might prevent tenant complaints and legal battles.
“We cannot build our way out of a crisis of this proportion,” said Elena Popp, founder of the Los Angeles-based Eviction Defense Network, one of the groups pushing for stronger rent-control laws in California.
The statement above suggests enough homes can’t be built for Californians. While the economy is booming and people can’t afford housing prices, the rental market has heated up. There is lots of land in California to build multifamily buildings. Builders need incentives and confidence they won’t be stabbed in the back after committing their billions.
Speaking Up Against Rent Controls is Wise
And while rent is controlled in the short term, the lack of new housing means rents means vacancy rates plummet since there’s not enough rental apartments, condos and homes available. And a lack of multifamily building hurts local and national economies.
Consider that rent controls have been in place since 1943 in New York, yet it’s had the most persistent rental housing problem of any US city. Toronto too has expanded rent controls with persistently high housing costs and aging infrastructure. Hardly an endorsement for rent controls.
Rent control increases of 1.5% for instance don’t cover cost of living increases, repairs, ROI needs, or proper maintenance of properties
Is support for rent control irrational, especially during a housing availability crisis? Yet voices for rent control are loud and persistent. Their argument is usually emotional and focused only on one statistic: rent prices. If their voice wins, the situation is lose-lose for all.
Please do Share this post on Linkedin and Facebook!
Better Vision and Leadership Needed
Governments, investors, and property managers must have the courage to look forward even if the present is painful for renters. It certainly proves the point, that if housing isn’t built, a housing crisis is not far off. And we’ve been in it for years, with government perhaps pandering to these loud voices.
In California, the state government’s Proposition 2 is targeting $2 billion to help with the issues of homelessness for seniors, military veterans, and poverty prevention. It’s a stop gap, band aid type measure to deal with the housing crisis, but not a sustainable solution.
Without rent controls, new housing units are built and prices begin to fall — demand vs supply. With growing investment in housing, employment and wages rise which rewards property investors (and property management companies).
And at a time when the housing market is lagging the economy, removing disincentives and risk might encourage property investors to commit to building more multifamily developments. With rent controls, rehabilitation of buildings to make them safe, compliant with growing regulations, and cost effective is impossible. Why would anyone spend their money to fix crumbling old buildings?
Reactive Governance Always Fails
The best property managers know how a bottom up management approach leads to crisis, unforeseen losses, and mounting costs. A top down approach with focus and vision, a good property management system, and a keen eye for quality and efficiency gives investors and landlords confidence to hire you.
Rent controls are a bottom up business management scheme, and they hurt everyone.
7 Reasons Why Rent Controls Don’t Work
- discourages investment in new developments
- discourages investment in rehabbing/converting old buildings to meet regulations
- prevents choice for tenants and keeps tenants trapped in high priced situations they don’t want to be trapped in
- prevents homeowners (especially seniors) from selling their houses because there’s nowhere for them to move to
- makes eviction a difficult process for landlords and tenants
- decreases quality of living and amenities for tenants
- renters have to stay put, instead of moving to a new location for a better job
The overall effect on the economies of cities such as San Francisco, San Jose, San Diego, New York, Los Angeles, and other cities is negative. Rent controls are a dead end trap for investors, property managers, and most importantly for tenants.
Take time to support those who fight rent controls and arm yourself with the rationale against rent control legislation. It can seriously impact your business and ruin your state’s economy.
See also: How to do Tenant Screening | Best Accounting Software for Property Managers | Best Property Management Apps | How to Use Property Software | Toronto Housing Market | Toronto Condo Prices | Australia Housing Market | UK Rental Market | California Housing Market | Apartments for Rent | Renters Insurance| 2018 Rental Housing Market | How to Reduce Tenant Turnover | Cloud Property Management Solution | Tenant Screening | Improve Property Revenue | Improve Property Cash Flow | Property Management Issues | Real Estate Portfolio Tips | Starting a Property Management Business | ManageCasa Property Software