Oregon's new bill (SB608) eliminated the state statute removing the ban on rent control going in place Feb-2019 and also put in place an emergency clause implementing a 7%+GPI limit immediately. What do you guys think about rent control in other states going forward?
Trending Content
| +83 | LP coming into deal at higher land basis. How to model returns to GP? | 19 | 13h | |
| +76 | Increasing RE Industry's Cash Compensation, Collectively | 43 | 1d | |
| +73 | Major Decisions | 13 | 2d | |
| +44 | Being asked to stay behind and train my replacement | 11 | 10h | |
| +34 | Niche down to an operator or stay an allocator | 11 | 13h | |
| +24 | Breaking into CRE late 20s | 7 | 5d | |
| +23 | Thoughts on joining an early-stage REPE fund | 7 | 1d | |
| +22 | Self Storage ECRI | 9 | 3d | |
| +20 | How to get good at RE Modelling? | 18 | 13h | |
| +20 | Public Homebuilders | 7 | 10h |
Career Resources
Rent control is a terrible idea, but people don't understand why beyond "my rent will be lower" so it would not surprise me to see it enacted elsewhere.
Terrible idea which prohibits direly needed renovation of existing workforce housing. All this does is create a scarcity of quality upgraded housing for young professionals.
You're right here, not sure why you got that MS. Everyone who took intro to econ in HS or Econ 101 in college should understand this. The goal should be to create an incentive for development to increase supply.
Exactly. Development but arguably more important redevelopment because only through redevelopment can you create nice housing at rental rates lower than rates needed to make new construction work which is becoming too high for the average American.
We're at a point nationwide where Pandora's box is being opened with rent control movements gaining momentum all over. People forget San Francisco's rent stabilization ordinance started at % but now is down to 3% sometimes lower depending on CPI. We're essentially letting the fox in the hen house so to speak. CA is about to get the same law with theirs being 5% + CPI in AB #1482.
See the following video for a great explanation why rent control is so detrimental and always has terrible unintended (opposite) consequences:
Who know's if it will get steam but a group of NYC landlords are taking rent control to the SCOTUS again. https://www.wsj.com/articles/landlords-challenge-new-yorks-rent-control… Also, I read the other day that BX has been warehousing units in Stuy Town in n effort to make NYC reconsider the recent changes.
“In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”
~Assar Lindbeck
I think everyone can agree that rent control is bad, but do you think it will happen is the bigger question.
You'd be very surprised/disappointed at how little people understand about the most basic of fundamental economics. Especially those who show up to planning and zoning meetings at odd hours to twist our elected officials arms into enacting legislation that is fundamentally harmful to the vast majority of people (except for the rich and token poor).
Unfortunately, yes I believe that it will get worse.
Unless cities across the countrycan seriously liberalize their overbearing zoning and land use regulations to allow a much greater supply of housing to be built at a lower cost, flooding the market, and depressing prices.
That being said, it is a major uphill battle considering the fervent opposition at a local level, rampant NIMBYism, and a true lack of understanding, reasonableness, and nuance in the public discourse surrounding this debate regarding basic fundamental economic principles.
Having been on the front line of this debate, there are serious headwinds facing any reasonable change to our land-use regulations that could significantly improve the cost of housing for individuals.
It's not a lost cause entirely as the grassroots YIMBY movement is making progress in bringing the conversation to the middle. There are also some precedents of societies eventually accepting upward growth and development as the acceptable means of addressing affordability concerns.
However, no major metro area in the US outside of Texas has even come close to addressing the affordability problem in a growing economic climate. And they can only do that because of their generally lax attitude towards development and culture that praises and prides itself on economic/business success. Even then, most of those cities have burdensome density/setback regulations that prevent full economization of the land value.
Our current land-use regulations by-and-large are fundamentally designed to be resistant to mixed-use infill development patterns on a large scale. This is facilitated and actively supported by hyper-local political organizations that "inform" public officials by rabble rousing people who are afraid of change, and essentially holding land-use planning commissions hostage. Many being single family homeowners who directly benefit from the scarcity, and hold way more political power over elected officials, and thus everyone else, than they should ever have. Considering that the vast majority of municipal land in America is zoned some version of single-family residential, I don't see those political winds changing anytime soon, but I hope so much to be proven wrong.
https://ternercenter.berkeley.edu/blog/land-use-politics-housing-costs-…
Will echo the comments above that I think rent control will only exacerbate affordability problems in the long term. With that said, rent control is clearly gaining momentum nationally and especially so in city centers, particularly on the west coast where city councils tend to be more left leaning.
From an acquisition perspective, I like that Oregon now has rent control defined. It’s much easier to underwrite and price in when you know exactly what the rent control looks like. I’m more concerned in metros where rent control is not defined, especially if it does end up passing in my hold periods and is even more extreme than Oregon’s. I think most investors would be very happy with their 7% + CPI rent growth. You’d be a lot less happy if you underwrote 4%+ and ended up with rent control that brings rent growth down to 2%.
I thought I posted on this last night, apparently I didn't hit the Add button.
Here in San Diego several friends of mine who are long time tenants of the same landlord received rather large rent increases recently. It was the same week our glorious Gov Newsom inked his approval of statewide rent control. A former roommate of mind got a 35% bump. Granted, she was well below market and still is, but the 35% rent bump came solely due to the threat of government intervention. She hadn't had a bump in 4 years. I know several others with double digit increases that same week and the landlords flat out said it's to get the overall rental rates up due to future limitations.
What happens is the landlords, prior to this becoming law, increase the baseline or median rent in the market considerably because they know in the future they cannot do a one time substantial raise, therefore, it happens now. Rent control threats, not even the law, drives up the median rental rate so that the future 5-8% bumps are from the new baseline.
The last two years with the thread of repeal of Costa Hawkins, I've seen some wild rent bumps in the beach markets. 3br units are $4k mo now. That's cheap for coastal CA though, but in San Diego with our low wages that is a fortune. I have a Town Home deal I'm working on right now, large 2/2's and they're well north of $3k and you aren't going to walk to the beach. It's about a mile.
Additionally, we in CA are waiting for the real devil in the details...eviction for Just Cause. This is the biggie and so is relocation assistance. Some estimate relo assistance at $5000 a door.
There are so many scenarios where my clients are finding ways to bake in all these new limitations and expenses, and of course it's passed on to the tenant. The lower class, the politicians and the supporters of rent control have sealed the fate of renters for generations to come. 10-30% bumps before the law passes and 5-7% annual bumps every year forever.
Just to add to this a little those 35% rent increases won't stand unless they were implemented before March 15, 2019 per the language in AB #1482. As is the case with any law like this they will roll back rents to a point in time and then owners can start increasing at 5% + CPI from that point forward. So tell your friend they will most likely being seeing some form of concession to net out this increase in the near future. Everything else is spot on.
One thing I'm still trying to figure out with the 12-month tenancy just cause eviction is what's the definition of rent as it relates to month-to-month leases? We manage on lease expiration and usually give tenants a m-t-m option but where lease rent is based on prorated terms so does AB #1482 kill m-t-m leases as we know it?
I think tenants are not going to want to rock the boat and put new laws in front on a landlord on MTM terms. Then the landlord comes hunting for a "just cause" to boot them.
Aaaaandd it just got way worse.......
https://www.nytimes.com/2019/09/11/business/economy/california-rent-con…
Yet the housing bill by Scott Weiner to allow a very modest amount of additional housing around transit stops was shelved.
California, I'm sorry to say, but
Inventore nulla perspiciatis accusamus. Et vel aut minus. In perspiciatis perferendis dolorum quibusdam dolorem consequuntur. Architecto a ratione quibusdam voluptates repellendus deleniti. Inventore porro ea culpa saepe.
Quaerat voluptatem quo blanditiis autem aut ut. Labore ea distinctio doloribus temporibus hic corrupti et.
Saepe tempore ut numquam facilis placeat qui cum quidem. Voluptatem voluptatum dicta quidem sunt. Fugiat incidunt ut officia veritatis culpa. Laborum ad ea hic saepe sint magnam dicta. Consequuntur dolores facere similique sit. Repellendus quo voluptatem et fugiat accusamus.
Et perspiciatis rerum quo quia et. Quis voluptatem tenetur corrupti quaerat. Et rerum occaecati quidem et placeat assumenda. Veniam laborum qui cum voluptatem nostrum architecto.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...