ARLINGTON, VA—Keeping multifamily rents affordable has been a puzzle with many proposed solutions. However, one of those proposed solutions—rent control—freezes the rental market at a specific point in time while everything else continues to move forward and change, asserts Robert Pinnegar, president and CEO of the National Apartment Association (NAA).
“In a rent control environment, you have limited returns, disincentive to invest and reinvest in product, a decline in the overall housing stock, discouragement of new construction and really, over the long term, it diminishes the value of the property and ultimately the local jurisdiction loses in property taxes,” he said. “As time moves on and the economy continues to grow, you really are limiting the options of the local municipality.”
Other consequences of rent control include longer commutes and small businesses closing their doors due to the lack of local, supporting residential demand, he said.
However, Pinnegar does see jurisdictions offering innovative solutions as alternatives to rent control. He thinks these alternatives are showing promise in reaching effective rental market solutions that don’t devolve into a game of housing haves and have-nots. For example
- Denver has created LIVE Denver, a more streamlined version of the Section 8 housing program that engages the private sector.
- Connecticut offers property tax abatement for the development of new rental housing and the rehabilitation of existing housing that is occupied by low- and moderate-income individuals.
- North Dakota’s public-private partnership provides state tax credits to individuals and businesses who contribute to its Housing Incentive Fund for the development of low to moderate-income housing.
NAA projects that 4.6 million new rental units will be needed by 2030 just to keep up with current demand. That’s far above the current rate of delivery. Then factor in the approximately 11 million units in the current stock that were built before 1980.
“Many of those units are reaching the end of their useful lives and need to be rehabbed and brought up to current standards,” Pinnegar said. “When you have rent control come into a particular jurisdiction, you’re really putting that older housing stock at a disadvantage and limiting the options of those people searching for housing.”
Given the length of the development process, rent control also hurts the pipeline of supply, Pinnegar noted. “In some areas, the entitlement process can take two to three years, so it’s a gamble that you’ll actually hit the market at a point when there’s demand to support that new product coming to market.”
By working with localities to create public-private partnerships as well as relaxing regulations, the rental housing industry provides viable alternatives that work for everyone.