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In 2019, growing concern about a lack of affordable housing led legislatures in the nation’s two largest multifamily markets — New York and California — to enact rent stabilization measures. Of the two, the New York laws were more restrictive, limiting the ability of owners to raise rents after renovating rent-stabilized apartments and to deregulate them when rent crossed a set threshold. In California, Gov. Gavin Newsom signed a bill that restricts landlords from raising annual rent more than five percent above the local cost of inflation. Properties built within the last 15 years are exempt, and the bill sunsets in 10 years.

While Fannie Mae and Freddie Mac remain committed to preferential pricing for affordable housing, the trend to more stringent rent regulation has made some members of the multifamily industry apprehensive. They fear that these laws will depress property values and discourage owners from renovating properties.

There’s More Smoke Than Fire

This uneasiness was only partially reflected in Capital One’s annual survey at the GlobeSt. Apartments Conference in Los Angeles. Asked to gauge the likely impact on investor strategy of the ongoing push for housing affordability, close to 60 percent responded that investment would shift to new markets or property types. At the same time, only 14 percent of respondents forecast a decrease in overall investment and more than a quarter, 28 percent, said there would be no change at all. In other words, the consensus view is that the multifamily market provides a variety of options for resourceful investors.

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