Rent regulation aimed at addressing housing affordability has varied impacts on markets where legislation has been implemented, according to an analysis by Trepp Research. The analysis examined the impacts that restrictions have on multifamily property values and investment performance, as well as changes in apartment supply, vacancy rates, rent trends, housing affordability, and CMBS distress rates.
In 2019, New York City implemented the Housing Stability and Tenant Protection Act (HSPTA), which limited rent increases and eliminated vacancy decontrol. Since then, multifamily property values have dropped 30% and regulated rents have lagged substantially behind market rates, said the report. About a quarter of small landlords’ regulated units in New York City are vacant because it is uneconomical to rent them. Rent regulation has supported affordability in the city as half of rent-stabilized tenants pay below-market rates, but critics say this discourages maintenance investment.
In California, the statewide Tenant Protection Act of 2019 limits annual increases to roughly 5% plus inflation for properties more than 15 years old. Trepp’s analysis found that rent-controlled buildings in the San Francisco Bay area sell at discounts compared to unrestricted properties, and controlled rents are substantially below market levels. Tenants in rent-controlled units stay up to 20% longer, but landlords in the market often convert them into condos or owner-occupied homes, which reduces the rental supply.
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In Los Angeles, property values are slightly depressed compared with unrestricted buildings, and rents for stabilized units are significantly below market since the 2019 regulation was enacted, said the report. Rent control has not deterred new multifamily development, but affordability remains challenged due to insufficient housing supply, according to Trepp.
The Twin Cities of Minneapolis and St. Paul offer an interesting comparison, as St. Paul implemented strict rent control in 2022 while Minneapolis has taken a free-market approach and promoted housing development to address affordability. Between 2017 and 2022, Minneapolis increased its housing stock by 12% and rents rose only about 1% over that five-year period, which Trepp described as an extraordinarily low rent growth rate that suggests abundant new supply tempered price increases.
Meanwhile, in St. Paul, multifamily valuations immediately declined following rent regulation, and new rental unit completions fell sharply, from nearly 1,000 units per year to less than 300 in 2024. Although the regulation provided immediate relief for existing tenants, it reduced supply risks to long-term affordability, said the report.
Trepp also studied Portland, Oregon, and Portland, Maine, to see how their rent regulations impacted rents and property values. In Oregon, statewide legislation enacted in 2019 caps rent increases at 7% plus the annual increase in the Consumer Price Index. Portland also requires landlords to pay relocation assistance for large rent increases. The analysis found minimal impact on property values, with rents increasing moderately and occupancy remaining high. The regulation has not resolved fundamental affordability due to supply shortages, according to Trepp.
In Maine, Portland enacted strict rent control in 2020, which tied annual rent increases to inflation and prohibited vacancy resets. As a result, property values have been depressed due to income stream constraints. Occupancy has remained high, but new development has been cautious, said Trepp. Overall, the regulation provides significant short-term relief for incumbents, but long-term affordability depends on increasing housing supply, the report said.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
