The Rise of Rent Control
Housing affordability has become a hot topic these days. In one of the recent Democratic debates the moderator asked the candidates for their “solutions to the nation’s housing affordability crisis.” In the last few years there have been increased calls for rent control and other measures that politicians see as a “quick fix” to the problem. While controlling rents may seem like a reasonable idea on the surface, history has shown that artificially capping rents has long-term negative outcomes and unintended consequences. It In short, it destroys a developer’s incentive to build new supply (the real problem) and diminishes a landlord’s incentive to renovate and improve existing housing stock.
The National Multifamily Housing Council (NMHC) estimates that more than half of the total apartment units nationwide are at risk of potential new rent control regulations. In 2019, Oregon was the first to adopt statewide rent control, capping rent increases at 7% plus CPI—not to exceed 10%. In New York, legislators enacted a broad expansion of the state’s existing rent control policies to include limiting capital improvements to just $15,000 per unit.
Following Oregon, California also passed a statewide rent cap (5% plus CPI not to exceed 10%). Bills were also introduced in Colorado, Illinois and Nevada looking to lift statewide preemption of rent control. Each of these measures failed. At the Federal level, Representative Alexandrian Ocasio-Cortez (D-NY) introduced a proposal to limit rent increases to the greater of 3% or CPI. So far, this bill has gone nowhere.
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*NMHC
- California has already secured enough signatures to put another (presumably stricter) initiative on the ballot in 2020.
- Colorado and Illinois are both expected to return measures eliminating rent control preemptions. Chicago teachers recently included rent control as a demand for settling their recent strike!
- Florida and Utah both recently introduced measures to remove statewide preemptions on rent control.
The list goes on and is growing. Nevada is the only market we currently own in that is under threat. As value-add apartment owners, you can bet we are watching this very closely.
Sincerely,
Edward M. Aloe
President and CEO
626-229-9057
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[Pulse] Housing is in the middle of an inventory crisis. Here’s why
There are multiple contributing factors and (hopefully) multiple ways out
Supply and demand are two of the most basic components of economic theory. Too much supply, and products become commodities with falling prices. Too much demand, and scarcity creates bidding wars which drive prices higher. This, in an overly simplistic way, describes what’s happened over the last decade in the housing market.
The combination of an over-supply of new construction along with millions of foreclosed homes unexpectedly flooding the market while demand plummeted led to home values falling by over 35% nationally from peak to trough.
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Freddie Mac’s Guggenmos Looks Ahead to 2020 for Multifamily
Market for multifamily mortgages is projected to continue to see growth.
Apartment rents are still on the rise. Rental communities across the country are still fully occupied on average, despite years of new construction. But just a few months ago, the financial markets flashed warning signs of a possible recession in 2020.
How long can the good times last? What challenges and opportunities will apartment investors find in 2020? Multifamily Executive asked Steve Guggenmos, vice president of research and modeling for Freddie Mac Multifamily, to share his outlook for the coming year.
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Even With Climbing Rents, Phoenix Still Affordable Market
Job growth continues to bolster the Valley of Sun.
Data from RealPage puts Phoenix in the No. 1 position for rent growth in the U.S. at 8.2%. Las Vegas and Greensboro, N.C., are Nos. 2 and 3. Even more disturbing is the rate of acceleration, which has been picking up speed since 2018. Since 2010, Phoenix rents are up 48.2% as compared with the national average of 35.9%. The bad news has to be taken with the realization that Phoenix, even with climbing rents, is still one of the most affordable places to live in the U.S. Its $1,163 average rent per month is still under the national average of $1,416.
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About CALCAP
California Capital Real Estate Advisors, Inc., and its affiliate entities (CALCAP Asset Management I & II, CALCAP Properties, CALCAP Lending, and CALCAP Senior Healthcare I, collectively known as "CALCAP"), is a California based investment company founded and 2008 and headquartered in Pasadena, California. The Company sponsors alternative real estate investment opportunities focused on demographically driven housing. CALCAP has been able to consistently provide both individual and institutional investors with outstanding returns over the last 10 years. The Company's core strategies look to actively create alpha for investors while managing risk. CALCAP currently has over $300mm in Assets Under Management. To learn more visit
www.calcapadvisors.com.
Social Mission
CALCAP has created the CALCAP CARES program to encourage employees to find a way to give back to the neighborhoods where we invest. CALCAP has created "GiveTime4Autism" as its initial program which will allow employees the ability to donate unused vacation and sick days for a very worthy cause.
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LOS ANGELES
The Sanborn House
65 N. Catalina Avenue
Pasadena, CA 91106
SAN DIEGO
12626 High Bluff Drive, Suite 360
San Diego, CA 92130
PHOENIX
740 N. 52nd Suite 200
Phoenix,AZ 85008
SANTA BARBARA
1309 State Street Suite A
Santa Barbara, CA 93101
IRVINE
2603 Main Street, Suite 850
Irvine, CA 92614
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Edward M. Aloe, President & CEO
(626) 229-9057
Patrick A. Wakeman, Principal
(858) 764-4890
Drew Buccino, Principal and COO
(602) 419-3381
Greg Blix
Director of Investor Relations
(805) 896-8500
Len Israel
CEO, CALCAP Lending, LLC
949-439-1044
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Mark A. Mozilo, Principal
(626) 229-9056
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