Are We One Step Closer to National Rent Control?

The Biden Administration launched a broad-based effort by federal agencies to “improve the quality of life for renters.” The announcement comes at a time when 40% of renters are struggling to keep up with their rent payments, but raises questions about how to make housing affordable in a way that is fair for both renters and landlords. (1)   Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.   U.S. Rent Growth   Rents have been soaring across the country, as housing demand continues to outpace supply, but it has also been slowing down as the Federal Reserve works to slow inflation with rate hikes. According to Zillow, typical U.S. asking rents are $1,981, which represents a yearly growth rate of 7.4%. That’s down from a peak of 17.1% last February. (2)   Rents and rent growth vary wildly from market to market. In Miami, year-over-year rent growth is 11.7% while Las Vegas is showing a negative .9% increase. A few other examples include Cincinnati with a rent growth rate of 10.2% and Indianapolis, at 9.6%.   Federal Renter Protection Effort   Getting back to the renter protection announcement, let’s look at some of the top calls to action:   1 - The Federal Trade Commission or FTC and the Consumer Financial Protection Bureau (CFPB) will be investigating ways that tenants are being unfairly prevented from getting into housing or removed from housing they already have. Some of the practices they will be investigating include the use of background checks, tenant screening algorithms, adverse action notices for rejecting applicants, and information on an applicant’s source of income.    2 - Those two agencies will also issue guidance for the credit reporting process, and coordinate enforcement efforts to ensure the accuracy of the information. They will also hold background check companies accountable if they engage in unfair procedures.   3 - The Federal Housing Finance Agency or FHFA will be involved with renter protections that include limits on excessive rent increases. The agency describes it as a public process that prioritizes transparency with updates, including one within the first six months. The FHFA will also encourage affordability for the multifamily market with affordability requirements for Fannie Mae and Freddie Mac loans.   4 - The Department of Justice is expected to issue guidance on the prevention of anti-competitive information sharing in the rental market.   5 - The Department of Housing and Urban Development or HUD will work on new rules that require at least 30 days notice before a lease is terminated for a public housing tenant who stopped paying rent.   6 - The Biden Administration plans to hold quarterly meetings with tenants and tenant advocates to make sure their voices are heard.   Blueprint for Renters Bill of Rights   All this is part of the so-called “Blueprint for a Renters Bill of Rights. The guiding principles include:   1 - Safe, Quality, Accessible, and Affordable Housing 2 - Clear and Fair Leases 3 - Education, Enforcement, and Enhancement of Renter Rights 4. - The Right to Organize   Housing Providers Involvement   Several housing provider groups are also participating in this effort.   The National Association of Realtors or NAR and its affiliate, The Institute of Real Estate Management, have made a commitment to promote resident-centered property management practices. That might include the use of alternative credit scores for applicants who don’t have much of a credit history or the sharing of information with an applicant about Housing Choice Vouchers or rental assistance programs.   The National Apartment Association and the National Multifamily Association have also made commitments to promote resident-centered management practices. That might include help for tenants who want to improve their credit scores by reporting positive rent payments to credit bureaus.   While those agencies are promising those contributions, they are also speaking out against rent control. As mentioned in a Bigger Pockets blog: “Numerous studies have found that the long-term effects of rent control hurt the people these policies intend to help.” (3)   Why Rent Control Fails   There are studies by the Brookings Institution and Stanford that show rent control may provide short-term relief for renters but decrease housing affordability over the long-term. That’s because landlords get out of the business, which reduces the amount of available housing, increases demand, and leads to higher rents.   The National Apartment Association says that rent control discourages the creation of affordable rental housing including new construction and rental housing renovations. The National Bureau of Economic Research says that rent control keeps smaller families from downsizing and opening up rental space for new larger households.   There are several detailed well-informed arguments against rent control, but at the heart of the issue is what is truly happening with rent inflation. Currently, rent growth is coming down. Yes, it is still growing year-over-year, and yes, a large chunk of the renter population is rent-burdened. That calls for a solution, but rent control is only a short-term solution. And it’s very difficult to get rid of it once it’s in place.    According to Bigger Pockets, the National Multifamily Housing Council would like to see direct subsidies to low-income renters and builders who create affordable housing. Many housing industry insiders also say that rental housing policy should be regulated at the state and local level.   Why Federal Rental Policy is a Bad Idea   In a CNN article, NAR’s Kenny Parcell warns of the negative impact of federal policies saying they can “potentially drive housing providers out of the market” and make housing more expensive over the long-term. He also says: “Expanding the federal government’s role in rental policy also places an even greater undue burden on mom-and-pop providers.” (4)   NAR said high rents are the result of a supply and demand imbalance, and that more affordable housing is needed to keep rents from rising like they have been. The NAA’s Bob Pinnegar says: ““For months the National Apartment Association worked with the White House in good faith.” He says: “We stand by our commitment to promote industry resident services and practices, (but we are opposed) to expanded federal involvement in the landlord and tenant relationship. Complex housing policy is a state and local issue and the best solutions utilize carrots over sticks.”   That’s it for today.   If you’d like to learn more about landlord tenant relationships and property management, you’ll find several articles at newsforinvestors.com under the Learning tab. While you are there, please click the Join for Free button for complete access to all our data.    Please remember to subscribe to our podcast, and follow me on instagram @kathyfettke for real estate market updates and commentary.   Thanks for listening!   Links:   1 - https://www.whitehouse.gov/briefing-room/statements-releases/2023/01/25/fact-sheet-biden-harris-administration-announces-new-actions-to-protect-renters-and-promote-rental-affordability/   2 - https://www.zillow.com/research/december-2022-rental-report-31992/   3 - https://www.biggerpockets.com/blog/biden-announces-renter-bill-of-rights?utm_source=Iterable&utm;_medium=email&utm;_campaign=Newsletter%20%7C%2001/29/23%20Control%20(Free)   4 - https://www.cnn.com/2023/01/25/homes/biden-tenant-protection-renters/index.html