Investment Property Owners May Force Rent Control



I just read a blog entry from an investment property owner complaining about the prospect of rent control. According to him, rent control is bad, because it “destroys the availability of good housing”; it allegedly “punishes” property owners by not allowing them to charge [exorbitant…] market rate rents; it discourages developers from building new housing; it cuts into profits; it is “socialist”; it “reduce[s] the amount of capital to invest in multifamily housing; and “existing market rates are higher than they would otherwise be if it weren’t for rent control”; it brings more regulations from cities with rent control that allegedly cost the property owners more … and he complains about a [hypothetical?] “story of a heart surgeon making $500,000-a-year who wants a pad in SF and gets to enjoy the benefit of rent control.”

Then, he goes on to complain about lower return on investment in interest charged on debt (i.e., bank loans), corporate and municipal bonds an dividend-paying stocks as well … all (according to him) because of rent control.

This person’s entire argument is based on his claim that property owners (i.e., he) will not make as much profit as he thinks he should. Instead of profiting (hypothetically) three million on his properties, he thinks it will hurt him to only make 2 million [profit ].

But, by charging market rate rent, he is helping to price more and more people OUT of the market. “Market rate rent” – today – is just another way of saying, “let’s extort as much money as we can possibly get from as many people as possible by gouging people in a market where low housing availability exists.”  When supply is low, demand higher and higher prices. Because that is exactly what investment property owners and landlords are doing. A 2014 New York Times article reports:

“Nationally, half of all renters are now spending more than 30 percent of their income on housing, according to a comprehensive Harvard study, up from 38 percent of renters in 2000. In December, Housing Secretary Shaun Donovan declared “the worst rental affordability crisis that this country has ever known.”

Meeting astronomical rents is hard enough for middle-class Americans, but it is especially hard for lower-income people which includes the elderly, disabled, and other folks who are less fortunate. In fact, for many, it’s virtually impossible. The number of homeless Americans is growing larger than ever before. Some of the biggest factors contributing to homelessness are a growing lack of affordable housing, stagnant and shrinking incomes, government budget cuts, and a shameful lack of effort (by government, corporations,  businesses, real estate companies and individual owners and … well, society in general – to overcome this income and housing disparity problem.