Rent Control: What To Know
The Treasure Valley is booming. We are seeing an influx of people. In fact, Idaho was the nation’s fastest growing state in 2017. As a result, the demand for housing has gone up. For most of 2018, way up, and both sale and rental prices increased dramatically.
The increase in prices is good if you own an investment property. Without any extra investment in time or money, you get more for your rental property. However, if you were looking to buy, the seller’s market might have had you choose to wait it out.
The Response to Rising Housing Costs
Though the market in the Treasure Valley is slowing slightly, the rapid rise in population and housing prices have started to get attention as communities and states are looking to ensure adequate housing and sustainable growth.
One proposed solution is rent-control.
The way in which rent control is proposed can vary slightly, but basically it caps the increase in rental properties over time. The goal of rent-control is to ensure affordable housing by ensuring rental prices do not increase to greatly from year to year.
In fact, our neighboring state of Oregon has proposed state-wide legislation to introduce rent-control as a solution, limiting rental increase to 7% per year (plus inflation). Caveats to the law and the absence of no vacancy controls are efforts to make the bill more amenable to investors. (You can read more about the specifics on this legislation here.)
The Problem With Rent Control
There are actually several problems with rent-control as a solution; the most prominent being that it actually tends to lead to an increase in housing prices in the long run.
To begin, rent control tends to affect contractors and developers more than investors in the beginning. Knowing that return on investment will be limited, investor interest is hindered, and their investment into developments is decreased. The capital investment needed to develop and construct housing units decreases because most contractors and developers build to sell (they generally do not build to manage). In the long run, less housing is created and prices go up.
Rent control also gives investors more reason to sell their investment property. With legislation such as Oregon is proposing, a landlord can take tenancy or take a unit off the market in order to renovate and then sell it as a condominium, reducing available rental housing even further.
And for investors and lovers of capitalism, the joy of a good investment and the income that comes from having an investment property in a strong market are capped. Though there are no safeguards for losing money if you have an investment property in a declining market, your success is being limited to safeguard those looking to move into your growing market. There is just something unjust about having your success limited when you are willing to take all the risks.
What You Can Do
Whether or not you live in the Treasure Valley or the Pacific Northwest, what happens here can potentially affect us all. It is important to be aware of legislation happening in neighboring states. When something like rent-control is passed state-wide, other states will notice and give it more attention when considering options for their own housing issues.
Rent control is an unsustainable option. It unfairly caps the gains of investors; and it also exacerbates the housing crisis in the long run. So when rent-control is an issue up for debate, you need to take action.
If you live in Oregon, call your legislators. If you don’t live in Oregon, find someone you know who does and have them call their legislators. (Of course you can call any legislator you like, but they are more likely to listen to a constituent, voter, or local investor). Get involved in your communities and be aware of proposals such as this. Let your representatives know what you think. Your voice matters.
The Ace In Your Back Pocket
You may not know, but the owner of Prestige Property Management is a vocal participant in Idaho legislation. She is at the capitol regularly talking to congress people and lobbyists. She knows what is in the pipeline in regards to property management, rent control, eviction legislation, etc. If you are an investor with Prestige Property Management, you have a voice speaking for you directly into the legislators’ ears. Turn the volume up by adding your own.
Find the contact information for your representatives here.
For more information on how you can get involved and stay informed on critical legislation, email Miste: email@example.com.