We Need Housing Supply, Not Rent Control

Tomorrow’s announcement on the August Consumer Price Index will most likely be similar to July’s numbers, showing an increase in higher cost of housing. I want to point out that the increase is mainly due to single family, not rental housing. Every day, we hear about housing affordability and how it is at crisis levels. Capitol Hill wants to regulate rents, but that’s not going to solve the issue. We have a national crisis because of the lack of supply.? We need the Federal and State levels to deploy capital now and reduce zoning to start bringing costs down. ??

Rents have fallen across the country over the past five months, and in the second quarter of this year, per CoStar, including concessions (free rent!), rents were down .30%. Similar to supply chain issues which caused the cost of automobiles to skyrocket, the pandemic wreaked havoc on the housing market. ?Single family homes sold for exorbitant premiums, and multifamily rents increased at dramatic rates. ?That is no longer the case. ?

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Yet calls for rent control continue to echo across the country. ?From Maryland to Oregon local governments don’t seem to have read the research nor watched what happens when rent control is implemented. ?Investment goes down. ?Supply dries up. ?And rents go up. ?

A group of 17 democratic Senators recently signed a letter to FHFA Director Sandra Thompson calling for expanded tenant rights in apartment buildings with Fannie Mae or Freddie Mac mortgages. ?They also called for some type of rent control to prohibit "egregious" rent increases. ?First, the Senators are focused on a 2022 issue in 2023. ?Second, if they want to limit "egregious" rent increases, should we assume they will also limit "egregious" profits to American homeowners who sell their home with a Fannie or Freddie mortgage on it? ?Third, we live in a market-based economy where landlords adjust rents every day to meet market pricing. ?The only way to keep rents down is with new supply. ?

The solution? Fannie Mae, Freddie Mac, and HUD. Those three, government-controlled entities could start solving the problem immediately. They have authorization in 2023 to lend $185 billion to the multifamily industry to refinance and build affordable rental housing. ?Yet through the end of July, they have only deployed $65.6 billion, or 35% of their authorized annual lending amount. ?We don't need more regulation, appropriations, or new federal programs. ?We just need Fannie, Freddie and HUD to play their mandated roles of supplying counter-cyclical capital to the housing market in times like this.

There are currently 650,000 homeless people in the US. This affordable housing and national homelessness crisis can only be eased by increasing the supply of housing to push down costs. ?Local governments need to forget about rent control and focus on reducing zoning restrictions. In Los Angeles,?79% of the land is zoned single family, and as a result, the state with 12% of the US population has 30% of the homeless population. ?At the other end of the spectrum, Houston has the least zoning of any major US city and has seen its homeless population decrease by 63% since 2011. ?

As I said, housing affordability is due to a lack of supply, not regulation. Deploy capital, reduce zoning and start bringing costs down. ?