One of the biggest problems facing landlords today is the growing number of areas with rent control laws in place. The cause for this is a significant rise in rental rates that are the result of reduced construction levels and a never-ending increase in the number of renters seeking new housing. The is more to this picture than meets the eye.
3 Key Factors that Affect Rental Rates
Recent research shows that there are three major factors known to have a significant impact on rental rates in any area. These are the number of available rental units in the area, the average wage in the area, and the number of jobs.
One of the best ways to control rental rates in any given area is to ensure there are always plenty of rental units in keeping with the pace of job and income growth in the area. But for many areas, this creates a very complex situation because it often requires to changing local zoning regulations and in many cases building codes. Something many cities and towns are loath to do.
In for the Quick Fix
So far, most of this sounds like it shouldn’t be that hard to overcome, after all, it only makes sense to make more precious land available for housing. Adding more housing is a great way to help stimulate the local economy and allow an area to grow. However, for various reasons, most local governments seem to be more likely to turn a blind eye to this need and refuse to make the necessary local zoning and regulation changes.
Instead, many seem to keep looking for a quick fix to the problem with the out of control rise in rental rates. The one most local governments seem to latch onto is rent control. By this, we mean putting a ceiling on how much rents can be in a certain area for a specific type of dwelling. In other words, this puts the amount you can rent your properties out for in the hands of the government instead of in yours where it belongs.
The Best of Intentions
Despite the fact that rent control legislation was introduced with the best of intentions, it has its share of drawbacks. It has led to a reduction in housing supply, a decline in property values, and a reduction in the quality of the housing that is available. The reduction in available housing stems from the fact many investors choose not to invest in building homes in areas with rent control legislation in place.
At the same time, the reductions in both quality and value stem from the fact that despite the rising cost of maintenance, being unable to increase rents beyond a government set point, often leaves landlords and property owners unable to afford all but the most emergent of repairs, let alone the cost of upkeep. While higher rents can be an issue in those areas without rent controls in place, the extra money helps to keep these areas far more desirable making the “quick fix” more like a slow death.