The Rent Regulation Riddle: The Jury is Still out on the Effect of Rent Controls
APRIL 2024
In the global landscape of residential real estate, one puzzle looms large: rent regulations.
Nations grapple with the delicate balance between tenant protection and investor incentives, with none seemingly finding a solution to appease both sides. Rent control laws protect tenants against sudden price spikes, but critics caution against this, highlighting stifled investment as a result of lower returns, and diminished housing quality, with landlords less inclined to maintain their properties.
Paul Jackson, managing partner at Accord Group, has seen similar results. “After the emergency rent cap was introduced in Scotland in September 2022, I’m aware of only one new residential investment scheme being started,” he says. “For a market that’s in a severe housing crisis, any decline in investment is troubling, but as a general rule we see many investors continuing to favour markets that operate without controls.”
Accord’s Jackson is looking beyond rent regulations. “These controls operate differently in each market, so the impact on investor appeal will vary,” he says. “However, regardless of regulation, we see the most favoured markets as the ones with strong fundamentals, such as good economic and population growth, and a lack of housing product, which can drive supply-and-demand imbalances favorable to investment.” As a consequence, his efforts in Europe are currently focused on markets with no rent controls. Nevertheless, Accord can point to “some great examples” of successful investments in US markets with significant rent regulation, says Jackson, proving that powerful demographic movements and supply-and-demand dynamics have the ability to negate rent control’s negative impact.
Success in the United States despite regulation is a story echoed by Burton. “We’ve been successful in heavily regulated areas [such as] Los Angeles and the Bay Area, and in nonregulated regions [such as] Texas and Arizona, and those in between, such as Colorado and the Pacific Northwest,” he says. “Discerning investors can find strong opportunities in each of these environments as long as there is certainty over rent regulations and no danger of frequent changes.”
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ABOUT ACCORD CAPITAL PARTNERS LLC
Accord, through its affiliates, is a global capital advisor, principal investor and investment manager. With its headquarters in San Francisco and personnel in Chicago, London, Hong Kong and Seoul, Accord engages with a wide variety of participants in the real estate private equity industry. Accord Capital Partners, its broker/dealer affiliate, provides advisory and capital raising services in the United States. Accord Europe Limited, its broker/dealer affiliate, provides advisory and capital raising services in the United Kingdom and Europe. For further information on Accord, visit: www.accord-group.net.
