BUILDER Magazine recently interviewed Culhane Meadows’ Atlanta partner Sharon Lewonski to discuss the effect rent controls could potentially have on singe-family rentals.
Here are some excerpts from Sharon’s interview:
The push toward single-family inclusion in rent reform measures comes right at a moment when the number of single-family homes built to rent is on the rise. NAHB estimates nearly 1 in 20 new single-family homes—or 5%—today are built-to-rent houses. As both millennials and downsizing baby boomers have displayed a penchant for renting either out of necessity or by choice, a growing share of single-family rentals has been one of the hallmarks of this housing cycle, with 39% of the nation’s rental stock now single-family homes, according to Harvard’s Joint Center for Housing Studies.
In other words, rent control is no longer just a multifamily issue.
“Given the rising count of single-family rental units and the small but growing share of single-family built-for-rent construction, rent control policies are a risk for the single-family market as well,” Robert Dietz, chief economist at NAHB, wrote in the October issue of BUILDER. “Moreover, by distorting market signals of the relative prices of renting and owning a home, rent control can also negatively affect demand for for-sale housing.”
…
Brad Dillman, chief economist at Atlanta-based Cortland, which owns and manages more than 60,000 apartment homes nationwide, says he definitely falls in Dietz’s camp. “Rent control doesn’t work,” Dillman says. “It carries with it a variety of unintended consequences.”
Those consequences include stifling the motivation for developers to build more housing stock. “It actually has the opposite effect,” says Sharon Lewonski, a real estate attorney at Atlanta’s Culhane Meadows and a member of the Urban Land Institute. “What happens with rent control is you basically take rental units off the free market, people in rent-controlled units never move, and you’re providing disincentives for new construction and new development.”
While 31 states still have laws prohibiting rent control at the municipal level, including Georgia where Lewonski is based, some cities are opting for inclusionary zoning, which requires a certain amount of affordable units to be included in new developments to receive entitlement approval.
“Some people think that’s another form of rent control,” notes Lewonski, who points to Atlanta’s recent passage of inclusionary zoning as the setup of a possible legal fight. “The bigger question is whether Atlanta’s inclusionary zoning ordinance is constitutional, based on the statewide ban against rent control legislation.”
The complete article can be found here.
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