New research conducted by economists from MetroSight – sponsored by the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC) – reveals that overregulation could negatively impact rental housing affordability by increasing operating costs, discouraging new construction, increasing the cost of housing and limiting its accessibility and availability for Americans.
"Behind the High Cost of Rent" addresses a critical gap in evidence-based research regarding the financial impacts of rental regulations on housing costs and market dynamics. Leveraging proprietary data from NAA’s historical "Survey of Income and Expenses in Rental Apartment Communities," the study uses econometric methodologies to quantify the effects of specific housing policies on operational expenses and revenues. This analysis draws from a dataset from 2004 to 2019, encompassing more than 2,100 multifamily properties across 50 U.S. markets annually, representing between 600,000 and 850,000 apartment units each year, ensuring robust and statistically significant findings. By grounding its conclusions in extensive, longitudinal data, this research offers actionable insights for policymakers, housing advocates and industry stakeholders aiming to balance affordability and supply challenges.
Below are the report's key findings and their implications.
Source-of-Income Laws
- Increase in vacancy losses by 10.4%, likely because of the Housing Choice Voucher program’s complex and duplicative leasing process.
- Collection losses rise by 12.5%, with irregular payments from non-traditional income sources like subsidies.
- Utility costs grow by 9.4%, likely due to missed utility payments linked to unreliable income sources.
Eviction Regulations (Just-Cause & Right-to-Counsel Laws)
- Collection losses surge by 37.5%, likely due to a prolonged eviction process.
- Insurance costs rise by 14.3%, likely because of higher premiums from perceived risks and liability associated with residents remaining in the property after their lease expires.
- Utility costs increase by 13.2%, likely due to housing providers absorbing costs for renters who remain post-lease expiration without paying utilities.
- Repair and maintenance costs grow by 12.8%, likely due to higher incidences of property damage due to limited screening.
- Capital expenditures climb by 17.2%, as housing providers are likely to upgrade properties and raise rent to mitigate higher compliance costs associated with resident screening laws.
- Utility costs rise by 9.8%, as discounts are needed to fill vacancies due to limited screening methods.
Conclusion
The report highlights the unintended consequences of overregulating the rental housing industry. While these laws aim to protect renters, these measures, while often well-intentioned, risk exacerbating the very challenges they aim to resolve. Rental housing providers urge policymakers to avoid adopting flawed policies that inadvertently undermine housing affordability, inflate operational costs and discourage investment in the development of new housing supply. Instead, collaborative efforts should center on implementing data-driven solutions designed to benefit both renters and housing providers. Prioritizing policies that streamline rental processes, maintain economic sustainability and expand access to quality affordable housing can create a more balanced and inclusive rental market that addresses the needs of all stakeholders.
For an in-depth analysis and more data-driven insights on how housing regulations impact operational costs, read the full report.