Does Government Have it Wrong...AGAIN?!?

Question

[Disclaimer: This is an apolitical post, I'm a moderate of neither the Republican nor the Democratic party.]

What do people think regarding the "Renter's Bill of Rights" proposed by Biden? It's yet to be solidified, but it currently smells like national rent control. For a more detailed description, check the BP blog post linked below.

My feeling is that rent control is bad and a headwind for multifamily housing. However, government has regulated housing for longer than I've been alive, and in a more heavy-handed way in the past few years, yet multifamily housing has been one of the best places that an investor could invest recently, despite government's best efforts to level the playing field between owners and renters. Is this just more noise, something that may take a few bips off an investor's rate of return? Or is this the final nail in the coffin, which means to me that other real estate asset classes, such as essential retail, industrial, farmland, etc., will outperform multifamily in the near-medium term?

https://www.biggerpockets.com/...

Greg M. · Answer

For the millionth time, there is NOT a lack of housing. There is increasing demand for housing in certain areas where the new supply does not keep up with the demand. There is nothing in the Biden bill that would help change this. They either need to do things that will stimulate housing growth (no/low interest loans to builders in certain areas; tax incentives to builders; removal of the political blocks to build; incentives to homeowners to build and rent an ADU or split their property into a duplex; promoting mixed use properties; providing funds for transitioning commercial properties into residential; etc) or they need to convince people to move elsewhere / not move to the crowded areas. They can do this by luring companies to certain areas or offering tax incentives. And also by not implementing things like rent control, S8, free phones/food/etc and allow prices to rise to the point those on the lower economic end give up and move.

The only thing this Bill would do if passed is drive more landlords out of the business, reduce construction of new units, and cause rent to go higher. It would encourage landlords not to put money into their existing units and therefore contribute to their falling quality as well as lower tax revenues and GDP.

Thankfully, I don't see it ever passing the House. I'm not even sure it could pass the Senate as it only takes 2 D's to understand that rent control doesn't work.

Jeff Willis · Answer

@Michael GansbergThe Government has built and managed housing since the mid '30s. It has always failed. The Government needs to stay out of the business of housing. Ledt the free market work. As to Biden, it is all about votes.

https://www.governing.com/comm...

Not one program or agency the Government has ever created to solve a problem has ever solved the problem it was created to solve.

Mike Dymski · Answer

Government "solutions" are society's next "problems".  The government grossly overstimulated the economy and increased the money supply by 7 trillion dollars or 50%.  Rents and prices for everything, including labor, are adjusting in the normal course.  And now the Fed is overtightening and the opposite is occurring.  It's Government Whack-A-Mole and citizens are paying a dear price.  We have lost our minds if we think the government is the solution.

Bruce Woodruff · Answer

Right again, Mike! I honestly think that the average investor on this forum has a far greater understanding of the basic economy than all these Ivy League morons that really run things.....

Mark F. · Answer

I f'ing love your posts. So much common sense a politicians head would explode if they read it. This proposal = trash. Don't think I need to beat a dead horse.

Nathan Gesner · Answer

I don't believe this bill will get any traction. Organizations are already lined up to fight it. We may eventually see something like this in America, but the current administration does not have the political capital to force this on the states and it will die a quiet death.

Bruce Woodruff · Answer

This^^^ All day long. Anyone can look this up and verify it, but yet people continue to spread this 'misinformation'. Because it's so easy to accept if you don't dig deeper.....

'I have a friend who wants to live near the beach in San Diego, and he can't find anything he can afford....oh dear, we need more affordable housing'......

Michael Gansberg · Answer

@Karl B. - I agree with your thinking. I'm also de-emphasizing residential in my portfolio in favor of commercial, which is probably something I should've done awhile ago. Three years ago, I was 100% residential, now- depending on how you calculate it- I'm closer to 75%, and continuing to shift. If enough residential investors feel the way we do, that should have a meaningfully negative impact on future rates of return.

I understand the emotional connection to housing- everyone needs somewhere to live, right? But my sentiment is that if government wants to make housing a right, which is reasonable, then government should build and manage the housing for those who are unable or unwilling to pay, as opposed to nationalizing the housing stock by way of rent control.

Karl B. · Answer

There's clearly a problem with lack of housing yet rent control = less new build. It also means more slum lords and worse living conditions as there's less incentive (and money) for landlords to maintain a property/fix it up as they cannot raise rents/are rent capped.

They try and blame the massive, faceless companies who buy up properties and rent them out yet 70% of landlords are mom and pop who rely on rental income.

Commercial appeals to me and I've made plans to purchase a NNN property in an investor friendly state. I'm waiting for cap rates to rise some more, which has FINALLY happened as of recent, but there will be better rates to be had, IMO.

Mike Dymski · Answer

The last stimulus check was handed out in March of 2021 when unemployment was plummeting, consumer debt levels were low, savings were at record levels, and the economy was very strong.  95% of people (who wanted to work) were working throughout the pandemic yet unemployment benefits were increased beyond median pay...and job search requirements were eliminated.  Talk to any employer for the past five years, even during the pandemic, and they will tell you how hot the job market is/was.  We constantly hear stories about government shutdowns on the news, in social media, and on podcasts but here in SC, the shutdown lasted about three weeks.  And stay at home for those three weeks meant stay at Home Depot.  Seriously, overflow parking lots and long lines.  We are not doing anything about the supply side to increase labor and materials into the country...just mashing the demand side down to shrink to greatness.

Does Government Have it Wrong...AGAIN?!?

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