The challenge of housing affordability is no longer confined to major urban hubs; it’s a crisis spreading across communities nationwide, affecting households at nearly every income level. While policymakers seek solutions, a new report sheds light on a counterintuitive truth: the proliferation of well-intentioned rental regulations, such as those currently in place in Maryland, is actively making housing more expensive and hindering the construction of affordable units.
A study from MetroSight.com examined multifamily rental properties between 2004 and 2019. It reveals that complex, localized regulations diminish viability for housing providers, which is then passed directly to tenants as higher rents. If we want genuinely affordable options for renters, we must prioritize regulatory streamlining.
The Financial Burden of Fragmented Regulation
Laws designed to promote housing equity and security, such as those governing income sources, evictions, and resident screening, have a tangible, detrimental effect on multifamily operational performance. Here is how rental mandates, all of which are currently in use or under consideration in Maryland, drive up costs:
- Source-of-Income (SOI) Laws: These laws prevent property owners from differentiating applicants based on income source (such as housing vouchers). While intended to ensure fair access, they have led to greater revenue losses due to collections and vacancies, and higher utility expenses for operators.
- Eviction Regulations: Laws like just-cause eviction statutes and right-to-counsel regulations are meant to protect tenants from arbitrary removal and ensure fairness. However, the study found these rules led to significantly lower revenue and higher operating costs for operators. Expenses spiked due to increased legal fees, extended eviction timelines, and higher costs for salaries and personnel, marketing, and insurance.
- Resident Screening Laws: By restricting a housing provider’s ability to consider records like old arrests or convictions, these laws are intended to reduce barriers to housing. Yet, properties operating under these restrictions experienced greater revenue losses and increased operational expenses for utilities and repair and maintenance.
The ultimate implication is clear: while tenant protections are important, their associated costs can discourage new construction and ultimately reduce the long-term supply of affordable housing.
The Path to Affordability: Regulatory Stability
If complex regulations increase costs and suppress supply, the opposite approach—streamlining regulations—offers a proven solution for market viability and investment. Properties in states with preemption laws reported:
- Higher Revenues: Specifically, increased rent revenue collected.
- Reduced Operational Losses: Notably, preemption laws significantly cut losses related to concessions (like rent discounts).
- Increased Capital Expenditures: By reducing the risk of future regulations that could undermine business viability, these laws give owners greater incentive to commit to capital improvements and property upgrades, benefiting residents and improving property quality.
The evidence is clear: regulatory stability supports long-term housing viability and encourages reinvestment.
For tenants seeking stability and affordable options, supporting streamlined regulations is not just about helping landlords; it’s about removing the hidden costs that inflate rents and ensuring the necessary supply is built and maintained to meet the nation’s growing demand.