ISA Briefing: Controlling interest: Keeping tabs on residential regulations
Through history, residential rent controls have tended to appear at times of external shock and dislocation. COVID-19 and the subsequent inflationary spike have proven to be such a catalyst. Changes to rent regulations can potentially reshape the risk-reward profile of residential investments, impacting values over both short and long timescales. As we set out in a previous piece, A New Wave of Residential Rent Control, the introduction of rent control measures can also have unintended consequences that distort the market. While often sold as a solution to spiraling housing costs, in practice they can have the opposite effect to their intent, deterring the construction of new rental housing, thus leading to further increases in rents. Our findings in that report still hold true, but an update is needed because the “great reflation” period has seen a groundswell of support for further rent regulations, especially in Europe. The pandemic opened the door to unprecedented government intervention, and there has been a heightened willingness among politicians to introduce forms of rent control. But there continues to be vast differences across countries, regions and cities, reflecting varying political appetites for intervention. What is the impact of these recently enacted measures and which markets have been most impacted? Contributors: Brian Klinksiek Global Head of Research and Strategy Ryan Daily Vice President, European Research & Strategy Jen Wichmann Browne Senior Vice President, US Research & Strategy