By Del Nordby, Reno Gazette Journal, June 14, 2024
As the owner of a small apartment complex, I understand the concerns that prompt the consideration of rent control measures. However, I urge Nevada legislators to carefully consider the long-term consequences before implementing such measures.
My wife and I spent over two years repurposing an empty former assisted-living facility on Oddie Boulevard into 59 apartments, now called The HUB@Oddie.
Developing projects such as this typically bring challenges. In our case, the challenges included borrowing money at a time when interest rates doubled, unforeseen conditions found during renovation, and theft of copper inside the building not covered by insurance all added cost of security and security cameras and many other unaccounted-for expenses — again, not untypical when re-purposing a 40-year-old building. The point is that developing a property such as this takes time, energy, and a certain amount of risk tolerance. In our case, our return on this investment will take longer than expected.
Despite all that, we are striving to rent the apartments at an affordable rate that allows us to cover our operating expenses and realize an equitable rate of return. But if our rents were to be capped, or even lowered below market rates, the project would not be feasible, and we would not have been able to provide these 59 units to the local underserved community.
Housing inventory deteriorates
While rent control may seem like a quick fix to address housing affordability issues, it ultimately stifles economic growth, undermines property rights, and fails to address the root causes of the housing crisis.
First of all, rent control discourages property owners from investing in and maintaining their properties. When rent prices are capped below market rates, property owners have less incentive to make improvements or renovations. This leads to a deterioration in the quality of housing stock, ultimately harming tenants and communities.
Rent control exacerbates housing shortages by reducing the incentive for developers to build new rental units. In cities where rent control measures are in place, developers often opt to build condominiums or other types of housing that are not subject to rent control. This further restricts the supply of rental housing and drives up prices in the unregulated market.
Rent control can have unintended consequences, such as creating black markets for rental housing or encouraging landlords to convert rental units into vacation rentals or condominiums. These unintended consequences can exacerbate housing shortages and affordability issues, particularly for low-income tenants.
Lastly, rent control represents a violation of property rights by dictating how property owners can use and profit from their investments. Property owners should have the freedom to set rent prices based on market conditions and recoup their investment costs. Rent control undermines this fundamental principle of property rights and diminishes the incentive for individuals to invest in rental properties.
Policy that actually works
Instead of implementing rent control, policymakers should focus on implementing market-based solutions to address housing affordability issues. This may include increasing housing supply through zoning reforms, streamlining the development process and providing incentives for affordable housing construction. Additionally, policymakers can explore alternatives such as housing vouchers or subsidies to assist low-income tenants without distorting the rental market.
While the intention behind rent control measures may be noble, the negative consequences far outweigh any short-term benefits. Rent control stifles economic growth, reduces housing supply, violates property rights, and fails to address the root causes of the housing crisis. Policymakers should pursue alternative solutions that promote economic viability, encourage investment in rental housing, and preserve property rights for all stakeholders involved.
Del Nordby is the president of Lara Properties, a real estate development company in Reno.