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