A new study sponsored by the National Apartment Association (NAA) and National Multifamily Housing Council (NMHC) shows how overregulation could negatively impact rental housing affordability by increasing operating costs and discouraging new construction.
“The debate over housing policy and affordability has never been more important than it is today. It is a kitchen table issue affecting individuals and families throughout the country,” said NMHC president Sharon Wilson Géno. “This new research on how regulations can drive up housing costs, discourage investment needed to build housing, and ultimately negatively affect housing affordability and opportunity will help inform the discussion and educate lawmakers at all levels of government on how policies they propose may have unintended consequences. Working closely with our partners at NAA, we hope these results encourage policymakers to consider policy solutions that increase housing supply and lower costs.”
The research, conducted by MetroSight economists, analyzed the housing cost impacts of regulations such as source-of-income laws; right-to-counsel statutes and just cause eviction laws; and criminal and resident screening restrictions. The study used NAA’s Survey of Operating Income and Expenses in Rental Apartment Communities, which was conducted annually between 2004 and 2021, to examine the data from 600,000 to 850,000 apartments nationwide.
“As housing continues to be a topic of discussion among state, local, and federal lawmakers, this study importantly quantifies how regulations ultimately increase costs for housing providers and residents alike,” said NAA president and CEO Bob Pinnegar. “At a time that demands bold action on housing affordability, policymakers must reject damaging regulations and instead turn to sustainable solutions that lower costs and increase housing supply.”
Key findings include:
- Source-of-income laws: These can increase operational costs such as vacancy losses by over 10%, likely due to the complex leasing and duplicative leasing process for housing choice vouchers;
- Just cause eviction laws and right-to-counsel statutes: These can increase collection losses by over 37%, most likely due to a prolonged eviction process; and
- Criminal and resident screening restrictions: These have been found to increase capital expenditures by over 17%; this is likely due to housing providers upgrading properties and increasing rents to mitigate compliance costs associated with these screening laws.
“Balancing the need to protect renters with the need to control costs and maintain operations viability is difficult, and, despite the urgency of addressing housing affordability, there is limited rigorous research to measure the effects of such legislation,” said MetroSight economist and founder Issi Romem. “The data provided by the NAA offers a rare opportunity to look under the hood at housing providers’ operations and evaluate how policy decisions shape the housing outcomes that matter to people.”
In addition to this affordability report, NMHC also recently released research from RCLCO’s Charlie Hewlett, Caroline Flax Ganz, and Jackson Browning on how local tax incentives can help reduce housing shortages and lead to a strong return on investment for municipalities.
The big hurdle has been the hesitancy of municipalities to adopt such incentives because of concerns over the timing and magnitude of budgetary impacts.
The research, which was supported by the Douglas M. Bibby NMHC Research Foundation, found:
- Evaluations from multiple cities show that tax abatement programs positively impact affordability directly through the creation of new deed-restricted affordable housing and indirectly with a boost to the supply of market-rate housing;
- Tax-based programs can help fill developers’ financing gaps, especially in those cities with affordability constraints; and
- In cities with affordability requirements, tax-based incentives often result in more affordable housing than the minimum required.
“This work clearly demonstrates that tax incentive programs offer a real solution to the building of badly needed housing in communities across the country,” noted Wilson Géno. “Not only do these programs lead to the creation of new affordable and market-rate housing and improve housing affordability, they also directly benefit communities in a variety of ways. This research should encourage lawmakers to support legislative proposals to incentivize the broader use of these tools that will lead to lower housing costs and greater housing opportunity.”
