New U.S. Rent Regulations Already Eroding Values of Apartments
- Investment yields climb in states that have enacted new limits
- Building buyers demanding higher returns for the added risk
Residential buildings are seen in San Francisco, California.
Photographer: David Paul Morris/BloombergThis article is for subscribers only.
Rent caps are starting to put pressure on apartment-building prices in the country’s most-expensive real estate markets.
Multifamily properties in states where lawmakers this year have passed tougher restrictions on rent growth are seeing their value erode as investors demand higher returns for the risk of owning the apartments. Capitalization rates -- a measure of investment yield that rises as prices fall -- climbed in the second quarter in New York, California and Oregon, all states that have enacted rent caps, according to an analysis by Real Capital Analytics Inc.