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Rent controls need not stop big investors from funding new homes, one of the world’s largest landlords has said, a stance that goes against the argument of many property investors that price caps worsen housing shortages.
“You do not have to have the windfall of a year of 14 per cent rent increases in order to have a viable investment product,” said Bob Faith, chief executive of Greystar, the $78bn US-based residential developer and landlord.
“We operate in a lot of markets around the world where rent control does exist.”
Faith’s comments suggest that large investors may have been willing to stomach a more interventionist approach than the one taken by the UK’s new Labour government, which has been seeking to win approval of investors and has emphatically ruled out rent controls.
Governments across advanced economies are grappling with how to tackle record public anger at the high cost of housing. In the UK, where rents have risen at a record pace this year, Sir Keir Starmer’s government is already under pressure to reverse its position on caps.
Some UK investors and industry groups, including the British Property Federation, have lobbied the government, arguing rent controls would cut off investment in new supply and hurt tenants in the long run.
Grainger, the UK’s largest listed landlord, this week welcomed a package of rental market reforms that included ending arbitrary evictions and greater rights to challenge excessive rent hikes, but no rent controls. Grainger said controls had “proven detrimental to renters when implemented elsewhere”.
Faith said the key issue was whether rent controls allow investors to cover their expenses in the long run. Greystar has invested nearly £20bn in the UK since 2013, and currently has nearly 50,000 units of rental and student housing in its portfolio and under construction. It typically raised its UK rents by 5-8 per cent this year, the company said.
“I am not someone who would say, gosh, rent control of any type [is something] I am allergic to, because I am not . . . as long as there is an ability over time for revenue to move with inflationary pressures,” he said. “Everybody can argue, should it be [inflation] plus 1 per cent, plus 3 per cent — all of those are just kind of window dressing.”
But the Charleston, South Carolina-based CEO also warned against policy U-turns.
“What institutional investors run away from is uncertainty around regulatory situations. So I think that’s why the Labour government saying: ‘medium term, we are not going there’. That is what institutional investors want to see. It gives them confidence to come into a market,” he said.
Faith co-founded distressed property investor Starwood before launching Greystar in 1993, which now manages nearly 1mn units in more than a dozen countries. He said to help solve the lack of housing “we have to have an asset class that is attractive to long-term institutional investors”.
These large investors own 2 per cent of UK private rental housing, versus 37 per cent in the US, according to Green Street.
He said “absolute caps” on rent — that do not allow for inflation-linked increases — would put off institutional investors and lead them to “underinvest in the asset”.
Limits on the rents investors can charge on newly built properties can also backfire if they make new construction financially unviable. “If you cap the rents people can start with, [and] if costs have gotten out of whack, that also will shut off the supply,” he added.
Faith, who was speaking in London for the opening of Greystar’s new European headquarters in the redeveloped Bloomberg building on Finsbury Square, said the company is trying to “address the middle of the market” with moderately priced rental products.
“It is truly almost unlimited demand at those sorts of [moderate] price points,” he said — adding that the supply of homes for 25 to 35-year-old renters is “really missing in a lot of the great cities of the world”.
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