Rent controls won’t deter investment in housing, US mega-landlord says

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Rent controls should not stop big investors from financing new homes, one of the world’s biggest landlords has said, a position that counters the argument by many property investors that price caps are exacerbating the housing shortage.

“You don’t have to have the windfall of a year of 14 percent rent increases to have a viable investment product,” said Bob Faith, chief executive of Greystar, a $78 billion U.S. residential developer and landlord.

“We operate in a lot of markets around the world where there is rent control.”

Faith’s comments suggest that big investors may have been willing to put up with a more interventionist approach than that adopted by the UK’s new Labor government, which has sought investor buy-in and strongly ruled out rent control.

Governments in advanced economies are grappling with how to deal with record public anger at high housing prices. In Britain, where rents have risen at a record pace this year, Sir Keir Starmer’s government is already under pressure to change its stance on ceilings.

Some UK investors and industry groups, including the British Property Federation, have lobbied the government, arguing that rent controls would cut off investment in new deals and hurt long-term tenants.

Grainger, Britain’s biggest listed landlord, this week welcomed a package of rent market reforms that included an end to arbitrary evictions and greater rights to challenge excessive rent rises, but no rent control. Grainger said the controls “have been proven harmful to tenants when implemented elsewhere.”

Faith said the key issue is whether rent controls allow investors to cover their expenses in the long term. Greystar has invested nearly £20 billion in the UK since 2013 and currently has nearly 50,000 rental and student housing units in portfolio and under construction. It has typically raised its UK rents by 5-8% this year, the company said.

“I’m not someone who would say, oh my gosh, rent control of any kind (is something) I’m allergic to, because I’m not. . . as long as there is an ability over time for incomes to move with inflationary pressures,” he said. “Everybody can argue, if it was (inflation) plus 1 percent, plus 3 percent — that’s all just kind of window dressing.”

But the Charleston, South Carolina-based CEO also warned against policy changes.

“Why institutional investors are fleeing is the uncertainty around regulatory situations. So I think that’s why the Labor government is saying, “in the medium term, we’re not going there”. That’s what institutional investors want to see. It gives them confidence to enter a market,” he said.

Faith co-founded real estate investor Starwood before launching Greystar in 1993, which now manages nearly 1 million units in more than a dozen countries. He said to help solve the housing shortage “we need to have an asset class that is attractive to long-term institutional investors”.

These big investors own 2% of private rented accommodation in the UK, compared to 37% in the US, according to Green Street.

He said “absolute caps” on rent – which do not allow for inflation-related increases – would discourage institutional investors and cause them to “underinvest in the asset”.

Limits on rents that investors can charge for newly built properties may also be reversed if they make new builds financially unviable. “If you limit the rents that people can start at, (and) if costs are out of control, that will stop supply,” he added.

Faith, who was speaking in London for the opening of Greystar’s new European headquarters in the redeveloped Bloomberg building in Finsbury Square, said the company was trying to “address the middle of the market” with moderately priced rental products.

“There’s really almost unlimited demand at those kinds of (moderate) prices,” he said, adding that housing supply for 25- to 35-year-old renters is “really lacking in a lot of the big cities of the world. “.