Stay up to date with free updates
Just register Real estate sector myFT Digest – delivered straight to your inbox.
One of the world's largest landlords has said rent controls should not stop big investors from funding new housing, a position that runs counter to the argument by many property investors that price controls are exacerbating the housing shortage.
“You don't have to have a windfall of 14 percent annual rent increases to have a viable investment product,” said Bob Feit, CEO of Greystar, a $78 billion U.S. residential real estate developer and landlord.
“We operate in many markets around the world where rent control exists.”
Faith's comments suggest that big investors may have been prepared to accept a more interventionist approach than that adopted by Britain's New Labour government, which sought to win investor approval and firmly ruled out rent controls.
Governments in developed economies are trying to solve the problem record public anger high housing costs. In Britain, where rents have risen at a record pace this year, Sir Keir Starmer's government has already under pressure change your position on capital letters.
Some UK investors and industry groups, including the British Property Federation, have lobbied the government, arguing that rent controls would reduce investment in new supply and harm tenants in the long term.
Grainger, the UK's largest registered landlord, this week welcomed a package of rental market reforms that included an end to arbitrary evictions and greater rights to challenge excessive rent increases, but no rent controls. Grainger said the controls “have proven detrimental to tenants when applied elsewhere”.
Faith said the key question was whether rent controls allowed investors to cover their costs in the long term. Greystar has invested about £20bn in the UK since 2013 and currently has about 50,000 rental and student housing units in its portfolio and under development. It has typically increased UK rents by 5-8 per cent this year, the company said.
“I'm not one of those people who's going to say, 'Oh my God, rent control of any kind.'” [is something] “I'm allergic to it because I'm not … as long as there's room over time for incomes to move with inflationary pressures,” he said. “Everyone can argue whether that should be [inflation] Plus 1 percent, plus 3 percent – all this is just a kind of show.”
But the Charleston, South Carolina-based CEO also cautioned against sharp policy reversals.
“Institutional investors are running away from the uncertainty around regulatory situations. So I think that's why the Labour government is saying, 'We're not going there in the medium term.' That's what institutional investors want to see. It gives them confidence to come into the market,” he said.
Feit co-founded distressed real estate firm Starwood before launching Greystar in 1993, which now manages nearly 1 million units in more than a dozen countries. He said that to address the housing shortage, “we need an asset class that is attractive to long-term institutional investors.”
These big investors own 2 percent of private rental housing in the UK, compared with 37 percent in the US, according to Green Street.
He said “absolute caps” on rents that prevent them from rising in line with inflation would scare off institutional investors and lead them to “underinvest in the asset”.
Limits on the rents that investors can charge on newly built properties can also backfire if they make new construction financially unviable. “If you limit the rents that people can start with, [and] “If costs get out of control, that will also lead to supply disruptions,” he added.
Faith, speaking in London at the opening of Greystar's new European headquarters in the redeveloped Bloomberg building in Finsbury Square, said the company was trying to “reach the middle end of the market” with moderately priced rental products.
“There really is almost unlimited demand for this kind of [moderate] “price points,” he said, adding that the supply of housing for renters aged 25 to 35 is “really lacking in many major cities around the world.”