If rent regulation raises the rent, is it worth the cost?

Can regulations give renters a break? Or do they actually nudge rents higher?
With Californians paying more of their paychecks to the landlord, debate swirls around how to best control the soaring expenses of tenants. Proposed solutions run from enabling more apartment construction to changing rules on rents increases to wondering if government intervention is needed at all.
Online rental tracker RentCafe recently studied the state-by-state variances of legal protection offered to renters. States were ranked on variables such as eviction restrictions, rent controls, terms of security deposits, tenant property and privacy rights.
RentCafe’s 10-item yardstick found California laws ranked 18th friendliest to renters.
That scorecard does not say what an above-average rank is worth. Is there a cost to renters for the regulations that most favor the tenant, such as might be found in No. 1 ranked Vermont? Are rent savings created in, say, landlord-friendly Arkansas? It eked out last place on RentCafe’s scale over West Virginia because “Arkansas is the only state where tenants can face criminal charges for failure to vacate.”
You’d expect the headaches of government oversight to somehow be passed along to the tenant in the form of higher rents, no? Following the rules is a cost of doing business, especially when these laws can limit how much — and when — a rental owner can collect.
So I filled my trusty spreadsheet with RentCafe’s rankings of renter friendliness and compared that measurement with data from the National Low Income Housing Coalition’s rental-cost scorecard for the 50 states and the District of Columbia. I sliced RentCafe’s state scores into thirds, using the highest ranked 17 states as a measure of renter-friendly places with the 17 lowest ranked states as representative of pro-landlord laws. California landed in the middle pack, by the way.
Here are five things I learned about how much landlords charge for the varying levels of regulatory hurdles among the states…
1. Size matters: The 17 states with laws most favorable to tenants tended to be less-populated, averaging 437,000 renter households vs. 1.15 million in the 17 least-friendly states. Six of the states with the smallest renter population were ranked among the 10 best places for renter protections. And big states often have big landlords who have big political muscle. California was an anomaly: the nation’s biggest renter population with some relatively renter-friendly laws.
2. Share matters, too: Renter-friendly laws require statewide lawmaking oomph. So is it any surprise that states that legally favor renters have a larger share of tenants? I found on average 40 percent of households rent in the most renter-friendly states but just 35 percent in landlord-favoring states. Vermont is 53 percent renters; California is 46 percent; and Arkansas 33 percent.
3. Higher rents: Seems you pay up for having real estate rules on your side. The 17 most renter-friendly states had an average rent of $1,102 a month for a typical two-bedroom unit vs. $1,015 where the scales of justice lean toward landlords. That’s a 9 percent premium. By this math, California rents averaged $1,608 a month, third-highest in the nation.
4. Lower pay: Kind of surprising. The average renter’s estimated monthly pay — assuming 21 days of work at renter wage — was $2,732 in the most renter-friendly states vs. $2,864 where landlords fare best legally. That’s a 5 percent shortfall for those living in pro-renter states. California bucks this pattern: Its $3,554 average renter pay is third-highest nationally.
5. Landlord’s take: Bottom line, according to my math, is that tenants pay a larger share of their income to the landlord in states that are the most renter-friendly: averaging 40 percent vs. 36 percent in pro-landlord states. Californians pay 45 percent of earnings to the rental bill, the nation’s sixth-highest share.
You can argue all you want about how much renter protections increase the size of one’s rent check. But remember, the month-to-month cost is only one variable in measuring something’s value.
Look, most renters don’t simply take the cheapest available unit. Location, condition, style and amenities are part of the equation, too.
Plus, legal limitations on the amount of rent and lease terms — good, bad and/or costly — can offer a tenant varying levels of certainty. People often pay up for peace of mind. And knowing the rent won’t go through the roof is what’s at the heart of the great rent debate.
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Source: Oc Register