Sen. Cramer Discusses Costly Impact of Government Regulation on Rent

Hearing

U.S. Senator Kevin Cramer (R-ND) discussed the impact of government regulation on rental costs during a Senate Banking Committee hearing on today's housing market.

Senator Cramer focused on problems in the housing rental markets, in large part exacerbated by government intervention. Senator Cramer pointed to a recent study conducted by the National Multifamily Housing Council (NMHC) and the National Association of Home Builders (NAHB) which found that regulations account for over 40% of multifamily development costs.

"What is the ultimate end to the constant government distortion of markets? The sticks and the carrots seem to just create a higher price and very little in regards to providing more supply. The biggest problem with the cause of inflation is when demand outpaces supply. So we keep incenting demand and don't do enough in my view to incentivize supply, and I'm not really sure where it all ends. But one part of that scenario we don't talk about enough is the cost of regulation. There's been a study--I'm sure you're familiar with--recently that predicts about 40% of the cost of multifamily and single-family rent is regulation. Can you speak a little bit to government regulation? I am sincere when I say I think we struggle to find the balance. Every time we try to solve a problem, we incentivize one side or the other and all we do is escalate costs. Can you speak a little bit to that imbalance? What's the right balance if you have a sense what that might be?" asked Senator Cramer.

"You're correct on the National Home Builders Association, they did do a study. Looking at all levels of government, regulation adds about 40% to the cost of building homes and to the cost of building real estate and developing real estate. And that is directly passed on to the very people we're trying to help. So we have to make sure that we're dealing with the root cause of the issue, which is a lack of supply. Everyone, even every witness here today, we agree that that is the problem. We need to focus our efforts and focus our dollars on every level of government, local, state, and federal level on making sure we're creating more housing. When we create solutions--that in many cases I even understand why they're being created in the short term to help one side--it doesn't help the problem. It doesn't solve the problem that we need more housing, we have to make sure there [are] plans to create more units and not initiatives that pit one side against the other. We have to make sure that the tenant-landlord bond, which is sacred has a place to live in this country," responded Mr. Darion Dunn, Managing Partner, Atlantica Properties.

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