Rent control is a government program that determines a fixed amount private landlords can increase their rents year after year. Municipalities enforce it. This is not a new policy and its origins date back to the 1920s where it was enacted to help curb the effects of inflation on rising rents; a similar problem we face today. The Providence City Council is voting to enact rent control, even though this policy has shown so many flaws over the decades since its first introduction. And, it comes on years of anti-landlord legislation being proposed and in some cases passed by our legislature. A stronger RI economy will only benefit every resident, including renters. All these measures will only undermine the economy. I wish our leadership would focus on the basic principles of supply and demand and work tirelessly to increase supply. Work with local developers instead of detracting investors to engage in this state. How about provide incentives to landlords to offer below market rents instead of creating artificial freezes on a free market system? What will RI look like if our housing depreciates in value? Guess what tenants will lose too along with home owners now as well.

Yes, it is true we have also experienced decreased demand for our higher end rentals for over a year and have been paying increasing attention to pricing them just right. Providence has generated many new upscale rental buildings that have amenities like gyms and security. We recently did a rental in a three family- a nice one but one without any amenities- and tried to explain these factors. It sat and when we looked further, Zillow showed 56 comparable rental listings. That is a lot of inventory for Providence especially this time of year. The drastic increase in rent prices was driven by a shortage and many rentals that served working and lower class tenants got new kitchens and bathrooms along with huge rent increases and targeted a different tenant pool that had historically not lived in these neighborhoods. Now, demand is shifting to these newer buildings. Over time, this will return rentals that once housed working class to them and ease the rent burden on these tenant pools as well. Supply and demand do drive but it takes time. There is still a huge need for working and lower class rentals and this rental category is still experiencing price increases and shortages. But, the easing at the top will help.

You are not alone if you have noticed that the typical 4% annual increase in your home owner’s insurance is a thing of the past. Some are thankful just to have a policy. With increasing volatility of extreme weather related property loses, the insurance market has been reeling and the vast majority of us have been paying. Time will tell if extreme weather will become increasingly the norm. And, if it does, how will the insurance market react? In Florida private insurance companies are mitigating loses by closing shop and the state sponsored insurance has become the biggest carrier. This translates into higher costs for home owners and/ or greater risk as more homeowners opt to forgo insurance altogether. Again, this burden will disproportionately affect middle and lower classes as homeownership becomes elusive in its affordability or even practicality. Although I am not a big advocate of increasing government involvement, this is an area homeowners should get assistance.

So, the Federal Reserve met this week and kept the fed funding rate constant. Further, they hinted of some possibility that there may be 3 small rate cuts in 2024. While the fed lending rate does not directly influence the 30 year mortgage rate, the economic data around the Fed’s decisions do. It seems the Fed is ever closer to achieving that allusive economic soft landing. Consequently, we saw an immediate drop in the 30 year rate- much welcome news to borrowers. Greater indications of economic stability ahead (more “normal” fed lending rate, inflation cooling, and overall economy not sputtering) will lead to further relief in mortgage rates. How will this impact the market? Visually, you can imagine a spring that has been wound tighter and tighter emblematic of pent up demand—all those buyers who couldn’t afford to buy with high rates and all those sellers who didn’t want to leave their 3% mortgage rates: lower rates will release that spring. It is still time to get in the game now before this scenario plays out. The cost of refinancing to lower rates will be offset by potential increases in sales price from pent up demand.

Have we finally hit a ceiling? For the first time in years, some of our rentals sat. Sure, our priced right rentals aimed at middle and lower class renters were still swamped but higher priced rentals have become stagnant. There is still a lack of inventory but, with many new construction rental buildings in the Providence area, some of the edge of at least the higher end market has been softened. This will benefit middle and lower class renters, as units they traditionally habited that became priced out of their range, will slowly become available again. Investors will need to plan accordingly and remember Zillow isn’t the bible- it takes more a temperature of what rentals are being offered at, not how long they are sitting. I think it is time to be more realistic with rent prices and pray that everyone who bought high can still generate adequate cash flow. After all, we do not need any more instability in the housing market.

It has been in the news a lot lately… and, yes, it is true zoning trends can lag or even create housing needs. Single family zoning laws, borne in the early 20th century, became more restrictive with the growth of suburbs in the 1970s in an effort to protect residential home ownership from any negative impacts on its value. Now, there is need for a change with the limited housing supply and limited buildable lots. Thankfully, RI Legislature has been up to something good. Next year, new laws will come into effect enabling previously unbuildable lots to be buildable. RI isn’t throwing away all caution and normal processes remain in place to make sure lots are suitable. But, for substandard size lots, as long as they are a legal lot on record, setbacks would reduce by the ratio of the actual versus allowed lot size. This is just one example and there is a lot to digest but the intent is to create more housing with incentives to build affordable housing. Drafted primarily by Johnston town planner, Thomas Dellar, this type of out of the box thinking will give RI a legs up to address affordable home ownership. More to come and hopefully we will have some new houses under the works in 2024! "

Session just wrapped up and we were left with a whammy: as of September, you can no longer evict without a lead certificate. The lead law reads every unit must be inspected every two years regardless if you turn over a tenant or not. So, while this is pretty straightforward when you have a tenant turnover, what about those not so clean long term tenants that don’t like anyone in their unit? Or, the ones that changed a lock and got a dog? Keeping units safe for tenants is one of our pillars but it isn’t always a straightforward process. We walk through units twice a year to look for unsafe conditions like peeling paint. But, with our old housing stock, we have to count on tenants too to inform us if there is an unsafe condition and also be somewhat clean. For example, what if a tenant’s child had a tantrum and threw a hardball into the wall? Now, the older underlying layers of paint have been exposed and small particles of lead dust fell on the floor next to his baby brother’s toys. Baby brother comes over to watch his older brother try to hide this hole and unknowingly rolls his own toys back and forth through the lead dust. As older brother frets how to best hide the wall hole, baby brother starts mouthing his own toys (he is teething) and has ingested lead. It takes that little for a lead exposure to occur. A couple months is going to be tough for landlords and our 16 lead inspectors to get up to date.

The party is over, the hangover lingers. Neither buyers nor sellers are particularly happy in the moment. But, if we have any hope to preserve middle class home ownership, now is the time to stay on course. The inflationary spiral took the reality of home ownership away from many. Now, we look at high prices and high rates and even fewer can buy. But, the high rates have already slowed the pace of price increases and the rates will not remain high forever. Indeed, most expect some leveling off by end of the year although our newest financial bump in the form of bank failures has certainly made this trajectory less certain. I don’t doubt the resiliency and health of our economy. I worry our political leaders will lose sight of the fundamental need to create/ enable affordable home ownership. The middle class is the backbone of our society. Lack of affordable home ownership erodes the middle class and leads to a greater wealth gap. Ultimately, this is just bad for everyone with an overall reduction in American productivity and, perhaps, just as importantly happiness…. Buyers and sellers let’s deal with the pain now and hope it lessens a bigger problem.

Earlier this year, there was some confidence that long term mortgage rates may get below 6% by the end of the year. It seemed at this time the Fed found the magic formula to tame inflation while achieving that soft landing for the economy but stubborn inflation date followed with an uptick in mortgage rates. Now end of the year predictions are just a field in the high fives to low 7s depending who you ask. Many are fixed on the Fed’s next interest rate move after this week’s bank failures. A freeze in rate hikes would provide short term relief but be harmful in the long term as inflation is still sticky. The Fed’s uncharacteristically blunt message to date is there will be pain in the quest to calm inflation. Obviously, we feel that pain in the real estate world and SVB bank failure is another example. My guess is the fed will hold true to their message and at least do a .25 hike. And, I think that is a good sign for our economy: the fed has the right tools to steer out of a pandemic, handle bank failures, a war and supply chain issues without sending our economy into a tailspin. In the real estate world the giddy days are behind us but that’s a good thing in the big picture. We need more supply and affordable home ownership.