Business: Playing Rental Roulette

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Rent regulation has spread to nearly 100 cities, and it discourages building. In Los Angeles, San Francisco and several other California cities, voters adopted various controls after many landlords failed to pass along their property tax savings from Proposition 13 in the form of lower rents. Result: construction of additional rental housing in California is at an all-time low. Builders say the return on investment is simply too unattractive.

There is not much relief in sight for the renter, short of moving to cities such as Dallas, Houston, Minneapolis and Atlanta, where housing is plentiful for varying reasons, including no rent controls and mobile populations that create high turnover. But some localities are trying to improve life for the renter. Wichita needs 30,000 workers over the next three years to keep its economy booming, and city fathers recognized that recruiting them would be easier if they had places to live. The city floated a revenue bond issue last April and used the proceeds to make loans at interest rates between 8.5% and 9% available to builders of five rental projects. Spurred by low-interest money, rental construction has surged. The vacancy rate has moved up from one-fifth of 1% last August, but it is still an extremely tight 1.2%.