Democratic state and city officials’ advocacy for rent control policies poses challenges for apartment real estate investment trusts (REITs) in places like Washington state, Massachusetts, New York City, Los Angeles, and Washington, DC.
The adoption or enhancement of rent control policies is unfavorable for apartment REITs that are exposed to high-risk geographies, such as AvalonBay Communities, Inc. (AVB), Equity Residential (EQR), and UDR, Inc. (UDR). We believe the restrictive rent-control proposals in Washington, DC, and Massachusetts are particularly limiting for these operators, given their exposure to those regions. Other affected companies include Essex Property Trust Inc. (ESS), Mid-America Apartment Communities, Inc. (MAA), and Camden Property Trust (CPT).
Democrats at the state and local level have advocated for rent control policies as affordability, the cost of living, and the housing shortage have emerged as central issues for voters. As a result of this advocacy, Washington state, New York City, and Los Angeles have adopted or enhanced rent control and stabilization laws.
Democrats have proposed similar policies in the form of ballot initiatives in Washington, DC, and Massachusetts, as well as proposed legislation in Nevada and Connecticut.
While legal challenges have successfully blocked rent control initiatives from appearing on the 2026 ballot in both DC and Massachusetts, we believe revised rent control proposals could be adopted in the 2028 election cycle. Property owners may advance sophisticated legal arguments against rent-control ballot initiatives and legislation, helping to stall or stop the adoption of some policy measures, thus insulating apartment REITs from limits on rental revenue growth. But the momentum is on the side of rent control policy advocates in big cities and Democrat-controlled states.
For example, lawmakers in California, New Jersey, Rhode Island, Vermont, and Hawaii proposed rent control legislation in recent sessions. While none of these bills have advanced to date, Capstone believes the political landscapes in these states are favorable for the passage of rent control regulations, and such legislation could be enacted within the next several years.
Currently, only California, Oregon, and Washington maintain statewide rent control laws. But Democrats in other state legislatures have prioritized the passage of rent control policies. During the most recent legislative session, at least 198 bills related to rent control and rent stabilization were introduced across 30 states and the District of Columbia, according to data from the National Apartment Association.
Specifically, legislators in states governed by Democratic trifectas—including those in Washington, Massachusetts, New York, and Oregon—have pushed for increased tenant protections on the presumption that the Republican-dominated federal government will not advance further tenant protections. Rent control policies have historically been widely opposed by Republicans, and we believe these measures are likely to be adopted only in states and localities fully under Democratic control.
Rent control has also reemerged as a preferred policy tool for Democratic officials at the local level, with many local leaders attempting to follow New York City Mayor Zohran Mamdani’s campaign playbook. Several cities across the country, including Los Angeles, have either adopted rent control measures for the first time or expanded existing rent control restrictions in the past year.
Varying Impacts on REITs
Capstone views the current popularity of rent control as highly negative for apartment REITs with exposure to geographies likely to adopt these measures. While we have focused our exposure analysis on six prominent publicly traded apartment REITs—AvalonBay Communities, Equity Residential, Essex Property Trust, UDR, Mid-America Apartment Communities (MAA), and Camden Property Trust—we view AvalonBay, Equity Residential, and UDR as most exposed to geographies that have adopted or are likely to adopt rent control in the near future. Notably, AvalonBay Communities and Equity Residential are in the middle of a merger, which is projected to close in the second half of 2026 after shareholder votes on August 12, 2026.
Supreme Court Case
The Supreme Court has turned away several broad challenges to rent stabilization in recent years, denying cert in 74 Pinehurst v. New York (2024) and CHIP v. New York City (2023). However, Justice Thomas, in both denials, has written that the constitutionality of regimes like New York City’s is an important and pressing question, while Justice Gorsuch indicated he would have granted review — suggesting the court is holding out for a better case to hear.
One potential option moving through the courts is Small Property Owners of New York v. State of New York, which the Institute for Justice filed in November 2025. It targets a narrow piece of the law: the 2019 rule change that eliminated vacancy rent increases. The plaintiffs argue that capping rents on empty units needing six-figure renovations amounts to an unconstitutional taking, and they have kept the suit away from any touching protections for current tenants, which is where prior challenges stalled. The case is still in early stages, and a cert petition is likely a few years off.
What’s Next:
While state legislatures are largely out of session and no rent control initiatives are set to appear on the ballot in the November 2026 elections, we anticipate that state and local officials will continue to explore adopting and enhancing rent control measures in 2027 and 2028. We will continue to closely monitor rent control developments and their potential impacts on apartment REITs.
Read more of Capstone’s financial services coverage:
California Industry Faces Policy Crossroads in Race for Insurance Commissioner
States Race to Regulate Earned Wage Access
Trump Punches at Banks (Again)
