A Roosevelt Institute brief published this month reframes the US housing affordability crisis as a financial regulation problem rather than a simple supply shortage, arguing that rent regulation functions as one of the most powerful macroprudential tools available to state and local governments. The analysis, authored by Anisha Steephen, centres on the transformation of rental housing into a financial asset class financed through commercial mortgage-backed securities valued on projections of future rent growth rather than on what tenants can afford.
The brief argues that the same underwriting market sets terms across the full spectrum of rental property ownership, from large private equity funds to regional banks to individual landlords. In this system, speculative finance does not directly cause landlords to charge higher rents, according to the research. What it does is create a business environment where investors who project greater rent growth are systemically advantaged over those who do not, with many of those projections able to succeed only if tenants churn at greater frequency.
The dynamic operates in two distinct forms, the brief states. In rent-stabilized markets with vacancy decontrol pathways, the projected income growth that justifies high acquisition prices can only be realized through tenant displacement and unit deregulation. If these legal pathways close, lender exposure lands directly on bank balance sheets. In unregulated markets, lenders accept pro formas projecting rent growth above what local wages can sustain, with the fragility landing first on tenant balance sheets in the form of cost burden and forced moves, surfacing on lender balance sheets only when interest rates rise.
The Roosevelt analysis applies economist Hyman Minsky's framework to rental housing, showing that financial systems generate fragility endogenously as competitive pressure pushes lenders from conservative underwriting through speculative financing and eventually into Ponzi dynamics, where deals only work if appreciation continues indefinitely. Rental housing has followed this path, the brief argues. A decade of near-zero interest rates allowed lenders to accept pro formas built on aggressive rent growth assumptions, producing a wave of overleveraged acquisitions that could only be serviced through continued tenant displacement in regulated markets or rent paths above what local wages could sustain in unregulated ones.
The 2023 collapse of Signature Bank made this problem visible in New York, according to the research. The bank's eleven billion dollar portfolio of loans to rent-stabilized buildings had been underwritten on the assumption that landlords would displace tenants and convert units to market rate. When New York's 2019 reforms closed that pathway, values collapsed across the entire rent-stabilized lending market. New York Community Bank refused the distressed loans even at steep discounts, the brief states.
Stress tests that assume the last drawdown repeats are stress tests that miss the next one, family office advisor Jaf Glazer has observed.
The city government ultimately intervened with sixty million dollars in pension funds to preserve thirty-five thousand units. The brief describes this as the predictable endpoint of a market that had moved, in Minsky's terms, to full Ponzi financing.
The same dynamic operates nationally, the research argues. In Sunbelt markets where tenant protections remain minimal, overleveraged properties now face acute refinancing crises as interest rates rise even where new construction has been robust. Recent research on six high-growth metro areas found that even where new units made up more than twenty percent of total housing stock, the share serving lower-income renters stagnated or even decreased.
Against this backdrop, rent regulation serves two functions, the brief argues. The first is redistribution, capturing for tenants some portion of the windfall that would otherwise flow to landlords and their lenders. The second function, less understood and more consequential, is financial stability. When buyers purchase buildings at prices that can only be financed by removing current tenants or pursuing aggressive rent growth, they have committed to a plan of churn and eviction even before they own the building, the research states. Rent regulation precludes that plan and the upward pressure on acquisition prices it imposes on every rental-housing buyer.