Proposed Fishers rental cap: a solution that will hurt homeowners & renters

By STEVE LADIG
Guest Columnist

Fishers is on the cusp of running an experiment in unintended consequences that will be felt across the city.

The city council is considering Indiana’s first-ever law capping rental properties at 10 percent per neighborhood. Homeowners – the very people this ordinance is supposed to protect – will end up feeling a financial sting that lawmakers and advocates aren’t advertising.

The ordinance is being sold to Fishers’ citizens as a measure that will protect property values. Since some neighborhoods in Fishers have already enacted rental caps similar to the city’s proposed law, we already have data on how they affect homeowners. The real-world consequences are far from what city officials have promised. This policy would take a major bite out of home values while also throwing up roadblocks to growth and economic development in the city.

Property data shows homes in Fishers have appreciated an impressive 66.1 percent over the past six years. However, in the 58 neighborhoods that have already enacted rental restrictions, appreciation has lagged significantly at just 50.1 percent.

The math is clear: this rental cap could cost the average Fishers homeowner on average $49,000 in lost appreciation compared to the city average. The Fishers homeowners who will suffer the most are the neighborhoods that already are over the 10 percent rental cap. There are currently 17 neighborhoods with over 30 percent of rentals and those homes have appreciated over 70.1 percent over the past six years. These homeowners could lose on average $64,000 in lost appreciation!

This ordinance directly contradicts the city’s own 2022 Housing Study, which concluded that Fishers needs more than 13,500 additional housing units by 2040, including 3,450 more rental units. The study specifically anticipated 1,040 older single-family homes filtering to rental status and did not recommend rental caps. The rental cap will cause rental rates to skyrocket given the reduction in supply, which will unduly enrich the institutional investors and force out families who would like to feel out Fishers first by renting before they buy. Also, given the skyrocketing rental rates and loss in home values, institutional investors will undoubtedly redirect their purchases to “higher-end” neighborhoods that currently have little to no rentals.

Yet again, another unintended consequence not communicated by the City of Fishers to its homeowners!

There’s a simple reason why the demand exists for these properties. Fishers is growing, building, and thriving. New businesses, new jobs, and new investments require more housing. Unfortunately, Fishers is not immune to the national trend of high housing prices that make it impossible for many people to own a home, particularly younger families that can’t ever seem to save enough to make a down payment. In a housing market that is increasingly difficult for young families to enter, investment in rentals can add more options instead of taking them away.

The driving force behind this ordinance is a narrative that says institutional investors (Wall Street) are rapidly buying properties in Fishers. This narrative misrepresents both what is happening in the local housing market and what happens when those investors buy a property. These investors own only 23 percent of single-family rentals in Fishers, and these purchases are becoming less common, not more. Purchasing activity has declined significantly since interest rates rose; the last institutional investor purchase occurred in January 2023, and these property owners have actually sold 18 homes back to individuals and families. Once investors purchase properties, they typically improve them, undercutting another argument from rental cap proponents. There’s no evidence that rental properties are maintained poorly compared to owner-occupied homes.

But one of the most troubling aspects of this proposal is how it would override the will of local neighborhoods. At least 10 Fishers HOAs have already tried and failed to implement rental caps due to a lack of resident support. The homeowners in these neighborhoods have done their research and home values will suffer if a cap is put in place. Homeowners should have the ability to lease their home if so desired. On average, a home purchased back in 2020 and before with a fixed low interest mortgage, can earn a 59.5 percent annualized return on their investment. This citywide ordinance would force these restrictions on communities that have explicitly rejected them. Making matters worse, homeowners seeking exceptions would potentially have to disclose sensitive personal information about divorces, deaths, health issues, or job changes to city officials.

Fishers doesn’t need this unprecedented, heavy-handed approach to housing policy. Rather than implementing policies that restrict property rights, reduce the supply of housing options, and potentially decrease home values, the city should focus on the actual recommendations from its housing study: creating diverse housing options at attainable prices and supporting quality rental stock.

Fishers’ homeowners deserve to know the full economic impact of this proposed ordinance. In early February, I supplied Mayor Fadness and the Fishers City Council with 28 pages of research done on this subject and asked them to share the data with the residents of Fishers.

It is clear that they are not interested in doing so and being transparent.

The data suggests that this rental cap will depress property values, eliminate housing options, and make Fishers’ residents worse off. Policymakers should avoid passing slapdash ordinances without fully understanding all the costs. The mayor and city council owe homeowners the truth – and the right approach to housing.

If you would like to make a difference in changing the direction of this ordinance, Fishers’ residents are encouraged to email Mayor Fadness and all Fishers City Council members with your feedback and suggestions and participating in the Public Hearing at the 7 p.m. Monday, April 21 City Council meeting.

For more information on this ordinance, visit FishersRentalCap.com.

Steve Ladig, a 33-year resident of Fishers, is the Managing Broker of Ladig Realty LLC.