DEFINITION of 'Rent Control'
A price control that limits the amount a property owner can charge for renting out a home, apartment or other real estate. Rent control acts as a price ceiling by preventing rents either from being charged above a certain level or from increasing at a rate higher than a predetermined percentage.
BREAKING DOWN 'Rent Control'
The purpose of rent control regulations is to limit how much money individuals and businesses must spend on renting real property. The amount of rent permitted may vary across jurisdictions and property types, but is generally set at a level considered affordable to renters and fair to property owners.
The economic impact of rent control regulations has been disputed. Some economists consider rent controls, like other price ceilings, to be market distortions that discourage the construction of more homes by limiting the profits owners can earn from them. By discouraging the construction of new housing stock, regulators may create the same housing shortage they sought to prevent by enacting the legislation in the first place. Others believe rent control is a viable method of ensuring affordable housing for renters that prevents landlords from capriciously raising prices.
Rent regulation schemes may permit property owners to increase rents at a fixed rate, or at a rate indexed to economic factors. Rent levels indexed to inflation, for example, allow owners to increase the rent they charge tenants based upon the rate of inflation or the rate of inflation plus a percentage.