DEFINITION of 'Rent Regulation'
A law that limits the amount and frequency with which landlords can increase the rents they charge their tenants. Rent regulation may also tell landlords when they can increase rents (e.g., every September), reduce services or evict tenants. Some rent regulations allow landlords to increase the rent to market value when tenancy changes or upon making significant renovations or improvements.
BREAKING DOWN 'Rent Regulation'
Rent regulation provides the legal framework for the rent-control laws that exist in many cities for the intended purpose of making housing more affordable. U.S. jurisdictions that have rent control include San Francisco, Los Angeles, numerous New Jersey municipalities, New York City and numerous other cities in New York State, and four Maryland jurisdictions. Many states – including Florida, Illinois, North Carolina and Texas – explicitly prohibit or preempt rent-control laws.
Economically speaking, rent regulation is a type of price control known as a price ceiling. Price ceilings limit the amount that can be charged for a good or service and can sometimes have the unintended consequence of creating shortages. Thus, rent regulation may backfire. While it may provide more affordable housing for renters who have already secured rent-controlled units, it may make finding a rental in the first place more difficult. It may also discourage the creation of new rental units since potential landlords know rent regulation will limit their earnings. In addition, the rental housing shortages caused by rent regulation can drive up rents in newly established rental units.