What Is Rent Stabilization?

Rent stabilization is a form of control over housing pricing, originating in the first half of the 20th century, that's often described as a form of insurance for tenants against unreasonable rent increases. Although rent stabilization is sometimes confused with rent control, they are not precisely the same (see "Rent Stabilization vs. Rent Control," below.)

Restrictions established by rent stabilization laws aim to keep existing housing affordable. They may also include other goals such as protection against wrongful eviction, encouraging a variety of income levels within a neighborhood, and increasing tenant retention, according to a 2019 report from the Urban Institute, a social policy think tank.

Rent-pricing regulations are designed to keep housing costs for renters from rising too quickly, which they do by enacting local-level restrictions that limit the amount that can be charged for rent in certain buildings. They typically limit rent increases, often setting an allowable annual percentage increase, and include restrictions on actions like evictions. California state law, for instance, prohibits unjustified evictions and limits yearly rent increases to 5% plus the local consumer price index (CPI) or 10%, whichever is lower.

Key Takeaways

  • Rent stabilization is a form of control over housing pricing that originated in the 20th century and that's often described as a form of insurance for tenants against unreasonable rent increases.
  • Only the District of Columbia and four states have active laws that regulate rent—California, Maryland, New Jersey, and New York. Many states have preemptively banned localities from putting rent regulations, such as rent stabilization, in place.
  • By 2018, 32 states had passed laws prohibiting local governments from passing rent control laws and four states follow the Dillon Rule, which only allows cities to pass such laws if the states grant them the explicit permission to do so.
  • Rent regulations were never popular outside of coastal areas and, as of 2018, a total of 182 cities—almost exclusively in places like California, New Jersey, and New York—had them.

Understanding Rent Stabilization

Rent regulations were first enacted in the U.S. in the 1920s, although they have gone through several distinct historical phases since then.

They are generally split into two types of regulation, also called "generations," which harkens back to when the two different types were common historically: first-generation, or "rent controls," which were common in the 1950s postwar housing boom, and second-generation, or "rent stabilization," which was common in the 1970s.

Today, this sort of regulation on rent is relatively rare, and researchers classify the existing restrictions as "stabilization efforts," although they vary in how strict they are. Some places, such as New York, have preserved a terminological distinction between stabilization and controls. In either case, these restrictions were never popular outside of coastal areas and, as of 2018, a total of 182 cities—almost exclusively in coastal areas like California, New Jersey, and New York—had such controls, according to the 2019 Urban Institute report.

In the United States, in 2018, 32 states had outright banned local governments from enacting rent regulation and several others follow some form of the Dillon Rule, which allows rent control only when the state gives explicit permission, the Urban Institute report found. Of the remaining states, only a few actually have rent restrictions and even these are tightly regulated. A 2020 map from the National Multifamily Housing Council (NMHC), a nonprofit research foundation, gave similar figures when it listed 25 states that preempt rent controls, an additional 6 states that preempt rent control and mandatory inclusionary zoning, and 7 states that operate under the Dillon Rule.

Proponents of rent stabilization, including the advocacy groups Policy Link and the Center for Popular Democracy, have argued that rent regulation measures are "the only policy tool that can immediately provide relief to renters facing unaffordable rent increases," in part because they reach into private housing and can scale quickly and effectively.

25

Number of states that preempt rent regulations, according to a 2020 map from the National Multifamily Housing Council.

The NMHC commented that the COVID-19 pandemic may lead to an increase in legislative threats to rent regulation, especially if regulators view rent ordinances as a natural progression from eviction moratoria. In contrast, the National Apartment Association, a national organization that is staunchly opposed to rent regulations, has said that COVID-19 may lead to the spread of these regulations as an emergency measure and has presented arguments for preventing this from happening.

Do rent regulations work in the ways in which they are intended? Other scholars summarize the empirical evidence as mixed. A 2018 report from the Brookings Institution, a public policy research organization, for instance, argued that while rent regulations help tenants in the short term, they ultimately have ill effects in the long term, including the loss of housing affordability and the creation of gentrification and spillover from the rent-regulated location into the surrounding neighborhood.

Rent Control vs. Rent Stabilization

While they are sometimes conflated, rent control and rent stabilization have different historical backgrounds and some places still make a distinction between the two. They are also described as "first-generation rent controls" and "second-generation rent controls," and "rent-regulated" is used as a general term for both.

Rent control, or first-generation controls, were more aggressive. In New York City, for example, they apply to buildings built before 1947 where the tenant has lived continuously since before 1971. Landlords are allowed to increase rents under this kind of restriction, but there's a limit of 7.5% annually as well as an upper limit, called the "maximum base rent" that is updated every couple of years to keep up with operating costs, according to the NYC Rent Guidelines Board.

Historically, rent stabilization, or second-generation controls, focused on more modest restraints. In New York, rent-stabilization laws apply to buildings built between 1947 and 1971, and they include the right to renew and constraints on rent increases, which are determined every year.

Of the two kinds of restriction, rent stabilization is by far the more common form today. The 2017 NYC Housing and Vacancy Survey, for instance, reported that there were 22,000 rent-controlled apartments, compared to 966,000 rent-stabilized apartments in the city in that year. The authors of the Urban Institute study attribute this partly to provisions that require continuous occupancy and vacancy control in New York City. 

Real World Examples of Rent Stabilization

A study of the effects of rent control measures on tenants and landlords in San Francisco, published in 2019, investigated what happened after a 1994 law enlarged rent control protections in San Francisco to include small multi-family housing built before 1980, removing the exemption of these structures from 1979 rent control laws. The study concluded that the controls had decreased renter displacement, especially for minorities. However, it also contributed to the inequality and the gentrification of the city, the study said, by causing landlords to convert their properties to avoid rent controls and to court high-income renters. Ultimately, the change decreased the supply of rental housing in the city by 15% and decreased the percentage of renters residing in units with these protections, the report said.

Another study looked at what happened to the neighborhoods surrounding rent-controlled tenancy after the surprise removal of rent controls in Cambridge, Mass., in 1995. Based on housing market data between 1988 and 2005, it concluded that getting rid of the controls led to billions of dollars of price appreciation for rent-controlled properties and nearby properties that had never been under rent controls, which the authors say are only partly explained by residential investments.

The 2018 Brookings report summarized the available empirical evidence, relying on those two examples, as suggesting that rent regulations provide existing tenants with insurance against rent increases, but that it does so at considerable cost.

Is My Property Rent Stabilized?

Rent-stabilized rules vary by location. The best way to check them is to look into the regulatory bodies in charge of these rules. Cities will often have resources you can use to tell if a particular property falls within existing stabilization rules. Los Angeles, Calif., for example, has the Zone Information and Map Access System, or ZIMAS. In New York City, the agency that manages these laws, the NYS Homes and Community Renewal, has a website where you can request information about a specific apartment (not all apartments in rent-regulated buildings have rent restrictions).

What's the Difference Between Rent Controlled and Rent Stabilized?

Rent-regulated properties can refer to either rent-controlled or rent-stabilized properties. The difference lies mostly in how strict the rent controls are, and the names come from the different historical phases when these regulations were common. As a rule of thumb, rent controls are more severe, fixing rent to a specific price. Rent stabilization usually limits price increases to a certain percentage.

How Many States Have Rent Stabilization?

Only four states and the District of Columbia have "active" rent-stabilization laws—California, New Jersey, New York, and Maryland. As of 2018, about 182 cities had active rent-regulation rules, according to an Urban Institute report.