DEFINITION of 'Rent Control'

Rent control is a form of 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.

Why Rent Control Was Introduced

Rent control may have been instituted in response to some factor affecting the economy. For example, in New York City rent control was instituted in the wake of World War II and the policies continue to remain in place for certain properties. What started with temporary federal legislation, the Emergency Price Control Act of 1942, was eventually replaced by state-based legislation that enforced rent controls.

New York State Homes and Community Renewal is the state agency that regulates rent controlled and rent stabilized apartments in New York.

The current rent control program in 51 municipalities including New York City applies largely to residential buildings that were built before February 1947. This policy is also in effect for Albany, Buffalo, and towns and villages in counties including Albany, Erie, Nassau, Rensselaer, Schenectady, and Westchester.

Among the requirements for an apartment to remain under rent control, the tenant or their lawful successors must have resided in the apartment since before July 1, 1971. Lawful successors include spouses, lifetime partners, and family members. Once that apartment is vacated, its designation may switch to rent stabilized, or it may be removed entirely from rent regulation if there are fewer than six apartment units in the building.

RELATED TERMS
  1. Rent Regulation

    Rent regulation is a law that determines how much and how often ...
  2. Rent Ceiling

    Rent ceiling is the maximum price a landlord is allowed to charge ...
  3. Rent Expense

    Rent expense is the cost incurred by a business to utilize property ...
  4. IRS Publication 527 - Residential ...

    An Internal Revenue Service (IRS) document providing tax information ...
  5. Ground Rent Arrangement

    A situation in which someone owns a structure but not the land ...
  6. Sandwich Lease

    A sandwich lease occurs when a lessee on a property leases to ...
Related Articles
  1. Investing

    Pros and Cons of Renting vs. Owning a Home

    Owning a house might be an appealing idea, but it may have a lasting impact on your lifestyle. Learn more about other implications of rent vs. buying a home.
  2. Insurance

    When Is Rent Guarantee Insurance a Good Idea?

    Prospective renters are turning to rent guarantee insurance to boost their chances of getting approved by a landlord or management company. Is it worth it?
  3. Investing

    Buying vs. Renting in the San Francisco Bay Area

    Buying vs. renting in the San Francisco Bay Area is a conundrum: Both are pricey. How to decide.
  4. Personal Finance

    Easy Ways to Cut Rental Costs

    If rent payments are crippling your finances, read on to learn how to save money.
  5. Investing

    Where Rents Are Rising Most (Or Not So Much)

    If you’re in the market for rental housing, rents are rising more slowly in major metro areas; secondary-market rents, however, are growing faster.
  6. Financial Advisor

    3 Things to Consider When Renting By the Room

    Although renting by the room can increase returns on rental property, it does come with a few caveats.
  7. Small Business

    How Much Is Your Spare Bedroom Worth?

    Instead of using your spare room for storage, why not rent it out? With some research and work, renting out a room can make you money and cut your bills.
  8. Personal Finance

    How To Rent Your Home So You Can Pay Your Mortgage

    If you own your home, but temporarily can’t afford the payments, and can’t a find cheaper place to live, temporarily renting your home may be the solution for you.
  9. Personal Finance

    Buy or Keep Renting: What's the Best Choice?

    Here's how to determine whether renting or buying a home is best for you.
  10. Investing

    Are You A Good Tenant?

    Landlords are looking for specific factors that are perceived to make up good tenants - do you fit the profile?
RELATED FAQS
  1. How are prepaid expenses recorded on an income statement?

    Understand how prepaid expenses are recorded on a company's financial statements. Learn why a prepaid expense would be considered ... Read Answer >>
Trading Center