What Is Rent Control?

Rent control is a government program that places a limit on the amount that a landlord can demand for leasing a home or for renewing a lease.

Rent control laws are usually enacted by municipalities and the details vary widely. All are intended to keep living costs affordable for lower-income residents.

Rent control is not widespread in the U.S. According to a recent study by the Urban Institute, 182 municipalities in the U.S. out of about 89,000 have rent control regulations, and all of them were in New York, New Jersey, California, Maryland, or Washington D.C. In fact, 37 states have laws that forbid local governments from enacting rent control measures.

However, the issue of rent regulation has been revived in recent years, particularly in cities and states where spiraling costs of living combined with stagnant wages have created a housing affordability crisis for moderate-income residents and elderly people on fixed incomes.

Oregon is the first state in the U.S. to enact a statewide rent control law. The law, signed in March 2019, restricts annual rent increases to 7% plus the increase in the consumer price index.

[Important: Rent control advocates such as the Urban Institute argue that price controls can be effective for the population that the laws target.]

How Rent Control Works

The earliest rent control laws in the U.S. date to the 1920s, and were often outright rent freezes. These generally proved unworkable. In the 1970s, the idea of rent control surfaced again, this time in a more moderate form often called rent stabilization.

For example, New York City has two rent control programs:

  • The older rent control program has been in the process of being phased out for decades. It placed severe limits on rental prices, but the only renters still covered by the law have been living since 1971 or earlier in buildings that were constructed before 1947.
  • The 1970s-era rent stabilization program regulates prices in about half of the city's rentals. The rents can only be increased yearly, and the allowable percentage increases are capped by a housing agency. The rules and exceptions are labyrinthian and are administered by a combination of city and state agencies.

The high cost of living in New York City is frequently cited as proof enough that rent control doesn't work. The median price for a one-bedroom in New York was $3,070 in 2018.

Rent control advocates such as the Urban Institute argue that price controls can be effective for the population that the laws target. That is, moderate-income people and elderly people on fixed incomes may be able to stay in their homes while gentrification forces prices up all around them.

The Advantages and Disadvantages of Rent Control

Rent control has always been controversial. The rent control regulations in cities today most commonly regulate price increases for lease renewals, not new tenants. That arguably has some benefits for landlords, who can charge whatever the market will bear on vacant apartments or, in the worst case, keep on tenants who have every incentive to stay put and pay the rent on time.

The main arguments against rent control include:

  • Rent control reduces the supply of decent housing since landlords would rather convert a building to condos or adapt it to commercial use than abide by a law that limits their profits.
  • Investment in new rental housing screeches to a halt.
  • Maintenance of buildings under rent control is lax or nonexistent because of the poor return on investment.

The main arguments for regulation include:

  • Rental prices in many U.S. cities are rising far faster than wages for moderate-income jobs.
  • Rent control enables moderate-income families and elderly people on fixed incomes to live decently and without fear of a personally catastrophic rent hike.
  • Neighborhoods are safer and more stable with a base of long-term residents in rent-controlled apartments.

Key Takeaways

  • Most rent control laws limit the amount a landlord can increase rents on existing tenants.
  • Rent control is controversial. In fact, 37 states have laws that forbid local governments from enacting such measures.
  • Oregon became the first state in the U.S. to enact a statewide rent control law in 2019.