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What Is Rent Control? The Holy Grail of Affordable Housing, Explained

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Rent control is a law that means a home’s rent can be increased by only an incremental amount restricted by the government. As such, rent-controlled homes—typically apartments—remain affordable, shielded from landlords who, on the open market, can hike the rent to whatever people are willing to pay.

“In rent-regulated housing, the government regulates rents with the goal of providing affordable housing for families in the area,” said David Reiss, director of academic programs and professor of law at the Center for Urban Business Venturing.

Rent-regulated apartments are most common in New York City (which enacted the law in 1943), but they are also common in San Francisco and some other densely populated urban areas. But rent control does have some drawbacks and challenges, especially if you’re trying to find these coveted units on your own.

What’s the difference between ‘rent-controlled’ and ‘rent-stabilized’?

The terms “rent controlled” and “rent stabilized” are often used interchangeably to describe any type of government regulated rental unit, but there is a big difference between the two terms that you should know.

Rent-regulated apartments are true unicorns.

“Rents in rent-regulated apartments are severely restricted,” says Reyes. In these apartments, annual rent increases hover below 1 percent. So, understandably, “very few apartments are rent-controlled – in New York, less than 2 percent,” Reiss says.

To qualify for rent control, the building must have been built before 1947 and have been occupied by the same family since 1971. Yes, these apartments can be passed down to children or other family members, but that’s it, no friends or subletting allowed. So unless you have a great-grandfather who has inhabited the same old apartment since the 1960s, you may forget to find such an apartment.

“Once the current tenant leaves, possibly to be carried out in a coffin, the apartment loses its rent-controlled status,” Reiss said.

Rent-stabilized apartments, on the other hand, can have rents that are somewhat higher than their rent-controlled cousins. To get an idea of how “stable” these rents are, landlords are usually allowed to raise rents by only 1% or 2% per year. The actual amount is determined annually by the city council and is often the subject of intense debate between tenant groups and landlords.

What are the drawbacks of rent control?

But the rent ordinance also has its drawbacks for landlords and tenants. For landlords, the tax abatement may not be enough to cover the cost of buying an apartment on the open market, so it could be a losing game for them. For tenants who want such an apartment, rent regulations can be bad because existing tenants in a building tend to hold out until the end, so apartments are rarely open and scarce.

In addition, because the prices of rent regulated units are artificially low, landlords who own unregulated apartments may jack up those rents to compensate. As a result, cities where rent control exists typically have two housing markets: a rent-controlled market where prices are suppressed, and a supplemental market where prices are skyrocketing.

Cities without rent control, such as Atlanta or Chicago, still have a moderately priced housing market, while in cities such as New York or San Francisco, it is a more polarized world where people are either lucky enough to get low rents or find themselves at the mercy of the sky-high open rental market.

In addition, rent control has led to a so-called gray market. Tenants with favorable rental terms tend to hold onto their rentals for long periods of time and may sublet them illegally rather than put them back on the market.

And rent control can create a strong adversarial relationship between landlords and tenants. If a landlord’s building is filled with tenants paying well below market rents, then the landlord has a strong financial incentive to evict those tenants or convert the building to other uses, such as apartments.

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