Key Takeaways
- The Biggest Strength: The primary objective of rent control is to grant tenants short-term housing stability and affordability and shield them from unforeseen, drastic rent increases that might compel them to vacate the premises.
- The Biggest Shortcoming: In the long run, it can severely diminish the quantity and quality of available rental properties by deterring builders from constructing new units and deterring landlords from keeping the existing ones in good condition.
- It Makes Winners and Losers: Although it shields some current tenants, it can make it very hard for new individuals to obtain accommodation to live, frequently making housing scarce.
- It’s a Temporary Solution, Not a Permanent One: Most specialists concur that although rent control responds to a temporary crisis, it does not provide the solution to the fundamental issue of lacking sufficient dwellings for all those needing one.
- Property Management is Essential: In any rental market, but particularly in complex ones, expert management serves to balance the interests of the property and the interests of the tenant.
What is the greatest strength and greatest weakness of rent control?
So you’re attempting to get your head around this rent control business, then?
It’s one of those issues that does get people fired up, I can tell you.
Everyone has a very definite view on it.
But what’s the truth?
What is it that it does well and where does it completely fail?
If you’re a renter dreading your next rent check, or a landlord struggling to understand the rules, you want the plain facts.
Not the political soundbites.
So let’s get down to it, like, really basically.
The greatest advantage of rent control is easy to see: it lets people stay in their homes.
Its greatest failing?
Maybe it’s why you can’t afford an apartment in the first place.
It’s a heart of gold policy with some very serious unintended consequences.
Getting this push and pull is really key for anyone even considering housing.
And for property owners who have to wade through these regulations, well, that’s where a business that understands, like Palmaway, can really be the difference maker just by managing the complexity on a day-to-day basis.
Understanding Rent Control: It’s Not as Simple as It Looks
What is Rent Control Anyway?
So what are we even talking about when we talk about “rent control”?
I think a lot of folks imagine a law that simply puts rent in amber for all time.
But that’s not necessarily how it is any longer, at least not where most places are concerned.
Contemporary rent control, which people commonly refer to as “rent stabilization,” really involves capping how much a landlord can increase the rent yearly for an existing tenant.
The idea is to stop something that is known as “economic eviction.”
That’s just a fancy way of saying that a landlord raises the rent so high that the existing tenant just can’t pay it and has to vacate.
So the idea is stability.
It’s intended to provide tenants, particularly older people or families who don’t have a lot of dough, with some predictability.
They can sign a lease and not lie awake at night wondering if their rent will double next year.
How Did We Get Here?
Rent control is not some new fad concept.
Its origins date way back, usually to periods of grave crisis.
During World War II, for instance, the US government imposed national price controls on all things, including rent, to halt wartime inflation and maintain stability for families while fighting men were away.
After the war, a lot of them just continued with their local versions of these regulations.
New York City is probably the most famous example, with its really complex system that’s been around for decades.
And in recent years, as cities like San Francisco, Los Angeles, and Portland have seen rents go absolutely crazy, the idea has made a huge comeback.
People are desperate for solutions, and rent control feels like something that can be done right now to help.
But is it actually doing what we think it is?
The Biggest Strength: Stability and Affordability
So let’s dive in.
What is the number one success of rent control?
Why do so many fight so hard for it?
It Provides a Shield for Tenants
Let’s say you’re in an apartment you adore.
Your children are in a nice school, you know the people living around you, your drive to work is short.
Then your lease is expiring and your landlord presents you with a new one.
The rent isn’t increasing by fifty dollars.
It’s increasing by five hundred dollars.
What do you do?
To many, that’s not merely an inconvenience.
It’s a catastrophe.
It involves pulling up your entire life, potentially relocating to a completely new city, switching schools, getting a new job.
Rent control is protection against all of that.
It says, “No, you can’t raise it that much.”
This individual gets to remain that sense of security, of not being subject to the mercy of an unhinged market, is enormous.
It’s by far the strongest point.
It keeps groups of people together and stops individuals from being forced out of communities they have helped create.
It Assists Those Who Need It Most
This stability is not only a matter of comfort.
It’s a matter of survival for low- and fixed-income families.
Consider a retiree who gets by on social security.
Their income is fixed each month.
If their rent happens to increase dramatically, they absolutely do not have any means to continue.
They have no choice.
Rent control, for them, is a lifeline.
It’s what enables them to age in place with dignity rather than being driven into an awful position.
So in discussing the advantages and disadvantages of rent control, you have to begin with this human factor.
The advantages and disadvantages of rent control aren’t abstract; they impact actual people’s lives concretely.
The power is in the immediate, concrete protection.
It’s a policy that attempts to place people before profits, at least in the case of people who are already residing in a rent-controlled apartment.
The Biggest Shortcoming: Killing the Supply
Alright, so if it’s such a great lifeline, what’s the problem?
Why do so many economists groan when they hear the words “rent control”?
The biggest shortcoming is that it often hurts the very group it tries to help by strangling the housing supply.
Developers Just Stop Building
Let’s say you’re a developer with a few million dollars to invest.
You want to develop a new apartment complex.
You’re considering various cities.
One city has rent control legislation that restricts how much you can charge down the road.
Another doesn’t have such laws.
Where are you going to invest?
You’re going where you can get the maximum return on investment, and that’s practically never the city that has rent control.
This is the number one issue.
Rent control discourages new construction.
If builders aren’t building new apartments, then the total number of apartments in the city stays the same.
But the number of people wanting to move to the city might be growing.
This creates a huge shortage.
And what happens when there’s a shortage of something?
The price for the remaining available units goes through the roof.
So while those living within rent-controlled units are safe, the rest of us are competing for a very small number of market-rate units that are now very costly.
Landlords May Cease to Maintain
There’s a flip side to this supply issue.
Suppose you have an older rent-controlled property.
The law caps how much you can increase the rent annually, but not how much your expenses increase.
The cost of repairs, plumbing, insurance, and property taxes continues to rise.
If your rent income isn’t covering your costs, what’s the big deal?
You begin to skimp.
Perhaps you hold off on repairing that leaky roof.
Perhaps you never upgrade the appliances.
Perhaps you do the bare minimum necessary to make the space livable.
The building eventually breaks down.
So the failure isn’t that we don’t have new housing; our existing housing can break down.
This is a classic case of an unintended consequence.
The policy aimed at making housing affordable is at times resultant in making it less quality.
When you examine the advantages and disadvantages of rent control, this supply issue is the behemoth “con” that’s so difficult to navigate around.
That’s the reason why the advantages and disadvantages of rent control are such a hotly contested topic.
It benefits an outwardly visible group of individuals presently but can cause an even greater problem for all the rest in the future.
Other Factors of Relevance
The advantages and disadvantages of rent control do not end with just stability and supply.
There are a few other complications that make this entire issue more complex.
It Can Help Some People But Hurt Others
This is an extremely cynical section.
Rent control has the ability to create two completely separate classes of tenants.
You have the “insiders” – the individuals who got a rent-controlled apartment many years ago and now enjoy a below-market-rate bargain.
They are living high.
And then you have the “outsiders” – individuals who are in town for the first time or just want to relocate.
They are hitting a tough market with very little choice and astronomically high prices due to the shortage.
So you have to wonder, is that fair?
The policy benefits one group while making life a lot more difficult for another.
It can also create some strange situations.
Perhaps a retired couple resides in a massive three-bedroom rent-controlled apartment because it is affordable, yet a young family with three children is jammed into a small one-bedroom because that is all they can afford.
The housing isn’t necessarily going to those who need it the most.
It’s just going to whoever arrived first.
Cities Lose Money Too
This is an angle that most don’t even consider.
Cities use property taxes to fund schools, parks, firefighters, and roads.
Where does the tax revenue go?
It goes to the value of the property.
If a rent-controlled building generates less revenue for its owner, the overall value of the building can actually decrease.
And if the building is worth less, it pays lower property taxes.
That means less money for city services that everyone, including the tenants in that building, uses.
So a policy meant to help the community can sometimes strain the community’s budget.
It’s all connected in ways that are hard to see at first glance.
The pros and cons of rent control really do ripple out everywhere.
So What’s the Solution? Is There a Middle Ground?
After considering all these advantages and disadvantages of rent control, it seems quite messy, does it not?
Folks do need to be shielded from wild rent increases, but we do need more housing supply.
So what can we do?
Most housing analysts will tell you the actual long-term solution is to increase all kinds of housing.
Sounds too easy, but it’s supply and demand.
We should make it easier to build, though, with an emphasis on affordable units.
Some cities attempt inclusionary zoning, which is where if a developer comes in to build a new high-end building, they have to reserve some percentage of units to rent at sub-market rates.
Other suggestions are direct housing vouchers for low-income families, which assist the individual without distorting the whole market, or tax incentives to landlords who maintain rents at affordable levels.
There isn’t a silver bullet.
It’s typically about experimenting with a combination of things.
And for homeowners, all these regulations can be a nightmare to comply with.
That’s where having an expert team comes in.
A good property manager knows the local legislations inside and out.
They can deal with tenant relationships, budget maintenance schedules, and keep the property compliant and a sound investment, even in a regulatory framework.
These types of companies exist in this world on a daily basis, dealing with these very issues for owners, which is truly a full-time job unto itself.
Frequently Asked Questions
What are two negative consequences of rent control?
Two big ones are that it reduces the incentive to build new rental housing, creating a shortage, and it can lead to landlords deferring maintenance on their existing buildings, leading to a decline in housing quality over time.
What is the biggest strength of rent control?
Its biggest strength is providing immediate stability and affordability for existing tenants, protecting them from sudden, drastic rent increases that could force them to move out of their homes and communities.
Which states have rent control?
It’s not a state-wide thing in most places.
It’s usually up to individual cities.
Some states like California and New York have cities with strong rent control laws (like NYC, San Francisco, Los Angeles).
Some states, like Oregon, have statewide rent stabilization policies.
But many states actually have laws that prevent their cities from creating rent control.
Does rent control mean my rent will never go up?
No, almost never.
Most modern “rent stabilization” laws allow for a small, predetermined percentage increase each year to help landlords cover rising costs.
It’s not a freeze; it’s a limit.
How can I find out if my apartment is rent-controlled?
You need to check your local city housing authority’s website.
They will have the specific rules for your area.
You can also ask your landlord or property manager directly.
Understanding the pros and cons of rent control is the first step to having a real conversation about housing.
It’s not all good or all bad.
It’s a policy with a very clear heart but some really complicated consequences.
If you’re a property owner feeling overwhelmed by the changing rules of your local market, you don’t have to figure it out alone.
Getting a professional opinion on your property’s potential can help you make a plan.
Palmaway offers a free, no-obligation rental property estimate to help you understand your options in today’s complex housing landscape
