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-controlled homes, the government regulates the rent with the goal of providing affordable housing to families in the area,” says law professor David Reiss, academic program director for the Center for Urban Business Entrepreneurship.

Rent-controlled apartments are most common in New York City (which enacted laws to this effect in 1943), but they’re also widespread in San Francisco and a handful of other densely populated urban areas. But rent control does come with some downsides and challenges—particularly if you’re trying to find one of these highly coveted units yourself.

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 are substantial differences between these two terms that you should know.

Rent-controlled apartments are the true unicorns.

“Rents for rent-controlled apartments are severely limited,” says Reiss. In these apartments, rent increases hover well under 1% per year. As such, understandably, “very few apartments are rent-controlled—in New York, less than 2%,” says Reiss.

To qualify for rent-controlled status, the building has to 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 subletters allowed. So, unless you have a great-granduncle perched in the same ancient apartment since the ’60s, you can probably forget about ever finding such an apartment.

“Once the current tenant leaves, probably carried out in a coffin, the apartment will lose its rent-controlled status,” Reiss says.

Rent-stabilized apartments, on the other hand, have rents that can be raised a bit more than their rent-controlled cousins. For a sense of how “stable” these rents are, landlords are typically allowed to raise rent by only 1% or 2% per year. The actual amount is determined each year by a city board, and is often a point of fevered debate between tenants groups and landlords.

What are the drawbacks of rent control?

But rent regulations have their drawbacks for landlords and tenants alike. For landlords, the tax abatements might not be enough to cover how much they’d make on an apartment in the open market, so it might be a losing game for them. For tenants hoping to land such an apartment, rent regulations can be bad since a building’s current tenants often hang on for dear life, so apartments rarely open up and are scarce.

Also, since the price of rent-regulated units is artificially depressed, landlords who also have unregulated apartments might inflate those rents to compensate. As a result, cities where rent control exists usually possess two housing markets: the rent-controlled market in which prices are held down, and a complementary market where prices skyrocket.

In cities such as Atlanta or Chicago where there is no rent control, there is still a moderately priced housing market, whereas in cities such as New York or San Francisco it’s a much more polarized world where people either lucked out with low rent or find themselves at the mercy of the sky-high open rental markets.

Furthermore, rent control leads to so-called gray markets. Tenants who have favorable lease terms tend to hold on to rentals for a long time and might illegally sublease them as opposed to putting them back on the market.

And rent control can create a strongly adversarial relationship between landlords and tenants. If a landlord has a building that is filled with tenants paying far below market rents, the landlord has a strong economic motive to evict the tenants or to convert the building to another use, such as condominiums.

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