• Rent control is a rule that limits how much landlords can raise the rent prices every year.
• Rent control aims to keep housing affordable and prevents landlords from making unreasonable rent increases.
• Most states in the U.S. have an unfavorable opinion of rent control; only five states allow rent control, while 31 rule against it.
• Rent control can negatively impact the economy by making real estate investors and developers less motivated to build new homes, leading to a housing shortage.

The goal of rent control is to protect tenants from sudden, massive increases in rent that can force tenants to move out.

The traditional way of doing this is to set a fixed price limit on how much landlords can charge (known as a rent freeze), but this can sometimes make it hard for property owners to make enough money to take care of their properties.

To find a better balance, some policymakers have suggested another approach: rent control. This rule limits how much rent can go up each year, which can still protect tenants from skyrocketing rent prices while allowing landlords to make a reasonable profit. Markets that allow rent control will review this limit regularly, usually every year.

In theory, rent control can help ensure affordable housing is available[1] while also encouraging the growth and development of the real estate market.

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States With Rent Control

Only five states and the District of Columbia have rent control laws: Oregon, California, Maryland, Minnesota, New Jersey, and New York.

In California[2] and Oregon[3], the laws apply to the whole state, but in the others[4], it’s up to individual counties and cities to decide if they want rent control.

On the other hand, 31 states[5] have rules that prevent local governments from creating rent control laws, meaning that rent control is not allowed at all in those states.

Three primary factors contribute to rent increases: supply and demand[6], interest rates[7], and policy changes.

Supply and Demand

Supply and demand is the biggest contributor to rent increase.

When there aren’t enough rental properties available in an area (more demand than supply), landlords can raise the rent because more people want to rent than there are places available to rent. This causes rent inflation[8], where rents rise uncontrollably.

On the other hand, if too many rental properties are available in an area (more supply than demand), landlords may have to lower rent prices to attract tenants.

Interest Rates

Interest rates can also play a role in rent increases.

When it’s expensive to borrow money, some people who would normally buy homes may choose to rent instead, forcing them to remain renters longer than intended. This can increase demand for rental properties and push rent prices up, especially with the popularity of remote work and the gig economy.

Policy Changes

Policy changes can also affect rent prices by passing laws like rent control or rent freezes.

President Trump signs the CARES Act (The White House from Washington, DC, Public domain)

For example, during the COVID-19 pandemic, many local governments put temporary freezes on rent increases and evictions to help homeowners and tenants[9]. When these policies were lifted, some landlords felt the need to make up for lost income, forcing them to increase rent prices.

Whether rent control is good or bad depends on who you ask.

Landlords’ Perspective

From a landlord’s perspective, rent control is not ideal.

If landlords cannot raise the rent to match current market rates, it may be harder for them to make enough money to maintain their properties[10]. After all, rent control doesn’t address the real reason that rents are rising: the growing demand for housing.

Rent control also makes it harder to evict tenants, as they are likely to stay in their apartments for longer[11]. Furthermore, tenants may have less incentive to move elsewhere due to the (almost certainly) high cost of rent in other locations. Since landlords can’t evict tenants without cause, they can’t find new renters who can pay more and increase their income.

Additionally, developers may be less likely to build new properties in areas with rent control because they may not be able to make as much money. This makes it difficult to expand the availability of affordable housing[12].

Ultimately, both scenarios lead to a shortage of affordable housing[12].

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A Tenant’s Perspective

For low-income earners and existing tenants, rent control can be beneficial.

They can continue to live in their apartment or unit for as long as they can afford their current rent, which may not increase as much over time. This can help make their housing more affordable relative to the rest of the housing market.

Rent control can also provide some stability for tenants, which can be important for people struggling to keep up with rising rent prices. This stability can help tenants form relationships and networks with others in their neighborhoods and build a sense of community[13].

While rent control may benefit certain individuals, the overall economic effects tend to be negative.

Economic theories suggest that rent control can lead to a housing shortage because suppliers are less likely to create new housing when prices are artificially constrained.

Investors also tend to avoid rent-controlled areas because the potential for rental income is lower, further decreasing the housing supply and driving up demand. This can lead to a two-tier housing market[14], with regulated rents in one area and sky-high rent prices in another, where tenants compete for limited spaces.

A two-tier housing market visualized, in Hong Kong

Furthermore, rent control can discourage landlords from investing in improving the quality of their rental units, which can result in older, less safe, and outdated properties.

This can decrease the overall value of nearby real estate, which can further hurt the economy.

BY THE NUMBERS: The U.S. needs to build 3.8 million more properties to meet the housing needs of those who want to rent and those who prefer to own.

Source: NPR

1. Rajasekaran, P., Treskon, M., & Greene, S. (2019, January.) Rent Control. Urban Institute. Retrieved from https://www.urban.org/sites/default/files/publication/99646/rent_control._what_does_the_research_tell_us_about_the_effectiveness_of_local_action_1.pdf
2. Chandler, J. (2020, January 6.) Here’s how California’s rent control law works. Curbed LA. Retrieved from https://la.curbed.com/2019/9/24/20868937/california-rent-control-law-bill-governor
3. Drake, L. (2019, March 1.) Rent Control Is Now The Law In Oregon. Oregon Public Broadcasting. Retrieved from https://www.opb.org/news/article/oregon-rent-control-law-signed/
4. Ask the I-Team: Can Maine cap how much landlords can increase rent? (2022, May 24.) WPFO. Retrieved from https://fox23maine.com/news/i-team/ask-the-i-team-can-maine-cap-how-much-landlords-can-increase-rent-housing-market-skyrocketed-pine-tree-legal-assistance-lease
5. Shaw, J. (2022, October 4.) Battle Over Rent Control Continues in Localities Nationwide. REBusinessOnline. Retrieved from https://rebusinessonline.com/battle-over-rent-control-continues-in-localities-nationwide/
6. Bhattarai, A. (2022, February 10.) Four reasons your rent is going up. The Washington Post. Retrieved from https://www.washingtonpost.com/business/2022/02/10/rent-rising-inflation-housing/
7. Abramowicz, L. (2022, June 18.) Why Is the Cost of Rent Going Up? Ask the Fed. Bloomberg. Retrieved from https://www.bloomberg.com/opinion/articles/2022-06-18/why-is-the-cost-of-rent-going-up-ask-the-federal-reserve
8. Thompson, D. (2022, August 18.) Why the Rent Inflation Is So Damn High. The Atlantic. Retrieved from https://www.theatlantic.com/ideas/archive/2022/08/rent-inflation-housing-demand-prices/671179/
9. Benfer, E. (2020, June 22.) Coronavirus rent freezes are ending — and a wave of evictions will sweep America. THINK. Retrieved from https://www.nbcnews.com/think/opinion/coronavirus-rent-freezes-are-ending-wave-evictions-will-sweep-america-ncna1230916
10. Dubner, S. (2019, April 3.) Why Rent Control Doesn’t Work. Freakonomics. Retrieved from https://freakonomics.com/podcast/why-rent-control-doesnt-work/
11. Thompson, J. (2018, November 28.) Can a Property Owner Evict Tenants Without Reason? SF Gate. Retrieved from https://homeguides.sfgate.com/can-property-owner-evict-tenants-reason-3029.html
12. Demsas, J. (2021, December 2.) I changed my mind on rent control. Vox. Retrieved from https://www.vox.com/22789296/housing-crisis-rent-relief-control-supply
13. Diamond, R. (2018, October 18.) What does economic evidence tell us about the effects of rent control? Brookings. Retrieved from https://www.brookings.edu/research/what-does-economic-evidence-tell-us-about-the-effects-of-rent-control/
14. McArdle, M. (2019, June 14.) Opinion | The one issue every economist can agree is bad: Rent control. The Washington Post. Retrieved from https://www.washingtonpost.com/opinions/2019/06/15/comeback-rent-control-just-time-make-housing-shortages-worse/