Rent Control

Rent control is a general term for the regulation of the rents charged by owners of residential property. Imposed mostly during times of war or rapid inflation, rent controls are intended to protect tenants from steep increases in housing costs. In addition, rent controls can also cover other rights of tenure, such as protections against arbitrary eviction.

A bête noir in economics, rent control is criticized on many counts. It is alleged to distort the normal functioning of the private housing market by creating perverse incentives for landlords and tenants. Because it restricts the amount of rent that landlords may charge, rent control might reduce the incentive to invest in residential property, thereby leading to inadequate maintenance and consequent physical deterioration. Similarly, rent control might inhibit development of new rental housing. Because rent control gives tenants financial incentive to stay in place, it discourages families from moving to more suitable housing in line with changes in household size and circumstances. This reduces the fluidity of the housing market. Rent control can also promote a black market in illegal sublets. Moreover, the existence of rent control generates inequities by favoring residents in rent-regulated housing over other renters, especially younger and minority households.

Rent control is far less monolithic than one would presume from the critiques leveled against it. While the earliest forms of rent control imposed during World War II were quite stringent, most were repealed or liberalized by the 1950s. Subsequent rent control laws are far more moderate. They allow for higher rent increases as well as for decontrol, in which specific apartments are no longer regulated and additional rent increases are permitted when units are vacated. Many of these regulations exempt new construction and small or owner-occupied buildings. They also often allow landlords to amortize capital improvements through additional rent increases. As a result of these variations, it is very difficult to provide statistical support for the negative effects commonly associated with rent control.

A 2007 study of rent regulation in the state of New Jersey, which compared rent increases in the 76 rent-regulated municipalities with populations over 10,000 with those in 85 nonregulated cities of similar population found no significant difference in rents or in the amount of new rental housing development. At most, moderate rent control seems to dampen sudden increases in rent, but over the long term, it does not make rents substantially lower than what would otherwise be charged.

Debates over rent control's efficacy, equity, and efficiency are becoming increasingly moot in the United States. The number of localities with rent control has diminished over time. Where rent control remains in effect, the number of housing units subject to rent regulation is declining. At present, the great majority of rent-regulated housing units, more than 1 million in total, are located in New York City, which has had rent regulation since 1943. About 100 of New Jersey's 566 municipalities have some form of rent control, and rent control remains in place in a handful of California jurisdictions. In the 1990s, Massachusetts passed a voter referendum abolishing rent regulation in the three cities where it was in effect, and California passed a law mandating decontrol when a vacancy occurs. The New York State legislature introduced luxury decontrol—decontrol when apartments reach a certain rent level—in the mid-1990s, which along with other factors, caused New York City to experience a net loss of nearly 100,000 rent-regulated units from 1994 to 2005.

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