Planopedia

Rent control is the term used to describe a government policy that limits the amount a landlord can raise the cost of rent when renewing a lease. Rent control is highly controversial as a government control on the economy, with political support or opposition usually breaking down along ideological lines—with the right opposing and the left supporting. While rent control fell out of favor as a tenet of housing policy in most of the United States for several decades, the quickly growing price of rent in most of the United States has seen a resurgence local and state jurisdictions implementing rent control. Some pro-development interest groups, which would have traditionally opposed rent control, including YIMBYs, have supported rent control policies to help contain the rising cost of rent.

Rent Control and Rent Stabilization

Rent control is also sometimes referred to as rent stabilization, though experts would argue that the terms refer to two distinct policy tools: 1) rent stabilization describes the more common policy tool in existence today, allowing for periodic rent increases, limited by a predetermined amount and 2) rent control describes a complete freeze on rent hikes. Rent control is the term used most often in common speech and in the media, however, even when referring to rent stabilization, which is the more common policy in practice today. Some of the distinction has been lost to the evolution of rent control policies over time: according to the Urban Institute, "Although early local rent-control policies imposed strict price ceilings, most local regulations today are rent-stabilization efforts, which target specific property types within a city and allow for periodic rent increases." For the purposes of this explanation, the two will be used interchangeably. 

The Great Debate: Does Rent Control Actually Make Housing More Expensive?

An understanding of rent control requires an understanding of the ongoing debate about its effectiveness in achieving its desired goal: to reduce housing costs for renters as a key form of affordable housing policy. According to multiple sources, there is a large degree of consensus among economists that rent control has the opposite effect, reducing both the quantity and the quality of housing. These economists argue that rent control removes some of the financial incentives for developers to build new housing, and for landlords to improve their existing housing. The scarcity of quality housing options that can emerge as a result of this lack of financial incentive will create a supply and demand imbalance that will eventually increase the cost of housing in the long run, according to this argument. 

Some of the recent political support for rent stabilization can be found on more of a middle ground. A 2019 study by the Terner Center for Housing Innovation at the University of California, Berkeley found, for example, that rent stabilization policies in that state had protected from rent increases, "at least in the short term."

The Details of Rent Stabilization

According to a study by the Urban Institute, 182 municipalities had some form of rent control in 2019, though the number has surely increased since then, not even counting the many cities that set temporary rent control measures during the pandemic. Local rent control laws can vary widely by jurisdiction, but most, including California,  will index their maximum allowable rent increases to inflation. On those cases, years where inflation is high, will allow higher maximum allowable rent increases. St. Paul, on the other hand, caps residential rent increases at 3 percent annually, regardless of inflation.

Other key points of distinction will include the age and type of buildings. New York City's rent control exempts new construction, for example, only applying to buildings constructed between 1947 and 1971. Other cities will allow rent control on multi-family housing, but not for single-family homes. 

Rent control policies are usually adopted and enforced by local jurisdictions, though two states, Oregon and California, adopted statewide rent control laws in 2019. The District of Columbia also has a rent stabilization ordinance in place. Much more typical, however, is for states to preempt local jurisdictions from approving rent control laws. As of July 2022, 32 states have laws that forbid local governments from enacting rent control measures, according to the National Multifamily Housing Council. The Colorado State Legislature is, as of this writing, considering a law that would remove the state's preemption of local control to allow jurisdictions to implement rent control if they choose, but all in all, the prohibition of rent control is one of the most common forms of the state preemption of local control.

Legal Questions Created by Rent Control

Some opponents of rent control policies have argued against rent stabilization ordinances on legal terms, by describing rent control as a government "taking" of private property, as defined by the 5th Amendment of the U.S. Constitution (takings are concept critical to numerous planning practices, most infamously for the use of eminent domain.) The debate about whether rent control policies are a taking is still subject to debate by state and federal courts, with a major ruling on the subject occurring as recently as 2021, with Community Housing Improvement Program v. City of New York in the United States Court of Appeals (analysis from the Cato Institute and Next City). The case Lingle vs. Chevron was a takings case decided by the U.S. Supreme Court in 2005, although that case applied to a rent cap on a commercial lease, but Supreme Court rulings dealing with the concept of rent control as a taking date back to 1921, in the case Block vs. Hirsh. The legal questions inherent in the use of rent control are likely to continue to play out in the courts, all the way up to the Supreme Court, as the legal system defines the metrics by which rent control is considered as a taking.

Relevance Born of Crisis

As rental costs in the United States have risen beyond the reach of the average American, some form of rent control is becoming an increasingly popular tool to provide relief for renters. In 2019, the state of California adopted statewide rent control, for example. And in 2021, St. Paul voters adopted a law generally considered the most aggressive rent stabilization measure in the United States.

There's a lesson for everyone in the recent resurgence of rent stabilization around the country in that rents cannot keep going up, divorced completely from the reality of the economy and the ability of renters to pay the increasing cost of rent. There are several options for how to respond to skyrocketing rents. Rents can be brought down by a collapse of demand, such as by people moving elsewhere, like is currently happening in expensive places like Los Angeles and San Francisco. YIMBYs, and some academic studies, will argue that prices can be stabilized by building more supply (with rents declining at the time of this writing, some are crediting a glut of new housing supply with contributing to the decline, as well). Or, rents can be controlled by government fiat, in this case by rent control or rent stabilization.