Introduction to Rent Control Laws

Rent control refers to laws that limit how much landlords can raise rents on residential properties. The goal of rent control is to provide affordable housing, prevent displacement of tenants, and promote neighborhood stability. 

Rent control policies first emerged in the United States during World War I and World War II, when there were housing shortages. Cities like New York City and Washington D.C. passed emergency rent control ordinances to prevent price gouging on rental housing. After the war, some of these ordinances expired while others evolved into more permanent rent regulation laws.

By the 1970s, rent control laws were in place in cities like New York, Washington D.C., San Francisco, Los Angeles, Boston, and others. These laws limited the amount that rents could be increased on an annual basis, often tying increases to inflation rates. Rent control provides important tenant protections and makes housing more affordable for lower income residents. However, rent control has also been controversial and criticized by some as a disincentive to new housing construction. The debate around rent control continues today in many cities and states.

Major Cities with Rent Control

Rent control laws exist in several major cities across the United States. Some of the most notable include:

New York City

New York City has one of the oldest and most extensive rent control systems in the country. Rent control laws were first passed in NYC in 1943 in response to wartime price controls. Today, around 22,000 units in NYC are still rent controlled, meaning the rents can only increase by a small, regulated amount each year. Rent control mainly applies to tenants who have lived in the same apartment since before 1971. It offers strong protections and restrictions for landlords in raising rents.  

San Francisco 

San Francisco passed rent control laws in 1979. The system covers around 76% of the city's rental housing stock. Rents can only be increased by 60% of the consumer price index each year. When a rent controlled unit becomes vacant, landlords can raise the rent to market rate for the next tenant. This system keeps rents lower for long-term tenants, while allowing increases when people move out.

Los Angeles

The city of Los Angeles passed rent control in 1978. Today around 75% of rental units in LA are subject to rent control. As in San Francisco, landlords can raise rents each year based on a maximum percentage. And they can raise rents to market rates when a tenant moves out. 

Washington DC 

Washington DC has had some form of rent control since 1985. Currently around 44% of rental units are covered under rent stabilization. Rent increases are limited based on the Consumer Price Index. Landlords can also petition for larger increases to cover capital improvements. 

Boston

Boston passed rent control in the 1970s, which covered much of the city's housing stock. In 1994, it was overturned through a voter referendum. However, in 2019 Boston brought back a more limited form of rent control. It now covers buildings built before 1975 and limits rent increases to 7% plus inflation per year.

State and Local Rent Control Laws

Rent control laws in the United States are enacted at the state and local levels. There is no federal rent control law. The specifics of rent control policies can vary widely between different cities and states. 

California

California passed the Tenant Protection Act of 2019, which placed statewide rent control on certain properties over 15 years old. Local jurisdictions in California can enact stricter rent control laws. Cities like Los Angeles, San Francisco, Oakland, Berkeley, and San Jose have local rent control ordinances. These laws typically limit annual rent increases to a certain percentage, such as 5% or 10%. Landlords in California can apply for exemptions to raise rents higher than the caps if capital improvements or financial hardship can be demonstrated.

New York 

New York has the longest history with rent control laws, dating back to 1943. Rent control applies to buildings constructed before 1947 in NYC and other select counties. Rent increases are set by the Rent Guidelines Board each year based on economic factors. In 2019 the allowable increases were 1.5% for 1-year leases and 2.5% for 2-year leases. Landlords can also apply for additional rent increases above the caps if they make building improvements or have increased operating costs. 

Massachusetts

Massachusetts allows cities to implement rent control if they choose through a 1994 state law. Only Boston, Cambridge, and Somerville have adopted rent control so far. Boston's rent control policy limits increases to 2% annually on buildings older than 1978. Landlords need to register units and justify larger rent increases.  

The specifics of rent control laws, like the annual allowable increases or age of buildings covered, depend on the particular city and state laws. But the overall goal of limiting large rent spikes remains consistent.

Arguments For Rent Control 

Rent control laws aim to provide stability and affordability in rental housing markets. Advocates argue rent regulations benefit tenants and communities in several key ways:

Stabilizes Rents

By limiting how much rents can increase each year, rent control protects tenants from sudden large rent hikes. In cities without rent regulations, it's not uncommon to see rents spike 20-30% or more year-over-year as demand rises. Rent control creates more predictability in housing costs for tenants.

Prevents Displacement 

Stable rents allow low and moderate income tenants to remain in their homes and neighborhoods long-term. Rapidly rising rents can push out long-time residents who can no longer afford the costs. Rent control helps prevent displacement particularly among vulnerable groups like the elderly, disabled and families with children.

Benefits Long-Term Tenants

Rent control rewards tenant loyalty and longevity. Long-term tenants receive the most benefit from rent stabilization since their housing costs remain below market rates. Turnover is lower in rent regulated units, providing housing security.

Arguments Against Rent Control

Rent control policies have been criticized by economists and policy experts as contributing to housing shortages, reducing the supply of available rental units over time. 

One of the main arguments against rent control is that it discourages new housing construction and investment in maintaining existing buildings. By capping rent increases, landlords and developers have less financial incentive to build new housing or renovate units. This can gradually constrict the supply of available rental housing in a city with rent control.

In the long run, critics argue that rent control leads to a mismatch between supply and demand - the number of renters continues growing as housing stock ages without new construction or maintenance. This housing shortage then makes it even harder for renters to find affordable apartments. 

Landlords may also convert apartments to condos or other uses exempt from rent control, further reducing supply. Some economists suggest this reduction in supply could counterintuitively make rents higher than they would be without controls. 

Additionally, rent control can provide an advantage to existing tenants while harming new renters. Under rent control, current tenants enjoy below-market rents while new renters face highly competitive markets with limited vacancies and high rents on non-controlled units.

Overall, critics say that while rent control aims to make housing more affordable, it can indirectly make rents more expensive and harder to find for many tenants in the long run by curtailing supply. They argue that increasing housing supply through new construction is a better approach than imposing rent caps.

Rent Control vs. Rent Stabilization

Rent control and rent stabilization are often used interchangeably, but there are some key differences between the two housing policies.

Definitions

Rent control

 refers to laws that limit how much landlords can raise rents each year for tenants in existing housing units. Rent control laws typically cap rent increases at a fixed percentage, such as 2-3% per year.

Rent stabilization

laws limit rent increases for existing tenants renewing leases, but do not impose a cap on rent levels for new tenants. Landlords can raise rents to market rates once a unit is vacated and leased to a new tenant. 

How They Differ

The main difference is that rent control applies to the housing unit, while rent stabilization applies to the tenant. Under rent control, the rental unit is regulated and maximum rents apply to all tenants. With stabilization, it is just the existing tenant who is protected from large rent hikes.

Rent control is more restrictive for landlords, while stabilization allows more flexibility to raise rents to market rates between tenants. Stabilization also often allows landlords to raise rents more than the typical 2-3% under rent control to cover maintenance and operating costs.

Cities with Each Policy 

A few major cities with some form of rent control include:

• New York 
• San Francisco
• Los Angeles
• Washington DC
• Boston

Cities that have rent stabilization but not pure rent control include:

• New York
• Los Angeles 
• San Jose
• Oakland
• Berkeley

Many more cities in California and other states have various forms of rent stabilization policies. Rent control is less common than stabilization policies.

Impact on Housing Supply

Rent control laws have sparked much debate around their impact on housing supply and affordability over time. 

Supporters of rent control argue that it helps make housing more affordable for tenants in the short-term by limiting rent increases. They say that rent control gives security and stability to tenants, allowing them to stay in their homes long-term. This is especially important for low-income and elderly tenants. Supporters also claim there is little evidence that rent control reduces new housing construction significantly. They argue that high land and construction costs, along with zoning restrictions, play a much bigger role in limiting new development.

Critics of rent control counter that over the long-term, limiting rent increases reduces the returns to landlords and developers, which acts as a disincentive for building new rental housing. By keeping rents artificially low, rent control can increase demand and reduce vacancies. Critics argue this leads to shortages of rental housing over time. They say shortages then put upward pressure on market-rate rents for uncontrolled units. Critics believe this makes the rental market less affordable overall, hinders mobility, and benefits a limited number of incumbent tenants over the broader public. They argue that relaxed zoning rules and increased density allowances would be more effective at increasing supply and affordability.

There are also disagreements over the extent of negative impacts on supply. Some studies show that the effects on new construction are relatively small in many cities. However, most economists tend to agree that rent control does negatively impact housing supply to some degree. The debate continues over whether the benefits for protected tenants outweigh the costs in reduced supply and housing market distortions. The evidence suggests the impacts likely depend on the specific provisions and implementation details of local rent control policies.

Legal Challenges

Rent control laws have faced numerous legal challenges over the years, primarily from landlord groups arguing that such regulations violate rights and constitute improper "takings" of private property.

Birkenfeld v. City of Berkeley (1976)

This California Supreme Court case upheld Berkeley's rent control ordinance after a challenge from landlords. The court ruled that the regulations did not amount to a physical taking of property requiring compensation. This case set an important precedent supporting local rent control laws.

Fisher v. City of Berkeley (1984) 

The U.S. Supreme Court affirmed the legality of rent control in this key case originating from a challenge to Berkeley's ordinance. The high court rejected arguments that rent control violated due process or equal protection. This ruling allowed local rent control laws to stand across the country.

Cwynar v. City and County of San Francisco (2001)  

A U.S. District Court ruled that San Francisco's rent control ordinance was constitutional and did not violate property rights. While acknowledging landlords' valid concerns, the court deferred to local governments' rights to regulate housing and land use. This upheld San Francisco's expansive rent control system.

Apartment Assoc. of Los Angeles County v. City of Los Angeles (2009)

This state court case challenged Los Angeles's rent stabilization ordinance. The court found that the law did not improperly take property and served the legitimate purpose of protecting tenants from housing shortages. The ruling affirmed the legality of rent stabilization.

Challenges Continue Today

Lawsuits seeking to overturn specific rent control policies or entire ordinances continue around the country. While federal courts have established the overall constitutionality of rent regulation, debates persist around restrictions placed on landlords and property rights. Ongoing legal challenges shape rent control laws.

Proposed Reforms

There have been various proposals in recent years to reform existing rent control laws in some cities. These range from strengthening regulations to weakening or eliminating them entirely.

In California, there have been efforts to expand rent control laws to cover more cities and units. State Proposition 10 on the 2018 ballot would have repealed the Costa-Hawkins Rental Housing Act, a state law that limits the scope of local rent control laws. This measure did not pass, but advocates continue to push for expanded rent regulation.

Some cities with existing rent control have also considered changes. New York examined closing the "vacancy bonus" loophole that allows landlords to raise rents 20% whenever a tenant moves out of a rent-controlled unit. The reform did not pass but could be revisited. 

On the other side, there have been initiatives to relax rent control requirements. In 2020, California passed Proposition 21, which would have allowed cities to apply rent control to housing over 15 years old. Voters rejected this ballot measure, maintaining the current law that only allows rent control on older buildings.

At the most extreme end, some landlord and developer groups have pushed efforts to repeal rent control laws entirely. For example, in 2018 landlords funded Proposition 10 in California to eliminate local rent control, but voters rejected the measure. Rent control remains controversial and politically charged in many cities.

Going forward, there will likely continue to be tension between interests on both sides of this issue, leading to ongoing debates and proposals to modify existing rent regulation policies. The future direction will depend on the shifting local political environment in major cities and states with rent control.

Future of Rent Control 

The future of rent control laws in the United States is uncertain and will likely depend on several key factors. 

Predictions on Expansion or Reduction

Some housing advocates and progressive policymakers predict that more cities and states will look to implement new rent control laws or strengthen existing ones in coming years as rents and housing costs continue to rise faster than incomes. However, the real estate industry and some economists counter that rent control is counterproductive and predict that cities may begin rolling back their rent regulation policies.  

California recently passed a statewide rent control law in 2019, indicating growing momentum for renter protections. However, the new law was also watered down compared to the original proposal due to opposition. This exemplifies the contentious divide around rent control policies.

Key Factors

The future direction of rent control will likely depend on:

• The balance of power between tenant advocacy groups and landlord groups in local politics
• Broader trends in the housing market, including rent increases 
• The severity of affordable housing shortages in certain cities
• Legal challenges to rent control laws
• Impact of new construction on housing supply
• Perceived successes or failures of existing rent control policies
• Overall public opinion and political will for or against rent regulation

Progressive cities like San Francisco and New York with acute housing shortages will likely aim to maintain or expand rent control protections for tenants. Meanwhile, cities and states with landlord-friendly governments may look to reduce regulations. The future is uncertain, but rent control will remain a hotly debated policy issue.