What Is Rent Control and Is It Beneficial for Tenants and Landlords?

November 23rd, 2021
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Rent control is likely a term you’ve heard thrown around if you are a regular tenant or a landlord. It might have even saved you from rent increases and allowed you to stay in an apartment longer than you would have expected. But what is rent control exactly?

How does it work and how does it apply in different areas? Is it subject to change? And, finally, is it as beneficial as it seems? In this article, we’ll answer all of these questions and try to focus on the effects of rent control on tenants and landlords.

What Is Rent Control?

Rent control is an umbrella term for laws that regulate the amount a landlord can charge for rent. But many of these laws also go further and regulate how landlords can terminate short-term rental agreements or not renew leases. These laws are usually in force in particular cities and are not as commonly applicable state-wide.

Namely, cities like Los Angeles, New York City, and San Francisco all have some form of rent regulation. Sometimes, these rent control laws are applicable to larger territories – for instance, Oregon has a statewide rent control law and D.C. has a district-wide one. California has enacted a new rent control law (named the Tenant Protection Act) on January 1, 2020.

However, even in an area where rent control applies, not all rental buildings are subject to it. Often, the following are excluded:

  • Buildings built after a certain year (newer buildings)
  • Luxury apartments that rent over a certain amount
  • Owner-occupied properties that contain 2 – 4 units
  • Condominiums and single-family homes in planned unit developments

Vacancy Decontrol and Vacancy Control

Based on how long a property is subject to rent control, it comes in two primary forms: vacancy decontrol and vacancy control. This distinction is essential for both tenants and landlords because:

- Vacancy control regulates the rent amount on a property regardless of who is renting, i.e. if a tenant moves out and a new one moves in, rent control still applies.

- Vacancy decontrol regulates the amount of rent the current tenant can pay. When the current tenant moves out or is evicted for just cause, rent control and the restrictions no longer apply (unless they would apply pursuant to some other regulation).

In essence, just because the previous tenant paid a certain amount in rent for an apartment doesn’t mean you will be paying the same amount if you move into the same apartment. Conversely, if you are a landlord, you may be permitted to increase the rent for a new tenant when a new one moves in, even when rent control is applicable in your location.

Who Enforces the Laws and Ordinances?

Where rent control is applied, rent control boards (or other equivalent bodies) are authorized to enforce the laws, to a certain extent. For instance, where vacancy control applies, rent control boards set the maximum base rent for each unit. Landlords must also petition the board before raising the rent for reasons other than standard annual increases.

However, the rent control boards do not have wide-sweeping authority. If a landlord files an eviction lawsuit, for example, the board usually cannot stop the proceedings. They can, however, impose fines for ordinance violations. Regular legal remedies apply in areas where rent control boards have no authority.

What Rent Increases Are Permissible?

If vacancy decontrol applies and a tenant moves out or is evicted, the landlord can increase the rent for a unit at will. But if rent control in the form of vacancy control applies, the situation is different. Once again, the particular reasons a landlord can increase rent can vary from location to location, but the following factors are grounds on which rent can be increased:

  • Regular annual increases
  • Increased operational costs (such as remodeling or higher taxes)
  • Bringing the building up to code.

How Are Evictions Handled Under Rent Control?

Smiling Young Woman Renting Office

Vacancy decontrol permits landlords to increase the rent when an old tenant moves out, but that doesn’t mean that a landlord can evict a tenant for any reason. Precisely to avoid landlords evicting tenants in order to increase the rent, rent control laws provide certain restrictions to evictions.

The specific restrictions vary from locality to locality, but it is always based on the landlord having just cause to evict. For example, substantial violations of the lease agreement – like not paying rent or moving in people not on the lease, can be just cause for eviction.

If the tenant intentionally causes damage to the property or performs illegal activities in the apartment, it can be grounds for eviction. In some localities, if the landlord wishes to move into the apartment or rent it to an immediate family member, they can also evict the tenant.

In essence, these laws and ordinances are intended to stop unscrupulous landlords from evicting tenants just to make more money from rent. That also means that not every single infraction can be cause for eviction even if it falls within the wider purview of a theoretical just cause.

So, if you are one or two days late with the rent, a landlord can evict you in theory. But in some jurisdictions, you can take it to court and let the judge decide if this one-day tardiness was the true reason you got evicted or if the landlord actually just wanted to increase the rent.

However, this would usually require you to hire a lawyer, so the costs and benefits of fighting a wrongful eviction are disputable. At the very least, you can lodge a complaint with the rent control board. As was previously stated, they likely can’t stop the eviction, but at least the landlord may need to pay a fine and may be more honest with future tenants.

However, this would usually require you to hire a lawyer, so the costs and benefits of fighting a wrongful eviction are disputable. At the very least, you can lodge a complaint with the rent control board. As was previously stated, they likely can’t stop the eviction, but at least the landlord may need to pay a fine and may be more honest with future tenants.

Rent Control in California

The recently enacted rent control law in California is a good example of how rent control laws function in general. For one, the state-wide law is superseded by local regulations regarding rent control or eviction if the local regulations provide more protections. So it mostly applies to localities that do not already have some types of rent control laws.

Primarily, it:

  • Restricts the annual increase in rent to 5% plus the local inflation rate, up to a maximum of 10%.
  • Requires just cause for evictions.

An additional stipulation is that these restrictions are not optional, i.e. a tenant and landlord cannot agree that these rules will not apply. However, certain housing is exempt from the law, like building built in the last 15 years, two-unit properties where the second unit is occupied by the owner, and single-family homes and condominiums (under certain conditions).

Is Rent Control Beneficial to Tenants?

A Real Estate Agent With a Home Model is Talking to Clients About Renting a Home

Most tenants would agree that rent control policies are beneficial to them. After all, your rent is cheaper and your landlord cannot evict you for any spurious reason. That is enough for most tenants to support rent control measures, but not everybody agrees. And it’s not just disgruntled landlords that can’t make more money who are against rent control.

Counter-Arguments to Rent Control

The National Apartment Association is one of the larger opponents of rent control in the U.S. They state that:

“Rent control distorts the housing market by acting as a deterrent and disincentive to develop rental housing, and expedites the deterioration of existing housing stock. While done under the guise of preserving affordable housing, the policy hurts the very community it purports to help by limiting accessibility and affordability.”

The NAA’s stance echoes the sentiment of various economists and public figures since rent control was introduced post-WWII. The counter-arguments are complex, but they can be simplified to – rent control distorts supply and demand and actually reduces the supply, stymies investment, and lowers the quality of apartments offered.

Whether this is one of the rent control myths propagated by big investors or a simple truth is, ultimately, up to you to decide. But focusing on the big picture is a luxury not many have. For most tenants, rent control is a beneficial instrument that provides some level of protection from rent increases and undeserved evictions.

Are You a Landlord That Can’t Make the Math Work?

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