Swedish economist Assar Lindbeck once claimed that, “in many cases, rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” But ask any tenant paying below market price, and you might get a different response.
Despite being around for decades, rent control is still a controversial practice, with back-and-forth debate over its value within America’s economy.
Rent Control History
The birth of rent control came out of World War I, not surprisingly, in New York City, an area known for its rent control policies. During and even after the war, building and construction had stopped, which resulted in a housing shortage. With the city’s vacancy rate dropping below 1 percent, rent prices sky-rocketed, which led to renting strikes. These uprisings mostly took place in working-class neighborhoods, with women at the forefront.
Eventually, the Republican-controlled New York state legislature authorized a rent-control plan to curb rent charges and prevent people from getting evicted. Soon, other cities like Washington, D.C., passed comparable laws. However, the problem in New York was that there was no board to manage the new legislation, and municipal court judges weren’t confident in how to resolve tenant problems.
By 1929, the state laws expired, and construction had started to boom again. But after World War II, the concept was revived and has remained relevant ever since.
Largest Cities with Rent Control Policies
|New York City||NY||8,128,980||17,351 people/sq.mi.
|Los Angeles||CA||3,782,544||7,525 people/sq.mi.
|San Jose||CA||939,688||5,206 people/sq.mi.
|San Francisco||CA||797,983||5,860 people/sq.mi.
|Jersey City||NJ||245,226||11,634 people/sq.mi.
The main goal with rent control is to make affordable housing available to lower- and middle-income residents. In areas without rent control, rent prices increase and decrease based on supply and demand. So if an area becomes particularly popular, rent control makes this area accessible to more than just people willing to pay top dollar to live in this location. Thus, rent control makes sure cities and areas don’t become restricted to wealthy residents and create large pockets of inequality.
However, the debate goes back and forth. While it may benefit tenants in the short term, economists and critics believe there are more long-term consequences of rental control, including lower property value and housing investment, or more “inertia,” which the New York Times outlines as a key factor to housing shortages.
Pros and Cons of Rent Control
|Protects access to housing||Provides landlords opportunity to discriminate against long-term tenants|
|Protects the tenant from being taken advantage of||Provides landlords opportunity to slack on repairing and maintaining units until end of lease|
|Benefits young, middle-income, and elderly people||Studies show increases in housing investment when rent control is dismantled|
|Allows neighborhoods to maintain economic and social diversity||Limits landlords' income and also hurts communities that depend on property tax revenue, which is calculated based on property's value|
|Allows tenants to budget better for their future since the cost won't change||Enables tenants to exploit the program (the rich, families that pass apartments down, subletting that jacks up the price) or just never leave|
Compared to standard rent control, rent stabilization is a more flexible option that’s only available in New York City and in Nassau, Rockland, and Westchester counties outside of the city. Under this program, a city board comes together every year and figures out how much landlords should charge their tenants. In New York City, generally it applies to buildings of six or more units built between February 1, 1947, and December 31, 1973, while outside of the city, it applies to non-rent-controlled apartments in buildings of six or more units built before January 1, 1947.
The Bottom Line
While most states have laws forbidding the practice of rental control, some debate whether the housing approach isn’t worth a second look. On the other hand, there are some pricey drawbacks to it. Just ask developers Will and Arthur Zeckendorf, who were forced to pay a 73-year-old recluse $17 million in order to buy out his rent-controlled apartment.