what is rent control

What is rent control? Many associate it with apartments in high rent areas like New York, a city well known for rent control. It controls rent prices, but who benefits from the program? Which apartments qualify?

What is a rent controlled apartment?

A rent controlled apartment has a maximum rent price, assigned by the government, attached to the unit. This price does not go up due to market demand or inflation. The rent control program is a fairly small state government program which especially benefits elderly residents on a fixed income.

Rent control is quite different from other rent subsidies offered by the government. Only older apartments and elderly residents qualify for it. Rent controlled apartments are for residents who have been living in the unit since 1971, or earlier. So that new complex you’ve had your eye on would not be covered.

Why was rent control created?

Rent control has a unique history. Its original name is the War Emergency Tenant Protection Act. Which war are tenants protected from? Surprisingly, World War II ! In 1942, President Roosevelt created a law called the Emergency Price Control Act. At that time, employment was up, due to all our resources going toward the war effort. The EPCA was made into law in response to inflation pressure.

Rent Stabilization

As rent control is gradually phased out, places like New York are leaning toward rent stabilization. Rent stabilization only allows rent to increase by a small increment each year (1% typically). Rent stabilization allows those who make a lower income to live in cities with high rental rates.

With rent stabilization, once the rent hits a certain point, the landlord can no longer increase it. The only way the rent can go back to market rate is if the renter starts to earn a consistently very high income ($200,000+ for 2 years). Rent stabilized units can be very hard to find: you won’t find them advertised in the paper or online. Once a resident signs a lease on a rent stabilized home, they stay put since the market rate is so much higher.

Rent control is a set rate from 1971. It does not take into account inflation or increasing costs for repairs. This is tough on landlords: they are losing money on the unit. And then that becomes not good for the tenant, because the landlord can’t afford to do necessary repairs on the home.

So, what happens to all the people living in an expensive place like New York, who cannot afford the rent at market rate? That is where rent stabilization comes in. It allows people making a lower income to find a place to live, while providing the landlord with more money to make necessary repairs.

What about repairs and renovations in a rent controlled unit?

How do landlords afford to do repairs and renovations with no rent increases? In California, they have a  Capital Improvements Passthrough which allows landlords to increase the rent to pay for repairs like a new roof or windows. After the repairs and costs have been covered, the rent goes back to its original price. However, not every state has this, so disrepair is a problem with many rent control homes.

Rent control is one of the oldest government control housing subsidies in existence today. It’s also unlike any other rental subsidy regarding its origins with WWII, and the protection of elderly residents. Many believe rent control will soon be replaced by rent stabilization. Keep your eyes peeled for new regulations in your state.

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About The Author

Bekah Steenbock is a freelance writer with a background in real-estate and business growth. She is a native Austinite, but has called Seattle, Mankato, Milwaukee, Las Vegas and Atlanta home. Bekah, her husband, and their three children love exploring the outdoors in their spare time.

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