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This article is about a rent ordinance. For the movie of the same name, see Rent Control (film).

Rent control refers to laws or ordinances that set price controls on the renting of residential housing. It functions as a price ceiling.

In the United States during World War I, rents were "controlled" through the efforts of local rent anti-profiteering committees and public pressure. From 1919 to 1924, a number of cities and states adopted rent and eviction control laws. Modern rent controls were first adopted in response to WWII-era shortages, or following Richard Nixon's 1971 wage and price controls. They remain in effect or have been reintroduced in some cities with large tenant populations, such as New York, San Francisco, Los Angeles, and Washington, DC. Smaller communities also have rent control, notably Santa Monica, Berkeley, and West Hollywood California along with many small towns in New Jersey. In recent years, rent control in some cities, such as Boston and Cambridge, Massachusetts, has been ended by state ballot.

In some regions rent control laws are more commonly adopted for mobile home parks. Reasons given for these laws include residents owning their homes (and renting the land), the high cost of moving "mobile" homes, and the loss of home value when they are moved. California, for example, has only 13 local apartment rent control laws but over 100 local mobile home rent control laws. No new mobile home parks have been built in California since 1991.^[1]

Contents 1 Purpose and scope 2 Argument in favor 3 Argument against 4 Enforcement issues 5 References 6 See also 7 Further reading 8 External links

Although the political debate over rent control is far-reaching, as described below, the purposes and provisions of such laws are intended to be limited in scope. They define which rental units are affected, and may have only larger or older rental complexes covered by the law. The frequency and degree of rent increases are limited, usually to the rate of inflation defined by the Consumer Price Index or to a fraction thereof. (San Francisco, for example, allows annual rent increases of 60% of the CPI, up to a maximum 7%.[[1]])

Unregulated rent increases may be allowed when a tenant moves ("vacancy decontrol"). Rent-control laws that don't include vacancy decontrol are called strong rent-control laws. Such laws were in effect in five California cities (West Hollywood, Santa Monica, Berkeley, East Palo Alto and Cotati) in 1996, when AB 1164 (known as the Costa/Hawkins Bill) made strong rent-control unenforceable in California (except in special cases like mobile home parks).^[2][3][4].

Landlords have an opportunity to show that they are not receiving a fair return, for example by proving an increase in costs (such as capital improvements) that should be passed on to tenants. Tenants may be able to claim that decreased services or the lack of necessary repairs offset such additional increases or justify a rent reduction. Landlords may be required to register current rent levels or provide other information on rent increases and/or terminations of tenancy. (Since rent control laws vary considerably from jurisdiction to jurisdiction, landlords and tenants who may be affected should contact their local jurisdiction to obtain information on which law, if any, which applies to them.)

Rent control may be compared to zoning, where jurisdictions try to balance the rights of individual property owners with community interests. As with much urban planning, a successful balance may benefit both community values and property values, while an unsuccessful balance may have the opposite effect.

Communities consider the adoption of rent controls when conditions such as low vacancy rates, inadequate maintenance and large rent increases already exist. The community will have either a large tenant population or a tenant population which is considered by the community to be especially vulnerable. The creation of new rental housing may already be limited by geography, hazardous conditions (such as flood zones or earthquake faults), or by general economic conditions. Housing inspection programs, rental mediation and information services, and efforts by the rental industry itself to restrain unacceptable behavior may have been attempted with only limited success. A significant number of landlords have reacted to an existing scarcity by seeking excess profits, providing substandard goods and services or other behavior the community believes is improper. Conditions have already deteriorated and substantial portions of the community believe a solution is needed for an urgent problem.

Rent control is necessary to prevent landlords from imposing rent increases that force key-workers or vulnerable people to leave an area. Maintaining a supply of affordable housing is essential to sustaining the economy. Homeowners who support rent control point to the neighborhood instability caused by high or frequent rent increases and the effect on schools, youth groups, and community organizations when tenants move more frequently.

It has been contended that housing is an inalienable positive human right that equals or exceeds the property rights of landlords. Therefore the needs of the tenant should supersede the needs of the landlord.

The rental-accommodation market suffers from information asymmetries and high transaction costs. Typically, a landlord has much more information about a home than a prospective tenant can reasonably detect. Moreover, once the tenant has moved in, the costs of moving again are very high. Unscrupulous landlords can thus conceal defects and, if the tenant complains, threaten to raise the rent at the end of the lease. With rent control, tenants can ensure that hidden defects at least be repaired to comply with code requirements, without fearing retaliatory rent increases. Rent control may thus compensate somewhat for inefficiencies of the housing market.

Income tax codes often provide benefits for housing owners, and rent control allows tenants to share in some of those benefits. In the United States, the Internal Revenue Code allows landlords to claim depreciation deductions for rental property even while increasing rents. Homeowners may also deduct property taxes and mortgage interest, and exclude capital gains, from their taxable income. Tenants get none of these housing-related deductions or exclusions. By limiting the extent to which landlords can raise rent on purportedly depreciated property, rent control thus enables tenants to participate in the benefits that the legal structure confers upon housing.

Some property tax measures also promote the societal goals of community stability and allowing people to hold onto their homes even in times of inflation. In California, Proposition 13 generally caps real estate tax increases at 2% per year. Leading the campaign to enact Proposition 13, California politician Howard Jarvis claimed that landlords would pass tax savings along to tenants; when most failed to do so, it became an argument for rent control, to allow tenants to share in the benefit of the property tax control.[[2]]

Price ceilings can create shortages and reduce quality. It is argued that rent control creates a shortage of housing, reduces its quality, deters investment, and raises rents on tenants who are excluded from its protections (for example, in jurisdictions with vacancy decontrol, tenants who move or arrive later).

Furthermore, rent control may not be effective at lowering rents in the area under control. A rent control board or regulatory agency may be captured or politically influenced by the land owners or "landlords", and may be able to influence the regulatory process or "game the system" to the extent that the rent-controlled increases are more than what they would have been in the free market without the rent control law.

If a price is forcibly kept low, there will be higher demand. When demand outpaces supply, there is a shortage. However, since builders are restricted in the rents they may charge, they are less willing to construct more housing. Since supply is perpetually low, landlords also do not have to worry about tenants leaving - and there is little or no incentive to maintain the property. For example, unless the owner can reasonably expect that punitive action will be taken against them, they might let building maintenance deteriorate in order to mitigate the lower rental income. People moving into the city would have difficulty finding housing because of the shortage created by rent control.

Rent control laws are said to be a a textbook example of the problems that arise in trying to artificially reduce prices. The natural consequence in a free-market economy is a reduction in supply and consequent shortages.

Areas with rent-controlled housing are blamed for difficulty of finding vacant housing and the resulting power imbalance between landlords and tenants. Tenants have serious difficulty finding housing, so they are seriously disadvantaged if they must move. As a result, landlords can impose numerous conditions and requirements.

Rent control has been disavowed by some unlikely governments. Speaking in 1989, Vietnam's Foreign Minister Nguyen Co Thach said: "The Americans couldn't destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and that we must change policy."(http://www.econlib.org/Library/Enc/RentControl.html)

Moreover, it is argued that rent control violates the property rights of the property owners. Owners are limited in what they may do with their property, to some extent putting it to work for "the social good." In jurisdictions that do not already have rent control, introducing it may reduce the resale value of affected property. The benefits of rent control can accrue disproportionately to wealthy and well-connected tenants. In summary, it has been argued that the goal of making housing affordable and available to the poor can be accomplished more efficiently by the same free market that created the affordable units in the first place, or by government construction or subsidy if free market mechanisms alone are deemed insufficient.[3]

Some landlords use extralegal means to evade rent controls and attempt to take advantage of housing conditions. Some landlords may step up discrimination against any group they dislike if they believe there is a surplus of prospective tenants. Jurisdictions that implement rent controls may have to pass laws in response, such as forbidding landlords from compelling new tenants to hire the landlord's moving company. In some areas with especially strict rent controls, landlords may require key money (a non-refundable deposit). Demanding key money is illegal in most of North America, but since the landlord will invariably demand it in cash, it is very difficult to trace and nearly impossible to prove in court.

1. ^ Presentation to Ceres City Council, Ceres, California, by staff in rent control study, 2005, I think.^{[citation needed]}
2. ^ AB1164 Bill Text. Retrieved on 2007-12-01.
3. ^ California Civil Code Sections 1954.50-1954.535. Retrieved on 2007-12-01.
4. ^ Peter Dreier (May 14, 1997). Rent Deregulation in California and Massachusetts: Politics, Policy, and Impacts - Part II.

• Just cause eviction controls
• Affordable housing
• West Hollywood
• Santa Monica
• Rent control in New York

• Baar, Kenneth K., "Guidelines for Drafting Rent Control Laws: Lessons of a Decade". Rutgers Law Review, Vol. 35 No. 4 (Summer 1983)
• Gilderbloom, John I. Editor. Rent Control: A Source Book. Center for Policy Alternatives; 3rd edition, June 1, 1981. ISBN 0-938806-01-7.
• Keating, Dennis. Editor. "Rent Control: Regulation and the Housing Market". Center for Urban Policy Research: 1998. ISBN 0-88285-159-4
• Niebanck, by Paul L. Editor. The Rent Control Debate. Urban and Regional Policy and Development Studies. 148 pages. University of North Carolina Press. February 1, 1986. ISBN 0-8078-1670-1.
• Tucker, William. "Zoning, Rent Control and Affordable Housing". 1991. ISBN 0-932790-78-X

• What Rent Control Does, Economics in One Lesson by Henry Hazlitt, 1946
• Pro-rent control article from tenant.net
• Rent Control History in Ontario and Canada
• Testing Hypotheses About Rent Control in Canada Commissioned by Canada Mortgage and Housing Corporation - Dispels many myths
• Anti-rent control article by economist Paul Krugman
• New York Magazine article on Rent Control including interviews with tenants
• Rent Control in the New Millenium by Dennis Keating
• Almanac of Policy Issues - Rent Controls
• Rent Controls and Housing Investment
• Pro-rent control article from Dollars & Sense magazine
• Four Thousand Years of Price Control - Mises Institute