What Are the Effects of Rent Control?

In San Francisco all residential units constructed before June of 1979 are subject to rent control.

Rent control studies over a 30-year period have provided contradictory, convoluted and hard-to-understand conclusions. As summarized by a 2003 Swedish rent control study, "Rent control reminds us of macroeconomics: if you are studying it, and you are not at least a little bit confused, you are probably not yet thinking clearly." Rent control is legislation, usually at the city level in the United States, that limits how often and how much rents can be raised. In some states rent control is nonexistent. In others it is prevalent. In California, for instance, as of 2010, more than 40 cities had some type of rent control, applicable to at least some types of buildings or mobile homes.

Affordability to Some

Clearly, rent control lends a degree of affordability to those tenants who have remained in rent-controlled apartments for a long time. This is true whether or not the recipient needs this benefit. A senior who is on a fixed income may need and benefit from rent control. A wealthy business owner who may own property outside the city does not need, but does benefit from, rent control. Additionally, in many cities, such as San Francisco, rent control only applies to building of certain types, locations or date of construction. Because rent control applies to buildings and not people, the benefits accrue unevenly across the tenant population.

Reduced Supply

A oft-cited 1981 study on rent control in many countries concludes that these controls result in a decrease in the supply of housing units. The thinking behind the conclusion as it applies to new construction is that investors do not want to risk capital investment in an area in which profits are constrained. On the other hand, controls that do not apply to new construction, such as San Francisco's, would not deter builders of new units. In California, a state law called the Ellis Act allows landlords to go out of the rental business, either permanently or up to at least five years, one of the few escapes from rent control available to landlords of rent-controlled buildings. Some have used this law to turn apartments into TICs (tenants in common units), a local version of ownership that occurs as a precursor to condominium mapping. Others, according to one San Francisco newspaper article, use the law to vacate their buildings for a period of five years and then put the building back into the market with market-rate rents.

Reduced Maintenance

A 1985 Federal Reserve Bank study on the relationship between housing quality and maintenance and rent control concludes that rent-controlled housing is associated with housing maintained at a lower quality than it would have been had the units not been subject to rent control. On the other hand, a 2009 broad study on the effects of rent control in Los Angeles concluded that most rent-controlled units were maintained as well as non-rent-controlled units. Results may be different because code enforcement efforts in some communities are stronger than in others and rent control provisions are more restrictive in some communities than others, as concluded in a 2003 study.