Rent regulation is a system of laws for the rental market of dwellings, with controversial effects on affordability of housing and tenancies. Generally, a system of rent regulation involves: *

Price controls Price controls are restrictions set in place and enforced by governments, on the prices that can be charged for goods and services in a market. The intent behind implementing such controls can stem from the desire to maintain affordability of go ...

, limits on the rent that a landlord may charge, typically called rent control or rent stabilization *

Eviction Eviction is the removal of a Tenement (law), tenant from leasehold estate, rental property by the landlord. In some jurisdictions it may also involve the removal of persons from premises that were foreclosure, foreclosed by a mortgagee (often ...

controls: codified standards by which a landlord may terminate a tenancy *Obligations on the landlord or tenant regarding adequate maintenance of the property *A system of oversight and enforcement by an independent regulator and ombudsman The loose term "rent control" covers a spectrum of regulation which can vary from setting the absolute amount of rent that can be charged, with no allowed increases, to placing different limits on the amount that rent can increase; these restrictions may continue between tenancies, or may be applied only within the duration of a tenancy. As of 2016, at least 14 of the 36

OECD The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...

countries have some form of rent control in effect, including four states in the United States. Rent regulation is implemented in many diverse forms. It is one of several classes of policies intended to improve housing affordability. Its efficacy and collateral impacts have been the subject of disagreement and controversy. There is consensus among economists that rent control reduces the quality and quantity of housing units.See also the "

Effectiveness Effectiveness or effectivity is the capability of producing a desired result or the ability to produce desired output. When something is deemed effective, it means it has an intended or expected outcome, or produces a deep, vivid impression. Et ...

" section for more references supporting this statement.

Forms

The loose term "rent control" can apply to several types of price control: * "strict price ceilings", also known as ''rent freeze'' systems, or ''absolute'' or ''first generation'' rent controls, in which no increases in rent are allowed at all (rent is typically frozen at the rate existing when the law was enacted) * "vacancy control", also known as ''strict'' or ''strong'' rent control, in which the rental price can rise, but continues to be regulated in between tenancies (a new tenant pays almost the same rent as the previous tenant) and * "vacancy decontrol", also known as ''tenancy'' or ''second-generation'' rent control, which limits price increases during a tenancy, but allows rents to rise to market rate between tenancies (new tenants pay market rate rent, but increases are limited as long as they remain). Rent price controls remain the most controversial element of a system of rent regulation. Modern rent controls (sometimes called rent leveling or rent stabilization) are intended to protect tenants in residential properties from excessive rent increases. This is usually done by mandating gradual rent increases or rent freezes, while at the same time ensuring that landlords receive a return on their investment that is deemed fair by the controlling authority.

Effects

On housing supply

There is consensus among economists that rent control reduces the quality and quantity of rental housing units. However, some economists challenge this consensus and argue that controls do not have a statistically significant impact on quantity and quality of housing units. One historical example of widespread rent control occurred in the US during

World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

. Roughly 80% of rental housing was put under rent control in 1941. The observed result was that landlords opted to sell their units at uncontrolled prices rather than renting at controlled prices, leading to an increase in home ownership and a decrease in rental units. A number of neo-classical and Keynesian economists say that some forms of rent control regulations create shortages and exacerbate scarcity in the housing market by discouraging private investment in the rental market. In addition, there would be a dead weight loss and inefficiency since some of the loss due to price ceilings is never gained again. This analysis targeted nominal rent freezes, and the studies conducted were mainly focused on rental prices in Manhattan, or elsewhere in the United States. In 1971, the Swedish economist Assar Lindbeck, a housing expert, said that "rent control appears to be the most efficient technique presently known to destroy a city – except for bombing". In a 1992 stratified, random survey of 464 US economists, economics graduate students, and members of the American Economic Association, 93% "generally agreed" or "agreed with provisos" that "A ceiling on rents reduces the quantity and quality of housing available." A 2009 review of the economic literature by Blair Jenkins through EconLit covering theoretical and empirical research on multiple aspects of the issue, including housing availability, maintenance and housing quality, rental rates, political and administrative costs, and redistribution, for both first generation and second generation rent control systems, found that "the economics profession has reached a rare consensus: Rent control creates many more problems than it solves". . In a 2012 poll of 41 economists by the Initiative on Global Markets (IGM) Economic Experts Panel, which queried opinions on the statement "Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them," 13 members said they strongly disagreed, 20 disagreed, 1 agreed, and 7 either did not answer, were undecided, or had no opinion. . In David Sims's 2007 study of the deregulation of the housing market in Cambridge, Massachusetts, he found that "rent control had little effect on the construction of new housing but did encourage owners to shift units away from rental status and reduced rents substantially." Paul Krugman writes that rent control inhibits construction of new housing, creates bitter tenant–landlord relations, and in markets with not all apartments under rent control, causes an increase in rents for uncontrolled units. Thomas Sowell wrote in 2008 that rent control reduces the supply of housing, and has stated that rent control increases urban blight. In 1994, San Francisco voters passed a ballot initiative which expanded the city's existing rent control laws to include small multi-unit apartments with four or fewer units, built prior to 1980 (about 30% of the city's rental housing stock at the time). A 2019 study found that San Francisco's rent control laws resulted in landlords removing 30% of the rent controlled units from the rental market (by conversion to condos or

TICs A tic is a sudden and repetitive motor movement or vocalization that is not rhythmic and involves discrete muscle groups. Tics are typically brief and may resemble a normal behavioral characteristic or gesture. Tics can be invisible to the obs ...

) which led to a 15% citywide decrease in total rental units, and a 7% increase in citywide rents.

On low income renters

In a 2013 analysis of the body of economic research on rent control by Peter Tatian at the Urban Institute, he stated that "The conclusion seems to be that rent stabilization doesn't do a good job of protecting its intended beneficiaries—poor or vulnerable renters—because the targeting of the benefits is very haphazard.", and concluded that: "Given the current research, there seems to be little one can say in favor of rent control." A 2016 study by NYU's Furman Center takes a more positive view on rent regulation, especially as a tool to slow gentrification: "Although rent regulation is ill-targeted if viewed as a purely redistributional program," write the three authors of the study, "as a program to promote longer-term lower rent tenancies for the tenants who benefit from it, even in hot rental markets, it seems to succeed." A 2021 Columbia Business School study found that there are benefits to rent regulation, arguing that "the housing stability they provide disproportionately benefits low-income households. These insurance benefits trade off against the aggregate and spatial distortions in housing and labor markets that accompany such policies."

Alternatives

To address the challenges lower-income individuals and families face in securing affordable housing, research points to more effective interventions. According to a research review by Lisa Sturtevant, key strategies include increasing federal housing vouchers and expanding the Low-Income Housing Tax Credit (LIHTC) program, both of which are seen as more promising for creating affordable housing options. The Reason Foundation identifies, next to housing vouchers, less restrictive

zoning In urban planning, zoning is a method in which a municipality or other tier of government divides land into land-use "zones", each of which has a set of regulations for new development that differs from other zones. Zones may be defined for ...

and building regulations as a key alternative to improve housing affordability. They argue that these regulations inflate development costs, thus limiting the availability of affordable rental units. Reducing these regulatory burdens and simplifying approval procedures will encourage new construction and expand the housing supply.

History

Early modern Europe

Rent control was used in

Rome Rome (Italian language, Italian and , ) is the capital city and most populated (municipality) of Italy. It is also the administrative centre of the Lazio Regions of Italy, region and of the Metropolitan City of Rome. A special named with 2, ...

as early as 1470 to protect

Jewish Jews (, , ), or the Jewish people, are an ethnoreligious group and nation, originating from the Israelites of History of ancient Israel and Judah, ancient Israel and Judah. They also traditionally adhere to Judaism. Jewish ethnicity, rel ...

residents from

price gouging Price gouging is the practice of increasing the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair by some. This commonly applies to price increases of basic necessities after natural disaste ...

. Since Jews in the

Papal States The Papal States ( ; ; ), officially the State of the Church, were a conglomeration of territories on the Italian peninsula under the direct sovereign rule of the pope from 756 to 1870. They were among the major states of Italy from the 8th c ...

were forbidden to own property, they were dependent on

Christian A Christian () is a person who follows or adheres to Christianity, a Monotheism, monotheistic Abrahamic religion based on the life and teachings of Jesus in Christianity, Jesus Christ. Christians form the largest religious community in the wo ...

landlords, who charged them high rents. In 1562, Pope Pius IV granted Jews the right to own property worth up to 1,500 Roman scudi and enacted rent stabilization. In 1586, Pope Sixtus V issued a bull ordering landlords to rent out houses to Jewish tenants at reasonable rates.

By country

Australia

Rental regulations are administered by the state and territory governments. Rent control and freezes were features of the First and Second World War, the

Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...

, and the early stages of the

COVID-19 pandemic The COVID-19 pandemic (also known as the coronavirus pandemic and COVID pandemic), caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), began with an disease outbreak, outbreak of COVID-19 in Wuhan, China, in December ...

Australian Capital Territory

The

Australian Capital Territory The Australian Capital Territory (ACT), known as the Federal Capital Territory until 1938, is an internal States and territories of Australia, territory of Australia. Canberra, the capital city of Australia, is situated within the territory, an ...

(ACT) is the only jurisdiction with regulation specifying maximum rent increases. Rents can only be increased for sitting tenants once a year by a maximum of 110% of the

consumer price index A consumer price index (CPI) is a statistical estimate of the level of prices of goods and services bought for consumption purposes by households. It is calculated as the weighted average price of a market basket of Goods, consumer goods and ...

for the cost of rent in the ACT. Rents between tenancies are not regulated, and are allowed to rise to market rate upon vacancy (vacancy decontrol). Rent increases above the amount prescribed by regulation may be disputed by application to the ACT Civil and Administrative Tribunal (ACAT). Other Australian jurisdictions allow for rent increases every six to twelve months with variable notice periods.

New South Wales

New South Wales has a small number of tenants who are not covered by the ''Residential Tenancies Act 2010 (NSW)'', but rather continuing provisions of the repealed
Landlord and Tenant (Amendment) Act 1948 (NSW)
'. Such ‘protected tenants’ pay a regulated ‘fair rent’ set either through a ''Section 17A agreement'' registered with NSW Fair Trading, or a magistrate sitting as the Fair Rents Board (NSW).

Canada

In Canada, there are rent regulation laws in each province. For example, in

Ontario Ontario is the southernmost Provinces and territories of Canada, province of Canada. Located in Central Canada, Ontario is the Population of Canada by province and territory, country's most populous province. As of the 2021 Canadian census, it ...

the '' Residential Tenancies Act 2006'' requires that prices for rented properties do not rise more than 2.5 percent each year, or a lower figure fixed by a government minister.

China

China announced in August 2021 new nationwide rent regulations that cap maximum yearly rent increases to 5% in all urban areas, which comprise over 2/3 of the population and include most of the ~250 million renters in the country.

France

Rent regulations are determined in France based on the Rent Reference Index, which serves as the basis for what landlords can increase yearly rents by. In July 2022, France introduced a new cap on yearly rent increase of a maximum of 3.5% for one year.

Germany

German rent regulation is found in the "Civil Code" (the ''

Bürgerliches Gesetzbuch The ''Bürgerliches Gesetzbuch'' (, ), abbreviated BGB, is the civil code of Germany, codifying most generally-applicably private law. In development since 1881, it became effective on 1 January 1900, and was considered a massive and groundbr ...

'') in § 535 to § 580a. As common in German law, regulations are structured into an abstract, more general part that applies to all contracts of a certain type, followed by a more specific section for individual fields of application of this type of contract. Specific regulations for rental contracts governing apartments range from §§ 549 - 577a BGB. The German law differentiates between the rental price at the starting point of the contract and rent increases throughout the duration of the contract. Generally, the rental price at the starting point of the contract is determined by the contractual agreement between the parties. Only in designated regions with a strained housing market, the rental price at the beginning of the rental agreement are capped by law. Increases in the rental prices throughout the duration of a rental contract are required to follow a "rent level" (''Mietspiegel''), which is a database of local reference rent prices. This collects all rent prices of new rental contracts of the past four years, and landlords may only increase prices on their property in line with rents in the same locality.

Usury Usury () is the practice of making loans that are seen as unfairly enriching the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is charged in e ...

Rents are prohibited altogether, so that any price rises above 20 per cent over three years are unlawful. Tenants may be evicted against their will through a court procedure for a good reason, and in the normal case only with a minimum of three months' notice. Tenants receive unlimited duration of their rental agreement unless the duration is explicitly halted. In practice, landlords have little incentive to change tenants as rental price increases beyond inflation are constrained. During the period of the tenancy, a person's tenancy may only be terminated for very good reasons. A system of rights for the rental property to be maintained by the landlord is designed to ensure quality of housing. Many states, such as

Berlin Berlin ( ; ) is the Capital of Germany, capital and largest city of Germany, by both area and List of cities in Germany by population, population. With 3.7 million inhabitants, it has the List of cities in the European Union by population withi ...

, have a constitutional right to adequate housing, and require buildings to make dwelling spaces of a certain size and ceiling height. In 2020, Berlin implemented a rent freeze, which was unprecedented in the German housing market. It benefitted sitting renters, but it substantially reduced the supply of new housing, harming those looking for a dwelling. The rent freeze was repealed in 2021.

Netherlands

Yearly rent increases in the Netherlands are capped at a maximum of inflation + 1%, calculated as 3.3% in 2022.

Spain

The

Catalonia Catalonia is an autonomous community of Spain, designated as a ''nationalities and regions of Spain, nationality'' by its Statute of Autonomy of Catalonia of 2006, Statute of Autonomy. Most of its territory (except the Val d'Aran) is situate ...

region of

Spain Spain, or the Kingdom of Spain, is a country in Southern Europe, Southern and Western Europe with territories in North Africa. Featuring the Punta de Tarifa, southernmost point of continental Europe, it is the largest country in Southern Eur ...

passed a rent-regulation law in September 2020.

United Kingdom

Rent regulation covered the whole of the UK private sector rental market from 1915 to 1980. However, from the Housing Act 1980, it became Conservative Party policy to deregulate and dismantle rent regulation. Regulation for all new tenancies was abolished by the Housing Act 1988, leaving the basic regulatory framework was " freedom of contract" by the landlord to set any price. Rent regulations survive among a small number of

council house A council house, corporation house or council flat is a form of British Public housing in the United Kingdom, public housing built by Local government in the United Kingdom, local authorities. A council estate is a building complex containing ...

s, and often the rates set by local authorities mirror escalating prices in the non-regulated private market.

United States

Rent regulation in the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

is an issue for each state. In 1921, the

US Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all Federal tribunals in the United States, U.S. federal court cases, and over Stat ...

case of '' Block v. Hirsh'' held that regulation of rents in the District of Columbia as a temporary emergency measure was constitutional, but shortly afterward in 1924 in '' Chastleton Corp v. Sinclair'' the same law was unanimously struck down by the Supreme Court. After the 1930s

New Deal The New Deal was a series of wide-reaching economic, social, and political reforms enacted by President Franklin D. Roosevelt in the United States between 1933 and 1938, in response to the Great Depression in the United States, Great Depressi ...

, the Supreme Court ceased to interfere with social and economic legislation, and many states adopted rules. In the 1986 case of '' Fisher v. City of Berkeley'', the US Supreme court held that there was no incompatibility between rent control and the Sherman Act. Rent control existed in several Massachusetts communities from 1970 to 1994. During this time, at least 20% of all rent-controlled apartments in Cambridge housed the rich. The vast majority housed middle- and high-income earners. They included Frederik, Crown Prince of Denmark. As of 2018, 4 states (

California California () is a U.S. state, state in the Western United States that lies on the West Coast of the United States, Pacific Coast. It borders Oregon to the north, Nevada and Arizona to the east, and shares Mexico–United States border, an ...

, New York,

New Jersey New Jersey is a U.S. state, state located in both the Mid-Atlantic States, Mid-Atlantic and Northeastern United States, Northeastern regions of the United States. Located at the geographic hub of the urban area, heavily urbanized Northeas ...

, and

Maryland Maryland ( ) is a U.S. state, state in the Mid-Atlantic (United States), Mid-Atlantic region of the United States. It borders the states of Virginia to its south, West Virginia to its west, Pennsylvania to its north, and Delaware to its east ...

) and the

District of Columbia Washington, D.C., formally the District of Columbia and commonly known as Washington or D.C., is the capital city and Federal district of the United States, federal district of the United States. The city is on the Potomac River, across from ...

have localities in which some form of residential rent control is in effect (for normal structures, excluding mobile homes). 37 states either prohibit or preempt rent control, while 9 states allow their cities to enact rent control, but have no cities that have implemented it. For the localities with rent control, it often covers a large percentage of that city's stock of rental units: For example: in

New York City New York, often called New York City (NYC), is the most populous city in the United States, located at the southern tip of New York State on one of the world's largest natural harbors. The city comprises five boroughs, each coextensive w ...

in 2011, 45% of rental units were either "rent-stabilized" or "rent-controlled", (these are different legal classifications in NYC) in the District of Columbia in 2014, just over 50% of rental units were rent-controlled, in

San Francisco San Francisco, officially the City and County of San Francisco, is a commercial, Financial District, San Francisco, financial, and Culture of San Francisco, cultural center of Northern California. With a population of 827,526 residents as of ...

, as of 2014, about 75% of all rental units were rent-controlled, and in

Los Angeles Los Angeles, often referred to by its initials L.A., is the List of municipalities in California, most populous city in the U.S. state of California, and the commercial, Financial District, Los Angeles, financial, and Culture of Los Angeles, ...

in 2014, 80% of ''multifamily'' units were rent controlled. In 2019 California passed a statewide rent cap for the next 10 years which limits yearly rent increases to 5% plus regional inflation. In 2019

Oregon Oregon ( , ) is a U.S. state, state in the Pacific Northwest region of the United States. It is a part of the Western U.S., with the Columbia River delineating much of Oregon's northern boundary with Washington (state), Washington, while t ...

's legislature passed a bill which made the state the first in the nation to adopt a state-wide rent control policy. This law limits annual rent increases to inflation plus 7 percent, includes vacancy decontrol (market rate between tenancies), exempts new construction for 15 years, and maintains the state ban on local rent control policies (state level preemption). In November 2021, voters in

Saint Paul, Minnesota Saint Paul (often abbreviated St. Paul) is the List of capitals in the United States, capital city of the U.S. state of Minnesota and the county seat of Ramsey County, Minnesota, Ramsey County. As of the 2020 United States census, 2020 census, ...

passed a rent control ballot initiative which capped annual rent increases at 3 percent, included vacancy control, and did not exempt new construction, nor allow inflation to be added to the allowable rate increase. This was followed by an 80% reduction in requests for new multifamily housing permits, while in neighboring

Minneapolis Minneapolis is a city in Hennepin County, Minnesota, United States, and its county seat. With a population of 429,954 as of the 2020 United States census, 2020 census, it is the state's List of cities in Minnesota, most populous city. Locat ...

, where voters authorized the city council to craft a rent control ordinance, yet to be enacted—which may exempt new construction from the rent control caps—permits were up 68%.

References

External links

Rent Control Around the World: Pros and Cons – Including summaries of rent control laws in many countries
{{Authority control Affordable housing de:Mietvertrag (Deutschland) fr:Contrôle des loyers