4 Major Pros and Cons of Rent Control

4 Major Pros and Cons of Rent Control

by / Comments Off / 1 View / Jul 27, 2016

Rent control is a law that caps the increase of rent on a year to year basis. Rents are determined by landlords and tenants can agree, disagree or negotiate. Once a tenant has signed on the lease or rent agreement and starts to dwell at the address, the rent cannot be increased exponentially or arbitrarily. There is a certain upper limit set aside depending on which state you are in and which jurisdiction or city, town or district you are in. The rent control laws in Los Angeles are not the same as rent control in New York.

There are many rent control pros and cons. It may appear to be very desirable for tenants but that is not the case in every scenario. Also, it is not always a disadvantage for landlords as it is made out to be. Let us explore the various aspects of rent control which will showcase the merits and demerits.

List of Pros of Rent Control

1. Affordable Housing for Tenants
Imagine a scenario where a tenant pays ‘x’ as rent every month and that is deemed affordable. If the rent increases by 2% the following year, that can still remain affordable for most tenants. If the rent is increased by say 10%, it can easily become unaffordable for the tenant. Even if the increase is accommodated by the tenant in some way, whether through additional income or by instilling some austerity measures, the subsequent year’s increase will peg the rent at 20% more than the rent in the first year.

If the rent keeps on increasing at this rate which is entirely possible because the landlord will have a free run, then tenants will not find affordable housing in an area. They would have to move out, opt for poorer quality accommodation or perhaps will have to find some way to buy a home. Rent control makes housing affordable for tenants. Without rent control, there is no foreseeing how much a tenant may have to pay and by how much the rent can keep increasing every year.

2. Perennial & Chockablock Rentals for Landlords
Rent control naturally gets landlords to peg the increase within the rate or the capped mark. Since the rental is more affordable over the years, tenants are unlikely to move out. As a result, landlords that own many rentals will be able to have tenants staying perennially and they wouldn’t have to worry about vacant homes or apartments. This means more money for the landlord, less searching for new tenants and thus financial security in a way. Rent control is treasured by most tenants.

To hold onto the property, tenants are often more considerate, they don’t create major problems for landlords because of the fear of being evicted from an apartment that is affordable, the tenants are more likely to pay rents on time and the tenants are also likely to take care of their dwelling place, again for the fear of eviction. No one wants to get evicted from a rent controlled apartment. They may not get a similar deal elsewhere.

List of Cons of Rent Control

1. Unfair to Landlords
Landlords are dictated that they cannot increase the rent beyond a certain point. Inflation, cost of living and personal financial liabilities don’t follow the rule set by the government. It is likely that inflation over three years hits double digits, it is possible cost of living would increase by 10% all of a sudden and it is absolutely possible that landlords would have increasing financial obligations. Landlords cannot make up for this requirement of additional money by raising rents. One has to stay capped at the 2% or 3% or whatever the rate is that has been set aside in the state, city, district or town. It has been seen that many tenants who have otherwise experienced a growth in their income by 10% or much higher are still benefiting from rent control. In that sense, rent control doesn’t really benefit those who actually need it but even those who simply make the most of their advantageous scenario.

2. Lack of Enough Housing for Tenants
Rent control doesn’t apply to every neighborhood or every building in a given neighborhood. There are many cities where tenants outnumber the available apartments or housing options. In such areas, rent control doesn’t really help. People who stay in rent controlled apartments or houses stay there for a long time and those who have just moved in to the city or require leases will end up paying much more than the rent controlled prices. Rent control also deters many landlords or potential investors from putting their money into new properties. This creates a dearth in supply or availability of housing. Rent control can at times make rents unrealistically or ridiculously low for the landlords, tenants and the market. This doesn’t augur well for the rental industry.