What Is Rent Control And How Does It Work?

Finding an affordable place to live can be difficult, especially if you’re renting. When combined with utilities and other necessary expenses, rent can put a serious strain on your monthly budget.

The costs associated with renting are the reason many people seek rent-controlled properties when looking for a place to live. Rent control aims to improve housing affordability by preventing landlords from raising rent prices to overly high levels.

There’s more to rent control than meets the eye, however. Let’s take a look at how the program works, how to find rent-controlled apartments and other ways to secure affordable housing.

Rent control is a legal method used by states and local governments to cap the amount that landlords can charge for rent. It also limits the amount that landlords can raise rent for existing tenants.

Every municipality determines the rent control law’s provisions and puts any caps in place. It’s important to note that rental rates will typically fall below the current housing market rate, making the rentals more affordable. This method is also known as rent stabilization because it keeps rental prices from surging each year.

Keep in mind that rent control ordinances aren’t implemented everywhere. In fact, more than 30 states have passed laws making it impossible for cities and towns to implement rent control regulations. Fortunately, there are other forms of affordable housing that are available across the U.S. We’ll discuss those options later on in the article.

In an area with rent control, the jurisdiction or municipality determines how much landlords can charge for specific rental properties, and this is often based on square footage or the number of bedrooms in the unit. The municipality also caps the percentage that landlords can raise the rent on existing tenants each year.

If the landlord tries to charge too much or attempts to raise rent by more than is allowed under the rent control law, tenants can report the landlord to the city’s housing authority for the violation.

In a rent-controlled property, tenants won’t have to worry about paying more than the city deems appropriate. The rent will be capped at the maximum, and any rent increases will be limited to the levels that the municipality has set.

This can make rent payments more predictable for tenants. It also allows tenants to choose a house or apartment that they can likely stay in for years without having to worry about the rent becoming a major financial burden.

Rent control has been in place in some large cities for decades and has advantages and disadvantages for both tenants and landlords. Let’s take a look at some of these pros and cons.

The Pros Of Rent-Controlled Apartments And Rentals

The pros of rent-controlled apartments extend beyond providing affordable rentals to tenants. Rent-controlled apartments also:

• Create stability: In areas with rent caps, tenants are more likely to stay put. This creates stability for the tenants and the neighborhood.
  
  
• Free up money: Stable and fair rent prices allow tenants to use more of their income to pay for necessities and luxuries alike.
  
  
• Increase occupancy rates: One of the biggest challenges for landlords is finding reliable tenants to fill their units. Since rent-controlled properties are in high demand, landlords will likely enjoy a higher occupancy rate each year.
  
  
• Reduce eviction rates: Landlords may have to end tenancies for different reasons, such as if the tenants can’t afford their rent. This can make it difficult for the former tenants to secure safe housing in the future. Rent control protections reduce eviction rates, making renters more likely to find a new home if they ever need to move.

The Cons Of Rent-Controlled Apartments And Rentals

Although rent control has a number of benefits, rent-controlled apartments can also be:

• Less profitable: Since the law restricts how much landlords can charge for rent-controlled properties, they must accept a lower profit.
  
  
• Hard to find: Low profit potential tends to discourage landlords from offering rentals in rent-controlled areas. As a result, some people have a harder time finding an affordable place to live.
  
  
• Poorly maintained: Because landlords are limited in how much they can require in rent, they may be less willing to maintain or upgrade their rentals.
  
  
• Illegal in some areas: For better or worse, many states and cities have banned rent control. This makes it harder to find affordable rental housing and impossible for municipalities to offer rent-controlled properties.

Most landlords who oversee rent-controlled properties should tell you upfront if the apartment or rental unit you’re interested in is rent-controlled. However, finding these rentals takes a bit more work than scrolling through real estate listings online.

You’ll need to check with your city government to see if it has a list of rent-controlled properties on hand. Keep in mind that the list you’ll receive will likely be small or feature some rental properties that are unavailable.

If you want an apartment with rent controls in place, start looking for one as soon as you can. The sooner you can contact landlords in your area, the easier it will be to identify openings or put your name on a waiting list for new tenants.

Since rent-controlled properties are rare, finding one may not be possible in your area. There are, however, a few alternative forms of affordable housing that you’ll be more apt to find regardless of location. Below, we’ll explore a few options available in most municipalities even if rent control is banned.

Section 8 Housing

Section 8 housing is designed to help low-income individuals and families secure safe and affordable housing until their circumstances improve. The program is backed by the U.S. Department of Housing and Urban Development (HUD).

Qualifying individuals will receive housing vouchers that they can use to cover the cost of rent each month. HUD will pay the property owner or landlord the difference between what you pay and the monthly rent.

Any landlord is free to accept Section 8 vouchers, but it’s not required. When looking for apartments, make sure to discuss your needs and your options with the landlords you’re considering. If a landlord refuses to accept Section 8 vouchers, you may want to look elsewhere.

Keep in mind that Section 8 housing involves some income restrictions. Talk with your local housing authority to find out whether you qualify. It is also worth noting that in some areas, there might be a long waitlist for such housing.

Public Housing

Also provided by HUD, public housing works a little differently than Section 8 housing. Unlike Section 8 housing, subsidized or public housing is limited to specific apartments or properties managed by your local housing authority.

The types of public housing options available will depend on your location and the properties offered. However, most cities offer everything from apartments and townhouses to standalone homes suitable for larger families.

To qualify for one of these rentals, you’ll have to prove that your income falls within the acceptable range for your area. If you make more money than the maximum amount specified by the housing authority, you won’t qualify for a lease. Once again, long waitlists are common in some areas.

Getting A Roommate

If the cost of rent is too high for you to afford on your own, getting a roommate can help ease the financial burden you face each month. With a roommate, you can split the cost of rent and utilities, thereby lowering how much you pay.

Buying A Home

As surprising as it might be, buying a home may end up saving you money each month. While you’ll have to make a monthly mortgage payment just like you’d pay monthly rent, the amount you’ll spend on a mortgage payment could possibly be less than you’ll pay in rent.

Plus, unlike with renting, you’ll build equity with each mortgage payment. As your home equity increases, you’ll be in an overall better place financially and have more financial flexibility. For example, you’ll be able to keep more of the money from the sale of your home if you ever decide to relocate.

If you’re looking to buy a house, it’s best to take the time to get familiar with different types of mortgages so you can choose the best fit for your needs and your financial situation.

Here are a few frequently asked questions about rent control to help you deepen your understanding of this legal provision.

What does ‘rent control’ mean?

Rent control, also called rent regulation, is a legal policy that sets a cap on annual rent increases every year. Rent control also puts a limit on how much landlords can charge in rent for different property types.

How will I know if I’m living in a rent-controlled apartment?

Usually, landlords will tell you when you sign the rental agreement if the property you’re leasing is rent-controlled. If you’re not sure, you can always check with your local housing authority. They’ll be able to tell if your current rental is rent-controlled, and they can provide you with a list of suitable apartments in your area.

How can I find a rent-controlled apartment if I’m not already in one?

If you’re searching for available rent-controlled housing units, contact your local housing authority for assistance. They’ll help you identify rent-controlled apartments and rentals in your area and may be able to help you explore different affordable housing options.

What states have rent control laws?

Currently, Oregon is the only state that has implemented statewide rent control laws and tenant protections. Washington D.C., California, Maine, Minnesota, Maryland, New Jersey and New York don’t have state laws on rent control, but certain municipalities (like New York City and San Francisco) do have rent caps and rent control policies in place. 

Are any property types exempt from rent control laws?

Whether specific types of properties are exempt from rent control policies depends on the local or state laws. It can also depend on your local rental market and the housing supply in your area.

Some examples of property types that may not be subject to rent control laws include new construction properties, certain owner-occupied homes and luxury condominiums, townhouses and apartment buildings.

Will I always save money if I stop renting and buy a house?

It depends on the price of your house and the terms of your mortgage loan. The more money you spend on your home, the larger your monthly mortgage payment will likely be. If you’re looking to save money, choose a home and a mortgage that will give you a monthly payment that’s less than you’re paying in rent.

While finding a rent-controlled unit can be a great way to save on your monthly expenses, it’s an imperfect solution. Rent-controlled housing is hard to come by even in some cities where the program has been around for decades.

With this in mind, looking for alternative types of affordable housing or buying a home may be a better option. When you purchase a home, you’ll never again have to worry about unexpected rent increases.

If you’re thinking about buying a house, start the approval process today with Rocket Mortgage^Ⓡ. You can also give us a call at (833) 326-6018.