Introductory economics courses often teach that rent control is a bad policy. It is argued that artificial price caps impede production – in this case, the creation and maintenance of apartments. This is leading to a housing shortage and rising rents throughout the market.
However, the idea continues to gain traction and is attracting new attention in the United States.
Zohran Mamdani, who took office as mayor of New York on January 1, is pushing for a rent freeze for about 2 million New Yorkers. On his first day in office, Mr Mamdani also signed three decrees related to housing: City Hall will protect tenants and two more creation of target groups speed up housing construction.
Why did we write this
Across the United States, jurisdictions are seeking to implement rent regulations as housing costs continue to rise. But finding long-term solutions, including building millions of homes, will not be easy.
Across the country, authorities are moving to introduce rent regulations as housing costs continue to rise, especially in major cities. Los Angeles City Council members, for example, voted in November to lower the annual rent increase cap for most city apartments from 8% to 4%. Washington state caps annual rent increases up to 10% last spring. Washington, D.C., which already limits rent increases, is considering a ballot initiative that would I'd freeze Rented in full for two years. And later this year, Massachusetts residents will likely vote yes. voting question that will limit rent increases to the inflation rate, to a maximum of 5%.
Many cities have had rent control for decades. But a recent surge of new initiatives has renewed debate about the role of government in free markets. Supporters see rent control as a necessary measure to address the affordability crisis. Many economists remain skeptical, arguing that such tactics will increase long-term costs, worsen shortages and degrade housing quality.
Manuel Pastor, an economist and sociology professor at the University of Southern California, reflects a different, more middle-of-the-road view among some housing policy experts.
“This is one of those debates where the ideological fire doesn't match the empirical fire,” he says. “Rent stabilization is one tool… Why would you put that tool aside?”
Why are proponents pushing for rent control now?
Those who favor rent control argue that housing costs for working families have reached a level where the government must intervene to bring them down.
“Something has to give,” said Tara Raghuveer, who heads the Federation of Tenants Unions, a national organization that supports federal rent control. “The only immediate solution that makes sense on a large scale is rent control.”
In 2023 half of the tenants in the United States, they qualify as “cost-burdened,” meaning they spend more than 30% of their income on housing. (About 27% spend half their income on housing). Most of these burdened tenants lived in one of the nation's 50 largest cities.
Rent control is also popular among voters and can spur political action. According to Redfin's 2024 survey, 82% of respondents Limits on rent increases are supported.
Researchers say such regulation historically arose amid pressures in the housing market – dating back to World War I, when building materials were pumped out to support the war and housing construction declined. Congress also froze rents. for 80% of the country's population Rental stock during the Second World War.
By the mid-1970s, such strict freezes and restrictions gave way to “stabilization” policies, which allow rents to be adjusted but subject to certain restrictions. Rent-stabilized cities include Washington, Los Angeles and San Francisco, as well as New York, where about 1 million apartments are rent-stabilized. 69% of residents rent out their homes.
Who opposes rent control and why?
Opponents argue that rent control is not a viable long-term solution and is exacerbating shortages and increasing housing costs. They say it's not just a coincidence that cities with rent controls rank high on lists of places with large housing shortages.
“This is only making the housing crisis worse,” said Tamara Small, CEO of the Massachusetts chapter of the Commercial Real Estate Development Association. “This reduces the overall number of units and reduces the quality of those units.”
Economists have long argued the same thing.
According to a 2012 survey of economists at the University of Chicago, more 80% against rent control. Only 2% supported him. Investment in multifamily rentals fell 13% in 2024 after Montgomery County, Maryland, implemented a rent stabilization program, according to the company. Wall Street Journal.
Part of the resistance concerns housing quality: Lower rents leave landlords with less income to spend on renovations, which could add to the undesirable housing stock in New York and elsewhere. To get back on the market, apartments could require hundreds of thousands of dollars in renovations—renovations that owners are reluctant to do because they fear rental income won't cover expenses.
What do the studies say?
Researchers generally agree that the regulation is effective in reducing rents for tenants in affected apartments. A 2014 study found that rents in Cambridge, Massachusetts, where rent control was in effect from 1970 to 1994, were 44% lower in regulated units than in unregulated units. In 2022, a review of 31 rent control studies found that 25 found lower rents in rent-controlled apartments.
These cost savings also tend to lead to longer stays, and this stability can bring social benefits to families. But longer leases could create a mismatch between tenants' needs and the housing they receive, some economists say. For example, a family may decide to stay in a rent-controlled apartment even if it has outgrown it.
Rent controls can also lead to a net loss of rental units. A 2019 San Francisco study found that expanding rent controls reduces number rental apartment buildings by 15%, as some landlords tried to make up for lost profits by converting their apartments to condominiums. The reduced supply of rental housing is “likely to increase rents in the long term,” the study said.
Carefully crafting new rent rules could be key to preventing damage to the market, Professor Pastor said. Unlike more stringent rent control policies, many modern rent stabilization policies allow for some rent increases (helping landlords cover renovation costs). And they exempt newly built apartments from the tax to reduce the risk of construction cuts.
What are other ways to stabilize or reduce home prices?
Proponents on all sides of the debate agree that to lower rents in the long term, the U.S. must build more housing.
The price of any product tends to rise when demand exceeds supply. housing construction is difficult keep pace with population growth since the 2008 recession. A recent Goldman Sachs report says the US needs to build between 3 million and 4 million homes to close the gap.
Changing zoning laws to simplify regulations and eliminate parking minimums could make it easier to build multifamily buildings, since current requirements often add tens of thousands of dollars to construction costs.
But building millions of new homes will take time. It is also likely to clash with NIMBYism – the idea that building certain types of additional housing degrades communities. Some advocates also argue that rent control policies increase support for new housing construction.
A 2022 study found that residents of rent-controlled apartments were 37 percentage points more likely to support new housing development in their neighborhoods—possibly because it makes residents less concerned about gentrification and displacement.
