Rent Control: The Ugly Truth
Chandler Bing, in the final episode of the popular sitcom Friends, told his newborn twins that their New York City apartment was a happy place, and thanks to rent control it was a steal!
Awe, rent control. Keeping apartments affordable in sitcoms everywhere for years! Sounds nice. Would could be so wrong?
What is Rent Control?
It’s the federally mandated limit on rent increases. The idea is that it prevents greedy landlords from raising rent and making housing unaffordable. It limits how much, and how often, landlords can raise rent. At first glance, from a renter’s perspective, this sounds great.
In practice, it hurts renters over the long-term. Imagine that the economy is booming, market rents around the country are skyrocketing - but not in the rent controlled locations.
Example argument:
In our example location, for easy math, let’s assume it only rent can only be raised by 5% once a year. Average rent is $1,000/month here and around the country. Around the country, average rent just moved up to $1,200/month. In our pretend location, rent increased to $1,050/month. Rents are projected to keep rising.
A builder, scoping locations to build a new set of apartment buildings. She can choose our rent-control location, or another location. The cost of land is about the same. The cost of labor is about the same. So, she decides where to build based on which building will sell for more when it’s done. The final sales price is based on the rental income. In our location, rents are now nearly 15% lower than other locations which means that the sales price will be nearly 15% lower. Our builder opts to build someplace else. All the builders do. This means our location consistently has new rental options, and housing shortages issues are exacerbated.
On the flip side, where there are fewer regulations new homes are built in excess. Want a real life example? Let’s look at Austin, Texas.
During the pandemic, and shortly after, Austin saw a huge boom in housing prices. Everyone was moving there and there weren’t enough homes. Builders moved in to take advantage. So many homes were built that housing prices have since crashed. Why? Economics.
Assuming a relatively regulation free market, price is driven by supply and demand. If there is more demand than supply, price goes up. If supply is higher than demand, price goes down. In Austin, there were very few regulations to slow down the building process. From August 2022 to June 2025, median home prices in Austin fell by 13.2%. The market corrected on its own.
What about rent controlled markets?
Pretend you have rentals in our make-believe location. The market isn’t doing so great and around the country rents are going down. Average rent is now $950/month, but economists predict that by next year they’ll be back up to $1,000/month. You are only allowed to raise rents by 5%. That means if you lower the rent to $950/month (when it was originally $1,000/month), then next year you can only raise it back up to $997.50/month. If you were a landlord, would you ever lower rent?
Forbes.com called rent control one of the 10 worst ideas of the century. Why? Because it ends up making housing shortages worse. It discourages landlords from doing upkeep and renovations. They can’t afford to renovate if they aren’t allowed to raise rents post-renovation. In some cases, they may even opt to forego regular maintenance as well.
The idea of rent control regulations might sound nice, but it has proven to hurt renters, communities, and landlords.
“A survey by the American Economic Association found that 93% of U.S. economists agreed that rent control reduces the quality and quantity of available housing.”