Rent control refers to when a state government decides to limit the rent a landlord can charge. In simpler terms, if a tenant in Texas pays $1,000 a month living in a rent-controlled apartment, it will be illegal for the landlord to charge them more than that.
Given that rent-controlled apartments won’t have capped rent all the time, state governments allowing rent-controlled apartments set different rules and regulations to maintain this status. For instance, the New York state government only allows this format of renting only when family members are renting the apartment.
Other crucial regulations like the date of house construction will also determine the legality and continuity of rent control. If the set regulations and guidelines are not met, the rental apartments in question will be listed at market value.
Why Do People Prefer Rent Control?
The main reason why most people prefer rent control is that it keeps rent prices lower. Without rent control, tenants could be forced to pay more, especially if the area their current home is located becomes more popular. If they fail to pay the hiked rent, they will be forced to move to another location.
Doing so several times can be costly and disadvantageous. Another reason many people appreciate rent control is that it gives lower-income tenants access to more homes. Such tenants not only experience challenges keeping a home but also securing another one after eviction. This is why many tenants prefer rent control.
Advantages of Rent-Control
There are several advantages of rent control. Some of them include;
Saves the Tenant More Money
The main advantage of rent control is that it saves the tenant more over the year. Most tenants have been subjected to hefty rent increases at some point in their lives. But now that rent control limits the amount of legal increase, tenants aren’t subjected to big increases that affect their financial position.
There are rental properties that can increase rent by 10% every year. This makes it very difficult for an individual to live in that property without a job change or significant pay raise. Such predicaments are prevented by rent control.
With this format, there is some form of stability for renters. As a result, they can plan for their future knowing they will pay a fixed amount of rent for several years to come. This puts them in a better financial position.
Higher Chances of Lease Renewal
Given that the amount of rent is fixed, tenants are more likely to stay in the property for a long time. Relocating to another location or simply moving out of the property will mean risking a significant increase in the amount of rent they pay.
This is advantageous for tenants who won’t have to worry about dealing with vacancies every year. That will be the case because current tenants are likely to renew their lease. Dealing with vacancies is hectic and can be costly to the landlord.
Furthermore, turning the property over can cost up to $2,000 per apartment, a figure that increases when more vacancies are registered. Therefore, keeping the same tenants is beneficial not only for the renters but also the landlord — it helps the landlord eliminate unnecessary costs.
Disadvantages of Rent Control
As much as rent control is preferred by many people and boasts of several advantages, it has a few disadvantages. Discussed below are some of them.
Prices Fall Below Market
In most cases, rent-controlled houses and apartments fall below-market rents. The longer the apartment or house is rent-controlled, the further it falls behind. The biggest victim of this situation is the landlords — they won’t generate as much income as expected.
Most people invest heavily in real estate with the goal of enjoying long-term financial benefits. However, when rents are limited to specific amounts, it is challenging for landlords to achieve their financial goals. In fact, most of them will shy away from investing.
Furthermore, limited income means landlords won’t have enough money to maintain the property properly. Instead, they will keep postponing the repairs with the hopes of raising enough money. The number of repairs will increase when the property is vacant. When the property is in bad condition, it risks sanctions from the state government.
No Incentive to Upgrade
Usually, landlords regularly update their property by remodeling and installing new appliances to keep existing tenants or attract new ones. When a home has new appliances and improved amenities, the landlord can easily increase rent to carb for the expenses.
This only sounds fair because the tenant will be enjoying more comfort. However, with rent control laws, the drive and incentive to upgrade the property decreases significantly. Even when the landlord upgrades the kitchen appliances to modern ones and gets a new carpet, they will not be allowed to increase rent.
As a result, they will shy away from implementing both minor and major updates. This can significantly worsen the condition of the apartment.
Results in Older Buildings
Even though rent control mostly favors tenants, it is essential to note that most rent-controlled apartments are old buildings. While you might save a good amount of money living in such apartments, you won’t enjoy the same amenities and comfort offered in non-rent apartments. In most states, rent control laws apply to buildings built before 1985. This means that the building has been in existence for over three decades. Therefore, if you want to enjoy rent-controlled apartments, you will be forced to stay in an old unit.
Developers and investors are more likely to interest in building new apartments and homes in locations where rent control laws are applied. If the unit they intend to build is likely to be subjected to such laws, they will lose the incentive to build.
As mentioned earlier, most people invest in real estate with the main goal of enjoying financial benefits. With such benefits put in the hands of the state government, most people will shy away from building. As a result, such areas will remain untapped.