Rent control laws vary greatly based on the individual state or city where the rental property is located. For example, New York City and San Francisco are both big cities, and both have rent control laws, but these laws are very different. You must, therefore, check the local laws in the exact city where your rental property is located to determine the rules that apply. In general, rent control:
Sets a Cap on Rent Increases
Most rent control laws place a limit on how much you can increase a tenant’s rent by when their lease is up for renewal. This amount is usually based on an area-specific measurement, such as the local cost of living or inflation. In New York City, apartments that are limited by rent increases are known as rent-stabilized apartments, not rent-controlled apartments.
Could Set a Cap on Rent
In New York City, rent control laws put a limit on how much you can charge for rent. For example, you cannot charge more than $700 a month for a rent-controlled one-bedroom.
Laws could dictate how often a landlord could increase the rent. Also, there may only be a handful of reasons a landlord can evict a rent-controlled tenant, such as non-payment or significant damage to the rental property.
Does Every State Have Rent Control?
There are more states that do not allow rent control than there are states that do allow it. Even in many states that do allow rent control, rent control laws only exist in certain cities within the state.
New Jersey and the District of Columbia have rent control in place throughout the entire state or district. New York and California have rent control laws in place in certain cities. New York City and San Francisco are two of the most well-known areas with rent control regulations. Certain states, such as Alabama and Arizona, actually have laws in place which prohibit any rent control regulations in the state.
The theory behind rent control is to allow certain tenants to reside in an area where they may have otherwise been priced out. For example, a senior who has been living in an apartment for the last fifty years would be forced to move if there were no rent control laws because the area she is living in has become very desirable and expensive. Due to rent control, the tenant can expect a small, steady rent increase and will not one day be hit with a notice that their rent is increasing by $1,000.
Rent Control Impact on Landlords
Rent control negatively impacts landlords because the landlords are renting out units to tenants at far below the current fair market value of the unit. Besides the fact that they are collecting far less money for the unit, a rent-controlled tenant can even cost the landlord money.
The landlord is still responsible for paying all the holding costs associated with the unit, which are all at today’s current market prices. The landlord is responsible for performing repairs on the tenant's unit. In some cases, they are responsible for paying utilities, as well as all other expenses, such as mortgages, taxes, and insurance payments.
Landlord Options When Tenants Move Out
In most cases, once a rent-controlled tenant moves out of the unit, the unit becomes deregulated. The landlord then can charge the free market rent for the unit. There are exceptions to this rule. In New York City, if a rent-controlled tenant moves out and the building has six units or more, the unit goes from being rent-controlled to being rent-stabilized.
High Rent and High Income Threshold
Certain rent control laws allow an apartment to become deregulated once it reaches a certain monthly rent. In New York City, this amount is $2,700 a month.
Certain rent control laws allow an apartment to become deregulated if a tenant makes more than a certain income for two consecutive years. For example, if a tenant is making $200,000 a year, a court may decide that the tenant can afford to pay fair market rent and no longer need to live in a rent-controlled unit.
A landlord can try to offer the tenant a sum of money to leave. There have been stories of landlords offering tenants tens of thousands of dollars to move out of an apartment.
Many landlords try to force out rent-controlled tenants by evicting them. There are legitimate reasons for eviction, such as nonpayment or drug dealing. However, many landlords make false claims against tenants to try and force them out. Landlords in New York City are not allowed to evict disabled tenants or tenants who are 62 years of age or older unless they can provide them with a comparable unit to live in at the same or lower price and give them a moving stipend.
Eviction for Demolition
In certain cases, a landlord can get a rent-controlled tenant to move by claiming an eviction for demolition. The idea is that the property will be extensively renovated, basically torn down and rebuilt. There seem to be no laws in place to see if a landlord follows through on this demolition.
Use as a Primary Residence
Certain rent control laws allow a landlord to recover a rent-controlled unit if the landlord will be using that unit as their primary residence for the next five years.