Understanding Rent Control

Property Management Blog

There has been a lot of talk about rent control lately. It is being seen by tenants as a law to check the high handedness of landlords. Let us see what rent control is and what it means to landlords.

Rent control is method to control the rent increase seen across the country. By introducing rent control, government aims to put a ceiling on the maximum rent chargeable for a residential property. There are already cities like San Francisco and NYC having rent regulations. Many places in Maryland, California, and New Jersey also have similar laws in place.

Governments try to check high rents that result from increased demand for housing. It is resorted to make housing more affordable for the people. It is true that rent control proves beneficial for some renters, but it has adverse impact on landlords and even many tenants.

How it works?

Once rent control is introduced, landlords are forced to charge rents within a prescribed limit. Not only this as they also need to remain within limits of rent increase after a year. They cannot increase rent by 2-3% after a year. In some states, there is a clause that landlords cannot evict their tenants using no fault eviction. This is done to prevent landlords from evicting tenants to rent their property at a higher rent to another tenant.

This law affects tenants also in an indirect manner. By controlling rent, government takes away incentive form the real estate market with the effect that there is less investment and there are lesser numbers of homes available to renters. Shortage of homes causes prices to increase. Once this happens, rents continue to move upwards automatically. Also, with guarantee of rent not increasing drastically, most tenants remain in their homes and landlords can do nothing to make them leave. Landlords start to take less interest in repairs and maintenance and there is a general gloom in the housing market.

Impacts that are long term in nature

There are many landlords who learn to earn more money from their tenants besides their monthly rents. They force tenants to pay a higher advance deposit and charge for extra amenities. These tactics are noticed by authorities and they resort to tighter regulations. All these activities and regulations have a cascading effect and there is a gradual increase in disputes, litigation, and a general trend indicating poor relationships between landlords and tenants. New York is a prime example of side effects of rent control laws. It has a separate system of 30 courts to adjudicate disputed between landlords and tenants. There are some 300000 pending cases in front of these courts.

What is the way forward then?

Landlords need to make efforts to educate people, that they are not elites, enjoying increased rents and doing nothing.  They need to inform others how they must cope with increasing expenditures in terms of repairs and maintenance. Not only are the prices of construction materials increasing every year, but landlords also must take care of increased taxes and insurance costs. While the objective of rent control appears to be good in nature, its short- and long-term effects are costlier than the money nit aims to save for the common renters. By decreasing the number of housing options for the renters, rent control fails to achieve its objectives. It also creates unnecessary disputes and legal wrangles to increase the cost and burden of the government. Before introducing such a regulation, authorities need to make a thorough study of its impacts on the landlords, tenants and the housing industry. There are experts who feel that rent control destroys cities as New York has proved in the past.

If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty. 

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