REAL ESTATE

Council Post: Rent Control Versus Rent Stabilization: What It All Means For Landlords

Founder and CEO of Rentec Direct, property management software for real estate professionals.

Rent control issues have been persistently dominating headlines for years, and this scrutiny is only accelerating as rental rates and home prices have continued to skyrocket throughout the Covid-19 pandemic. A lack of affordable housing in U.S. cities is making this issue even more critical as cities like St. Paul, Minnesota; Springfield, Illinois; Boston, Massachusetts; Montclair, New Jersey and more are in the midst of fighting for rent control or rent stabilization for tenants. What does this mean for today’s landlords and investors?

Rent Control Versus Rent Stabilization

In basic terms, rent control is a government regulation placed on the rental rate a landlord can charge for a tenant to occupy a rental property. The restrictions can vary based on factors like location and duration of tenancy, and they can directly influence how much a landlord can raise the rent on an existing tenant.  

There are typically three types of rent control: 

• No rent increases are permitted.

• Rental rates are regulated between tenancies.

• Limits are placed on rental rate increases.

The terms rent control and rent stabilization are often used interchangeably, but there are some differences between the two concepts. While rent control generally locks in rental rates at a specific amount, rent stabilization allows for increases of a fixed amount set by local or state government (usually no greater than a small percentage). Rent-controlled housing is a pretty rare find these days, while rent-stabilized properties are more common. Both rent control and rent stabilization are intended to protect renters from price gouging and facilitate affordable housing, but many landlords see reduced profits and lost incentives. 

Local, State And Regional Regulations

Even if rent increases are permitted in your state, your city or county ordinances may override state regulations. Rent control and rent stabilization rules are most commonly location-based, so it is important to stay current with city, state and regional regulations. A lack of knowledge or understanding will not protect you from litigation. 

Oregon was the first state to implement rent control regulations on a state level, with California following with state-wide regulations on rent control and rent stabilization. Maryland, New Jersey and New York have also adopted policies allowing municipalities to set local regulations, while some states have prohibited rent control within their borders.

Stay up to date with your state’s real estate board and housing regulatory organizations anywhere you own a rental property to make sure you don’t miss any updates. As you make any policy or procedure changes, be sure to disseminate information to your staff and tenants as soon as possible. 

Can I Raise The Rent At My Property?

Compliance should be your top priority as a landlord or real estate investor, especially if you own properties in multiple locations as the regulations will be different at each property. Regulations not only vary by city, county, state and region, but they can also vary based on the type of property (commercial real estate is likely to have different rules and regulations than an apartment complex). Additionally, regulations will generally have specific criteria based on the age of the property, renter income and other legislation. 

After you’ve researched the laws in your area, make sure you understand the pros and cons of rent control and rent stabilization. This can be a controversial subject, and like with anything else, there are always two sides to consider. Explore the benefits and drawbacks for both landlords and tenants before you decide whether or not to invest.


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