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What we know about rent control and its impacts on rental housing

Housing prices in Washington D.C. and other coastal cities have surged, worsening affordability challenges.¹ As rents increase, the debate over rent control has intensified. Policymakers consider rent control as a tool to slow rent hikes and prevent the displacement of low-income households in high-cost areas. However, rent control policies often lead to unintended consequences, affecting the availability and quality of rental housing.

Rent control laws aim to stabilize rents and provide housing stability. While they achieve these goals for a subset of tenants, they also reduce profitability for housing providers,² prompting some to convert rental units into condominiums, neglect maintenance, or withdraw units from the market that require significant repairs. These responses can shrink the rental supply and increase rents for unregulated units, undermining rent control’s intended benefits.³

Additionally, rent control can discourage tenant mobility and make rental housing costlier and harder to find for new residents, especially in urban areas with restrictive land-use policies. This creates a divided housing market where long-term tenants enjoy stable, affordable rents, even if their units no longer suit their needs, while newcomers face higher rents and fewer choices.

This review focuses on “second-generation rent control” or “rent stabilization” laws, which permit annual rent increases and allow for higher rent adjustments when units turn over.⁴ It draws on U.S. studies over the last 20 years, emphasizing empirical (and not theoretical) research on rent control.⁵

Impacts on the housing supply

Studies show that rent control primarily affects the rent-controlled stock itself. In response to lower returns, many housing providers convert properties under rent control into condominiums. In D.C., for example, the number of rent-controlled units have declined by 14 percent from 85,000 units in 1984 to about 72,878 in 2020.⁶ Similar patterns are seen in other cities like San Francisco, where expansion of rent control to cover providers with fewer than four units led to a reduction in the number of renters and an overall increase in citywide rents, as units were converted or demolished.⁷

Although new construction is often exempt from rent control, the possibility of future rent regulations can discourage developers from building new rental units. Assessing these impacts is complex due to various factors.⁸ Research from cities with and without rent control in New Jersey and California shows that cities with rent control experienced slower housing stock growth compared to cities without such laws, although results vary when adjusted for city size and other factors.⁹

Some studies argue that rent control does not necessarily hinder new housing development. For example, New York experienced a construction boom during federal housing price controls, and New Jersey saw increased building activity after enacting rent control.¹⁰ However, it has been pointed out that these studies often fail to isolate the effects of rent control from broader market trends like rising household formation and increased demand.¹¹

There is also evidence that rent control shifts new development or major renovations toward for-sale properties rather than rentals. For example, the nearly 10-percentage-point increase in homeownership rates from 1940 to 1945, during federal price controls, is often cited as an example of how rent control can distort markets.¹² To put this in context, that rise in homeownership is comparable to the growth seen over the entire 20th century. A 2016 study found similar distortions, showing that a 2.5 percentage point drop in rents due to price controls correlated with a 1 percentage point increase in homeownership rates.¹³

Additionally, a 2007 study on rent decontrol in Boston found that while lifting rent controls had minimal impact on new housing construction, it did shift investment away from rental housing toward other types of properties,¹⁴ suggesting that changes in rent control policies can significantly alter broader housing market dynamics.

Impacts on the quality of housing

When rent revenue cannot cover operational costs, housing providers may cut back maintenance or delay renting units that require costly repairs.¹⁵ This problem is particularly pronounced in rent-controlled units, which are often older and more prone to deterioration.¹⁶

For example, the 2017 New York City Housing and Vacancy Survey (NYCHVS) found that 64 percent of rent-controlled units had maintenance deficiencies, compared to 47 percent of unregulated units. Rent-controlled units were also more than twice as likely to have three or more major maintenance issues (18 percent vs. 7.5 percent across seven different categories) even after adjusting for buildings age.¹⁷

Evidence indicates that stricter rent control regulations tend to be associated with a greater decline in housing quality. However, in areas with rent stabilization laws that allow for gradual rent increases rather than fixed price caps, the negative impact on housing quality is less severe.¹⁸ For instance, in New Jersey, where rent stabilization permits periodic rent increases and ensures providers receive a “fair” return, the link between rent control and declining housing quality is weaker, especially when factors like property values and foreclosure rates are considered.¹⁹

A study examining housing quality from 1978 to 1987 found that the decline in quality was directly related to the gap between controlled rents and market rates.²⁰ It also showed that providers were more likely to maintain their properties if they could negotiate buyouts with tenants or raise rents when tenants moved out. In many cases, long-term tenants took on maintenance responsibilities themselves, which improved unit conditions but transferred the upkeep burden from the provider to the tenant, undermining some of the financial benefits of rent control for tenants.

In Washington, D.C., an analysis of data from 1985 to 1987, during a period of halted rental housing production, found no statistically significant link between rent control and housing quality. Interestingly, units exempt from rent control during that time had higher overall rates of deficiencies, suggesting that factors other than rent control may have played a more significant role in determining housing quality.²¹

Impacts on rent levels and housing values

Rent control has been widely documented to lower rents in regulated units.²² A review of 31 studies found that 25 reported significant rent reductions due to rent control.²³ The extent of these rent discounts depends on factors such as housing demand, availability, and income levels. For example, in New York City, between 2002 and 2008, median rents in rent-stabilized units were 20 percent lower than in unregulated units,²⁴ with more substantial differences in Manhattan compared to other boroughs like the Bronx or Staten Island. Similar gaps are observed in D.C., with median rents in rent-controlled units in Wards 2 and 3 significantly exceeding those in Wards 7 or 8.²⁵ Over time, rent control tends to increase the gap between regulated and market-rate rents.²⁶

While depressing rents in controlled units, rent control can lead to higher rents in unregulated units. In New York, rents in unregulated units were found to be 22 to 25 percent higher than they would have been without rent control.²⁷ In Los Angeles, unregulated rents rose by over 46 percent after rent control was imposed, for exceeding the predicted 24 percent rise without rent control.²⁸ Some studies suggest that these increases in unregulated rents may be temporary and diminish within three decades if new construction is exempt from rent control laws.²⁹

Rent control also tends to decrease property values by capping potential rental income.  For instance, when New York City implemented universal rent control, the sale prices of affected multi-family buildings dropped by over 17 percent.³⁰ In St. Paul, Minnesota, the introduction of rent control in 2021 led to a 7-to 13 percent decline in the value of rent-controlled properties, with broader market impacts contributing to a 5 percent reduction in average property values.³¹

Conversely, removing rent control can significantly boost property values. In Cambridge, MA, property values for both controlled and non-controlled units rose sharply after strict rent control laws that were in place since 1970 were repealed in 1994.³² During the rent control period, controlled properties were valued 45 to 50 percent lower than non-controlled properties in the same neighborhoods. After the repeal, property values increased by $2 billion between 1994 and 2004, with $1.7 billion of that increase occurring in non-controlled buildings in neighborhoods that had previously been subject to rent control.³³ This suggests that the economic costs of rent control were borne not just by controlled units but also by non-controlled properties in the same areas.³⁴

Impacts on tenure, displacement, and access to opportunity

Evidence shows that the longer a tenant has tenure, the more discount they see in their rents compared to market-rate rents. This incentivizes tenants in to stay in rent-controlled units for longer periods;³⁵ This effect is particularly strong among older households and racial minorities. By lowering housing costs, rent control allows tenants to allocate more of their income to non-housing needs, effectively increasing their disposable income.³⁶

However, the extended tenure can lead to inefficiencies. Tenants may remain in their units longer than necessary, passing up job opportunities or better housing options simply because of the artificially low rents. This can result in a misallocation of housing, with tenants occupying apartments that no longer meet their needs. In New York City, for example, about 20 percent of renters were found to be living in units that were not the right size for their household. Some tenants stayed in larger rent-controlled apartments at low costs, while others were stuck in smaller units due to a shortage of available larger rent-controlled units.³⁷

In some cases, rent control can accelerate displacement and economic segregation by incentivizing housing providers to withdraw properties from the rental market. For example, in San Francisco, the expansion of rent control to small multi-family housing units in neighborhoods with rapidly rising property values lead to a decrease in renters and an increase in owner-occupied housing, often through buyouts or condominium conversions.³⁸ This shift in housing stock can accelerate displacement and worsen income inequality, defying rent control’s intended goals. These negative outcomes are often worsened by restrictive land-use policies that limit new housing construction.³⁹

Inequities in rent control

Rent control often struggles to effectively target lower-income households, meaning it doesn’t always reduce housing costs for those who need it the most. While some research shows that tenants in rent-controlled units are more likely to be elderly or belong to minority groups,⁴⁰ the distribution of rent benefits is often poorly targeted. In cities like New York,⁴¹ Cambridge,⁴² and across California⁴³, both high- and low-income households often receive similar benefits, highlighting inequities in how rent control is applied.⁴⁴

In many cases, more educated and wealthier tenants benefit disproportionately from rent control, while lower-income tenants—who need the support the most—are left out.⁴⁵ The biggest beneficiaries tend to be long-term tenants, while new renters and those who move frequently are often excluded from these advantages.

Although rent control lowers rents in regulated units, it also creates significant market distortions. It can reduce the supply of rental housing, degrade housing quality, and increase rents in unregulated parts of the market. The challenge is to design policies that protect tenants without discouraging providers from investing in and maintaining their properties. While the debate over rent control continues, one thing is clear: rent control is a blunt policy tool, and its effects vary widely depending on local market conditions and how the laws are implemented.

Source: https://www.dcpolicycenter.org/publications/rent-control-lit-review-2025/

Author: Emilia Calma

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