Blog Rent Control

A Comprehensive Study of Rent Control

March 25, 2024

Few economic policies have been studied as extensively as rent control, which is an umbrella term for policies regulating when and how much a landlord may raise the rent for a home or apartment.

In “Rent control effects through the lens of empirical research: An almost complete review of the literature,” Konstantin A. Kholodilin sums up the findings of 112 empirical studies on rent control, finding that the theoretical consensus on its effect is largely borne out by empirical research.

Key Takeaways

  • Rent control effectively caps rents within controlled dwellings, but the extent of its impact varies across countries and research methodologies.
  • Housing shortages, increased rents for uncontrolled dwellings, and reduced residential mobility emerge as unintended consequences of rent control.
  • Rent control negatively affects housing quality, and its impact on homeownership trends varies, with conflicting results from different studies.

In housing policy and scholarship, housing is considered “affordable” if residents can rent or own it for ~ 30 percent or less of their take-home income. People paying over 30 percent of their income for housing are considered “rent-burdened;” paying 50 percent or more of income for housing is considered “severely rent-burdened.” 

The most significant effect of rent control is, unsurprisingly, on the rents people pay: the overwhelming majority of studies find that tenants in rent-controlled units pay lower rents than they otherwise would have, while renters in uncontrolled dwellings pay higher rents and spend more time looking for housing.

Rent control’s effects on geographic and economic mobility are similarly clear, and near-universally found to be negative, for two main reasons. First, because moving would likely increase their housing costs, rent-controlled tenants have a financial disincentive to relocate in response to changing housing needs or job opportunities. Second, rent regulation provides heightened stability of tenure, which reduces the likelihood of eviction.

Examinations of rent control’s effect on housing supply were more mixed, with ⅓ of studies finding no effect and the remaining finding negative effects. This may be due to differences in policy design, specifically rent regulation regimes that exempt new construction for some number of years; or, rent control may encourage developers to build new homes for sale, rather than rental units. 

Studies of rent control’s effect on homeownership bear this out, with most of them finding an increase in the homeownership rate, possibly as a result of landlords converting former rental units to condominiums.

The studies are near-unanimous in their conclusion that rent control lowers housing quality in regulated dwellings due to landlords’ reduced incentives for maintenance, though this can be mitigated through smart policy design – like allowing rent increases that are pegged to improvements or inflation.

To sum up, while rent control achieves its primary objective of limiting rents, it sets in motion a series of unintended consequences that policymakers must carefully consider as they design rent regulation regimes.