Did you ever wonder how Monica and Rachel in “Friends” could afford rent in a two-bedroom New York City apartment on a waitress and chef’s salary? Well, the answer is rent control.
Rent control is a rare policy that fixes the price of rent indefinitely and falls under the umbrella term “rent regulations.”
It sounds great, right? Before you get too excited, you need to understand exactly what is rent control.
We’ll talk about the difference between rent control vs. rent stabilization, explain how it really works and give you a few advantages and disadvantages of living in a rent-controlled apartment.
Rent control vs. rent stabilization
Both rent control and rent stabilization are concepts centered around the idea of protecting tenants from major increases in the price of rent. The goal is to keep housing affordable while also enabling landlords to increase rent.
While people often confuse the two, there is a big difference between them.
Rent stabilization is the more common practice and means that landlords or property owners can only increase rent by a specific percentage year-over-year. In areas that have rent stabilization in place, the state sets the rate at which landlords can increase rent. Because this is a state issue, not a federal issue, it can vary drastically state-by-state. For example, Oregon limits yearly rent increases to 9.2 percent while Los Angeles County in California limits yearly rent increases to a mere 3 percent.
This is a more common practice and you’ll likely have an easier time finding a rent-stabilized apartment than a rent-controlled apartment.
Rent control is a policy that means landlords cannot increase a tenant’s rent. Effectively, rental rates remain set and won’t increase. Rent-controlled apartments have a set price for rent that will not increase whereas rent-stabilized apartments will see price increases but there is a cap on how much the rate can increase each year.
Rent-controlled apartments are incredibly rare, so if you live in or can find a rent-controlled apartment, you’re very lucky.
In fact, there are only 22,000 rent-controlled apartments out there. Even if you can find a rent-controlled apartment on the market, you have to meet a specific set of criteria to qualify for one. This includes:
- You cannot make more than $200,000 for two years in a row
- The building must have been built before 1947
- The apartment must have been lived in by the same family since at least 1971
- The apartment must be passed from family member to family member
- The person who inherits the rent-controlled apartment must have lived in it for two years straight before officially inheriting it
Now, it makes sense how Monica had such a great apartment in New York — she lived in the apartment with her grandmother for two years prior to inheriting it from her. This allowed her to take over the rent-controlled apartment and keep it in the family.
Where is rent control most common?
Out of the 50 states, only five have specific rent control policies in place. The other 45 exempt rent control or have no active policies in place.
The five states that have some rent-controlled apartments are California, Maryland, New Jersey, New York and Oregon.
Photo source: National Multifamily Housing Council
Pros and cons of rent control
As with everything, there are pros and cons to rent control depending on your perspective and situation.
Pro: Cheaper for tenants
Because rent-controlled apartments have a fixed price for rent, they are very affordable. You will pay the same price for rent year after year, even as your neighbors experience price increases. Rent-controlled apartments are cheap.
Pro: Affordable even when wages don’t increase
It’s common knowledge that rent prices are rising faster than wages are. So, you can live in the same apartment at the same price and still afford it, even if you don’t see a pay bump on your paycheck very often.
Pro: Foster safe neighborhoods
Rent-controlled apartments offer renters financial stability because they know that they can live on a fixed income. When there is financial stability, people will stay in the same location, develop relationships with neighbors and decrease renter turnover. All of these factors contribute to a safer neighborhood and environment.
Pro: Automatic lease renewals
When you live in a rent-controlled apartment, you automatically get the first right of renewal on your lease. Basically, you always have a place to live and can always re-sign your lease at the same rate.
Con: Not always well-maintained
Because of the fixed rent price in a rent-controlled apartment, landlords don’t maintain, update or refurbish them as often because it isn’t profitable for them. At times, rent-controlled apartments have outdated appliances because no one invests in them.
Con: Hard to come by
As we mentioned earlier, there are roughly 22,000 rent-controlled apartments in the wild, so they are incredibly rare and hard to come by. As such, you’ll be frustrated looking for one as the supply is so low.
Con: Landlords often lose money on rent-controlled apartments
If you’re a landlord of a rent-controlled apartment, you’re likely losing money compared to other landlords who can increase the price of rent each year. If you’re a tenant, this is great. But, it’s a con for the property owner.
How to find a rent-controlled apartment
Rent-controlled apartments are a unicorn in the real estate world. When you have one, hold onto it as they are very rare and you likely won’t have a better deal anywhere, especially in an expensive metro like New York City.
If you want a rent-controlled apartment, you have two ways to find one.
- You can inherit a rent-controlled apartment
- Research the city or state’s database of rent-controlled apartments
If you can’t find or qualify for a rent-controlled apartment, don’t fret. Rent.com has thousands of affordable apartments all across the country that would be perfect for you. Start your search today!
The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.