Rent control, Its Types and How It Affects Tenants

“Rent control”, this phrase usually conjures up some pictures in our minds. Renters visualize a place where in housing is pocket-friendly. In places like San Francisco, Stockholm and New York, majority of renters are covered with rent control since years. In layman language, rents can only be increased by specific amounts once in a year only. Additionally, tenants can be given the notice of eviction for minute reasons. Tenants who are not covered by rent control can receive rent increment notice at any time.

Usually, the rental amounts are carefully managed by a local rent board, which fixes the percentage of rental increment (on an annual basis). Rent controls must endow relief in long-term renting to old tenants. Secondly, the tenancy should be secured and rents must be regulated. Otherwise, landlords could send eviction notice to renters, in spite of heavy security amount by escalating their rental amount prohibitively. These increments are usually lower than the free or unregulated market rental fees in a specific area. This makes rental fee quite affordable for renters.

Rent control, different types

Tenancy Rent Control: This is the most common form wherein rental fees are negotiable at first, but there is a certain limit on the rent increment amount.

Split Systems: In this, only certain piece of the housing market is under the control of rent like de-nationalized buildings or poor households.

Maximum Rent Systems: At times, the concerned authorities decide the higher value of rent. The fixed maximum amount is applicable for old and new tenants both.

How rent control affects?

The first classic drawback of rent control is its impact on housing quality. In plain words, economists argue that tight control over rent daunts landowners from making maintenance and improving their properties. For an instance, in a market devoid of rent control, when a property-owner upgrades the property, he has the alternative of increasing the rent in the form of increased rent. However, NHMC (National Multi Housing Council) connects this rent control disadvantage with a decline in tax revenues related with property.

In efficient markets, both sellers and buyers can smoothly do business without any dispute due to good prices. However, rent control takes out this efficiency from the marketplace. As a part of renters are able to pay rental fees of buildings at a price tag below that balance. For example, in market like New York, which are packed with more tenants than apartment buildings reduces the supply of available apartment houses makes prices go high. In other words, unlucky tenants don’t get good deals on a rent-controlled house. They’ll pay more rent for a market rate building.

In addition to this, renters find limited options of apartments, and the apartments they do find are in bad condition or come with a backbreaking price tag. On the other side, property owners can no longer get profit from their hard-earned investments. As a result, this badly affects new constructions and a decrease in the quality of current buildings.

Finally…rent control has its set of pros (little) & cons and it affects tenants, landlords and new housing developments.

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