What Is Rent Control and How Does It Affect Your Rent Payments?
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With an already-low housing inventory now compounded by the devastation of the recent wildfires, Californians have seen rent prices skyrocket, and the idea of rent control is a trending topic once again. Here's some more information about the topic.
To manage the cost of rent for their residents, local and state governments can put a cap on how much landlords can charge for or increase a tenant's rent. In theory, it's a measure aimed to keep rent affordable and accessible in places where demand can outpace supply. While it may sound like a good practice on paper, there are two sides to rent control.
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Because rent control limits how much rent can cost or increase at any given time, it can be a positive measure for tenants. Tenants living in municipalities with rent control in place won't have to worry about sudden unaffordable price hikes, meaning they can plan to live in the same home over the long term.
Another plus to rent control is its effects on the community. Keeping rent affordable can slow gentrification, protecting low-income and minority tenants from being priced out of their own neighborhoods. It also reduces homelessness, putting less of a burden on the public in terms of providing public shelters, emergency medical care and social services for those who can't afford rent.
While controlling rent may help tenants, it can negatively affect housing providers. Groups like the National Association of Realtors argue that rent control unfairly puts the brunt of new economic burdens and maintenance costs onto the landlords. This may cause landlords to sell their properties if they can't afford to continue renting them or convert them into other types of units, leading to less available housing and lower property values.
Others believe measures like California's Proposition 33 don't solve the affordability issue. When there's a ceiling on rent prices, developers are less likely to construct new housing. Less housing due to a lack of development then compounds the problem: Existing rental units become more coveted, and prospective tenants are willing to pay more due to the lack of supply — but landlords are unable to raise their prices to cover their costs.
Before moving to or from an area with rent control measures in place, assessing your particular needs is a good idea. Areas with rent control may be appealing because they can offer long-term stability. However, this stability may come at the cost of limited housing options. Conversely, areas without rent control may feature a wider array of housing options, but you risk the possibility of significant price hikes.
If you're unsure of whether moving to an area with rent control is right for you, reach out to some experts and get advice on how it may affect your personal financial situation.
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This article originally appeared on GOBankingRates.com: What Is Rent Control and How Does It Affect Your Rent Payments?
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