In America, rent control laws were first introduced during World Wars I and II as a response to shortages and economic pressure. Today they are either leftover laws from these time periods or have been reintroduced by a state according to need. The most important point to remember is that rent control laws can vary widely from state to state, and from county to county. Even cities in the same county can have different laws due to various demands in markets and local demographics. So, you should conduct an inquiry as to the details of your city’s control laws. This article provides basic background information on residential rent control. startupguys.net
Basic Background
Rent control laws are set by a local board that determines the price ceiling for rental rates. The board determines the rates by considering various factors including cost of living, average rent prices in the area, and the type of rental unit. For example, some local boards apply rent control laws that are specific only to a certain type of building, such as large complexes or multi-floored apartments. As you can see, these factors will all vary from region to region.
Generally, rent control laws require a landlord to fix the rental price while the tenant is under a lease. This means that so long as the tenant is under the lease, the landlord cannot raise the rent. Or, they can only raise rent by a certain annual limit designated by the local board. Only when the unit becomes vacant can the landlord raise the rent in anticipation of a new lease with a new tenant. Some laws prohibit raising rent even if the unit is vacant. Those laws can also limit the landlord’s ability to evict a tenant, especially without just cause.
Basically, rent control means that the landlord can set the initial rent amount, but cannot raise the rent or is severely limited in the amount they can raise the rent.
The effect of controlling rent is that the longer the tenant stays in the unit, the rental payment becomes relatively less compared to the average rates in the surrounding area. So, the laws tend to favor the tenant, and most landlords dislike rent control. Instead of stabilizing rent rates, rent control laws can sometimes create pockets of disproportionate rates within a community. Those control laws can also have the unintended effect of limiting the amount of available housing in a city, since housing contractors can be hesitant to build in cities with it.
Consequently, many landlords are critical of those laws, although they must be abided by. Failure to adhere to the practices can result in legal sanctions for the landlord.
Vacancy Decontrol- What happens when the unit becomes vacant
A legal phrase that frequently comes up during rental rate control discussions is the term “vacancy decontrol”. Vacancy decontrol refers to ordinances regulating rent prices once a unit becomes vacant. As described above, most landlords will want to raise the rent after a lease is completed and the unit becomes vacant. Vacancy decontrol laws regulate whether the landlord can raise rent, and if so, by how much.
Usually when formulating vacancy decontrol rates the local board considers such factors as the tenant’s income and the previous rental rate. Ordinances that do not include vacancy decontrol provisions are known as “strong rent control” laws. Be sure to check for vacancy decontrol regulations when making a inquiry in your area.
Rent Control Preemption- Prohibiting It
In response to an endless barrage of complaints by both landlords and tenants, several states have adopted legislation that prevents local municipalities from imposing control laws. Legislative acts that prevent those laws are known as the Rent Control Preemption acts.
The term “preemption” means that the state’s decision to prohibit rent control overrides the local government’s authority to impose such laws. This means that if your state has adopted Rent Control Preemption, then it’s not allowed by law in your state.
Again, different states adopt preemption acts in various ways- some states adopt in whole while others adopt only part of the act. Usually the state will implement a preemption provision that has the following language:
“A local governmental unit shall not enact, maintain, or enforce an ordinance that would have the effect of controlling the amount of rent charged for leasing residential or commercial property.”
Even if the state has not preempted rent control, some states do make it very difficult for tenants to qualify for it. For example, in New York a tenant only qualifies if they have lived in their unit since 1971. This basically allows a greater number of landlords to raise rent according to their needs. Check to see if your state has preempted rent control (see the following lists below).