Rent Control vs. Rent Stabilization - What's the Difference?
Whether you're an experienced renter or you're embarking on your first journey as a tenant, rental terminology can be confusing! This is especially true for terms that sound similar and are sometimes incorrectly used interchangeably.
Two of the most commonly confused terms are "rent control" and "rent stabilization." Though you’ll most often find these terms in major metropolitan cities like New York, they're more common than you think!
When it comes to renting, it's essential to understand how the rent will change (or not!) throughout your stay. Rent control and rent stabilization are true to their history. They work to ensure that rent prices remain relatively stable and housing affordable.
That said, they are two distinct policies that will affect rent pricing differently.
Here's everything you need to know about rent control and rent stabilization. With this knowledge in mind, you can rent like a pro and maybe catch a great deal!
What is Rent Control?
Rent control is a policy that aims to regulate housing prices. It requires a unit's current rent price to stay the same, indefinitely.
In short, if you’re living in a rent-controlled apartment, you won't have to deal with rent increases, so long as the policy remains in effect.
Keep in mind that rent control is often used as an umbrella term that also includes rent stabilization. However, rent control is its own distinct policy, as is rent stabilization. Both terms fall under the category of “rent regulation.”
Rent-controlled apartments are nearly impossible to find. They are only available in a few of the most populous U.S. metropolitan cities across the country.
Of the 50 states in the country, 46 of them don't permit rent control policies or do allow them, but don't utilize them.
Pair the small number of cities that utilize rent control with the attractive price point that rent-controlled units offer and you get a recipe for rarity. It's very possible that you won't encounter a rent-controlled unit during your apartment search. More importantly, the number of rent-controlled apartments have dwindled.
At one time, there were millions of rent-controlled units available. Now, there are fewer than 22,000 left.
That's because once the requirements of a rent-controlled apartment fail to be met, the apartment is no longer legally required to adhere to the policy. The reason for that is that rent-controlled units are typically priced way below market value, especially in areas where home values have increased. Many landlords who own rent-controlled units stand to profit once a unit is no longer protected by rent control laws.
Unfortunately, rent-controlled apartments can only be passed down within families. The apartment in question must be located in a building that was built before 1947 and has been occupied by the same tenant or family before 1971.
To make things even more complicated, rent-controlled apartments can only be passed down if the next tenant has lived in the apartment for two consecutive years before inheriting it.
In short, unless you’ve been living in your family member's rent-controlled apartment unit for two years before they pass on the tenancy to you, there's no shot that you'll be able to find one during your search.
What is Rent Stabilization?
Rent stabilization is a policy that limits rent increases for units that fall under the policy. There are specific regulations that stipulate which rental units fall under rent stabilization policies.
Rent stabilization is another rent regulation method. Though it's a completely different policy, many people confuse rent control with rent stabilization.
Fortunately, rent-stabilized apartments are far more common than rent-controlled apartments. There are currently almost one million rent-stabilized apartments throughout the U.S.
If you’re seeking a rent-stabilized apartment unit, you shouldn't have too much trouble finding one in states like California, New York, Maryland, Oregon, and New Jersey.
However, keep in mind that rent stabilization is regulated at the state level. So, there's a lot of variety between the laws that govern the practice.
In fact, just last year, California Governor Gavin Newsom signed a statewide rent stabilization law into effect that limits rent increases to 5% each year plus inflation until January 1, 2030. New York's rent stabilization laws have been in place since 1969.
As the regulations for rent stabilization vary from state to state, it's difficult to find a single tool that’ll allow you to determine whether a building is rent-stabilized or not. That said, cities like Los Angeles and New York have created tools that make it easy to find this information.
Otherwise, you'll need to research your state's laws and gather information about a building to determine whether it falls under the regulations for rent stabilization.
Benefits of Rent-Stabilized Apartments
Now that you understand the basics of rent control and rent stabilization, you'll need to determine whether a rent-stabilized apartment is right for you.
To start, you'll need to consider the benefits of rent-stabilized apartments. Here's a breakdown of the most common benefits of rent stabilization.
- No Surprises: Under the laws of rent stabilization, landlords are only allowed to raise the cost of rent a certain amount in a predetermined time period. This ensures that tenants aren't forced out because of sudden, exorbitant rent increases. Additionally, it allows tenants to prepare for rent increases, as they come.
- More Affordable Housing: One of the major reasons for introducing rent stabilization laws is to address the problem of increasing homelessness due to high rent prices. Rent stabilization has worked to increase the number of affordable housing units available in notoriously expensive cities.
- Tenant Renewal Protection: Under the law, most tenants in rent-stabilized housing have the right to renew their leases if they wish to do so. Generally, landlords are required to provide tenants with the option to renew for a term of one year.
Though there are numerous benefits of renting a rent-stabilized apartment unit, many of these benefits favor renters over landlords. You may be hard-pressed to find a landlord who is keen on upgrading and maintaining a rent-controlled building or unit. That said, they won't typically leave you high-and-dry.
They'll likely ensure that the building is kept up to certain codes. They may provide the bare minimum when it comes to the building's maintenance efforts.
Don't expect upgrades, either. Those will likely go to the buildings or units that are rented at the market rate.
Exemptions to Rent Control
Before getting too excited about the chances that you’ll benefit from a rent-controlled unit, understand that there are several factors that may dictate whether you and your chosen abode will qualify. Here are some of the most common exemptions to rent control that you should know!
- Your Income: If your income is too high, it can cause your landlord to deregulate the unit so that it is no longer required to adhere to rent control guidelines. In New York, for example, if you make more than $200,000 annually for two consecutive years, you may lose rent stabilization protections.
- The Age of the Building: The age of your building and the specific date that it was built can disqualify your apartment for rent stabilization. These dates are very specific, down to the day. If possible, look this date up before you go searching for rent-stabilized units, to ensure that any buildings you consider will qualify. You can also ask your prospective landlord about this before signing the lease.
- Recent Legislation: Both Oregon and the state of California have recently introduced new laws regarding rent regulations. These updates can cause major changes that impact current rent regulations. They can cause some tenants to lose coverage.
- City Regulations: Some states have statewide rent regulation policies. However, some cities will also have their own laws tackling rent regulation. It’s important to know and understand how both state- and local-level laws will affect your chances of being covered under rent regulation policies.
Rent-controlled apartments are highly coveted. They ensure that tenants don't have to worry about rent increases.
However, rent-stabilized units are also favorable because they allow tenants to prepare for increases. They prevent astronomical rises over a short time.
That said, it’s much more likely that you’ll find your dream home in a rent-stabilized unit as opposed to a rent-controlled one.
Be sure to do your due diligence before making a final decision regarding whether you’d like to lease a rent-controlled unit. Keep in mind that there’s a good chance that you’ll likely lose out on certain upgrades over time. However, you’ll be protected when it comes time to renew your lease.
Regardless of whether the unit is protected by rent regulation policies, be sure to choose a unit that’s right for you!