Rent Control vs. Rent Stabilization: What Landlords Need to Know

Real estate investors managing rental properties must navigate the complex regulations of rent control and rent stabilization.

Understanding these terms is important because they're often used interchangeably, but they have distinct differences in regards to goals, implementation, and effect. Rent stabilization and rent control policies both influence property management, but they call for different investment strategies.

This article provides a comprehensive overview of rent stabilization and rent control, including their historical backgrounds and key features, as well as implications for landlords.

By exploring these policies, investors can learn how rent stabilized and rent controlled regulations shape the rental market — and what each practice means for their investments.

Understanding the differences between rent control and rent stabilization

Rent control and rent stabilization policies regulate the housing market and protect tenants from unaffordable rent increases. 

To understand the nuances of these policies, it's important to explore their historical context and key differences.

What is a rent controlled apartment?

Rent control laws aim to limit rent increases for certain rental units or properties — typically older buildings or units constructed before a specific date in high-demand urban areas.

Rent control laws vary by state, but they uphold tenant rights by protecting tenants from rapidly rising rents and preventing displacement due to gentrification. Renters in these units may be required to provide certain levels of maintenance and repair to protect the value of the properties. 

However, rent control is controversial, as it can limit landlords' ability to earn a fair return on their investments and may discourage new construction and investment in rental properties.

States with rent control laws

While most U.S. states have policies that effectively ban rent control, there are a few states and municipalities that have implemented rent control laws. As of 2024, California and Oregon are the only states with both state and city rent control, and certain cities and counties across Connecticut, Maine, and New York — plus the District of Columbia — have rent control laws in place.

States that do not prohibit rent control

These states do not enforce statewide rent control, but at the same time, they don't prohibit it:

• Minnesota
• Nebraska
• Nevada
• New Jersey
• Pennsylvania
• Rhode Island
• Vermont
• West Virginia
• Wyoming

Source: FitSmallBusiness.

What is a rent stabilized apartment?

Rent stabilization regulates rent increases for certain rental units, allowing landlords to raise rents annually by a set percentage, often based on local inflation rates. Unlike strict rent control, rent stabilization provides more flexibility while still offering tenant protections, such as just-cause eviction rights.

These policies often work alongside affordable housing requirements and incentives for new construction, aiming to protect tenants from excessive rent increases while ensuring landlords can maintain profitability. However, similar to rent control, rent stabilization can be controversial as it may discourage new investments in rental properties.

Rent stabilization policies differ across jurisdictions. For instance, New York has a dedicated Office of Rent Administration that oversees and enforces these policies.

Cities like Los Angeles, San Francisco, St. Paul, and Washington, D.C., also have rent stabilization laws. In 2019, Oregon became the first state to implement a statewide rent stabilization law.

However, most states either ban local rent regulations or lack rent control laws entirely, reflecting the often contentious nature of these policies and their effect on new investments in rental properties.

How to determine if an apartment is rent stabilized

To verify whether you have a rent stabilized apartment, you need to get your rental history from the agency responsible for rent regulation in your area. In New York, this is the New York State Division of Housing and Community Renewal (DHCR), but other regions may have different regulatory bodies.

Only the current tenant can typically request this information. The rental history will indicate whether your unit is stabilized and the maximum legal rent amount. It's important to compare this information with what you're currently paying to ensure there are no discrepancies. If there are overcharges, landlords may be required to repay tenants, sometimes with additional penalties.

This process is not unique to New York. Many cities and states with rent stabilization laws have similar procedures. For example, in California, tenants can contact local rent boards or housing authorities to obtain their rental history.

Can a landlord destabilize or deregulate apartments?

Landlords historically used various methods to deregulate or destabilize rent regulated apartments. One common approach was to perform significant renovations, which could justify rent increases that eventually exceeded the regulatory thresholds, leading to deregulation.

Additionally, if the rent for rent stabilized units or apartments has reached a certain level, often through cumulative annual increases, it could automatically become deregulated. These practices allowed landlords to convert rent-regulated units into market-rate units, thus potentially increasing their rental income.

However, recent legal reforms have significantly curtailed these pathways to deregulation.

In many areas, there are now laws that close loopholes that previously allowed for easy destabilization. Renovations that lead to substantial rent hikes are now more strictly regulated, and automatic deregulation thresholds have been eliminated or raised.

As a result, it has become much more difficult for units to fall out of rent stabilization, unless specific conditions like the expiration of a tax abatement are met. These changes aim to preserve the availability of affordable housing and protect tenants from losing their rent-stabilized unit status.

Comparative insights on rent stabilized vs. rent controlled apartments

The specific features of rent control laws and rent stabilization policies can vary significantly by jurisdiction, but they generally include caps on rent increases, tenant protections against eviction, and provisions for lease renewals.

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In terms of effectiveness, studies have shown that both policies can have mixed results. 

While rent control can provide short-term relief to tenants, it can also lead to reduced quality of housing stock and a decrease in new construction. 

Rent stabilization may be more effective in providing long-term affordability, but it can also result in landlords neglecting necessary repairs and maintenance if they cannot raise rents enough to cover those costs.

If you're curious about rent controlled or rent stabilized apartments in your area, state or local governments or housing authorities may provide FAQ sheets. For example, New York provides one that addresses policies in both New York State and New York City.

Pros and cons of rent control laws

Advantages of rent control laws include the following:

• Providing affordable housing options for tenants, especially in cities with high housing costs. 
• Helping to prevent the displacement of long-term residents who may be unable to afford market-rate rents. 
• Providing stability for tenants, allowing them to plan for the future and make long-term investments in their communities.

However, rent control laws also have some disadvantages:

• Discouraging landlords from investing in rental properties, leading to a shortage of available units and potentially reducing the overall quality of the housing stock. 
• Leading to a two-tiered rental market, with protected tenants enjoying lower rents while other tenants are forced to pay market-rate prices. 
• Reducing maintenance of rental units.

Pros and cons of rent stabilization laws

Unlike rent control laws, which typically place hard caps on rent increases, rent stabilization allows landlords to raise rents by a certain percentage each year. A local government agency typically determines the specific percentage increase. Some advantages including the following: 

• Providing landlords with some flexibility in setting rental rates while protecting tenants against sudden and dramatic rent increases. This can help prevent long-term resident displacement and ensure that rental housing remains affordable for many tenants. 
• Providing landlords with some predictability for their rental income, allowing them to plan for the future and make necessary investments in their properties.

However, rent stabilization policies also have some disadvantages: 

• Ineffectively controlling housing costs in rapidly growing or gentrifying neighborhoods. 
• Discouraging landlords from making necessary repairs or upgrades to their buildings since they may not be able to pass on the costs of these improvements to tenants. 
• Reducing investment in the housing market.

History of rent control and rent stabilization

Rent control laws and rent stabilization policies have a long and complex history in the U.S. 

Rent control laws in the U.S. first became widespread during World War II to prevent landlords from taking advantage of housing shortages and charging exorbitant rents. These laws were later expanded in the 1970s and 1980s as a response to rising housing costs and concerns about gentrification.

Rent stabilization policies also emerged in the 1960s and 1970s as a response to the growing demand for affordable housing and concerns about urban decay. 

These policies were initially focused on preserving existing rental units and preventing displacement, but they have since evolved to include a broader range of tenant protections and incentives for new construction.

Tenant rights and protections under rent regulations

Both rent stabilized and rent controlled tenants enjoy specific rights and protections under rent regulation laws.

• Protection from excessive rent increases: Rent regulation laws cap the amount by which landlords can raise the rent for regulated apartments, ensuring tenants aren't subject to unaffordable rent hikes.
• Right to renew the lease: Tenants in rent stabilized apartments have the assured right to renew their leases for one or two-year terms.
• Eviction protections: Both rent stabilized and rent controlled tenants are shielded from eviction unless the landlord can present a valid reason, such as non-payment of rent or creating a nuisance.
• Succession rights: These regulations allow rent controlled tenants or a qualified family member to inherit the apartment if the first stabilized tenant either dies or permanently vacates, ensuring continued housing security for the next stabilized tenant or qualifying family member.
• Right to challenge rent increases and eviction: Tenants have the ability to contest rent increases and evictions in housing court. Depending on their income, they may also qualify for legal representation to support their case.

What rent control and rent stabilized apartments mean for landlords 

From a landlord's perspective, the differences between rent control and rent stabilization are important. Rent control is a more extreme policy, limiting a landlord's ability to make a profit and discouraging investment in rental property. Rent stabilization is a more reasonable compromise, allowing for rent increases while providing tenant stability.

Landlords may view rent control and rent stabilization laws as a double-edged sword.

On the one hand, rent control policies can limit the revenue landlords can generate from their rental properties, making a profitable investment more difficult while covering operating costs, paying off mortgages, and making necessary repairs and upgrades. 

On the other hand, these policies can provide stability for landlords, allowing them to count on a consistent stream of rental income and rent stabilized tenants, potentially reducing vacancy rates.

Ultimately, the effectiveness of either policy in achieving its goals will depend on the specific details of how the policies are implemented and enforced.

How Azibo can help with rent increases

Landlords can find managing rent increases challenging. Staying informed about local laws, including rent control regulations, and keeping up with market rates and rental affordability is important. Property management platforms like Azibo centralize lease and lease renewal data, making it easier to identify upcoming expirations and opportunities to adjust rates.

Azibo’s integrated lease management, accounting, and financial management capabilities enable you to efficiently analyze operational costs across your rental portfolio. This helps determine appropriate rent increases and maximum base rents that cover expenses while considering local market rates and tenant affordability.

Partnering with Azibo can transform your property management approach by providing important tools for informed decision-making and streamlined rent collection.

Sign up with Azibo today, and manage your property with confidence.

Rent stabilized vs. rent controlled final thoughts

Rent control and rent stabilization policies have a complex history and a range of pros and cons, including providing affordable housing options and tenant stability but potentially discouraging landlords from investing in rental properties and leading to a two-tiered rental market.

As such, real estate investors must stay informed and engage with policymakers to ensure that their investments can thrive under the regulations and policies of their local area.

Rent stabilized vs. rent controlled FAQs

Is there a difference between rent control and rent stabilization?

Yes, there is a difference between rent control and rent stabilization. Rent control typically applies to older buildings with tenants who have been living there continuously for a long time, often with a cap on the allowable rent increases.

Rent stabilization applies to newer buildings and aims to limit the rate at which rents can increase annually, offering more gradual rent hikes and protections against extreme increases. Additionally, rent stabilization may include preferential rent, where landlords charge less than the legally regulated rent.

This lower rent can increase the legal amount upon lease renewal, providing landlords some flexibility while still offering tenants some level of protection.

How do rents increase in rent controlled apartments?

Rents in rent-controlled apartments typically increase according to a formula set by local regulations, which often take into account the building owner's expenses for maintenance and operational costs. The increases are usually capped at a specific percentage annually to prevent sudden and steep hikes in rent prices. Tenants can challenge increases if they believe they are unjustified or if there are outstanding maintenance issues in the building.

Can you inherit a rent stabilized apartment or rent controlled apartment?

Yes, it is possible to inherit a rent stabilized or rent controlled apartment in many jurisdictions. These regulated apartments often come with succession rights, meaning the lease can be transferred to a family member or close associate who has been living in the apartment for a specified period before the original tenant vacates.

Typically, this period is two years, but it may be reduced to one year for senior citizens or individuals with disabilities. For example, if your parent or grandparent lived in a rent controlled or rent stabilized apartment and you resided with them for the required period before they moved out, you could be eligible to inherit the lease.

However, proving eligibility for succession rights can require thorough documentation, especially in cases of low-rent apartments. Landlords may scrutinize residency claims and may involve legal verification. Following recent changes in some areas' rent laws, however, succession rights have become more straightforward, with units remaining under rent regulation even after the original tenant vacates.

This ensures that landlords cannot significantly increase rent or deregulate the unit upon vacancy, providing ongoing protection for succeeding tenants. It's also important to note that preferential rent agreements may affect inheritance scenarios, as the preferential rent could revert to the legally regulated rent during the succession process. Always check local regulations to understand your rights and responsibilities when inheriting a rent-regulated apartment.