The most straightforward way to make sure a family can afford housing is to limit the amount that its rent can rise each year. Although there are a few different ways to do this, they all fall under the umbrella of “rent control.”
Rent control measures are controversial. Advocates argue that rent control makes apartments affordable for tenants in rent-controlled units, while opponents claim that it actually makes other apartments in the city more expensive.
In this explainer, I focus on rent control measures in the District and the debates about the effectiveness of these policies.
Rent control creates affordable housing by limiting the amount that private landlords can increase the rent each year.
Typically, these annual rent increases are set by an independent government board or agency. They are often pegged to annual cost-of-living adjustments.
In the District, rents in rent-controlled apartments can increase by the Consumer Price Index — a measure of how much the price of a basket of consumer goods increases over time — plus two percent. However, rental increases cannot exceed 10 percent annually.
For tenants who are elderly or disabled, the maximum increase is the CPI alone. Rents for these tenants cannot increase by more than five percent.
With special approval from the Rental Accommodations Division (RAD) of the DC Department of Housing and Community Development (DHCD), landlords are permitted to make larger increases to rent-controlled units. These increases are typically approved only to compensate for major improvements or upgrades to a building.
When a rent-controlled apartment becomes vacant, landlords are permitted to raise the rent beyond the rent control limit. Before renting to the next tenant, they can raise the rent either 10 percent or to a level comparable for similar units. However, landlords in the District cannot increase the rent to more than 30 percent of the rent charged to the previous tenant.
In Washington, DC, nearly 80,000 apartments are rent controlled.
These rent controlled apartments are typically in older apartment buildings with at least five units.
There are many other rental apartments in the city that are not subject to rent control. For example, buildings built after 1975 are exempt from rent controls. This means that newly constructed buildings throughout the city are not subject to these regulations.
Apartments owned by landlords who own fewer than five units are also exempt from rent control measures.
Several years ago, a study by the Urban Institute estimated that there were 79,145 rent-controlled apartments in 4,818 buildings in the city.
Proponents of these policies argue that rent control is a simple, straight-forward way to keep housing affordable for families in rent-controlled buildings.
Rent control policies ensure that rents do not skyrocket from year-to-year. Like homeowners paying a fixed-rate mortgage, renters living in a rent-controlled apartment can predictably know their rental costs over the long term.
Similarly, these measures help to ensure that rents do not rise more quickly than incomes. By pegging rent increases to cost-of-living adjustments, the share of income paid by tenants should remain relatively steady over time.
This addresses concerns about housing cost burdens, where renters pay an excessive share of their income toward rent.
Finally, rent control regulations help to de-commodify housing by taking it out of the market processes.
Tenant advocates note that housing is increasingly used as a way for speculators and developers to earn a profit. By taking housing off the market, rent control measures can ensure that the goal of housing remains the provision of decent, affordable shelter for individuals, rather than simply investment opportunities for landlords.
To this end, many housing activists argue that housing should be a right, not a commodity.
However, opponents of rent control regulations argue that these programs make the rest of the housing market more expensive.
In fast-growing cities like DC, the demand for housing is outpacing the supply. New housing construction is limited by the fixed boundaries of the city, various zoning regulations and the restrictions imposed by the Height Act.
Because rent control takes a large share of units off the market, people searching for apartments have fewer apartments to choose from. With the supply of housing more restricted as the demand for housing grows, prices rise faster than they otherwise would.
Critics also contend that rent regulations impede the natural filtering of households from one rental unit to another. We would expect households to move into more expensive — and higher quality — units as their incomes increase. However, households in rent-controlled apartments may be disinclined to upgrade their apartment, even as their incomes increase, because their rental payments are capped.
As a result, apartments in rent-controlled buildings may not become available to low-income families or people at the bottom of the housing ladder.
Opponents also contend that rent controls do not create long-term affordability because landlords can return units to market rents once they become vacant. Although rent control programs keep housing affordable for a specific tenant in a specific unit, the landlord can substantially increase the rent for the next tenant.
Finally, some cities — like Berlin — are experimenting with citywide rent controls. These policies cap rents for all apartments in the city rather than just some of them (which is what happens in DC). Critics worry that citywide rent controls will halt development because developers will see fewer opportunities to earn a profit from building new apartments.
Rent control policies remain controversial. Although there are many ways to limit annual rental increases, the District has a system that caps rent only for a portion of apartments. While these policies help to keep rents affordable for households living in rent-controlled buildings, they also risk driving rents up on other units throughout the city.